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This guide to writing a business plan will outline the most important parts and what should be included in an
effective plan.
A business plan is a written description of your business's future, a document that tells what you plan to do
and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business
strategy, you've written a plan, or at least the germ of a plan.
Business plans are inherently strategic. You start here, today, with certain resources and abilities. You want
to get to a there, a point in the future (usually three to five years out) at which time your business will have
a different set of resources and abilities as well as greater profitability and increased assets. Your plan
shows how you will get from here to there.
However, getting started can be difficult to do. So, heres a seven steps in writing a
perfect business plan.
1. Research, research, research.
Research and analyze your product, your market and your objective
expertise, writes Bill Pirraglia, a former senior financial and management executive.
Consider spending twice as much time researching, evaluating and thinking as you
spend actually writing the business plan.
To write the perfect plan, you must know your company, your product, your
competition and the market intimately.
In other words, its your responsibility to know everything you can about your business
and the industry that youre entering. Read everything you can about your industry and
talk to your audience.
1. Start with a pitch to outline your strategy and the basic concept for your business.
Do this quickly and keep it simple. This isnt your investor pitch (yet), but more like a
simple one-page business plan. Really its just a sketch of your business concept. Your
pitch should include your key value proposition, an overview of the problem you are
solving, your solution to the problem, a description of your ideal customers, and an
overview of the competitive landscape. For more details, check out our guide to
creating the perfect pitch.
2. Validate the assumptions in your pitch. Does the problem you think you are
solving actually exist? Does your target market like your proposed solution? Do you
have enough potential customers who are willing to pay for your solution to make a
real business? As you test and validate your assumptions, update the pitch you built in
step 1.
3. Build a simple sales forecast and expense budget. At this stage, budgeting and
forecasting is more of a gut check rather than a detailed, precise forecast. You really
just need to figure out if you can build a profitable business from your idea and,
potentially, figure out roughtly how much money you need to raise. To figure this out,
youll want to build a cash flow forecast as well.
4. Schedule important tasks and milestones. Its important to move out of the
planning phase and start building your business. The sooner you can get started, the
more you will learn so you can adjust your strategy. Scheduling tasks and assigning
responsibilities creates accountablity that you can track and manage.
5. Set up a regular review schedule for your plan. Do this no matter what. As you
discover new information about the problem you are solving and your target
customers, update your pitch that you created in step 1 so that it reflects the latest
findings. A regular (monthly is ideal) review of your strategy and your progress
towards your goals will help you stay on track and, more importantly, help you change
directions should things not go according to your plan.
Now STOP. If you dont need to present a business plan document to outsiders, stop
here and start tracking your progress towards your financial goals and milestones.
Revise your strategy using the pitch that you created as you learn more about your
customers, what marketing and sales strategies work, and as you are more accurately
able to forecast your sales and budget your expenses.
But, there are plenty of people who do need a formal business plan document. Lenders
and investors often ask for a written business plan. So, should you need the full-blown
plan document, take these final steps:
6. Produce your business plan document. Weve put together a detailed guide for
this topic, so follow along there or consider using an online tool, like LivePlan, to
make the process easier.
7. Develop your executive summary last. Investors often ask to see just your
executive summary to start with. If they like what they see, they may ask for your
detailed plan. Writing your executive summary last is the best choice because you are
just summarizing all the detail that youve already put together in your detailed plan.
8. Refine your pitch into an investor-ready presentation. The pitch that you
started with in step 1 of this process will be nearly ready to present to investors at this
point, assuming youve been revising it as you go. You may need to add a few slides to
cover progress that youve made to date and other information specific to your
business and industry.
Thats it! Remember, business planning is more of a process rather than a single event.
Good business planning helps you find success, track whats happening in your
business, and adjust course as necessary.
The Business Planning Process:
5 Steps To Creating a New Plan
Creating your new business plan involves a detailed process with a number of stages,
some of which can overlap. Whether you are writing your plan from scratch or from a
template, or working with an experienced business plan writer or consultant, you will
find the following five steps through the process.
Research
Detailed research into the industry, customers, competitors, and costs of the business
begins the process. A variety of resources can be used for research, ranging from
databases and articles to direct interviews with other entrepreneurs or potential
customers. Research should be documented and organized carefully with the
information gathered and the source as there is a need to cite sources within the plan.
Strategize
Next, the information from the research should inform the strategy you choose for
your business. Revisit the strategy you created even before your research and dig
deeper into decisions on appropriate marketing, operations, and hiring for the first five
years of the company's life. Strategy generally pulls from the best practices of the
industry, but uses this only as a foundation on which to add very different activities
that create a competitive advantage.
Calculate
All of the activities you choose for your strategy come as some cost and (hopefully)
lead to some revenues. Sketch out the financial situation by looking at whether you
can expect revenues to cover all costs and leave room for profit in the long run. Begin
to insert your financial assumptions and startup costs into a financial model which can
produce a first year cash flow statement for you, giving you the best sense of the cash
you will need on hand to fund your early operations.
Draft
With financials more or less settled and a strategy decided, it is time to draft through
the narrative of the plan's many sections. With the background work you have
completed, the drafting itself should be a relatively painless process. If you have
trouble creating convincing prose, this is a time to seek the help of a business plan
writer who can put together the plan from this point.
Revisit the entire plan to look for any ideas or wording that is confusing, redundant, or
irrelevant to the points you are making within the plan. Finally, proofread thoroughly
for spelling, grammar, and formatting, enlisting the help of others to act as additional
sets of eyes. You may begin to experience burnout from working on the plan for so
long and have a need to set it aside for a bit to look at it again with fresh eyes.
With this business plan shortcut you can finish your plan in just 8 hours or less!
How to Create a Business Plan Step by Step
A business plan is a road map that helps navigate a company to success. It describes all
aspects of your business, including history, products, services, marketing and finance.
The plan indicates that a qualified management team exists. It communicates
information to those interested in your business, such as an investor who reviews your
plan to determine the likelihood of receiving a good return on an investment. Without a
plan, a business will likely fail.
1. Create a mission statement about why your business exists. For example: Develop
Internet-based software that provides easy project management.
2. Define a vision of what your business wants to become. For example: To become a
respected software vendor that possesses 60 percent of the market for project
management software.
3. Define the market that your business will serve. Include the business outlook for your
industry, what customer needs are addressed and a profile of targeted customers. For
example: Customers are project managers who manage multiple projects at
construction businesses.
4. Describe products and services, including their pricing. Include what makes the
products and services competitive.
5. Describe the companys legal and management structures. Explain how business
activities are accomplished. Indicate what permits and licenses your business maintains.
Include biographies of key managers.
6. Define marketing strategy, including pricing and promotion. Include customer groups
whose needs are met by your products and services.
7. Provide a balance sheet, which is a snapshot of the companys value. For an existing
business, this should cover the past three years.
8. Provide an income statement, which indicates the profit or loss over a period. For an
existing business, cover the past three years.
9. Provide a cash flow statement, which indicates revenue, expenses and available cash.
These are projected amounts if the plan is for a startup business. For an existing
business, provide amounts for the past 12 months. Actual and projected amounts are
used to project working capital.
10. Provide each principals personal financial statement and prior years federal tax
return if your business is applying for financing.
11. Append miscellaneous information that helps define your company. Include
marketing materials, contracts and key employee resumes, for instance.
12. Write an executive summary that defines what your business does and why. This
becomes the first section in the plan.