How to write a business plan: a step-by-step guide [2021]

When you’re starting or restructuring your business, deciding how exactly you want to move forward and finding a clear path to success can feel overwhelming. It can be even more difficult to convey the value of what you envision to potential investors, especially when you don’t have a detailed plan about how you’ll accomplish your goals. This is where knowing how to write a business plan comes into play. 

Everyone who came before you was sure their business would be successful, but only 50% of small businesses survive their first five years. Even more significantly, 17% of businesses who fail do so because of a lack of planning. 

Business plans should be a priority, as they lay out the steps you need to take in order to accomplish your specific goals and ensure nothing is missed. They can also be used to show potential investors that you’re serious and that you have a strong plan and business model, increasing the likelihood of receiving financing. 

What has to be within a business plan, exactly?

To help you answer this question we have outlined the key parts a business plan should cover, and for each section of the business plan outline below, we explain their purpose and highlight what each should include.

The executive summary 

The executive summary is a short overview of your business and your plans. It shouldn’t be more than two pages, and it can be used to capture the interest of potential partners, investors, and vendors. This should highlight why you’ll be successful.

Executive summaries must include the following:

  • A mission statement, which is a sentence or two that will explain what purpose your business will serve and what pain points you can fulfill
  • Information about your product or service, including anything that makes it different from what’s already out there
  • Basic information about your company’s leadership team, including existing team members and their roles
  • Information about where your team is located
  • Basic financial information (including current funding or what you’re seeking funding for) and high-level growth plans about what you plan to accomplish if you’re asking for financing

The company description 

This section will dive deep into the company itself, including the problems that you plan to solve, and the communities you want to reach. List out the specific audience segments, consumers, organizations, or businesses that you want as customers.

You also want to highlight what differentiators or competitive advantages will set your business up for success. This is, simply put, the place to advertise your strengths. 

You should include the following:

  • Every unique selling proposition (USP) that your business has, and each should be tied back into your mission statement
  • An explanation of every competitive advantage that you have as a business and a business owner
  • An individual highlight for each individual expert on your team
  • Information about company patents or copyrights if relevant

Market analysis

The market analysis is going to tell readers how you’ll fit into the existing market, and (more importantly) how you’ll stand out.

This section will involve in-depth research, so it may be one of the most time-consuming portions of the business plan to write. You’ll need to do competitive research to see what other businesses are doing, and what their strengths and weaknesses are. You can search for patterns amongst your competitors to see what brings them success, what works, and what you can do better. 

This is where you can explain how your company can fill a needed hole in the market. Is your product a superior quality? Can you offer additional features that your competitors’ products or services can’t? Are you serving an otherwise underserved market?

Here’s what you need to make sure you include in your market analysis section:

  • An analysis of what already exists in the market, with examples if possible of direct competitors and what they offer.
  • An explanation of how you can fit into the market and rise above it, with detailed information about what strategies, features, and assets you’ll use to set yourself apart.
  • An explanation of why this will be so valuable.

Organization and management

The organization and management section will detail how your company will be structured and who specifically will run it.

It should include the following:

  • Information about your business’s legal incorporation structure, which may be an S or C corporation, a general or limited partnership, an LLC, or a sole proprietorship. Explain who the different owners would be.
  • An organizational chart that showcases your management and leadership structure within the company. 
  • Highlight any executives and upper-level team members who are currently on board, along with information about each that explains how they’ll contribute to the success of your budding business. Including CVs of key members of your team may be useful.

Service or product line

Your business will offer products, services, or both. This is where you’ll detail exactly what you’re planning on selling.

This section should include the following information:

  • An explanation of how the product or service benefits your customer
  • The product lifecycle, which is how long it can be sustainable in the market after it’s first introduced
  • Plans for intellectual property like patent filings or copyright 
  • Research or product testing that you’ve conducted for your product or service

Marketing and sales

All businesses need a detailed marketing strategy if they want to connect with new customers and generate sales. This portion of your business plan will detail what your plans are.

You’ll need to include:

  • Specific plans you have for attracting, acquiring, and retaining customers. This will include different platforms that you plan to use, both online and in-person, and should account for all stages of the digital sales funnel.
  • An explanation of the sale process, including whether online checkout will be available, what the lead collection process is like, and what any client onboarding processes look like (if any). 
  • Data about how much you plan to invest in your marketing campaigns, and on which platforms. This will be important during the financial projections part of the business plan, so don’t neglect it; it can always be adjusted later, but you want to have a solid foundation now.

Funding request

Not all business plans are requesting funding, but if you are, this is where you need to outline what you’re seeking in terms of financing and what it will cover.

Explain what funding you’ll need over the next five year period, and why you need it. 

This section should elaborate on the following:

  • Whether you want debt or equity in exchange for financing 
  • The terms under which you’re seeking financing
  • The length of time of the loan, line of credit, or investment
  • An explanation of how you’ll use the funds and why they’re needed to start and scale your business
  • A future strategy about how you’ll pay off the debt in the future

Financial projections

Your funding requests should immediately be followed by your financial projections. This will explain how much you expect to make, both over the first one-year period and over a five-year period. You need to convince the reader that your business will be financially stable long-term so that they can recoup their investment.

Here’s what you should include:

  • Established businesses should include financial reports like income statements, cash flow statements, profit and loss statements, and balance sheets for the past five years (or whatever is available)
  • Mention any collateral that you can put against a loan
  • Explain how you plan to make money, including information like profit margins on your product or service line
  • Provide a financial projection of how much you expect to grow over the five year period

The appendix 

If you have anything else that you want the reader to know or see, the appendix is the perfect place to put it. This may include additional information like client testimonials if you’re already up and running, images of products or product prototypes, or resumes of any key players. 

Your appendix should always include the following if they aren’t already listed in the business plan:

  • Copies of any patents or copyrights 
  • Personal recommendations or testimonials 
  • Product research that didn’t have a place earlier in the business plan
  • Resumes or CVs of any high-level members 
  • Additional data about the process of manufacturing or creation
  • Any necessary permits or licenses that you’ve obtained

Writing your business plan cover letter

Once you have your business plan written and finalized, your job isn’t over. You’ll also need to write a strong business plan cover letter to accompany the plan itself when submitting it to lenders, investors, and potential partners for joint ventures. Even though it’s separate from the plan itself, the cover letter is still an important part of the submission and it deserves just as much thought and attention. 

Your cover letter will address the individual person or persons that you’re submitting the plan to, appealing to them specifically. It will essentially contain a brief personalized pitch for the value your business can offer them in particular. The importance of this can’t be overstated; if the investor doesn’t believe that the loan won’t be beneficial to them, they have no real incentive to offer to finance. 

Ultimately, these benefits can be anything that demonstrates the potential success of your ideas.

This could include the following:

  • Sustainable companies can make a note that eco-friendly brands are preferred by a growing segment of customers and are currently in-demand 
  • A chef wanting to bring cuisine to an area that’s never experienced it is offering something new and exciting automatically differentiating themselves 
  • Owners with thorough experience in the industry with other successful ventures are often appealing to investors because they’re considered “safe”  
  • Highlighting ground-breaking, patented products allow financers to get in on a break-through product that no one else can copy right away 

Business plan cover letters should be no more than two pages long, and they should do the following:

  • State that you’re applying for funding or an investment from the bank, lender, or investor
  • It should mention immediately at the beginning that a business plan is attached
  • Give a brief summary of what the business is, making it sound interesting enough so that they’ll want to read the full plan
  • Layout the benefits to the financer to showcase why this will be so advantageous to them
  • Thank them for their time and consideration, and state that you’re willing to set up an appointment to talk more if desired
Simple tips for writing a successful business plan cover letter 
A few simple tips can help your cover letter receive a warmer reception.
Do all of the following when writing your cover letter:
Use formal language while still keeping the tone conversational; avoid using esoteric, industry-specific terminology that only experts in your field would recognize
Avoid the use of slang or contractions
Keep it to two pages or less; one page is even better 
Use simple sentences to get your point across, and avoid being too wordy; conciseness is best 
Use active voice instead of passive voice 
Remember to focus on the biggest and most interesting assets of your business
Always proofread going through it at least twice, and ideally hiring an editor to review it once more

Three golden rules for writing a professional business plan

In addition to the standard business plan outline, following a few simple general writing recommendations can help you achieve the desired results you want. 

These include the following:

#1. Keeping your business plan brief & concise

Your entire business plan should be thorough, while still being as concise as possible. Using simple, short sentences to get your point across is important, and you want to avoid having a 30 page-long business plan because very few people will read it. Remember to include important information, and cut what isn’t needed. Trust us — if the receiving party wants more information, they’ll have no problem asking for it.

Your business plan should be short enough to revise and to read in one sitting. It needs to be comprehensive. 

#2. Know your audience  

Your business plan isn’t just for internal use; you need to get potential vendors, financers, and partners on board, too. Highlight information that will appeal most to them, such as your past experience in an industry or powerful differentiators to the market.

It also means that you want to tailor your language to the people reading your plan. You may work in a highly-specialized, technical sector full of jargon that only people in your industry will know; this can be confusing to potential lenders who aren’t familiar with the field at all, and it could be enough to get them to put down your plan.

Using formal but plain language that anyone would understand is key unless you’re specifically writing to someone you’re positive would understand.

#3. Don’t fall prey to intimidation

Even if this is overwhelming, remember that there’s no need to be intimidated. The worst thing that someone can say is no, and just because one person says no, it doesn’t mean that it’s true for the next. 

Start with one section at a time, as breaking the business plan into different sections will feel more manageable. 

You know your business better than anyone, and you believe in it. If you didn’t, you wouldn’t be going through all this trouble. As long as you’re laying out the facts clearly, someone else is bound to see it, too. Don’t forget that many of the greats have stood exactly where you are now, at the beginning.

If you’re still worried about the business plan or want help either writing or editing it, you can always work with an expert business writer. They can write your business plan from scratch, help you write it based on an outline, or edit what you already have to ensure that you’re on the right track.

Business plan examples

Before you start writing, it’s always helpful to draw inspiration from strong examples that show the expected standard. Fortunately, the Small Business Administration (SBA) has samples of both traditional and lean business plans available. Let’s take a look at both. 

Traditional business plan example 

You can follow these formatting guidelines for the entire business plan:

  • Have a cover page with the name of the company, a note that it’s the business plan, the owner’s name, and the date the plan was created.
  • The executive summary should contain bolded headlines for “Product,” “Customers,” and “Future of the Company” with a few sentences elaborating underneath each.
  • The company description page with “mission statement,” “principle members,” and “legal structures” headers with a simple sentence for each one. You can list principle members in bullet points. 
  • The market research section should have headers and distinct sections for industry research, descriptions of customers, company advantages, and the regulations your business follows. This section should be thorough, using complete sentences and including at least a paragraph in each section.
  • The product and/or service line section needs to have distinct sections that explain what the product or service is, the pricing structure, the product lifecycle, intellectual property rights, and research and development. You can use bullet points to convey this information. 
  • The marketing and sales section must have bolded headers that will explain your growth strategy, how you’ll communicate with the customer, and how you’ll process sales. Each can use bullet points and doesn’t need to be more than a paragraph long. 

The SBA’s traditional business plan sample looks at a fictional fledging toy company. Each section is thorough and formally formatted, with a bolded header in larger text and smaller font underneath.

You can download the SBA’s traditional business plan sample here

Lean startup business plan example

The lean startup business plan sample is very simple. The entire business plan is contained in a single chart, with each section containing three brief sentences at most. The writing is more concise, using bullet points and sometimes incomplete sentences.

The brand’s identity is a great example, which is much briefer compared to the traditional company description, saying “Wood Grain Toys manufactures high-quality hardwood toys for children ages 3-10.”

The market analysis is another strong example of the differences between the two. In a traditional business plan, the market analysis section is extensive and typically includes information about your customers, your competition, and what you’ll do differently. In the lean business startup plan example, however, this is simplified into two small section — “the competition” and “target market” — which contain a total of four sentences all together instead of multiple pages of content. 

You’re conveying fast facts here while giving the basic information that someone may need at a glance.

You can download the SBA’s traditional business plan sample here

Conclusion

Taking the time to write a strong, comprehensive business plan that can guide your business and persuade external team members to get on board is well worth the effort, whether you pen the plan yourself or hire outside help.

Business plans are a crucial part of connecting with financers, partners, vendors, and investors.  Since they can also guide your internal team on how to move forward during the early years of managing the business, they’re exceptionally valuable for multiple different purposes. They can help you convey why your business will be a success and why it’s such a great investment for everyone involved.

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Daniel

Daniel

Contributor @samcx.com. Passionate about everything Sales, Marketing and Account Management.

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