An effective business plan is an essential tool for any company, guiding critical strategy and growth decisions. Following key steps to develop your plan sets you up for success. Learn business plan best practices, view plan templates, and get examples to optimize your business strategy.
Understand Why You Need a Business Plan
A well-crafted business plan serves many vital purposes:
- Strategic planning: The process of researching and writing a plan helps founders clarify objectives, evaluate opportunities and risks, and determine key next steps.
- Guiding decisions: With a plan in place, all activities can tie back to defined goals, keeping efforts aligned.
- Measuring progress: Plans provide benchmarks that let you track progress and pivot when needed.
- Securing funding: Investors want to see a proven concept and strategic growth plan before providing capital.
- Assigning responsibilities: Plans outline individual goals and who is accountable for what.
- Explaining your business: A plan helps communicate your vision to partners, team members, and other stakeholders.
Ultimately, a plan turns an idea into an actionable strategy.
Know the Standard Business Plan Format
Most plans follow a common structure comprised of several key sections:
Executive Summary
A high-level overview of the key elements of your plan, often written last. Include:
- Business description/objectives
- Products/services offered
- Target market highlights
- Competition differentiation
- Management team introductions
- Financial projections and key milestones
- Funding needs
Keep it to 1-2 pages maximum.
Company Description
Detailed description covering:
- Business concept, vision, and niche
- Legal entity structure
- Office location(s)
- Accomplishments to date
Products and Services
Explain:
- Your core products and/or services
- Pricing strategy
- Production/delivery plans
- Competitive advantages
Market Analysis
Research the market to analyze:
- Customer segments and target demographics
- Buyer personas
- Market size/trends
- Competitor landscape
Strategy and Implementation
Outline:
- Sales and marketing strategies
- Operational plan/needs
- Growth tactics
- Hiring plan
- Financial plan
- Actionable milestones
Management Team
Summary of:
- Key team members and responsibilities
- Ownership structure
- Board/advisors
- Organizational chart
- Culture and values
- Team’s competitive advantages
Financial Plan
Include:
- Past financials (if applicable)
- Breakdown of startup costs
- Revenue model and sales projections
- Expense projections
- Profit/loss forecast
- Cash flow assumptions
- Projected balance sheet
Appendix
Any supplemental materials, like:
- Bios/resumes of key team members
- Product literature
- Market research data
- Legal documents
- Credit histories (if seeking funding)
Conduct Extensive Research
Thorough research across all plan sections is crucial for proving concepts and making strategic decisions. Key areas to research:
- Market demand: Is there proven demand for your offering? Analyze target demographics, buyer pain points, purchase drivers, and how much consumers currently spend to solve problems your business addresses.
- Competitive landscape: Identify direct and indirect competitors. Study their offerings, pricing, successes/failures, and opportunities to differentiate.
- Industry analysis: Understand your industry’s overall size, historic growth, trends, regulations, and future outlook. Lookup industry reports from reputable sources.
- Operating requirements: Explore available real estate options, equipment costs, licensing and legal needs, and all operational expenses required to deliver your product/service and run the business.
- Startup costs: Estimate upfront costs like equipment purchases, security deposits, branding, marketing, etc. Factor in a contingency buffer (~10-20% extra) for unplanned expenses.
- Revenue drivers: Determine your recurring revenue streams and potential sales volume based on market size data, expected conversions from campaigns, and other metrics.
Do in-depth research to validate every assumption and projection. Cite credible sources.
Choose an Effective Business Plan Format
Beyond the standard structure, consider these formatting tips:
- Keep it brief: Avoid unnecessary length and complexity. Use concise summaries, bullet points, charts, etc.
- Visually engage: Use formatting like headings, white space, lists, and graphics to facilitate skimming.
- Funnel structure: Start broad describing the opportunity, then steadily narrow focus toward granular financials and implementation tactics.
- Call out key data: Highlight critical info like milestones and financial projections with bold fonts, underlining, or text callouts.
- Link between sections: Reference relevant data from other sections rather than duplicating content. Cross-link data points thematically.
- Add appendices: Supplement with supporting materials, keeping the plan content streamlined.
Formatting for brevity and skimmability allows busy investors to efficiently evaluate your business potential.
Write Convincing Plan Content
Follow these tips for developing compelling, substantive content:
- Avoid hype: Craft content that feels realistic and evidence-based rather than exaggerated. Back claims with stats.
- Tell a story: Build narrative flow moving from opportunity to strategy to financials.
- Explain benefits: Focus on the value customers derive rather than just features.
- Address risks: Identify potential pitfalls and dangers, outlining mitigation strategies. This builds credibility.
- Get feedback: Ask knowledgeable colleagues to review your plan and provide constructive criticism.
- Use visuals: Charts demonstrating traction, financial projections, process flows, etc. help communicate complex concepts simply.
- Show don't tell: Provide concrete examples, data, and evidence to back statements.
- Be specific: Ambiguity undermines credibility. Include thorough operational details.
- Mind tone: Strike a professional tone avoiding unnecessary adjectives and emotive language.
With compelling, precise content presented strategically, your plan will resonate with investors.
Outline Your Strategic Growth Plan
Investors want to understand your strategic plan for scaling, including:
Go-to-Market Strategy
Explain marketing/sales tactics to acquire and retain customers:
- Key channels - paid ads, SEO, email, salespeople? Mix?
- Promotions/offers
- Partnerships
- Customer service/support
Geographic Expansion
When/how will you expand to new markets? Consider:
- Regional → national → global trajectory
- Orderly city-by-city or state-by-state sequence
- International expansion - country prioritization
New Products/Services Roadmap
Overview your product development pipeline:
- R&D stages
- Target release dates
- Market needs addressed
Financial Milestones
Illustrate growth through milestones like:
- Hitting scale targets: customers, revenue, market share
- Achieving cash flow positive
- Opening locations in new regions
- Expanding manufacturing capabilities
Outline an ambitious but viable strategic growth plan.
Forecast Detailed Financials
Thorough financial projections are imperative for pitching investors and managing ongoing operations.
Past Financials
If you have an existing business, include past financial statements like income statements, balance sheets, and cash flow statements for e.g. the last 3-5 years.
Startup Costs
Detail expected startup costs, like:
- Incorporation/legal filings
- Rent and buildout
- Equipment
- Inventory
- Branding
- Marketing
- Working capital/cash buffer
P&L Projections
Develop a month-by-month profit and loss projection covering at minimum the first year. Factor in:
- Anticipated revenue
- Expected cost of goods sold and gross margins
- Fixed and variable operating expenses
- All overhead costs
- Planned hires
Project when you will turn cash flow positive.
Cash Flow Assumptions
Document assumptions driving cash flow projections like:
- Gross margins
- Percentage of sales on credit
- Inventory turnover rate
- Days sales outstanding
- Monthly payroll costs
Thoroughly justify projections.
#8 Secure Startup Funding (If Needed)
Some tips if your plan involves soliciting investors:
- Determine how much funding you need and how it will be used. Request a reasonable amount.
- Highlight how the investment enables important growth milestones that expand profit potential.
- Be transparent about risks and challenges, not just upsides.
- Emphasize your team’s unique capabilities and competitive edges.
- Outline future funding needs and plans if applicable.
- Keep investor pitch decks concise with just essential info.
- Practice pitching and anticipate likely questions.
With a strategic growth plan and demonstrated market opportunity, you can demonstrate attractive ROI potential to investors.
Set SMART Goals
Outline tangible objectives and key results using the SMART framework:
- Specific: Straightforward, detailed, and well-defined goals.
- Measurable: Quantifiable metrics to track progress.
- Achievable: Ambitious but viable given constraints.
- Relevant: Aligns with overall vision and direction.
- Time-bound: Defined target completion dates.
SMART goals like “Acquire 1,000 new customers within 9 months of launch by expanding to Seattle, San Francisco, and Los Angeles” keep your team focused.
Make Strategic Decisions
With extensive research and analysis completed, make decisions driving the rest of your plan:
- Business legal structure - LLC, sole proprietorship? Impacts liability and taxes.
- Pricing model - price points, recurring plans? Balance profitability and value.
- Sales process - direct, wholesale, multi-channel? Balance cost, control, and reach.
- Hiring plan - in-house vs outsourcing? Consider needs, costs, and capabilities.
- Office space - purchasing or leasing? Factor costs, logistics, growth plans and cash flow.
- Financing - self-funded, debt financing, investors? Model cash flow needs.
- Accounting software - QuickBooks, Xero, Wave? Balance features and cost.
- Key partnerships - who helps you deliver offerings, extend reach?
Research empowers informed strategic decisions for long-term success.
Craft an Executive Summary
Summarize key plan elements in a 1-2 page executive summary:
- Overview of business concept and offerings
- Founders’ experience/edge
- Target customers and underserved needs addressed
- Projected revenue/growth
- Competitive differentiation
- Key milestones and metrics
- Funding needs and uses
The executive summary gives readers an overview of the opportunity and strategic growth plan. Write it last after settling on details. Lead with your strongest selling points.
Use Plan Templates Thoughtfully
Leverage plan templates as helpful starting points but avoid over-reliance. Templates facilitate formatting, but compelling content comes from rigorous research and analysis.
Prioritize:
- Relevance - Ensure content aligns with your specific concept, product, market, and priorities.
- Strategic insights - Go beyond form-filling to share non-obvious learnings and “aha” moments from research.
- Compelling writing - Bring the opportunity to life through vivid descriptions and narratives.
- Visually engaging - Use formatting, white space, and visuals to facilitate easy scanning.
Treat templates as a tool, but make the content your own.
Get Feedback from Trusted Advisors
Before finalizing your plan, solicit feedback from reliable contacts like:
- Knowledgeable founders: Those experienced with plans can provide valuable input on strategy and financials.
- Target customers: Get reactions from people mirroring your buyer personas. Incorporate product suggestions.
- Domain experts: Ask those familiar with your industry for insights on trends, benchmarks, and projections.
- Investors: For plans seeking funding, get investor feedback on perceived risks, viability, and areas needing clarity.
Incorporate constructive feedback to extend your knowledge gaps and make improvements. Just be mindful advisors may offer contradicting opinions.
Optimize and Update Your Plan
Don’t let your plan collect dust on a shelf. Revisit it regularly to:
- Review progress toward goals and realign as needed.
- Update financial projections based on latest performance.
- Refine strategies that aren’t working.
- Identify new opportunities in the market.
- Modify implementation tactics/resource allocation based on learnings.
Continually evolve your plan as you hit milestones, learn, and grow your business. An outdated plan loses relevance.
Example Business Plans
Review abbreviated examples illustrating key plan elements:
Bakery Business Plan
Executive Summary
Hip local bakery, specializing in artisanal breads and pastries with a sustainability focus. Offering pickup and delivery with goal of expanding locations throughout Oregon. Run by experienced baker with 25 years experience.
Products and Services
Breads: Rustic Italian, multigrain, challah, cinnamon swirl, sourdough, baguettes, etc. Plus croissants, scones, muffins, cookies.
Coffee and espresso drinks. Beer and wine options. Gluten free and vegan menus. Bread club subscription. Catering/wholesale.
Market Analysis
Targeting urban millennials and upscale suburban families. Current options lack artisanal, sustainable focus we provide. Estimated $18M annual market locally.
Strategy and Implementation
Start with small shop in downtown Portland. Expand to Eugene, Bend, and Salem by 2025. Partner with local farms for sustainable ingredients. Strong digital marketing and social media leverage. Bring on pastry chef and baker in Y2.
Management Team
Led by Anne Smith (25 yr baker/owner of The Bread Shop) and Tom Wilson (MBA, 10 yr food industry finance manager).
Financial Plan
$100K startup costs. Investor funding secured. Year 1 projected revenue: $550K. Expenses: $300K. Pre-tax profit: $250K. Breakeven in 8 months.
Tech Company Plan
Executive Summary
SaaS platform delivering AI solutions to streamline supply chain operations. Improves inventory management, logistics, and order accuracy. Reduces costs 15-30%.
Market Analysis
$60B TAM for supply chain management software. Targeting manufacturing, distribution, and retail companies with $50M+ in annual revenue.
Strategy and Implementation
Leverage advanced machine learning and predictive algorithms developed past 3 years. Release MVP in mid-2023. Onboard initial 20 large customers through direct sales approach focusing on bottom-line cost savings pitch.
Management Team
Led by CEO who previously founded successful logistics startup acquired by Oracle. Strong advisory board with Fortune 500 supply chain execs.
Financials
$5M startup costs. Seeking $2M seed round. Projected 2025 revenue of $15M based on acquiring 75 mid-large customers at $300k ARR each. Estimated expenses of $10M by 2025.
Make Your Plan Stand Out
Set your plan apart from the pack by:
- Demonstrating deep understanding of market needs through buyer research.
- Featuring insights from failures and lessons learned, not just successes.
- Forecasting conservatively to build credibility.
- Detailing unique partnerships and strategic relationships secured.
- Outlining future funding requirements realistically.
- Explaining contingencies and plan B options for key risks.
- Showcasing capabilities and passion of management team through bios/credentials.
With a strategically sound business plan backed by extensive research, you’re ready to launch and scale your business with success.
