For many Americans, the idea of becoming your own boss is exciting—you get to be the visionary behind your products, schedule your own hours, and enjoy a lot of freedom. But getting to that point takes some work upfront.
Creating a business plan is one of the most important initial steps to take as you begin your entrepreneurial adventure. Here, we’ll explain how to write a business plan, explain the purpose of business plans, and share some examples that may help you draft your own.
Read on for an explanation and examples of business plans, plus, a step-by-step guide. Or, use the links below to skip ahead to the sections you’re most interested in.
- Why Write a Business Plan?
- Who Needs a Business Plan?
- Types of Business Plans
- How to write a traditional business plan
- How to write a lean startup business plan
- Starting a Business During COVID-19
- Wrapping Up
Why Write a Business Plan?
A business plan is an important document that creates guidelines for how you run your business, how you’ll approach market competitors, and how you plan to grow over time. Plus, a good business plan serves as a tool to help you secure funding from lenders or investors; financiers want to see a positive trajectory path and your business plan can help you illustrate that vision.
There are several benefits of a business plan, including:
- Demonstrating how your business will be structured and run
- Creating a plan for growth
- Serving as a tool to help secure funding
- Acting as an internal roadmap
- Fostering recruiting efforts
Who Needs a Business Plan?
A business plan can serve any business owner or partner who could benefit from a comprehensive plan or increased access to funding. Depending on what your end goal is, there are two types of business plans you can use, the traditional plan and lean startup plan. In the next section, we’ll discuss the typical components of these business plan examples.
Types of Business Plans
When you’re ready to create your business plan, you’ll have two formats to choose from: the traditional business plan and a lean startup plan. Depending on your business’ size, structure, and goals, you may go for a more detailed version—the traditional plan—or a pared-down one—the lean startup plan. Let’s take a closer look at the differences and similarities between the two.
Traditional business plan
A traditional business plan is the more in-depth version of the two standard options. If you’re a more detail-oriented person or are trying to appeal to key investors, it may benefit you to provide more detail on your business plan. Thus, learning how to write a traditional business plan may best serve you.
The typical components of a traditional business plan are:
- Executive summary
- Company description
- Market analysis
- Organization and management structure
- Marketing and sales statement
- Funding request
- Financial projections
Because there are more parts to this plan, it typically takes more time and thought to flesh out. We’ll show you how to write a traditional business plan a little later on in this post.
Lean startup plan
The lean startup format is less comprehensive than a traditional business plan, but it can be a great option if you’re looking to launch your business quickly. Perhaps you already have the financing you need and you just want to get the show on the road. In that case, a simple business plan could make more sense for you.
The main components of a lean startup plan include:
- Key partnerships
- Key activities
- Key resources
- Value proposition
- Customer relationships
- Customer segments
- Communication channels
- Cost structure
- Revenue streams
In these next few sections, we’ll take a closer look at each component of traditional business plans and lean startup plans. Understanding the context behind these will help you decide which style makes the most sense for your organization.
How to write a traditional business plan
Traditional business plans typically consist of seven sections that introduce the business, analyze its prospective market, outline sales plans, and finally, state its funding needs. Below, we’ll break down each individual section to help you create a thorough and effective business plan.
The executive summary is a high-level look at your business’ purpose and leadership. In this section, you may include things like your mission and values, location, short team bios, and a condensed description of your product or service.
The company description is the part of your plan where you really want your product and business model to shine. Here, you’ll want to explain how your product or service works, the problem it solves for your target audience, what makes it unique, and how you plan to succeed.
This section is also a good place to highlight any industry experts on your team, impressive investors, or other interesting benefits that may be appealing to potential partners.
Market analysis is a key component of your business plan because it helps investors see the promise behind your company. A market analysis basically summarizes what the existing market looks like, including, what your competitors are doing well and where they may be lacking. Use this section to answer these questions and follow up with how your product or service will stand out among your toughest competition.
Organization and management
The organization and management piece should cover logistics like the legal structure of your business—is it an LLC, sole proprietorship, or partnership. And, it should outline your organizational structure, for example, who your leadership team consists of and who reports to whom.
ProTip: An organizational flow chart is a good way to illustrate your internal team’s structure.
Marketing and sales
Marketing and sales can play an important role in a business’ path toward growth, meaning that prospective investors will be interested in how you’ll tackle this area. In this section of your business plan, you’ll want to outline your basic sales and marketing tactics and how you’ll plan to scale as your business grows.
If you plan to use your business plan as a tool to get funding, you will want to include a funding request in your final document. A funding request describes your capital needs and how you plan to spend that money over a certain period of time. Depending on the lender or investor you’re trying to appeal to, you may want to include a plan for debt repayment within your business plan too.
The final component of our traditional business plan sample is a financial projection. Financial projections use data and accounting records to predict the status of your finances over the next month, quarter, year, and so on and so forth. This is an especially important piece for future partners and investors because it will help them assess their financial risk as well as their room for reward.
As we discussed at the beginning of this post, a traditional business plan is just one example of a business plan. If you or your prospective partners prefer to have more detail, this type of plan is probably best for your needs. Otherwise, a lean startup plan may be a better option—we’ll show you how to write one in the following section.
How to write a lean startup business plan
If time is of the essence and details aren’t so much, a lean startup plan may be best suited for your business. As we briefly mentioned, lean startup plans are typically used when funding isn’t needed or if partners are in a hurry to open up shop.
Still, there are several important pieces involved in writing a business plan in the lean startup format. Let’s take a look.
Key partnerships are people or organizations that your business intends to work with on a regular basis. This can include:
- Product manufacturers
- Packaging suppliers
- Marketing and web service agencies
- Social media influencers or small business partners
- Contracted workers
In this segment, identify who you plan to work with to make your business a big success.
The key activities section helps call out your business’ differentiators. For example, what’s your business’ competitive edge on existing brands? Do you source all of your products locally? Is your organization black-owned? What social causes are important to your mission statement?
This section of your lean startup plan will identify resources you’ll plan to use to increase the value of your product or service for your customers. This may include staffing efforts, partnerships, capital, assets, patented products, and more.
A value proposition combines your company’s mission with its unique characteristics that help you bring something new to the table. When writing this part of your business plan, consider the question, “what does your business have that the current market competition doesn’t?”.
Your customers are the fuel that keeps your business going, so naturally, they deserve to make an appearance on your business plan outline. In this section, you’ll want to show how you see the customer experience playing out.
Some of the things you can mention here include:
- Details about your sales funnel
- Your definition of a sale
- What happens when a customer makes a purchase
When you began conceptualizing your business’ primary product or service, it’s likely that you had a specific customer in mind. Maybe they’re a Gen Z’er or Millennial learning how to manage their money, or perhaps they’re a parent trying to adapt to the work from home model. No matter who you’re trying to reach, it’s important that you identify them in the customer segment (aka target audience) section.
Including this description in your business plan will help you create a better strategy for connecting to your audience in the long term. Your customer segments section should give you a good idea of who your business is serving, so details like age, gender, race, occupation, and general interest should be helpful.
Building on the information you gathered in the previous section, you can get a good grasp on how your target market likes to communicate and where you’re most likely to connect with them. For example, younger audiences may be more likely to use social media to communicate with their favourite brands, while older audiences might prefer email communications.
By briefly noting communication channels in your business plan, you can identify necessary resources and start budgeting for your small business’ communication costs.
The cost structure is a key component of the financial aspects of your business plan. This section illustrates the fixed and variable costs your business expects to incur. Some examples may include : manufacturing, rent, salaries, and utilities.
Taking note of these costs will help you learn how to budget as you get started and as you scale business growth.
No matter what product or service your organization offers, noting how you intend to make money is one of the most important components of a business plan. In this section, include any sources of revenue you plan to take advantage of, including:
- Direct sales
- Subscription fees
- Selling ad space
- Licensing content to customers
Whether you choose to use the lean startup format or the traditional version, it’s a good idea to invest time in writing your business plan. Creating a professional template, carefully checking for errors, and adding custom branding are a few things you can do to enhance your document’s presentation.
Starting a Business During COVID-19
The ongoing COVID-19 pandemic has caused many of us to shift our careers, personal goals, and priorities, both by choice and because of circumstance. If these unique times have inspired you to start building your own business, there are certainly some considerations to make before you jump in. Let’s take a look at some suggestions and cautionary tips from the US Department of Commerce.
- Consider whether your business is in a position to succeed during a global pandemic and in a post-pandemic world. Businesses that are in high demand during the coronavirus pandemic include:
- Delivery services
- Cleaning services
- Online fitness providers and fitness equipment products
- Landscaping and household care providers
- Telehealth services
- PPE manufacturers
- Create a solid plan for digital marketing. With everyone at home and online, you will want to have a strategy for spreading the word about your company through social media, email, paid ads, and other virtual venues.
- Develop a pandemic plan as well as a long-term recession-proof business plan.
- Embrace flexibility and keep your head up. With so many unknowns circling throughout the last year, the Department of Commerce encourages new and seasoned business owners to be prepared for change and use business resources to stay motivated.
If you’re looking to launch your own business in the near future, learning how to write a business plan can be a solid first step. Before you run off to put your plan into action, keep these high-level takeaways in mind:
- A business plan is a document that can provide organizational and growth guidelines for your business to refer back to as you scale, solicit funding, and shift strategies. The purpose of a business plan can vary, but it’s often used as a resource to secure financing, partners, and talent.
- There are two standard formats to choose from: a traditional business plan and a lean startup plan. A traditional business plan is more comprehensive and best suited for businesses appealing to investors and prospective partners. On the other hand, a lean startup plan is typically leveraged when funding has already been sorted or when a launch needs to be expedited.
- The components of a business plan will vary depending on the format that best fits your operation.
- If you plan to start a business during the COVID-19 pandemic, carefully consider the pros and cons listed above. As always, reflect on your own finances, goals, and personal circumstances to make the most informed decision.
- Check out the Mint blog for business budgeting tips, personal finance education, and more.
Don’t forget to bookmark this page so you can refer back to these tips as you start to develop a business plan of your own. Best of luck in your entrepreneurial endeavours!