Planning to succeed
No professional sports team goes into a game without a plan. Business is no different.
Here’s what a formal, written business plan does for you: Your plan is your North Star. It helps organize ideas, set priorities, and keep your decisions focused on achieving your goals.
A well-constructed plan — and we’re here to help you with that construction — also makes it easier to manage your business and know you’re on track in terms of growing your product or services, your sales, and more.
A clear plan is also extremely useful in helping you get funding and create partnerships.
And finally, the process of writing the plan can clarify your thinking, identify challenges and solutions, and generally raise your chances of success.
Great news: Your plan doesn’t need to be perfect, so you don’t need to get bogged down trying to make it perfect. A business plan is a living document. It will change over time, and that’s completely normal — you’ll test, learn, and improve your plan as you go along. (The competitive business world calls to mind the famous WWI quote, “No battle plan survives first contact with the enemy.”)
The most important thing is to get going. This guide spells out all the elements to include, so you’re ready!
Here are the seven building blocks a business plan should include:
- A title page, with a good company name.
- An executive summary.
- A company description. Who are you?
- A market analysis. Who is the customer, and the competition?
- A product or service description. What do you make or do?
- A marketing and sales plan. How will you find and keep customers?
- A financial plan, covering the next 18 to 24 months.
Experts say a good plan balances detail and summary. It’s important to provide some specific information, but you can’t be all things to all people, nor plan for every single possibility — and of course you want to spend your energy building the business, not churning out a 500-page document. (In fact, most sources say going beyond 20 to 30 pages suggests a business plan should be further simplified and summarized. That means each of the following sections will be between one and three pages long.)
Let’s dig into each section and identify the details that will make the plan work for you.
- Title page
What could be simpler than a title page?
Well, your simple title page reflects one very crucial aspect of your business: Its name.
Your company name matters. Most experts suggest choosing something clear and direct (Dave’s Lawn Care, The Hot Dog Company, Polished), so customers can easily find you and know what you do.
Yes, there is room for creativity in business, and many successful companies have unusual names. Ultimately you want a name that you love — but it helps if customers love it too. (You can learn more in our companion guide, How to Choose a Business Name.)
- Executive summary
The executive summary is a short description of who you are, the problem you solve, and why you matter now. It should also include your high-level vision for the company.
A short executive summary highlights key points that are spelled out later in the plan. This paragraph or two will be enough for any reader – a potential customer, a partner, Mom or Dad — to understand what your business does and why people need it.
If you are seeking an investment partner or some form of funding, that will be a primary use of the business plan, so the summary should include the most important relevant numbers from the financial section that you will include later in the document.
The executive summary is also a good place to put a table of contents for the rest of the plan — reflecting the outline above.
You might write a quick first draft of this executive summary, and then revisit and revise it after you’ve completed the more detailed sections that follow.
- Company description
Who are you, and what do you stand for?
Those are first questions for your company description. Yours may include a full-blown ‘mission statement,’ like Patagonia’s “We’re in business to save our home planet,” but it may be simpler or less ambitious than that. The description lets readers quickly understand why you’re in business.
The company description section of your business plan should also cover:
- How the company is organized. Are you starting a Limited Liability Company (LLC), a sole proprietorship, or some other legal structure? (The web offers convenient definitions of all these terms and their implications for things like taxes and liability. A lawyer can help with advice and filing necessary paperwork.) This section of the plan can also describe how your company will operate on a daily basis.
- The management team, if applicable.
- The company location, and, if applicable, surrounding areas that the business serves.
- Company value proposition.
The central question of your value proposition is, how you are different then other businesses that are already in your market — in terms of what you offer customers?
Will you offer high-touch service, a new technology, lower prices, exclusive products, a more convenient location?
You will have an opportunity later in the plan for a more comprehensive list of product/service features. This section can be shorter and more focused on the value you will uniquely provide.
- Market Analysis
The market analysis section identifies and analyzes important factors including:
- Whether there is likely to be an appetite for the specific features/products or competitive differentiation you propose (i.e. the company value proposition you described in the previous section).
- The rough potential size of the demand for your offerings.
- The number and strength of your competitors.
This analysis needs to be supported by solid numbers, not just casual observation! That means market research will be the foundation of this section of your business plan.
Typical market research involves two types:
- Secondary research: Looking at already-published data sources.
- Primary research: Research you conduct, like surveying potential customers.
Secondary research: Let’s start here, because (despite the name) this is a logical first step — secondary research is usually easier and faster to get, and it will help you identify who you want to talk to later, in the primary research phase.
Public data sources provide information such as demographics by geographic location. Paid market research data services may provide additional details.
Again, you will want to capture not only general market data, but also as much useful data as possible about your direct competitors — what are their sales, number of employees or locations, and so on. Online services such as ComScore and Google’s AdWords give insights into competitors’ digital performance, including online traffic.
Depending on your product or service, however, secondary sources probably won’t tell you everything you need to know.
Primary research, on the other hand, allows you to ask potential customers for exactly the data you want, and get as much detail as you need. (The tradeoff, as you would expect, is that this direct customer contact is often more expensive and time-consuming than secondary research.)
Methods for primary research can include:
- One-on-one interviews.
- Surveys and questionnaires.
- Focus groups or panels.
Each approach has strengths and weaknesses. Fortunately, today you will find more options and services for conducting primary research than ever before.
While you can scale your research efforts to match your available budget, a solid business plan is expected to include some primary research, particularly for investment or other partners who want to see potential buyers validating your idea.
- Your product or service description
At last! With the market conditions and demand laid out in the previous section, you have provided context for the reader to understand what comes next. Now you are ready to describe your offering in some detail.
This description will include:
- What you are offering.
- The benefits to the customer.
- Sourcing and fulfillment, if applicable — how you will get the inventory, raw materials, or ingredients that go into your product, and how customers will receive their orders.
- Pricing models — these models can vary even for a single product, depending on how it is being distributed, with different channels taking different costs and markups.
- Marketing and sales plan
Customers don’t just show up as soon as you hang out your shingle — so many entrepreneurs have learned the hard way.
This section of your business plan will spell out your initial and ongoing efforts to build and retain your customer base.
Here are some elements to include in this section:
- Your sales and marketing budget, including
- Dedicated sales personnel or outsourced sales services
- Advertising or direct marketing expenses
- The cost of producing supporting materials such as sales sheets and ‘leave-behinds’
- How you will measure the success of sales and marketing initiatives, versus their cost.
- What marketing support services you plan to utilize.
- Customer retention plans, which might include descriptions of customer service, sales follow-up or service renewal contacts, and more.
Potential partners and investors will take great interest in your financial projections, which show how you expect your revenue, costs, and profits to grow over time.
But an even greater benefit is that the financials section of your plan helps you take a clear-eyed look at milestones you want to hit, and then make the decisions needed to get there.
Experts recommend including three years’ worth of projected financial performance in your business plan. Naturally, the first year will provide even more detail, broken out on a quarterly or even monthly basis.
Your business plan should include:
- Income forecasts.
- Capital expense budget projections.
- Cash flow statements.
- Balance sheets.
- Tax planning, including expected quarterly payments.
You can find templates for each of these elements online, and built into web-based or packaged financial software. Many accountants specialize in small-business finance as well, and their services can be very helpful if this not your strong suit.
No one is completely certain about how small business finances will unfold. However, being specific about your expected numbers allows you to recognize when things are off course, and potentially identify the root cause more quickly.
And on the positive side of the ledger, a plan allows you to know how to best invest money that comes in ahead of schedule
So get started!
A business plan covering all of this ground might feel like a lot of work. Fortunately, each step can help you clarify your ultimate goals, and how to reach them. Your business plan really works for you.
Again, a business plan is a living document — your first draft certainly won’t be your last, and you should expect to update and improve the plan as you launch your business and learn from experience.