Do you have a brilliant small business idea? A business plan is an effective resource to help determine whether your idea is viable or not before you start investing time, money and other resources.
A well-researched, well-written business plan gives a clear perspective of your goals. It can help you turn your thoughts into actionable steps and pitch your idea to financial institutions or possible investors when you’re seeking funding.
A typical business plan is a document divided into parts with several features that include a description of the business and what it tends to offer, competition analysis, market research, capital, sales strategy, labour requirements, and financial statistics. To best represent your business idea and strategies, you may want to include more or fewer components in your plan.
If you’ve decided on the lucrative small business ideas to start, let me share with you how to write an effective business plan for your small business. Let’s get on with it…
How to write business plan for your small business
The table of contents below describes how the following business plan template is divided into sections. Each section can be copied and pasted into your own document; you will need to add or delete sections or make changes to suit your specific requirements.
Once you’re done, make sure to format it nicely and if applicable, have it professionally printed and bound. You want to make the best first impression with your business plan. Spice things up. Make it appealing, something people will want to pick up and read.
Parts of a Business Plan Explained
- Executive Summary
- Business/Industry Overview
- Market Analysis and Competition
- Sales and Marketing Plan
- Ownership and Management Plan
- Operating Plan
- Financial Plan
- Appendices and Exhibits
- Cover Page
1st Section: Executive Summary
The executive summary introduces the plan but is the last section to be written. It provides a concise and positive overview of your company and should pique the reader’s interest and pique their desire to learn more. The executive summary should not span more than two pages. It should include highlights or brief overviews of other sections of the plan.
- Describe your mission statement—what need does your new venture fill? Sell your idea.
- Briefly describe your company, focusing on key details such as size, location, management, and ownership.
- Describe your company’s main product(s) and/or service(s).
- Pinpoint the customer base you intend to serve and how your company will serve them.
- Summarize the competition and your strategy for gaining market share. What distinguishes you from the competition?
- Outline your financial projections for the first few years in business.
- Outline your startup’s financing needs.
2nd Section: Business/Industry Overview
This section provides an overview of the industry and goes into detail about what makes your company unique.
Describe the industry’s overall characteristics, including sales and other statistics. Take note of trends and demographics, as well as cultural, governmental, and economic influences.
Describe your company and its place in the industry.
Mention the existing competition, which you’ll go over in more detail in the following section.
Determine which market segment(s) you will target and what improved, unique, or lower-cost products and/or services you will provide.
Many business plans include a separate section for products/services to add more detail or highlight unique aspects.
3rd Section: Market Analysis and Competition
This section focuses on your company’s competitive advantage and supports it with financial models and statistics. You must clearly show that you have thoroughly researched your target market, evaluated the competition, and determined that there is sufficient demand for your products/services to make your business viable.
Define your geographic target market(s) for your products/services.
Explain why your products/services are needed.
Estimate the overall market size and the number of units of your products/services that the target market might purchase. Include forecasts of potential repeat-purchase volume and how economic or demographic changes may affect the market.
Estimate your sales volume and value comparing them to any existing competitors. In easily digestible charts and tables, highlight any key competitive advantages.
Describe any useful entry barriers that may help shield your company from the competition. These could include technology, capital, employee strengths, regulations or location.
If either (or both) of these sections portray your company favourably, you may want to split the target market description and competitive analysis into two different sections.
4th Section: Sales and Marketing Plan
Here, profits are discussed, with a detailed strategic view of how you intend to entice customers to buy your products and/or services, including pricing, advertising or promotion, distribution, sales, and post-sales support.
Product or Service Offerings
If your products and/or services do not have their own section earlier in the plan, this is the place to answer the question: What is your one-of-a-kind selling point? Describe your products and/or services, including how they benefit the customer and what differentiates them from your competitors’ offerings.
What pricing will you use for your goods/services? Pricing must be low enough to entice customers while also being high enough to cover costs and generate a profit. Pricing decisions can be based on a variety of financial models, such as value to the buyer or markup from cost. It could also be based on comparisons with similar products and/or services in the market.
Sales and Distribution
Describe how you intend to distribute products to customers. Will you be selling at a wholesale or retail level? What kind of packaging will you go for? How will the products be delivered? How will you deliver a service to a customer if you offer one? What payment methods will you use?
Advertising and Promotion
List the various media channels you intend to use to convey your message to customers (e.g., website, email, social media, or newspapers). Will you employ sales promotion techniques such as product demonstrations and free samples? How about trade shows and product launches? Don’t forget about more commonplace marketing materials like business cards, brochures, and flyers. You should also include an estimated budget.
5th Section: Ownership and Management Plan
This section describes your company’s legal structure, ownership, and (if applicable) management and staffing requirements.
Ownership structure: Describe your company’s legal structure (e.g., corporation, partnership, LLC, or sole proprietorship). If applicable, include ownership percentages. If the company is a sole proprietorship, then this is the only section that must be completed.
Management team: Describe the managers, outlining their roles and responsibilities, key employee positions, and how each will be compensated. Include concise résumés.
Advisory board: If applicable, include an advisory board as a supplemental management resource.
Human resources: Make a list of the types and numbers of employees or contractors you’ll require, as well as an estimate of their salaries and benefits.
External resources and services: Be sure to include any outside professional resources that you’ll need to acquire, such as lawyers, consultants, or accountants.
6th Section: Operating Plan
The operating plan outlines your company’s physical needs, such as an office, retail space, warehouse, equipment, labour, or supplies. This section will vary to a large extent depending on the industry; for example, a large manufacturer should provide full details about speciality equipment or supply chain, whereas a psychotherapist’s office can get away with a much shorter list.
If your company is small (for example, a one-person, home-based consulting firm), you may want to skip the operating plan section entirely and include the operational essentials in the business overview.
Production: If you’re into manufacturing, state the time it takes to produce a unit and when you will be ready to begin production. Include factors that could affect production time and how you’ll handle potential problems, such as rush orders.
Development: Describe what you’ve done so far to identify potential locations, equipment sources, supply chains, and other relevant relationships. Describe the process of making a product.
Staffing: Describe the expected staffing requirements as well as the primary responsibilities of staff members, particularly key employees. Describe how you will recruit employees, including the employment relationship (contract, part-time, full-time), as well as any training requirements and how these will be met.
Facilities: Describe the physical location of the company’s facilities. Include geographical or building requirements; estimated square floor (with room for growth if expected); mortgage/leasing costs; utilities, maintenance, and related overhead costs. Include zoning approvals and other permits that you’ll need to carry out operations.
Supplies: You should include a description of the materials required, reliable sources, major suppliers, and how you will manage inventory if your business is in manufacturing, retail, or food services.
Equipment: Include a list of any specialized equipment required (as well as the cost), whether you will be getting it on a lease or purchasing it, and where you would obtain it.
7th Section: Financial Plan
For lenders or investors, the most important section is the financial plan. The goal is to show that your company will grow and become profitable. You will need to make realistic predictions or forecasts to accomplish this.
Tip: A smart financial plan understates revenues and overstates expenses to avoid inflated expectations.
Income Statements: Income statements show projected revenues, expenses, and profit. For a startup business, do this every month for at least the first year.
Breakeven analysis: Having a breakeven analysis as part of the package will show investors or lenders how many sales you need to accomplish to make a profit.
Cash-flow projections: A cash-flow projection shows your expected monthly cash revenues and expenses. To be considered a good credit risk, you must demonstrate your ability to manage your cash flow.
Balance sheet: A balance sheet is a snapshot of your company’s assets, liabilities, and equity at a specific point in time. This would be the first day of business for a startup.
8th Section: Appendices and Exhibits
This section contains, in detail, any information required to support other parts of the plan.
- Examples of Appendix or Exhibit items include:
- Extensive market research and competitor analysis
- Business owners’ credit histories
- Diagrams and/or research on your company’s products and/or services
- Owners’ and key employees’ resumes
- References from business associates
- Plans for a site, a building, or an office
- Brochures and other marketing materials
- Copies of mortgage documents or leases for equipment (or quotes)
Links to your company’s website, as well as any other materials that may be attractive to potential lenders or investors.
The appendix section serves as a store of materials that an investor can use to either assess specific areas of your business plan in better detail or as a point from which he can begin his due diligence.
The cover page should be simple and not cluttered with too much information. It should have:
- Your company logo if you have any
- A title for the business plan. Example: Business Plan for “Your Business Here”
- Business name
- Business address
- Contact information (e.g. Email, Phone)
- Business plan completion date
- Confidentiality statement
- Tip: If you’re sending it to a company or individual, you should include: Presented to “Name” At “Company“
Using a Business Plan Template: The Pros and Cons
- Ready-to-use designs
- Free downloads
- Generic, not custom-made
- Additional skills are required
- No guidance on financial actions
Ready-to-use designs: Templates provide general guidelines on what information is needed and how to organize it, so you don’t have to start from scratch. Instructions or text prompts may be included in more elaborate templates.
Free downloads: There are numerous free business plan templates available online. You can always use them to compare formats and features, as well as to improve your own.
Variations: If you know what kind of business plan you need – traditional, industry-specific, or lean – there’s a good chance you’ll be able to find a template that fits your needs.
Generic, not customized: Templates typically contain only the fundamentals, and tailoring the template to your business will require significant effort. You’ll have to reformat, improve copy, and populate tables among a lot of things.
No guidance on financial actions: You will need industry knowledge to apply the right financial models to your business. You will also need math skills to generate formulas and calculate figures.
Additional skills are required: Some degree of tech-savvy is required to integrate charts and graphs, merge data from spreadsheets, and keep it all up-to-date.
Simple vs Detailed Business Plan: Which Should You Go For?
A large company’s corporate business plan can run into hundreds of pages. However, for a small business, it’s best to keep the business plan brief and to the point. More so if you’re submitting it to bankers or investors. A simple 35 to 50 pages should suffice, with more space reserved for extras like photos of products, equipment, logos, or business premises or site plans. Your audience will most likely prefer concise research and analysis to long, wordy descriptions.
When compared to those who do not have a business plan, entrepreneurs who work with one are nearly twice as likely to secure financing and grow their business.
Congratulations! You are now familiar with the fundamentals of writing a business plan. Time to get to work!