How to Make a Business Plan: 5 Steps
A well written business plan can help attract funding sources, create realistic pricing and sales targets, and map out an operational plan for the first months, even years, of a new business. A lot is riding on knowing how to make a business plan that is thorough and polished, but researching and writing your business plan doesn’t have feel overwhelming.
Finding an appropriate template with the right elements to help you accomplish your goals is one way to simplify your task. Another is to divide the process into a series of manageable steps, each focusing on a different aspect of your plan.
The following five steps can help guide you through the process:
- Study your field and select the appropriate template.
- Focus on perfecting your summary.
- Highlight your business’s assets.
- Make sure the numbers work.
- Focus on persuasion.
Step 1. Research Your Field and Select the Appropriate Template
Not all business sectors require identical plans. The amount of content and detail, as well as the categories that investors will expect you to include, can vary widely, depending on your business sector –retail, manufacturing, professional service provider, or contractor – investors in each category of endeavor will have different expectations.
A traditional retail business, for example, may require 20 pages or more of material to gain a small business loan, while a larger scale enterprise could require more than 100 pages to attract venture capital, and a simple startup seeking a small amount of funding might be able to get by with a one-pager.
The key is to do your homework. Consult professional associations in your field to learn how to make a business plan that meets investor expectations. Network with other entrepreneurs to see if they would be willing to show you how they organized their own business plans. You can get started by selecting from basic template options like those available from the U.S. Chamber of Commerce.
While the sections your business plan requires may vary depending on whether you are selling products or providing services, manufacturing gadgets or creating content, nearly all business plans need to include the following sections:
- Executive summary
- Company description or overview
- Market or competitive analysis
- Organizational structure
- Service or product description
- Marketing and sales strategy
- Funding needs and financial forecast
Depending on the type of business you are hoping to start or revamp, you may need to include one or more of the following sections:
- Target audience or customer, including demographics
- Mission or vision statement
- Operational needs and costs
- Key leadership
- Appendices
Step. 2. Focus on Your Summary
Your business plan’s summary should focus on the problems you hope to solve or the benefits you hope to provide for your target customer. This initial section of your business plan will likely be the first element of your document you draft and the one you spend the most time revising.
It’s crucial to know how to make a business plan compelling enough to engage your readers, convince them to read your entire plan, and get them excited enough to consider giving you startup capital. It must be polished enough to convince investors their money is safe with you and likely to grow.
Think of it as your elevator pitch in written form. It needs to be easily digestible, as well as specific and detailed enough to give your target audience a basic idea of how your company strategy will lead to a profitable return on investment.
Your summary should provide your company’s vision, focus, mission, purpose, company culture, and way of doing business. It should articulate your commitment to your customers and community. The time you take to perfect your summary is an investment in your business goals, since the basic elements you include here can serve as guiding principles and core values for your company for years to come.
Step 3. Highlight Your Assets
Whatever you feel is your advantage in the marketplace –superior design, efficiency, or service –should be prominently highlighted in your business plan. If you have a highly accomplished leadership team, you should list them directly after your summary, providing short summaries and longer resume or CVs as part of your appendices.
Perhaps your advantages include market opportunities or strategies that make the timing of your new endeavor advantageous. Or, perhaps (thanks to your highly qualified leadership team), you have mapped out recruiting strategies or operational efficiencies that increase the likelihood of success. In the end, if you view your business plan as a blueprint for your future business operations, all the hard work you put into it will be worth it.
Step 4. Make Sure the Numbers Work
It can be tempting to inflate expectations to secure funding, but it’s a common mistake for those just learning how to make a business plan—and one that might cost you investors instead of attracting them. Loan officers and investors are likely far more practiced at reading business plans than you are at writing them. That means they can spot exaggerated claims.
Instead, do your homework. Calculate your costs and estimate your pricing as accurately as possible. Learn what your competitors charge and what the market will bear. Be honest about your expected revenue streams and conservative about the timeline you provide to estimate your progress toward profitability. One effective way to position your projected revenue is to provide a best-case and worst-case scenario.
The more granular you can get with costs (including payroll), pricing, and revenue estimates at this stage, the more challenges you are likely to discover and therefore anticipate before you secure funding. With a game plan at the ready for each challenging contingency you stumble across in your research, you’re much more likely to succeed. A business plan with accurate financial information can serve as a tool for managing your business in its first few years of operation, creating realistic financial targeting.
Step 5. How to Make a Business Plan: Focus on Persuasion
A business plan is a persuasive document. As you consider how to make a business plan, you need to visualize your document’s ideal readers – loan officers and investors. You’ll need to convince them that you can build a profitable business. As with any good argument, each assertion you make will require evidence to back it up.
Your final step will be to revise your plan, focusing on whether you’ve built a persuasive case that sells your business just as your future marketing efforts will sell you products. Have someone you trust read the final draft and give you their honest feedback. Make sure it is polished, professional, and error-free.
It’s a detailed, time-consuming process, but if you break it down into steps it will be more manageable and the final product will be more likely to secure the resources you need to get your business up and running.
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