Want to learn how to write a winning business plan?
In this post, we’ll cover the most important sections of a business plan and how to address them properly.
We’ll also cover some detailed steps and insights learned the hard way through trial and error that will help you avoid massive financial losses and make sure your business achieves profitability as fast as possible. This post will help you write a business plan that will be more effective in helping you get a commercial loan or raise money from private investors.
But even more than that, following the steps in this post will help you ask crucial questions about your business and dig deep to find the answers, so you can learn what you must do to make your business work (and the big mistakes you must avoid so your business doesn’t fail).
How to Write a Business Plan
As you go about the process of writing a business plan, keep these 5 key ideas in mind:
1. Keep It Short
Try not to exceed 25-30 pages for your business plan.
For the first draft of your plan, you’re welcome to write as many pages as you want. Your goal should be to simplify the business plan so that you only include the most important key elements that will make your business successful.
Remember the Pareto principle or 80/20 rule: 20% of what you do will produce 80% of the results. Keep your business plan to the 20% of action steps and items that will make the biggest difference.
If you write a super long business plan, readers will get bored and either skim through it or throw it away. You will get better results with a shorter business plan (assuming it is well-written and includes the most essential information about your business).
2. Keep It Professional
Keep your writing professional. Make sure to check for any typographical or grammatical errors. Most investors or bankers will say “no” immediately if they see your business plan is not written professionally.
Chances are if you can’t be bothered to fix typos in your business plan, you’ll likely gloss over important issues once the business is running, and that lack of attention to detail could cause your business to fail.
How you do anything is how you do everything. If you’re not acting professionally when you create your business plan, you likely won’t act professionally when you run your business.
3. Always Be Improving
Your business plan should be a living document. You should constantly be thinking of ways to improve it and revise it accordingly, especially when you get the same feedback about the business plan from multiple sources.
Once your business is running, you must always be improving the business and your current plans for the business. If done properly, your business plan will morph into a living document that will help you run your business better.
4. Be Meticulous in Citing Sources
Always cite sources for your statistics and figures (use footnotes). This will show investors that you did your research seriously and thoroughly.
Furthermore, by citing your sources you will look professional, you will be able to refer back to those sources for more information later on, and your investors will be able to look at those sources and verify your figures so they can learn more about the industry.
5. Use it Regularly
Your business plan is a marketing tool. You should be using it on a regular basis!
If you are working on a new start-up business, you should be sending that business plan to at least 100 people in the first year. Don’t spam random people.
Instead, make a concerted effort to send your plan to those people who may be able to help turn your dream into a reality by offering feedback, guidance, mentorship, introductions, or financial support.
Business Plan Sections: What Needs to Be in a Business Plan?
There are the key sections that are universal to almost all business plans.
Some sections may not apply to your particular business, so if it doesn’t make sense for you to include it, feel free to leave it out. Only include the sections necessary for your specific business.
1. Executive Summary
The Executive Summary is an overview. It should include all the high level / big picture details a potential investor would need to know to see if they’re interested. It should highlight only the most important aspects of the business plan. The Executive Summary should never exceed two pages!
I’ve seen some executive summaries that were more than 10 pages, which is the sign of an amateur. No one wants to read that much.
As Mark Twain said, “I would have written a shorter letter if I had more time.” Take the time to make your executive summary (and every section of your business plan) as concise and useful as possible.
You executive summary should include:
- A description of your business and industry
- A description of the management team
- Your operational strategy
- What makes the business unique (your competitive advantage)
- What the business needs to move to the next step (for example, if you’re looking to raise $100,000 in exchange for 10% ownership of the business, you should include that in the executive summary so that potential investors know right away what you’re looking for).
2. Business Description
The business description should include:
- Name of the business
- Nature of the business. What industry are you in?
- History of the business
- Stage of Development (If the business is a concept or a brand new start-up, let it be known here).
- Unique Features of the Business. List any patents, trademarks, intellectual property, or any other unique advantages or assets your business has.
Your marketing segment is crucial. You must be able to show readers of your business plan that a large market exists, that your company can attain market share in that business, and that you will be profitable in doing so.
Your marketing section must include:
- Market Size
- Projected Market Share
- Projected Sales for one to three years
- Your Market Niche
- Target Market or Target Customers
- List of Potential Customers (if B2B)
- Market Trends (socioeconomic trends, demographic trends, sales trends, industry trends, etc.)
- Projected Industry and Company growth rates
- Pricing Strategy
- Marketing Strategies
- Advertising Plan
4. Competitive Analysis
You must objectively look at the industry and your competitors and be able to identify their strengths and weaknesses and where the opportunities in the industry lie. You must also show that your company will be able to take advantage of these opportunities.
You should compare competing products or services based on prices, performance, service, warranties, availability, and other pertinent features. You should especially note how competitors may not be meeting the current needs of the market and how you plan to meet those needs and capture market share.
Note the location of your business and, if applicable, explain how that location is favorable in terms of wages, availability of labor, taxes, zoning requirements, and proximity to suppliers and potential customers.
You should also list all the needs of your business including storage space, real estate needs, equipment, supplies, machinery, and any other operational or logistical details. You should also detail the costs of all operational expenses including shipping, production, purchasing, delivery, and other expenses.
Make sure to include the name of the person who will be managing the operations, or that you plan to hire someone with a certain type of background for that position.
Optional: If the business is a start-up, you may prefer to list your “milestone schedule” or operational plan in this section which will detail the necessary steps for starting the business and achieving profitability.
Management is one of the most important and often overlooked sections of the business plan. You must be able to show how the management team will be able to take advantage of the opportunities in your industry.
If there are glaring holes in the skills and abilities of the management team, potential investors will be unwilling to lend money as this will be a huge risk. For example, if you’re starting an internet company and no one on the management team has experience in that industry, it’s unlikely you will be successful.
The key here is to let investors know
- Who the management team is
- What their experience is
- What their role will be in the business
- That they have the skills to perform that role well
- Any management positions you plan to hire or recruit for in the next one to three years
Your financial section must display the financial viability of the business. Show your business can make a healthy profit and can afford to pay interest or profits to investors or lenders.
Most business plans should include a full pro forma balance sheet, income statement, and statement of cash flows. Generally, creating projections for 3 years is acceptable. Don’t go over 3 years as it will take up too much space and it will be unbelievable (Who can accurately predict such things as the profitability of a start-up business 5 years from now?)
Hire an experienced business accountant to help you with your financial projections and financial statements, or be prepared to do some serious homework to study accounting and do it on your own or with the help of a mentor, advisor, or experienced friend.
In addition to financial statements, you should include some sort of assumptions section that lists all the major assumptions you have made about expenses, sales, and profits.
For example, if the industry is growing at 20% per year and you expect your business to grow that fast, simply list that assumption as well as a reliable source for the industry growth rate.
8. Critical Risks
This section is optional, but it should include the main risks involved in the business. This section is especially important for you as an entrepreneur to prepare, if not in your final business plan, at least for yourself to understand the risks of the business.
This section will force you to plan the “What ifs” of the business and to come up with potential problems ahead of time and strategies to overcome those problems before they come up. Critical thinking about the critical risks is key to growing and sustaining a business.
Most entrepreneurs don’t include this section, and that’s a huge mistake. It’s often the #1 section investors want to see because they need to know you understand what the risks are and have a plan in place to mitigate them.
9. Exit Strategy
This section is primarily for investors to let them know how they will be paid.
- Do you plan to go public?
- Do you expect to be acquired by a larger company?
- Or do you want to just grow the business and benefit from the future cash flows?
- What’s the plan for the business 3 years, 5 years, and 10 years down the road?
In other words, when and how will your investors earn back their profits?
You should also include management succession strategies and other business issues related to liquidity events and long-term company plans in this section.
For example, if your plan is to keep the company private and grow it steadily over the next twenty years, don’t say you’re planning to go public in 5-10 years. Be honest.
Nothing will make you more miserable in that situation than having an investor constantly working to help the company go public or achieve a milestone that directly conflicts with your goals for the company.
10. Milestone Schedule
Include a timeline of the business operations plan and profitability. If you’re starting a restaurant, you’ll want create at timeline that lists projected dates for initial funding, property selection, remodeling of the location, opening day, break-even, and so forth.
This section lets investors know the operational plan of the business in detail and helps them (and you) keep track of your progress.
If you fail to meet your milestones, investors should be concerned unless you give them fair warning ahead of time as soon as you notice there are issues, delays, or unexpected problems that come up. You should set reasonable milestones that you are reasonably confident you can hit.
If you fail to meet a milestone always remember to explain to investors what happened and how you’re taking the proper steps to get back on track to reaching profitability and moving the business forward.
This section is optional. Personally, I rarely use an appendix because I find it simply adds too many pages to the plan and is unnecessary.
I put all my sources in footnotes and let investors know that if they wish to see more information, I can provide it to them (you can include all your additional research and cut material from the business plan in an additional document just in case).
However, if there are specific resources, charts, graphs, or documents that are necessary for investors to understand your business, you should include them in the appendix.
Business Plans for Writers
When they set out to become writers, most people just think about the book. They’re focused on the plot or the value proposition, not on all the other moving parts that are involved with becoming a professional writer. And that’s great!
The key to becoming a successful, profitable author, more than anything else, is writing a great book. If your book isn’t well-written, well edited, and doesn’t have a great cover, you’re not going to get far.
But setting yourself up for success as an author goes far beyond being a good writer. Being an author is a business, and so you have to think like a business to succeed.
That means you need a solid plan in place to make sure you’re taking advantage of opportunities and avoiding common mistakes that could sabotage your career.
Who Are Your Customers?
This is called audience or market research. In order to find and connect with readers, you need to know who you’re writing for—because the quickest way to connect with no one at all is to try to connect with everyone at the same time.
Start by being focused. Instead of writing a book for all parents everywhere, focus on writing a book targeted at working single dads of girls.
There’s a lot less competition in that niche, meaning you can stand out more easily, and odds are, if you’re thinking about working single dads of girls, you know something about the topic yourself and can offer some unique insights. Build your niche and grow from there.
Where Will You Put the Business?
Once you have a book, how will you get it to people? If you’re self-publishing, the most popular answer is “Kindle.” It’s not hard to set up your ebook on Kindle in a few simple steps, and now you’re well on your way to making your first sales!
From there, you can consider where else it might make sense to sell your book. Nook and Kobo are good choices, as is Smashwords.
What Will You Charge?
When your book is published, you have to set the price. Think back to that coffee shop metaphor: will you charge $10 for a cup of coffee, or 99 cents?
It might be tempting to do either, but you have to keep in mind what it cost create that cup of coffee and also what people are willing to pay. 99 cents might be exactly right for a short story, but is it compensating you appropriately for a 600-page novel you spent three years writing, or for a business book that collects all your expertise from decades in your field?
At the same time, $10 is probably way too much to ask people to spend on a short ebook. The sweet spot is most likely somewhere in the middle: $1.99 and $2.99 are popular price points for novels, for instance, and you can always try running free or 99 cent promotions to boost sales later.
How Will You Let People Know You Exist?
Once your book is in the marketplace and priced to sell, you have to attract readers. This is often the scariest part of publishing for many folks, because not too many people have experience in marketing. Thankfully, it’s not as difficult as you might think!
Remember that target audience you came up with back when you were planning who your customers would be? Well, where do they hang out? What social media do they use? What groups do they hang out in on Facebook or LinkedIn?
Scope out some of those groups and get to know them, then start promoting your book through ads, guest blog posts, email newsletters, and more. It doesn’t have to cost a lot to market your book—you just need to be savvy about it and you have to be ready to put in the effort.
How Will You Keep People Coming Back?
Selling one book is great. Selling ten thousand books is better! So how do you get people to come back to you after you’ve sold them your book?
This can be tricky to balance with the needs of marketing your existing book, but with some smart scheduling, you can do it! The easiest place to start is with a niche that’s close to the one your current book is in. So if you wrote that book about working single dads of girls, maybe your next book is for working single dads of boys. You can build on a lot of the same expertise and similar audience targets, but now you’ve doubled your potential market.
How Will You Expand?
There’s more than one way to expand as an author. You can branch into new niches, like we just discussed, writing books that increase your scope and market. You can try writing something related but different, too, like adding children’s books to your lineup of parenting books.
But you can also expand into other products and services. What about a podcast for your fans? An online course to help those working dads streamline their lives and find more time to spend with their kids? You could even expand into selling tee shirts or coffee mugs with quotes or images from your brand.
The possibilities are endless!
Thinking like a business when you embark on your career as a professional author is a key way to set yourself up for success. By creating a strategic plan and thinking through what you’ll do to achieve your goals each step of the way, you can build your platform, connect with your audience, and reach heights you never even dreamed of.
And here you thought business planning was boring!
Create Your Business Plan
There you go! You now know the key sections you must include when you write your business plan.
Your job now is to continue researching and writing your business plan.
Got any questions? Post your comment below with any questions, suggestions, or ideas about writing a winning business plan.