The Ultimate Guide to Creating a Business Plan: A Step-by-Step Process

Understanding to Process of Creating a Business Plan

Definition and Importance of a Business Plan

A business plan is a document outlining a company’s goals and strategies to achieve them.

It’s valuable for both startups and established companies, helping to attract potential lenders and investors by detailing the business model, including how sales will be made and the advantages of the chosen business structure.

A well-crafted business plan is crucial for attracting investors and guiding a company’s strategic growth.

Types of Business Plans you can create

Traditional Business Plan

A traditional business plan is the most common type, providing a detailed and comprehensive overview of the business.

It’s a good choice if you’re very detail-oriented or want a comprehensive plan.

Traditional business plans use a standard structure and are often requested by lenders and investors. Using a business plan template can provide a structured outline for writing a business plan.

Lean Startup Plan

• A lean startup plan is a high-level plan that focuses on summarizing only the most important points.

• It’s fast to write and contains key elements only.

• Some lenders and investors may ask for more information.

Nonprofit Business Plan

• A nonprofit business plan is for any entity that operates for public or social benefit.

• It covers everything you’ll find in a traditional business plan, plus a section describing the impact the company plans to make.

Preparing to Create a Business Plan

Know Your Target Market

Customer Segmentation

• Identify your ideal customer and the actual and potential size of your market.

• Describe demographic information, such as target market, market analysis, and customer journey.

Market Research and Potential

• Outline your ideal potential customer and the actual and potential size of your market.

• Identify demographic information, such as target market, market analysis, and customer journey.

Set Clear Goals and Objectives

A business plan can help you think through barriers and discover opportunities you may have recognized subconsciously.

Landmark studies suggest that business founders who write a business plan are 16% more likely to build viable businesses.

For a new business, having a business plan is crucial not only for setting clear goals and objectives but also for managing financial aspects and securing funding.

Writing Your Business Plan

Executive Summary

• The executive summary is a high-level overview of your business, typically one page or less.

• It summarizes the other sections of your plan and focuses on the value proposition or unique selling point.

Company Description

History and Background

Write your company history like a profile, highlighting key events and milestones.

Describe your business model, including how sales will be made and the advantages of the chosen business structure.

Translate the list into a few short paragraphs.

Business Objectives

• Business objectives give you clear goals to focus on, which must be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).

• Objectives must also be tied to key results.

Market Analysis

Competitive Analysis

Understanding Your Competition

• Identify companies that currently occupy the market you’re looking to enter.

• Research competitors and create a table or spreadsheet listing them, and conduct a SWOT analysis to identify strengths and market factors that can contribute to a competitive advantage.

Market Trends and Opportunities

• Many investors say they bet on the team behind a business more than the business idea.

• Make sure to provide short bios of the key members of your management team that emphasize the relevant experience each individual brings.

Products and Services

Description and Unique Selling Points

• Describe the benefits, production process, and life-cycle of your offering.

• Focus on what sets you apart from competitors.

Marketing and Sales Strategy

Marketing Plan

Marketing Mix (4Ps)

Outline your marketing plan, including a flexible and evolving marketing strategy tailored to your unique needs, your unique selling proposition, and competitive advantages.

Highlight your strengths and what differentiates you from competitors.

Sales Strategy

Sales Channels and Tactics

• Explain how you will spread the word to potential customers about what you sell.

• Make sure readers know exactly what the path to a sale will be and why that approach will resonate with customers.

Business Operations

Logistics and Supply Chain Management

• Logistics and operations are the workflows you’ll implement to make your business idea a reality.

• Cover all parts of your planned operations.

Production and Delivery

No matter how great your idea is, a business lives or dies based on its financial health.

Include three major views of your financials: an income statement, a balance sheet, and cash flow statements. Emphasize the importance of cash flow statements in financial projections to identify gaps or negative cash flow.

Management and Organization

Company Structure and Hierarchy

• Identify your team members and explain why they can turn your business idea into a reality.

• Highlight expertise and qualifications throughout.

Financial Plan

Financial Projections

Income Statement

• Prepare a budget and financial plan, including financial statements and data.

• Provide at least three years’ worth of reporting.

Cash Flow Statement

• Avoid underestimating costs, as they can eat away at your business over time.

• Costs, profit margins, and sale prices are closely linked.

Funding Request

Amount and Purpose

• Outline how much money your small business needs, including a best-case and worst-case scenario.

• Consider selling equity or borrowing money to raise capital.

• The U.S. Small Business Administration (SBA) offers valuable resources and partnerships, such as guides for financial planning and templates for financial projections through organizations like SCORE.

Risk Management and Exit Strategy

Exit Strategy and Contingency Planning

• Refocus your productivity by assessing if you’ve hit your targets and identifying the products and services that deliver the returns you need.

• Realign with your goals by doing a gut check to determine whether your hard work is still aligned with your original goals and mission statement.

Conclusion and Next Steps

Review and Refine Your Business Plan

• Use clear, simple language and steer clear of industry jargon.

• Emphasize what makes your business unique and nail the details.

• Most business owners don’t follow their business plans exactly, but writing one will get you off to a much better start than simply opening your doors and hoping for the best.