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How to make a business plan

Ready to become a business owner, not just an employee? Follow these essential first steps to create a business plan.

A new business — of any size or structure, no matter the type of product or service — needs a roadmap to get itself underway and connect with customers. But without a plan on paper (or in a file on your computer), the idea is just that: an idea. Create a business plan to take that brilliant business ah-ha out of your head and put it into a form that others — including potential investors and business partners, banks who may lend you money and potential employees — can consume, question and ultimately buy into.

A business plan also helps you get organized, tap into your ideal market, dive deep into the competition and examine your financial situation for the tenuous but important first couple of years. And you can do all of this without months of work. How? Keep it simple and brief. Here’s how to write a business plan step by step.

Step 1: Answer the Questions

Each business plan contains roughly the same elements, and this is the most time-consuming portion of developing a business plan. No matter which style of plan you pursue, be sure to put in the time and energy to make it shine. In many cases, your lean plan or the executive summary of your traditional plan is your business’ first impression. Do the research about the market and customers, hash out the math and accounting so you can offer honest ideas on your financial needs and know your audience — avoid getting into the weeds with language that caters to industry insiders (unless that is your audience) and instead keep your message clear, concise and presented in everyday, easily digestible verbiage. Remember: Keep it simple and brief.

Essential traditional business plan pieces include:

  1. DESCRIPTION: The why — your company’s purpose. This should translate into a short tag line or mission statement.
  2. MARKET ANALYSIS: Research the industry, market and competitors. Where is the opportunity for your product? For growth? Who is your target customer? How can you do it better than the competition?
  3. ORGANIZATION AND MANAGEMENT: Describe your business’ legal structure, location and history. Don’t forget to talk about your team and what positions you’d like to hire in the future. Include your BUSINESS MODEL, which describes how you make money and identifies your revenue streams, as well as your TARGET MARKET — basically your customers, the channels you’ll use to reach them and the interactions you’ll have.
  4. PRODUCTS AND SERVICES: These are essentially based on your PROBLEM (What are you selling? How does your product or service solve a problem or fill a need?) and SOLUTION (What are you selling? What is the unique value your company brings to the market?).
  5. MARKETING AND SALES: Develop plans to attract customers — promotion, advertising, public relations, content marketing and social media. You also need to lay out how operations and distribution will work and set milestones and metrics for success. Finally, investigate your COMPETITIVE ADVANTAGE and identify key strategies, such as selling direct to consumers or using technology.
  6. FUNDING REQUEST: Outline your funding needs for the next three to five years, including projections of income, expenses, cash flow and budgets. Present details about how the money will be used. Be able to distill this into a FINANCIAL SUMMARY, which should outline expected expenses and a cost structure.
  7. APPENDIX: Use this section for additional information such as product images or illustrations and supporting documents such as permits, patents, contracts, etc.

Step 2: Pick the Type of Business Plan

In many cases, a business plan can be written on just one page. Known as a lean plan, it creates a summary of the key elements of your business that can be presented in bullet points. Include:

  1. PROBLEM. What problem does your product solve or what need does it fill?
  2. SOLUTION. What are you selling? What is the unique value your company brings to the market?
  3. BUSINESS MODEL. How do you make money? What are your revenue streams?
  4. TARGET MARKET. Who is your customer? What channels will you use to reach them? How will customers interact with your business?
  5. COMPETITIVE ADVANTAGE. What are your key activities? Identify strategies, such as selling direct to consumers or using technology.
  6. MANAGEMENT TEAM. Your team matters just as much as your great idea. How will they help you succeed?
  7. FINANCIAL SUMMARY. The financial forecast should outline expected expenses and a cost structure.
  8. FUNDING REQUEST. Estimate your needs and describe how investments will be used.

The lean plan may be all you need — and is a great way to get your foot in the door — but be ready for lenders and investors to ask for more detailed information or a presentation (that’s where the pitch deck comes in). If you plan to request financing from traditional sources — banks, investors, business partners — you’ll need every element in a traditional business plan, detailed above.

Step 3: Get Resources If You Need Them

If you still have questions, you’ll find examples and templates, calculators and detailed information about planning, launching, managing and growing your business through the U.S. Small Business Administration (sba.gov). You can also search for a local SBA office and partners for in-person assistance. Finally, build a network and continue to develop resources that you’ll need.

Step 4: Develop Ancillary Documents

Once you’ve worked through all those questions and research, move on to the related documents. The first one should be an executive summary, considered the CliffsNotes of a traditional, long-form plan. Use those insights to create a pitch deck, which is a presentation you can use to charm investors.

Step 5: Update Your Business Plan Regularly

You are creating a tool to help run and grow your business, and it should be updated as things change. Think of it as a strategic planning document for short- and long-term goals, expenses and targets — all of which change over time.

Download a checklist to help you create your business plan.


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