How to Write A Business Plan: A Complete Guide

Writing a business plan can be a daunting task if the sheer number of relevant topics is considered. What to mention, and what not? Fortunately, a standard structure for business plans has evolved through the years. This makes it possible to omit a lot of unnecessary material and focus on what is essential.

In this article, a complete guide to writing a business plan is given in a structured format that is easy to follow. If you follow the steps, you will cover all the necessary areas.

We also touch on related topics, such as mistakes that are made, legal issues, and more!

1. Before You Start: Your Business Plan Format

Broadly speaking, there are two types of business plan formats. The first one is for more established businesses and the second for the new startup. They differ in the amount of detail covered, the length of the business plan, and the time needed to write. Both follow roughly the same standard format.

The table below gives the main focus areas of the two types of business plan format:

The traditional format may take weeks to write, and fill dozens of pages. The startup format may take as little as one hour to write, and fill only one page in table format.

In this article, we will give descriptions of each of the formats, because at some point in time startups become traditional businesses themselves. That is the time when business plans are needed for restructuring, amalgamations, expansion, and similar purposes.

2. The Traditional Business Plan Format

The traditional business plan format includes 9 main topics: an executive summary, company description, market analysis, organization and management, service /product lines, marketing and sales, funding request, financial projections, appendix.

It is necessary to put the right content under each of these headings so that the business plan does not stray into irrelevant areas.

2.1 The executive summary: In the executive summary we provide only the essentials: our mission statement, the broad structure of the business (such as the number of employees, the management team), product/service lines, and where the company operates.

A key item in the executive summary is the purpose of the business plan. If it is to secure funding, mention what the funding is for (e.g. expansion, restructuring), how this funding will be used, and the potential benefits.

2.2 Company description: Rather than going into too much detail about employees, the management team, and similar topics, focus on what resources and strengths the company have to drive its competitive advantage – that which sets us apart from our competitors.

2.3 Market analysis: Here we need to demonstrate that we understand the market in which we operate. What are the main trends, how do competitors position themselves, and what is our response strategy.

2.4. Organization and management: This is the easy part because all the information here is at hand. First, mention the legal structure (e.g. is it a partnership? a sole proprietorship? is the business incorporated?) Explain the structure of the company, and emphasize the unique strengths of employees and managers.   

2.5 Service/Product line: Describeproducts/services, how do they add value to the customer, and – very important – what is the intellectual property situation with concerning the products/services. Are they unique, or can competitors copy them?

2.6 Marketing and sales: The most important considerations here are to describe how customers will be attracted, how sales will happen, and how customers will be retained. Also important here is to present sales projections.

2.7 Funding request: Now is the time to specify the main reason for the business plan (apart from organizing all concerned to focus on common goals and objectives).

If the idea is to secure funding, state whether you request debt or equity. State the period for which the arrangement is sought. Explain what the funds will be used for, and what profit is expected of the exercise.

2.8 Financial projections: The purpose of this section is to prove that your business does not present a risk and that it is financially stable. At the very least you will need an income statement, cash flow statement, and balance sheet.

For funding requirements, it will be good to include 5-year forecasts, as well as capital expenditure information.

To make masses of financial information intelligible and easy to interpret, this section lends itself to the use of graphs and visuals that are easy to understand.

2.9 Appendix: The appendix is where we put all the details that will make the main body of the business plan overcrowded and hard to follow.

This is the place where we put technical specifications, patent information, legal compliance documents, and similar types of information.

3. The Startup Business Plan Format

The startup business plan format also includes 9 main topics, markedly different from the traditional business plan format.

Here we focus on key partnerships, key activities, key resources, the value proposition, customer relationships, customer segments, channels, the cost structure, and revenue streams.

3.1 Key partnerships: Your business cannot operate on its own. All businesses enter into key partnerships such as suppliers, contractors, and other types of strategic partners. It is important to outline these because good key partnerships strengthen a business.

3.2 Key activities: this section is all about your competitive advantage, and how you go about achieving it.

3.3 Key resources: Here we need to demonstrate that we are actively leveraging our resources. Mention any strength, unique skills, exceptionally talented employees, intellectual property, and similar things.

Also mention how these are employed to reach customers that are otherwise difficult to reach.

3.4. Value proposition: In business, we get paid for the value that we add to a customer. Explain clearly what the value is that we add (through our products or services), and what mechanics and dynamics we use to achieve this goal.

Remember the main value drivers that attract customers, i.e. explain how we add value in terms of wealth, health, image, power, status, success, and security – and include increasing the convenience factor as part of our competitive advantage.

3.5 Customer relationships: Here the important thing is to look at the business from a customer’s perspective. How do we reach the customer, and how do they reach us? What communications strategies and mechanisms (only, personal, telephone, etc.) do we use?

3.6 Customer/market segments: Who is our customer, and how does our business serve this customer? Be specific about the customer’s needs and expectations, and how we meet these.

3.7 Channels: By channels, we mean communication channels and product distribution channels. List these channels, and also mention how these will be optimized over time.

3.8 Cost structure: A business can broadly focus on reducing cost as a strategy, or on optimizing efficiency in terms of value. Explain where you position yourself in terms of these parameters, and how this impacts your business cost.

3.9 Revenue streams: In this section, we explain how we make money. List all sources if there is more than one income stream. These may be as diverse as income from renting parking space, washing cars, and everything else under the sun.

4. The Business Plan Cover Page

The business plan cover page is important because it creates an immediate impression on the reader – who may be an investor. How do we organize a cover page, and what information must be on a cover page?

The business plan cover page must be visually pleasing without too many distracting embellishments (such as too many meaningless graphics).

The business name, as well as your name and contact details, are essential. Some business plans also include the company mission statement.

5. The Business Plan Template

The business plan template is a template to make planning easier and to make sure you do not leave unanswered questions that form a crucial part of the business plan. It is a document that is already formatted. It lays out sections and subsections of your business plan. It also poses the relevant questions that must be answered in each section.

If you choose to use a template for your business plan, you will essentially be prompted to type information into spaces provided for the answers.

While this makes life easier as far as organizing your content, it does not relieve you of the responsibility to generate the original information. You will still have to do your market research, for example.

6. The Legal Status of The Business Plan

Is a business plan a legal document, or not? A business plan is not a legal document in the United States of America.

There are – however – websites that promote so-called “legal plan templates”. This claim can be safely ignored. In this regard, it is important to know that there are no state laws with concerning business planning in the United States.

7. How do I Keep my Business Plan Secret?

When dealing with investors the situation arises that secret business plan information must be shared at some point. The question is: “How do I keep my business plan a secret, but manage to convince an investor at the same time?”

The only option here is to have the investor sign a non-disclosure agreement (NDA). This is a document that prevents the disclosure of specified information.

Some investors are hesitant to sign an NDA though, because they assess many businesses, and might sign away a similar opportunity that comes around just the next day!

8. Business Plan versus Business Proposal

What is the difference between a business plan, and a business proposal?

In the United States and most countries around the world, the business plan is used to present a company’s performance or prospects over 5 years. This document is then used as the basis for attracting funding, or for other purposes.

In some circles, this term has been replaced by the term “business proposal” to mean the same thing.

This is incorrect. A business proposal is not the same as a business plan. A business proposal simply means an offer to buy or sell a product/service.

9. Characteristics of a Good Business Plan

What makes a good business plan?

• A good business plan creates a professional impression. If the business plan is created in an unprofessional way, an investor will expect the same unprofessional attitude to his investment.
• Professional impressions are created when the business plan visually looks good, is concise and accurate, easy to read, and free of mistakes (like typos).
• It communicates that the company is uniquely qualified to succeed. Past milestones have been achieved, and that spells success for the future.
• It is backed up by third-party research (such as independent market research).
• The numbers create realistic scenarios, as opposed to wishful thinking.
• It is convincing.

10. Biggest Mistakes in Business Plans

What are the biggest mistakes made in business plans?

• Not realizing that you are presenting a marketing document aimed at convincing others to cooperate in your vision in some way or another.
• Present boring documents, as opposed to inspiring and exciting ones.
• Unrealistic growth claims. Investors are not easily fooled!
• Too many superlatives, such as “best”, “disruptive”, and similar terms with no way of backing them up with hard facts.

Conclusions

While there is no right or wrong way to write a business plan, there are several considerations to pay heed to. It is easier to fit your business plan into a suitable format than to force information in under headings that do not quite suit your message.

Each format has its focus areas and other peculiarities. If used correctly, these differences work in your favor. Another thing that could be of great help is a business plan template.

Below are some references that provide good material.