Plan your business
How to write your business plan
Your business plan is the cornerstone of your business. Learn how to write an effective business plan with a business plan template.
- A business plan helps you manage your business
- Choose a business plan that is suitable for your business
A business plan helps you manage your business
From the moment you start your business, a good business plan will guide you in managing your business. Use your business plan as a roadmap for how to structure, manage and expand your business.
A business plan allows you to get financing or to attract (a) (new) partner(s) for your business.
Investors need reassurance that they will recover their investment. A business plan may give an investor or partner(s) assurance that the decision to invest in your business was the right one.
Choose a business plan that is suitable for your business
There is no right or wrong way to write a business plan. What is important is that it addresses your business needs.
A majority of business plans will fall into the category of either traditional or lean startups.
Traditional: This is a widely used category based on a standard structure that encourages the entrepreneur to elaborate on each section of the plan. It is time-consuming and usually has many pages. It is a very detailed plan. Financiers and/or investors will, in most cases, request this category to finance or invest in your business.
The lean startup: This plan, based on a standard structure, is less commonly used by entrepreneurs. It is a summary of the most relevant aspects of your business plan. It can effectively be written within one hour and may only be one page long. The lean startup plan is a high-level plan containing only key elements. Financiers and/or investors may wish to receive more information about your business before investing in it or financing it.
Entrepreneurs are less likely to use this strategy. It is a condensed version of your business plan’s most important features. It can be written in under an hour and may only be one page long. The lean startup plan is a high-level plan that only includes the most important elements. Financiers and/or investors may want to learn more about your company before investing in it or financing it.
Before you start writing your business plan, it is advisable to choose a business plan template that suits your business needs and use this as your basis.
Structure of a traditional business plan
Choose a traditional business plan in case you wish to have a more detailed and extensive plan, or if you want to request financing from established financial institutions.
When you are writing a business plan, it is not necessary to strictly follow the structure of a business plan template. Use sections that make the most sense for your business needs instead.
The traditional business plan uses a combination of the following nine (9) sections:
- Executive summary
This summary contains a brief introduction to your company, explains why it will be successful, includes your mission, product(s) or service(s) and basic information about your company, management team, employees and location. It is also important to include financial information and a growth plan when applying for financing.
- Company description
Use this to provide detailed information about your company. Give a detailed description of the problems that your company has resolved. Be very specific and list the consumers, organizations or businesses your company intends to serve.
Explain the competitive advantages that will make your business successful. Are there experts on your team? Were you able to find a perfect location for your company? This description of your company will expose the competitive aspects of your company.
- Market analysis
You must have a good understanding of the prospects for your industry and target group. Competitive research will show you what other businesses are doing, and what their strengths are. Your market research should focus on trends and themes. What are your competitors doing that makes them so successful? Why does it work? Could you do it better? These are the relevant questions you need to ask.
- Organization and management
Explain to the reader(s) how your company will be structured, and who will manage it. Describe the legal form your company will have. Use an organization chart to explain who is in charge of what. Provide an insight into how the expertise of your employees will contribute to the success of your company. Consider including your employees’ résumés.
- Service or product line
Describe the goods you are selling or the services you provide. Explain how they will benefit your clients, and how durable your company’s products are. Share your plans for intellectual property, copyrights or patents. If applicable, give a detailed explanation of the research and development regarding your services and products.
- Marketing and sales
There is no single way to approach a marketing strategy. Your company’s strategy should evolve and change according to its unique needs. Your goal in this section is to explain how you will attract and retain customers. You should also describe how you will conduct sales. You will have to refer to this section when making your financial projections. Be sure to describe your marketing and sales strategy in its entirety.
- Request for financing
If you have requested financing, you will have to describe the requirements for qualification. Your goal is to clarify how much financing will be required for five years, and how it will be spent. Specify if you would like debt or equity, the circumstances that require you to request financing and the planned period in which it will be spent. Give a detailed description of how you are planning to use your funds. Specify whether the acquired funds will be spent on equipment, material, salaries or to pay off specific debts up to the time your business has become profitable enough to sustain itself. Always add a description of your financial plan, which addresses how your business will pay off future debt.
- Financial projection
Add a financial projection to your financing request. Your goal will be to convince investors/financiers that your business will be a financial success.
If you run an established business, include income statements, balance sheets and cash flow statements for the last three to five years. If you have other collateral you wish to include to secure financing, include it here.
Add a financial plan that will cover the next five years. Include forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets. For the first year of operations, be more specific and use quarterly or even monthly projections. Clearly explain your projections in your financing request.
You can include graphs and/or diagrams that provide an insight into the financial story of your business.
Use annexes to provide requested documents and materials, such as credit history, résumés of employees, product images, reference letters, licenses and permits, legal documents and contracts.
Structure of a lean startup
A lean startup format may be suitable if you wish to start your business quickly, if your business is not complicated, or if you anticipate that your business plan will be subject to regular adjustments.
Lean startup formats are charts that describe your business value proposition, infrastructure, customers and finances. They are useful for visualizing tradeoffs and fundamental factors of your business.
There are many lean startup templates. The oldest and most popular is the Business Model Canvas, developed by Alex Osterwalder. You will find this and other versions of the lean startup online for free.
Lean startup ‘Business Model Canvas’ version 9 components
- Key partners
Make an inventory of other businesses your business will collaborate with, such as suppliers, manufacturers, contractors and other similar strategic partners.
- Key activities
Make a list of ways in which your business may achieve a competitive advantage, for example, by selling directly to the customer or using technology to benefit from economies of scale.
- Key resources
List all resources that are of added value to your customers. These may be employees, capital and/or intellectual property rights.
- Value proposition
Convincingly state what makes your business unique and attractive to the customers in a particular market, for example, an innovation, service or feature.
- Customer relationships
Describe your clients’ interaction with your business. Will it involve automation or staff? Will it be physical or online? Give thought to your customer experience from beginning to end.
- Customer segment
Be specific when describing your target customers. Your business will not appeal to everyone. Hence, it is relevant to know which market segments you will serve.
Make a list of the most important ways to communicate with your clients. Most companies use a mix of communication channels. You can optimize these as time goes by.
- Cost structure
Will your business focus on cost reduction or value maximization? Define your strategy, then list your most significant cost(s).
- Revenue stream
Explain how your business will generate revenue, for example, through direct sales, membership fees or ad sales. You should indicate whether your company has more than one source of income.