How to Write a Business Plan That Will Grow Your Business
So you've developed an idea for your business and you've registered it. Now what?
Before you start grinding away at the day-to-day, you're going to want to sit down and build a plan for what your business is going to look like, not just in the day-to-day operations, but in the next year, three years and five years.
This document will help steer your course, inform strategic decisions about which opportunities you're going to pursue and which ones are distractions. It'll also play an integral role in getting funding.
That document is your business plan.
How do you write a business plan? What should include? What should you leave out? In this article, we break down the essential components and why they're important.
What is a business plan?
Your business plan is your business’s most important strategic document: it tells your business’s story. It explains how you got where you are, where you hope to go and how you’re going to get there.
Everything in your business plan is building an argument and telling a story of how you will get from point A to point B.
Why is writing a business plan important?
Writing your business plan is an excellent exercise in articulating your strategy. Many business owners have an idea in the back of their mind of where they want to go within the year and in the next five years, but often they don’t sit down and put it on paper.
But what you may not realize is that by putting your plan into writing, you are more likely to get where you want to go and if you don’t achieve your goals, you have a roadmap that you can use to help figure out what didn’t go according to plan.
Like we said, your business plan is also a very useful document to help you secure funding as it shows potential financiers that you’ve thought through the details of your business, established measurable goals and put together a plan to help you achieve those goals.
8 components of your business plan
A business plan will usually have eight sections to it:
- Executive summary
- Business profile
- Business overview
- Competitive landscape
- Financial projections
Each section has a distinct purpose in communicating how your business will reach the goals you've set out. Here's how you go about writing them.
Write your executive summary
This is a one-page summary of your entire business plan.
Though it goes at the beginning, it’s the last thing that you write.Your executive summary is the story that you want to tell, so tell it well. It’s what’s going to create a lasting impression for your reader, but more than that, it should create enough curiosity for them to want to go in-depth and keep reading.
Create your business profile
Your profile section puts all your contact information in one place and provides basic background on your business.
- Registered Company Name (or DBA - Does Business As)
- Business Address
- Phone number
Marketing tip: Your name, address and phone number (NAP) are instrumental in building up your local Search Engine Optimization (SEO). Track all the instances where they appear, keep them consistent and, if you update one, update them all.
- Email Address
- Date Established
- Ownership and Legal Status: Are you a sole proprietorship, a partnership or a corporation? Who owns your company and what percentage does each owner have?
- Company History: If you have an established business, do you have accomplishments or key milestones in your history that can showcase your impact?
You can also add to this section any social media channels where you are active.
Ultimately, your business profile gives readers all the information they need to get a hold of you. It also will prove a handy place for you to consolidate all of that contact information that you want to make public.
Develop your company overview
This section is all about what makes your business unique. It tells the story of what you do, who you serve and why you do it in a brief, compelling way.
- Products and Services: What does your business offer and what key benefit do your products and services offer your customers?
- Core Values: What matters to you as a business owner and how does that impact your business? What will you never sacrifice, no matter how much pressure there is on you? How will your core values influence the decisions you make?
- Target Demographic: Broadly speaking, who will most benefit from your products or services? What problem are they trying to solve that you can help them with?
- Unique Selling Proposition: What makes your product or service unique? What’s the key message you want to be known for?
- Vision: Where do you see your business in 5-10 years?
- Mission: What do you work to achieve day-to-day?
- Goals and Objectives: What milestones do you want to achieve? Include at least one short-term goal (within the first year) and one long-term goal (over 3 years). Then communicate the objectives that will help you reach those goals.
Your elevator pitch is a quick way for people to understand what you think your business is really about. In a lot of ways, it’s the beating heart of your business, where you share your hopes and dreams and how you will work to make those come true.
Analyze your competition
It’s important for new and veteran business owners alike to understand the market that they’re in. The competitive outlook section of your business plan helps you think deeply about that.
What’s the industry you’re in? What is the current industry makeup? What are the trends? Who are the major players? Who are your direct competitors and what is the local market?
These are all questions that help you make strategic decisions about how to position your business and how to find new opportunities tailored to your marketplace.
Most importantly, creating your competitive outlook helps set you as an authority in the eyes of prospective financial partners. It shows that you know your industry and that you have a chance to thrive in it.
- Industry: What industry are you in?
- Industry Description: What is the key characteristics of the industry? Is it dominated by a few key players or populated by many smaller shops? Are there any challenges that the industry is facing?
- Industry Trends: What are the local and global trends happening in your industry? Where do you see the industry going in the next 2-5 years?
- Local Market: What is the scope and reach of the geographic area you will serve? What is the nature of the competitive landscape? What kinds of businesses are around you? What are the opportunities and challenges present?
- Key Competitors: Who are your direct competitors? Make a quick profile of them: how long have they been around for? How successful are they? What channels do they use to advertise? How large are their social media followings?
- Key Competitors SWOT Analysis: Take your key competitors and analyze their strengths, their weaknesses, the opportunities you have and the threats they pose to you.
In analyzing your competition, you want to look at what your competitors are doing well, what they don’t do well, and how you can be better than them or improve what they’re doing.
The competitive outlook shows that you understand your industry, your market as well as the supply and demand chains and that you have identified viable gaps that your business is able to take advantage of in order to provide value.
You don’t want to go to an orchard and sell apples.
Outline your marketing strategy
When you’re starting out, word-of-mouth is one of the most powerful drivers of new business. While there are steps you can take to encourage your existing customers to spread the news that you exist, you don’t want to leave your entire marketing strategy to the whim and timing of customers.
That’s why you write a marketing plan. This section of your business plan functions as a summary that highlights the most important information.
- Goals and Objectives: What are your top marketing goals for the next year or two? What are the objectives you will set to help you accomplish those goals?
- To grow revenue by 20% each quarter
- Add 200 new customers each month
- Increase retention by 10%
- Increase Average Order Value by 15%
- Lower cost of goods by 5%
- Four Ps of Marketing: A marketing strategy will start with the Four Ps of Marketing.
- Product: What are you selling?
- Price: What do your competitors charge for services or products similar to yours? What will you charge in comparison and why?
- Place: Where will you sell it (online, physical store, back of a van)?
- Promotion: How are you going to sell it?
- Marketing Personas: Who is your ideal customer? Create a detailed profile that helps you understand who your audience is, how best to reach them and even how talk to them. This could include attributes like:
- Geographic location
- Purchasing power
- Family status
- Purchase Journey: What problems are your target customers trying to solve? Where is the first place they turn to? What do they do next? What factors do they tend to consider when making a decision about choosing a product or from which company? Once they’ve made that choice, how easy is it for them to complete their transaction? What happens after that?
- What is the typical sales cycle from initial client contact to making a sale?
- How long does the cycle last from beginning to end?
- Marketing Channels: What channels are you going to be present on? Which ones are you going to prioritize? Traditionally, the channels are broken out into three categories (although thanks to digital marketing, there is a lot of crossover between them).
- Owned media: the channels that are yours, like your website, email marketing and social media feeds.
- Earned media: the channels you don’t own and don’t pay for, like news outlets and bloggers. Earned media is usually the scope of public relations.
- Paid media: the channels that you don’t own, but you pay for, like Google Ads, social media ads, TV ads, newspaper ads, billboards, etc.
- Strategic Alliances: Are there other businesses or organizations that make sense for you to explore joint ventures or partnerships with?
Your marketing strategy is where you plan how you’re going to leverage your channels to reach new customers and retain their business.
Think of your business ops and personnel
Who needs to do what when? This is the question you’re answering next. You get to go through a typical day at your business and describe what goes on so you can figure out who you need to bring onboard and in what capacity.
- Business Operations: What are your opening hours? What does a typical day in your business look like?
- Location: If you have a physical location, describe it, its surrounding areas and why you chose it. Explain the opportunities that are there and some of the challenges you might find. If you don’t have a physical location, explain why, again making sure you think through the challenges this might pose as well as the opportunities.
- Management Overview: Describe your management team’s background and explain their roles in the day-to-day operations of the business. Who are the individuals in management positions and what value or specific skills do they bring to your business?
- Personnel/Staffing: How many full-time staff will you have? How many part-time staff will you have? What will be their job titles and roles? What’s the first position you’ll want to hire?
- Legal Issues: Who will be your lawyer or law firm?
- Insurance Issues: Who will be your insurance broker?
- Finances: Who will be your bookkeeper and your accountant? Will they be on staff or will you contract?
- Banking: Where you will you set up your business’s banking? What kind of account do you need? What additional services will you require?
- Marketing: Will you contract a marketing agency to help you do your marketing or will you keep it in-house?
- Suppliers: Who are the major suppliers for your business and how did you choose them? What are your supplier terms?
Your business ops and personnel section shows that you understand your business inside and out. You know what the day-to-day looks like and who you need to bring in to help you better serve your customers.
Make your financial projections
The purpose of your financial plan is first to show prospective investors or lenders the capacity for growth that your business has. Secondly, it projects how you expect your business will do, once you sit down and do the math.
The most important rule when you are writing your financial projections is to be realistic. It is not worth your while to blue-sky this section while thinking, “This will never happen.”
- Sales Forecast: Highlight the sales you expect to close each month in the first 3 years.
- Expenses Budget: Outline how much it is going to cost you to close those sales in your first 3 years. Differentiate between fixed costs and variable costs and think of both recurring expenses and one-time purchases.
- Cash Flow: Cash flow is the movement of money coming in and going out of your business in a month.
- Income Projections: Use the figures that you have put in your sales forecast, expenses budget and cash flow statement. Sales - cost of sales = gross margin. Gross margin - interest - expenses - taxes = net profit.
- Balance sheet: Your balance sheet takes into account your assets and liabilities to determine your net worth. Start with your assets: what do you project to have on hand every month for cash, accounts receivable (money that is owed to you), inventory, and substantial assets, such as equipment or land. Then determine your liabilities, taking into account interest accrued on any loans you have: accounts payable (bills you haven’t paid) and outstanding loans.
- Break Even: When do you project your company to start breaking even? When will your revenue cover your expenses?
If your business has been around for a few years, you can use reports from the previous years to help you make financial projections for the future.
Rather than set and forget these projections until the following year, this is a section that is useful to return to on a monthly basis to update with the actual figures and help you plan properly.
Wrapping up your business plan
Your business plan is a strategic document that tells the story of your business.
It helps you think deeply, anticipate the issues you will face and plan to overcome them. It is a useful exercise not just for new business owners. And it has tremendous value for potential investors or lenders.
This guide is designed to be a resource for you but still it can be overwhelming. The good news is, you don’t have to do it alone: our business banking experts are here to help you and your business thrive. They would be more than happy to answer any questions that you might have about how to write a business plan that will help you grow your business.