It’s tedious and time consuming, but it pays off. Companies who write a business plan are more than twice as likely to improve over the following year compared to companies who don’t, according to Bplans.
The good news is you don’t need to spend days writing a business plan. A business plan software like LivePlan will walk you through your business plan setup pretty quickly so you can develop your business idea and put together a solid pitch for your business.
Or you can put together your business plan by hand – keep reading and we’ll go over everything you need to know. In this guide, we’ll uncover the key steps to writing a business plan. For those who need a formally-written document, we also include a business plan template at the bottom of this article.
Who Needs a Business Plan?
The short answer? Everyone.
A business plan takes all the key considerations of your business, from your 1-sentence pitch to your revenue model, and puts it in a single neat document. Whether you’re a new, established or evolving business, everyone needs to have these answers prepared and reevaluated over time.
The long answer? Only if you’re pitching to someone.
Even though your business plan is something you’ll reconsider constantly (such as, when competitors come and go), it’s not always necessary to put it down on paper. The exception is if you’re presenting to an investor, customer, or potential partner/employee. In these scenarios, you need a complete and up-to-date business plan that follows a standardized format.
Next we’ll get into the different mediums you can use to write your business plan (slideshow vs. word document vs. informal sketches), then provide a business plan template that covers each component to include.
How Should I Write My Business Plan?
A traditional 20-30 page paper business plan is generally only needed when requested from a bank or investor. Here’s all the common ways entrepreneurs write business plans today:
- Slideshow – Illustrate your business plan with bullet points, images, and graphs. A slideshow is easier to create than a fully-written plan, and is more visually-enticing. It’s a good option if you’re presenting your plan in person to an investor, customer, or potential hire. Check out our guide on the Best Slide Presentation Software.
- Paper – A paper business plan has the same components as your slideshow, but written in extensive paragraph form. This is often what banks and investors will request after they’ve heard your initial pitch and decided they want to move forward.
- Business Plan Software – Similar to a paper business plan, but featuring a stylish template, interactive charts, and a “click ahead” table of contents. Using business plan software like LivePlan is generally much easier than writing from scratch, and allows you to create a more visually-enticing document. Learn more on our Business Plan Software Buyer’s Guide.
- One Page Business Plan – A short, 1-page business plan is a more concise version of a complete business plan. It’s used primarily when you don’t want to divulge the full plan but are starting a conversation with an investor, lender, or other party. You can write this on paper, or use business plan software like LivePlan, which offers many templates for 1-page business plans.
- Napkin – If you’re only using a business plan to consolidate your thoughts, and/or to get up to speed with a partner, any medium will do. If it’s not being shared with anyone else, don’t fret about the formatting. Just get the important ideas hashed out so you can start doing the real work.
Business Plan Template: The 9 Components
Regardless of the medium you choose, or whether you’re writing a one-page or full-length business plan, there’s 9 key components all business plans include. While all of these should be considered, you may emphasize, skip, or move around some sections depending on your particular situation:
1. Intro / Executive Summary
The first part of your business plan is a brief summary of your business: What you do, your products/service, your progress so far and future plans.
Start it off with your 1-sentence pitch. This is a bite-sized description of your business that explains your unique approach AND leaves the reader’s mouth watering. Here’s an example from a winner of GeekWire’s 2012 one-sentence pitch competition:
“A SafeWayHOME is the world’s first 24 hour designated driver mobile application that provides users with 3 designated drivers, and a 24 hour taxi service that is available anywhere in North America.”
The rest of your executive summary should briefly explain your company’s story and introduce your specific products/services/locations. Explain your accomplishments so far, and outline what you hope to achieve in the near future. Tone and style matter. For example, framing your business as a ‘train leaving the station’ is far more compelling than a business who ‘needs help getting off-the-ground.’
2. The Problem & Solution
“More than 40% of the United States is rangeland used for livestock, and the top concern of the ranchers who tend to them is ensuring an adequate supply of water… Every day, the rancher checks the water levels of his or her 20 to 30 water tanks.”
So begins the business plan of Barn Owl Systems, a finalist in the 2016 Wharton Business Plan Competition. It continues to explain how their product uses remote sensors to track water levels, thus relieving a great burden for ranchers.
Explaining your business in terms of a problem and solution is necessary to prove why your idea matters. One of the biggest mistakes entrepreneurs make in the early stages is to solve a problem nobody has. Taking some time to explain the problem with factual evidence shows you’ve done the research. You know the industry/market and are ready to make some waves.
Also keep in mind, you don’t need to solve a major world issue. If your city doesn’t have a good pizza shop, this can be just as much of a “problem” – at least, in the context of a business plan. For evidence, cite specific conversations you’ve had with residents that expresses their interest for the type of product or service you’re providing.
3. Product/Services Overview
In order to explain how your business “solves” the problem, you may need to get more detailed. Consider a separate section that highlights the “front-end” of your products/services – in other words, how your product appears to and is used by consumers. (You’ll describe the backend later on when you get into your business model.)
One way to do this is to draw a visual step-by-step process. Think of the 4 to 6 main steps of how your product/service is used. Then, illustrate the process with a simple graphic like the one above. Entrepreneur Patrick FitzGerald explains this in more detail, and provides more examples, in this video lecture.
If you’re selling a physical product, you can take a different approach and simply display your product with arrows pointing to all the unique features. Other ideas include a “before/after snapshot,” which illustrates how consumers went about a problem before and after the introduction of your product. Or, simply write a narrative that shows how your product can improve somebody’s life.
4. Target Market
Describe your target customer based on personality type, income level, age, gender etc. Again, this shows you’re knowledgeable about the industry and market. It will also be helpful when you write your marketing model further below.
Getting specific about your target market shows self-awareness. Claiming your target market for Bob’s Pizza Shop is “everybody in DuPage County, Illinois” will be a red flag to potential investors. Narrowing this to “young adults and families with young children” is a bit more assuring, especially if you go on to explain how your zip code has a high concentration of this demographic.
5. Competitor Analysis
Along with describing your target customers, you should outline the other businesses that exist in your space. Although every entrepreneur dreads to reveal their potential challenges, comparing yourself to competitors drives the point home on what makes you unique and advantageous.
It’s also something your audience will expect. It’s incredibly rare for a business idea to be so unique that there are no existing competitors. If truly nobody has thought of the idea before, it will beg the question, “maybe this isn’t such a great business idea?”
Business Plan Example: Competitor Analysis Table
|Guillermo’s Ristorante||Pizza Hut||Patch's Pizza||Bob's Pizza Shop|
|Distance (from city center)||10 Miles||3 Miles||7 Miles||0 Miles|
|Delivery?||No||Yes, $3||Yes, $2.75||Yes, $2 (free on orders over $20)|
Once you have some competitors in mind, organize them in a neat table like the one above. Make sure your business is on the far-right side, as this is the standard format for competitor analysis tables.
If you’re still having trouble finding similar competitors, go with the next-closest product. You can cover businesses that MAY venture into your space in the future (perhaps after they find out about your idea). Or, explore businesses that attempted to something similar in the past, but were unsuccessful. This, again, is excellent opportunity to show why your idea is different and advantageous.
6. Business Model
Here is where you get into the nitty gritty details. You explain exactly how your business works – from sourcing materials, to finding customers, to managing your day-to-day.
We can think of this section as a series of smaller plans (or models). Depending on your specific type of business, you may cover all or some of the models below:
- Revenue Model – How are you going to make money? Though it may seem obvious, not every entrepreneur figures out exactly how they’ll earn money right away. Even if you’re selling a product, it may take some trial and error to determine your exact profit margin.
- Development Model – How are you creating your product? If it’s a physical good(s), describe the sourcing or manufacturing process. If it’s a service, explain how you or your team will deliver.
- Distribution Model – How do you plan to sell your product? Will you be selling directly to customers, selling wholesale, using distributors, etc.?
- Marketing Model – How will you attract and retain customers? Describe all of your marketing initiatives, be it online advertising, coupons, billboards, foot traffic, etc.
- Operations Model – What will your day-to-day look like? This is where you describe how your team will function on a daily basis, including the key positions and responsibilities.
7. Your Team
Now, you describe your company and team in more detail. Who are they, and why are they rockstars? What is everybody’s background, and what are their specific roles at your business?
You should include details like alma maters and past ventures. The Team section is a chance to form a warm connection with your audience – so the more possible connections, the merrier.
The team section can actually go anywhere after the executive summary in your business plan. If there’s a recognizable face on your team, consider bumping this section up towards the front, so your reader is sure to find them.
8. Financial Plan
You’ve already explained how your business will operate and earn money. Now you need to break things down further by laying out your expenses and profits.
If you’re an established business, this means your financial history (1 to 3 years), plus projections on the following year. If you’re a new business, you’ll need to forecast your next 2-3 years.
A simple way to show financial history and projections is to create a profit & loss statement. Each row is a different revenue or expense, and each column is a different time period (typically months, quarters or years.) You can start with recent months/years, then move onto your projected revenue and expenses.
To create a profit & loss statement for your business plan, we recommend using LivePlan. They have a simple tool that makes it easy to enter your financial data and craft a table. Plus, you can use drop-down menus that, when clicked, list specific revenue sources or expenses. This help guide from LivePlan explains specifically how to create one of these charts using their software.
9. The Ask
If you’re presenting your proposal to a specific person, bank, or institution, don’t forget to end with the question. Whether it’s a loan, equity, or partnership you’re looking for, be sure to explain this and formally make the proposal.
You don’t need to lay-out everything just yet. You can leave many details up to negotiation, like equity or repayment terms. Just make sure you’re asking the ‘big picture’ question, like the amount of funding you need. A company that doesn’t know how much money they want may sound unserious.
Why Use Business Plan Software?
If you want your business to have some presentation value, we highly recommend using a program like Liveplan.
Whether you’re creating a slideshow, 1-page plan, or full paper document, LivePlan has a huge selection of templates that help you save a lot of time compared to writing from scratch. Plus, you can add engaging features like graphs and diagrams and financial charts. In fact, we’ve personally used LivePlan at Fit Small Business for our applications to lenders.
With the LivePlan editor, you work section by section. After selecting one from the left-hand column, you can use a drag and drop editor to write text and add images, charts or graphs. Further up, LivePlan provides instructions and examples of what other business plans included for that particular section.
The Bottom Line
A business plan is a collection of ideas, goals, and research about how to run your business. It matters less how you write it, and more that you’re simply asking and answering these questions.
If you are sending your business plan to a lender or investor, however, be sure to follow a standard format and include the necessary data (like a profit and loss statement). We recommend using LivePlan, which will help you make a professionally-formatted business plan much faster than working from scratch.