Writing a business plan can be tricky and time consuming, but it’s a crucial step if you’re starting a new business.
Not only is a business plan helpful if you’re looking for investors, but it can also be a great structural resource to help guide you and remind you of your business goals. So how do you create an efficient business plan that meets your needs? Here are five expert tips.
Make sure your business is viable
Before you start writing your business plan, you need to make sure your business idea or product is actually desirable to your intended customer base.
“Many entrepreneurs come up with a great idea without stopping to think if they are solving an actual problem for a group of people,” said Jenny Leonard, CEO of digital agency Never North Labs. “You don’t want to spend months or even a year working on developing a business or product idea only to find out nobody cares or even wants it.”
Leonard said you should spend some time researching your customer base by actually speaking to people your product or business idea would target.
“You’ll quickly find out just by talking to a few dozen people if your business idea or product is a hit or a miss,” Leonard said. “It may be a little extra work early on, but it will save you potentially hundreds of hours in the future by doing this work first.After doing this bit of research, you’ll have the clarity you need to write your business plan.”
Consider your audience
So what’s the first step in actually writing your business plan? Startup consultant Kristi Klemm said the first thing you should do is ask yourself, “Who am I making this plan for?” There are usually two answers to this question, Klemm said: You’re writing it to fit your own needs, or you’re writing it for investors or partners.
“It’s important to recognize when someone wants a business plan for their own needs,” Klemm said. “This indicates the person usually desires structure, and getting their motivations for starting a business on paper or [on a] screen is an important step for them in order to begin working [and] to acknowledge the business is really happening.”
This type of plan tends to be less reliant on outside data, functioning mostly to set into motion the actions needed to get the business off paper, and operating, Klemm said.
“It’s more of an expansive-yet-broad to-do list for the next 12-24 months,” Klemm said.
If you’re making your business plan for investors or partners, it should be very analytical, and include a lot of competitive and market research, with money-asks clearly defined and term sheets as detailed as possible, Klemm said.
“You’re already convinced the business is going to work. Now you need someone else to believe in you,” Klemm said.
Make it visual
A great way to simplify your business plan, both for yourself and your investors, is to make it more visual. Zack Pennington, chief operating officer at online music instruction resource Collabra Music, said you shouldn’t be afraid to use charts in place of long text paragraphs.
“Sometimes, people get too hung up on trying to explain their business model or cost assumptions in words, when a simple table, pie chart or flow chart can do wonders,” Pennington said. “Investors spend countless hours reading business plans, and if you use a chart that makes it simple and easy for them to understand what you do, you’re significantly more likely to hear from them.”
Pennington also noted a change in the way many business plans are being created.
“It’s OK for your business plan to look more and more like a slide deck, since that’s where most business plans are heading,” Pennington said.
Think about timing
When you’re creating your business plan, you also have to think about the time it will take you to reach your goals. Lora Ivanova, co-founder and chief marketing officer of at-home STD testing company myLAB Box, said that it’s key to ask yourself about your time line or personal runway.
For example, “How long can you and the people on your team — co-founders and anyone investing sweat equity — commit yourselves [to] full-time [work] or any meaningful capacity [dedicated] to your business?” Ivanova said.
Once you have that time frame, Ivanova said that the second most important question is, “Is that enough time, conservatively, to get your business to a place where it can sustain your ongoing commitment?” Or, in other words, “At what point in time can your business provide enough income for you to keep working on it?”
From there, you can figure out what goals you need to achieve and how to achieve them.
“Depending on any gap between your runway and revenue, your business plan’s primary goal will be to bridge that gap with tangible solutions,” Ivanova said.
She also suggested creating a business plan for your best- and worst-case scenarios.
“Looking at them side by side is a great reality check,” Ivanova said. “At the end of the day, any business plan is irrelevant if you, the founder [that the business’s] success hangs on, cannot sustain your livelihood to keep building.”
Writing a business plan is an essential task for any entrepreneur. It’s recommended as one of the first steps in getting your new venture off the ground, and having a business plan is required if you want to apply for a loan or raise investor capital. But if you’ve never written one before, it can be difficult to create one from scratch.
Rather than struggle with formatting and figuring out what to include, you can make your life easier by plugging all the information you’ll need into a pre-made template. There are plenty of Web-based business plan tools, but these often require you to create an account and save your work on the provider’s server. This means you will need to log in every time you want to view or edit your business plan, and that you will be dependent on someone else to keep your plan secure and accessible.
Bplans gives registered users access to a database of business planning tools, including a collection of free business plan templates that can be downloaded as Word documents. These templates cater to a wide range of businesses in different industries, such as retailers, online stores, independent contractors, service-based businesses and food establishments like restaurants, cafes and bakeries. Bplans’ Word business plan templates are comprehensive and include a table of contents and standard business plan sections — executive summary, company summary, products and services, market analysis, strategy, management summary and financial planning. Bplan business plan templates also come with instructions, making them a great option for beginners and new business-owners.
Whether you’re looking for advice articles, business planning software or a template for your specific type of business, you’ll find it at BusinessPlanToday (BPT). This website provides a range of free business planning resources, including multiple Word templates and a full chapter-by-chapter business plan writing guide. When you sign up for an account, you’ll also have access to BPT’s comprehensive business plan writing software, which lets you include additional visual elements like charts and graphs.
In addition to publishing business news and entrepreneurship advice, Entrepreneur.com also provides business tools. Their collection of business plans features free PDF, PowerPoint and Word business plan templates, which can be viewed and downloaded via the SeamlessDocs platform. The site includes a templates for a variety of specific business types, a business plan model that outlines the different parts of a business plan, and customizable templates that allow users to add their logos and business information. A guide to writing a business plan is also available for download.
This simple but useful website offers numerous printer-friendly Word samples and templates to help you write your business plan. MyOwnBusiness allows you to access the different sections of a business plan such as the business profile, licenses/permits and location as individual templates, or as a larger all-in-one document. The site also has several financial templates available for Excel. All downloads on MyOwnBusiness are compatible with current and older versions of Word (2003 and earlier).
Office Depot offers more than just office supplies and furniture. Its Business Resource Center contains a trove of free business plan samples for retailers, manufacturers and service providers. Office Depot’s business plan samples are in rich text format (RTF), which is compatible with Microsoft Word and most Windows-supported word processors. For merchants, the retailer business plan template includes forecasting and financial tables that require Microsoft Word version 6.0 or later.
It’s always a good idea to have a lawyer look over any official business documents. When you create your free business plan with Rocket Lawyer, you get the advantage of getting an attorney’s advice to make sure your document is legally sound. The questionnaire-style template asks you to fill in key information about your business — founders, structure and industry, marketing plans, financial projections, etc. — to help you cover all your bases. If you have any questions as you’re working, you can type them in a convenient sidebar box and they’ll be emailed to a Rocket Lawyer attorney upon completion (estimated turnaround is one business day). Your document is free to download as a Word document with a trial subscription, which you can cancel during the one-week period at no charge, or $10 to purchase on its own without a subscription.
Small business resource website SCORE aims to help entrepreneurs launch and grow small businesses across the United States. Their collection business planning tools include free Word business plan templates for startups and established businesses. For in-depth planning, SCORE provides a sales forecasting template, competitive analysis charts to determine your business’ strengths and weaknesses, and financial planning templates such as startup expenses, profit and loss projections, and financial statements. After crafting your business plan, you can also take advantage of SCORE’s mentoring services for expert business planning advice.
As part of our yearlong project “The State of Small Business,” Business News Daily plans to report on the small business environment in every state in America. In this installment, we asked a few of Florida’s more than 2 million small business owners about the challenges and opportunities of operating in their state. Here’s what they had to say.
Small business owners report generous tax benefits, access to several large markets, and ease of transportation by sea, air, and ground. Businesses in the Sunshine State also benefit from the thriving tourist industry, which brings potential customers in from out of state year-round. Florida boasted the country’s fourth largest economy in 2014, totaling a gross domestic product of $838.9 billion. Its economic growth also outpaced the nation by half a point that year at 2.7 percent. Small business owners also overwhelmingly said they don’t feel restricted by state regulations.
Entrepreneurs said recruiting the skilled labor they need remains difficult and that retaining customers can be a challenge in industries that cater to transient groups such as tourists. Some business owners also said they felt there was little guidance from the state when it came to complying with regulations, though the entrepreneurs we interviewed were nearly unanimous in saying the rules are not burdensome.
There’s a reason Florida is called the Sunshine State; it’s a thriving tourist hotspot. In 2014, the state attracted more than 98 million tourists, which generated more than $80 billion in economic activity, according to Visit Florida, the state’s official travel planning organization. Through the first three quarters of 2015 tourism outpaced that record-breaking year by 5.5 percent.
Laura Haftel, owner of the central Florida-based children’s boutique Tugboat and the Bird, said that prior to moving to their current location in Winter Park, Fla., her business was unable to harness the purchasing power of tourists.
“Moving to Park Avenue was a great move; we retained our loyal customers, but saw a real influx and uptick in the tourist business,” Haftel said. “Tapping into that tourist base was really key for us.”
For Rita Goldberg, founder of the British Swim School, the tourism industry indirectly benefits her business. While her swim lessons tend to attract residents, she said many were tourists first, and some have even become franchise owners.
“The more people who come here to visit, the more people who settle here,” Goldberg said. “A lot of my franchising down here is from people from abroad. We appeal to people who want to make a life down here.”
Florida is home to more than 20 million people living across more than 53,000 square miles of land. Large population centers are spread evenly throughout the Sunshine State, including in Miami, Orlando, Tampa, Jacksonville, and Tallahassee. The even distribution of Florida’s largest cities offers economic opportunity to the surrounding areas as well, and population density remains nearly uniform along the coasts of both the Atlantic Ocean and the Gulf of Mexico, easily connecting the cities with more suburban areas.
Ronnie Dragoon, who owns Ben’s Kosher Delicatessen Restaurant and Caterers, said the growing population coupled with tourism has been a big boost to business.
“It has been growing,” Dragoon said. “I have seven units and [Boca Raton] is my highest grossing unit, because Florida is such a high tourist area and also because South Florida has been settled and resettled by northerners.”
The continued draw of retirees from northern states ensures demand will continue grow, Sean Smallwood, founder and owner of law firm Sean Smallwood, P.A., said.
“With exploding population growth and retirees moving here in droves, the opportunity for small business owners to prosper in the Sunshine State is great for all different types of businesses,” Smallwood said.
Even web-based businesses not bound by borders, like Candice Galek’s swimwear dealer Bikini Luxe, are happy to zero in on local customer bases in cities like Miami despite their ability to reach out of state markets as well.
“In 2016, we plan on taking more advantage of the local economy,” Galek said. “We are most concerned about focusing on our Miami clientele.”
Every small business owner we spoke to cited favorable taxes as a big boon to doing business in Florida. For one, there is no personal income tax in the state. In addition, there’s a cornucopia of tax benefits available to businesses in Florida. One such benefit is the Community Contribution Tax Credit, which allows any company that donates to an eligible community-based organization to take a credit of 50 percent of the donations against its corporate income tax up to $200,000 per year. The state’s Department of Revenue maintains a list of the other available incentives.
“The small business climate is strong here,” Stacia Pierce, a success and business coach, said. “There’s so many tax breaks and other incentives that encourage people to go into business for themselves.”
The entrepreneurs who spoke to Business News Daily invariably praised the tax climate, with some even saying it gives them the opportunity to better compensate their employees.
“For the business climate here, as a whole, the obstacles are very low,” Peter Wasmer, CEO of Chrome Capital, said. “We don’t have a high tax problem that would preclude us from making positive decisions about benefits to employees, and that allows us to retain and attract talented employees.”
“We have low taxes,” Galek, of Bikini Luxe, said, adding that it makes the increasing minimum wage not just manageable, but a welcome change. “We have good morale, our employees are happy, and minimum wage is increasing, so that’s exciting.”
It may be tempting to dive right in when you have a great startup idea, but failing to create a detailed business plan is where many entrepreneurs go wrong.
A solid business plan can be the difference between just an idea and a successful business. It allows you to set goals and determine how to realistically measure them. In the process of creating one, you develop an understanding of your market and the competition that is based on facts, not just hopes.
A review of the competition
If companies focus only on themselves in their business plan, they are making a big mistake. Businesses should use their business plan partly to address the competition and how their idea differs from what’s already out there, said Steve Martorelli, CEO of Turnkey Processing, a payment processing provider.
“First, identify your X factor — what can you do 10 times better than your competition?” Martorelli said. “Next, test your hypothesis by talking to potential customers. Do they value what you are proposing to offer them as much as you think they do? Finding the answer to these two questions is the most important planning anyone can do.”
Companies that value innovation must make it a priority from the start. Your business plan should highlight the ways in which your startup will be original and groundbreaking, said Amy Hutchens, business strategist and CEO of AmyK International, which specializes in executive development.
“Innovation must be a critical component of every business plan,” Hutchens said. “By making innovation part of the plan, the process becomes intentional, not reactive or accidental, and sets the stage for a culture of creativity and innovation for the long run.”
A contingency plan
It is highly unlikely that everything about your business will go according to plan. Justin Palmer, founder and president of HomeLife Media, which operates pet-focused websites, said entrepreneurs should have a “contingency plan” that allows them to make any necessary business-model changes should something not go as anticipated.
“An example of a contingency might be, ‘If we do not have 1,000 paying customers within six months of operations, we need to shift product focus,'” Palmer said. “A metric such as this is especially vital if your business operates on the Web or builds software. A business plan is great, but there’s no point in sticking with a failing plan for too long.”
Preparation for success
On the other hand, businesses also should prepare for unexpected success. Your business plan should account for normal scenarios as well as highly successful, best-case scenarios, said Elle Kaplan, CEO of LexION Capital Management.
“When I started my business, I was in no way prepared for the success and level of growth we obtained,” Kaplan said. “I should have planned bigger and prepared for faster growth versus being surprised and having to rework my plan.”
A typical business plan will discuss a company’s target market, usually in terms of demographic information such as age, gender and income level. However, businesses should consider looking even further to define their target customers by factors such as lifestyle, needs and desires, said Amber Goodenough, co-founder of fourfour media, a Web design and development company.
“Psychographics ― customer values, lifestyles, habits and interests ― give you a deeper insight into your customers’ needs, wants and frustrations, which then helps you create products and services that really meet those needs and solve their problems,” Goodenough said. “The better you do that, the more money you make.”
A social media strategy
As social media remains a dominant force in marketing and customer engagement, a business plan needs to highlight how the company will use social media to its strategic advantage, said Stephanie Ciccarelli, co-founder and chief brand officer at Voices.com, an online marketplace that connects businesses with voice-over talent.
“No business plan should be without a section dedicated to the use of [social media] as part of their marketing efforts and channel for supporting and engaging customers,” Ciccarelli said. “These efforts may also tap into a company’s advertising, search engine optimization and customer service efforts.”
Employee engagement tactics
If your business is going to have employees, you’ll want to spell out how you’re going to keep them engaged and focused on their responsibilities, said Bill Rosenthal, CEO of Communispond, a provider of employee skills training. “The plan must include ways to show employees [that] their well-being aligns with that of the company,” Rosenthal said. “Establish metrics for everyone’s performance, and spell out the rewards for meeting the metrics.”
An exit plan
Although it may be the last thing on your mind when starting a business, providing an exit strategy with your business plan can be a great help if you decide to sell the business later on. A well-researched exit strategy can also help you land investors, said Mike Scanlin, a venture capitalist and CEO of Born To Sell.
“As an early-stage company, you need to show investors a path to 10 times their investment,” Scanlin said. “Make a list of exits — mergers and acquisitions or IPOs [initial public offerings] — in your space … to help convince [investors] that if they invest in you, there are plenty of people who will want to buy you in three to seven years.”
Benjamin Franklin has been quoted as saying, “If you fail to plan, you plan to fail.” Whether or not he actually said it, the idea behind it still holds true. Your business stands a better chance of succeeding when you plan carefully and consider every factor that may impact it.
This doesn’t just mean jotting down your thoughts and ideas. You need to take the time to actually sit down and create a well-crafted business plan. Just as a cake is the sweet reward for following the recipe, a successful business is the reward for creating a well-thought-out business plan.
Many new business owners are intimidated by the thought of developing a business plan. Many parts of it require some research and dedicated study on your part, in order for you to be able to discuss those components in the plan, and then implement them when you’re ready for action. Your lack of knowledge may be scary at first, but it is also enlightening: It is better to identify what you need to know now, than later, when your lack of knowledge might adversely affect your success.
But where to begin? Free business plan templates can help. They provide guidance by outlining the different parts of a business plan. You can choose a simple business plan template that you can finish in a few minutes, or a more comprehensive template that covers funding, market analysis, financial projections and other minutiae of running a business.
Entrepreneurs are often advised to write a business plan before they officially start their business. The act of writing the business plan will help focus on the details, find items that were not previously considered and fine-tune the approach to running a successful business.
Before a formal plan can be written, however, there are a few key elements you’ll need to work out that will ultimately help you craft that document. Entrepreneurs and business experts recommend taking the following steps before you sit down to write your plan.
Determine your purpose
The primary purpose of a business plan is to show investors, lenders and other potential stakeholders how your company plans to make a profit. Profit is important, but it’s far from the only thing that matters when you start a business, experts say.
“Business plans can be helpful tools to clarify … business activities, [but] they … encourage entrepreneurs to focus on what they are going to do,” said Alan Williams, co-author of “The 31 Practices” (LID Publishing Inc., 2014). “This overlooks two more important questions: ‘why’ — why it exists and why employees would want to get out of bed in the morning, and ‘how’ — the values of the business, what it stands for, how people representing the business will behave.”
Williams noted that entrepreneurs should take time to identify and articulate their business’s core values and purpose, which will serve as your organization’s compass for decision making at all levels. Williams’ co-author, Alison Whybrow, said that this “compass” can be discovered by having an honest, open conversation with your team.
Build your vision
The key to business success is having a clear vision of what you want to accomplish as a company, experts say. But before you write a business plan, you should come up with three to five key strategies that will enable you to achieve that vision, advised Evan Singer, general manager of SBA loan service SmartBiz.
“Sometimes, less is more,” Singer said. “It’s far better to do three things very well versus 10 things not so well.”
Clarify your business model
A good business plan always includes financial projections, but before you can figure out facts and figures, you’ll need to work through potential scenarios to make sure your business model is going to work.
“Start [answering] ‘what ifs,'” said Alex Muller, CEO of retail mobile engagement platform GPShopper. “If I sell this product at this price point, and this is the cost of client acquisition, what rates of return can I get? When you’re done building [and testing] the business model, then you can go back [and] write a business plan.”
Muller said a good financial model should include many of the details you would put in your formal business plan — for example, hiring, pricing, sales, cost of acquisition, expenses and growth. As with a business plan, your model should be revisited and updated as the realities of your business start to unfold, Muller noted.
Work out your name and legal structure
The way your company is structured — sole proprietorship, LLC, corporation, etc. — plays an important role in your business operations and strategy. David Pomije, CEO of jewelry e-commerce retailer Bijouxx Jewels, noted that it’s important to not only officially register your company, but also to ensure that you own the naming rights before you work on your business plan. The last thing you want to do is put your company name all over the official documents and website, only to find out that someone else holds the copyright, Pomije said.
Identify your target market
Of everything a new business owner or entrepreneur thinks of, the most murky is often the target market, or the ideal group of people for whom the product or service solves a problem. Grant Leboff, principal of Sticky Marketing Club, says to answer the question, “Why am I uniquely placed to solve the problem?”
“If you are unable to answer the question, you either have the wrong target market or the wrong offering,” Leboff wrote in a blog post. “In this case, more work will need to be done before you start targeting your potential customers.”
By painting a picture of the customer and then looking internally at your company, you can determine if what you have to offer is the most attractive to the type of client you want, Leboff said. If not, you may need to change your offering or define your target market differently.
Test out your business idea
There’s no point in spending time on a formal business plan if you’re not even sure there’s a market for your idea. Kara Bubb, a product manager at digital asset management software Widen Enterprises, said entrepreneurs should go out and talk to industry experts, potential customers in their target market and other entrepreneurs to determine their business’s viability.
“Talk to some real potential future clients [and experts], and ask for some honest feedback,” Bubb told Business News Daily. “What do they think about your business idea? Who, specifically, are you targeting with your business? How big is the market? Will your market buy what you are selling? Who is your competition?”
Bubb also recommended identifying your potential opportunities and risks, which can be done by conducting a SWOT (strengths, weaknesses, opportunities, threats) analysis of your business.
Do share your plan
If you want your company to succeed, then all employees should understand the business plan’s dynamics. It is not a document that you should lock away.
“The business plan keeps an organization focused, [and] it needs to be shared,” Cohen told Business News Daily. “Too many companies treat it as a confidential document to be kept away from the ‘prying eyes’ of the rank-and-file employees. I believe the business plan should be shared, discussed and amended where appropriate, through an open loop of feedback and insights.”
The more people who are involved, the more ideas you can circulate around the company, Cohen said. It is important to consider every worker’s input to ensure that the outcome is something that’s pleasant to all.
Do follow an outline; don’t go overboard.
You don’t need to have an over-the-top, elaborate document, fancy formatting or flashy decor. However, much like a road map, it must make sense to you as well as to your company’s employees.
Start your plan, said Cohen, by using a specific outline called SWOT, which stands for strengths, weaknesses, opportunities and threats. First, create an executive summary, in which you describe in what field you wish to succeed, and how and why you intend on doing so. And then, list your company’s strengths and weaknesses as well as opportunities for growth, and detail the threats to it that might hinder the achievement of those goals.
Do conduct research — don’t “wing it.”
As with any business project, research is absolutely critical to a solid business plan.
“Research is one of the big value-adds of writing a business plan,” said Joseph Ferriolo, director of Wise Business Plans. “Research forces companies to learn what they can expect to make and what the industry trends are.”
If the research indicates that your idea is viable, then you can proceed by writing down the goods or services you offer, your marketing plan, how much funding you need and your goals. For more ideas on specific points to include in your business plan, check out this Business News Daily article.
Do put it to use — don’t file it away.
Your plan is there for a reason. Don’t be afraid to refer to it as much as possible — think of it as checking the map when you’ve made a wrong turn. There is nothing wrong with using your plan to get back on track or to remain there.
“The biggest mistake people make is this: They prepare the document and then put it in a drawer and never look at it again. That’s self-defeating,” Cohen said.
Finally, remember that you should revisit your business plan as your company grows.
“Don’t just make the business plan and use it for funding — really benchmark your company against it,” Ferriolo said. “Reference the plan monthly and quarterly, and revise your research and estimates as you proceed. Being accountable to the vision you set forth will help keep you in line and successful.”
Editing and updating is always a good idea, too; you can never make too many revisions. Cohen said that a business plan is “a document that is never complete.”