Learning how to write a business plan is one of the most important steps to take when starting a new business. According to research, creating a business plan can increase your chances of starting your business by 152%. What’s more, published studies also show that planning can cause companies to grow up to 30% faster.
This may be why one of the most common questions about starting a business is how to write a business plan.
Creating a business plan is not rocket science, but there are a number of dos and don’ts you should be aware of before you start. A well-constructed business plan could be what makes your business a success.
On the other hand, a business plan that doesn’t check all the boxes could very likely chase away investors and jeopardize the planning and running of your new business.
Fortunately, you are in the perfect place to learn what steps you need to know about how to write a business plan. Read on to find out why you need one, what steps to include, and what key mistakes to avoid.
Why You Need to Know How to Write a Business Plan
There are many successful businesses today that were created without a business plan. Such as Google, Apple, Pepsi, Yahoo, Nike, Disney, and Walmart.
Does this mean that you don’t need to write a business plan?
Put it this way, unless you have an idea that’s guaranteed to be the next Facebook—let’s just say that a business plan is generally a very good idea.
Think of a business plan as your business guide book, or road map. By plotting out a business plan you should be able to tell whether or not your business idea is viable, what obstacles it’s likely to encounter, and what actions to take along the road to reach your goals.
Also, business plans are essential for when you begin the process of applying for a business loan. Survey results show that 64% of businesses that had a business plan attained some sort of funding, while only 18% of businesses with no plan secured a loan.
What’s more, of those surveyed, 64% of businesses with a plan experienced growth, as opposed to businesses without a plan of which only 43% experienced growth.
This shows that having a business plan in place not only sets you up for the best chance of finding success, but it can also help you to reach your business growth milestones.
What to Include When Writing a Business Plan Outline
If you are wondering how to write a business plan, the first thing to get clear on is what to put in it. Business plans should ideally include everything an investor or lender needs to know, as well as key projections that will help you meet your growth and operational milestones.
Besides this, you will also need to incorporate a clear and structured layout, as many facts as possible, and the right level of detail.
Here are some of the main elements that should appear in a well-written business plan.
A Clear Layout
A business plan consists of a few main sections. The traditional business plan format usually contains the following:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
This is not the only layout you can choose. The end goal when writing a business plan should be that the layout is clear, consistent, and professional.
If you are concerned about how to structure your layout, there are endless business plan templates you can download and purchase online, so don’t let that aspect phase you too much. The key is to focus on the content of the plan and ensure that it is a true, accurate, and well-researched representation of your business’s road map for the future.
One of the most important purposes of a business plan is to illustrate your business concept/idea clearly. This should include the details of the product or service that you plan on offering, as well as how it is to be implemented, and why you project that it will succeed.
Show Financial Projections When Writing a Business Plan Outline
Speaking of projections, it is essential to include in your business plan financial projections. Thorough financial projections are an integral part of business plans and are key to securing a business loan and investor interest.
To thoroughly present your financial projections you should include in your business plan the following:
- A sales forecast
- An expenses budget
- A cash flow statement
- Income projections
- A break-even analysis
- A projected balance sheet
Without these components, a business plan will be conceptually heavy no ‘meat and potatoes’ behind it, so be sure to invest the necessary time to draw up these projected financials.
When drafting a business plan, you must base as much of the information as you can on facts. These include things like know competitors, trends and themes in the market, customer purchasing habits, customer motivations/fears; and competitor positioning.
As business plans are future projections, they will inevitably include assumptions. However, make sure that these are critical assumptions to the business model and that they are highlighted as such.
Any critical assumptions made in a business plan should also be backed up with rationalizations to show how and why you came to these conclusions.
Your Target Audience
Another key area of research that should be included in your business plan is detailed information on your target audience. If you have researched your target audience well this shows that you have an understanding of them and are qualified to know whether they will buy your product (or service) as well as how to market it to them.
As mentioned above, business plans should always include information on your competition. Competition is a key area of business concern. Investors will want to know what your plans are regarding competition, and your business will do well to have a predefined strategy for separating itself from potential competition.
The reason why this is such an important area of a business plan is that competition can be the biggest obstacle to a new — or established business. Opening up a business that is in no way distinct than others like it in the same market means that you will be trying to compete with established brands for the same offering.
On the other hand, if new competition comes along once you are established and undercuts your offering or out does it in value, this can spell the end of success as you struggle to keep up.
Therefore detailed information on the existing and potential competition is crucial to any good business plan.
Including the Right Amount of Detail is How You Write a Business Plan Correctly
While we are on the topic of details, it is also critical that you include the right level of detail within your business plan. Too little detail will leave the plan flat, un-verified, and of little value to both your business and potential investors.
On the other hand, too much detail can render a business plan cumbersome and ineffective. Investors and lenders have limited time to review these types of documents. It is essential that you keep their attention and not bog down the message of your plan with non-essential information.
At the same time, an overly elaborate and a too detailed business plan is also not useful. Although business plans act as a road map, things will also change along with the road. A business plan should help you to stick to your key goals, not dictate small and erroneous details of your business’s operations.
Here’s How to Write a Business Plan with Minimal Mistakes
Knowing what to include in a business plan is key, but so is knowing what mistakes to avoid. Letting spelling errors, shaky financials, or incorrect information creep in is definitely not how to write a business plan.
These kinds of mistakes can turn off investors, reduce your chances of receiving a loan, and render the plan useless for guiding your business’s operations.
Spelling, Layout, and Writing Errors
It is essential that the final draft of your business plan is free from spelling and grammatical errors and that the layout makes sense.
We all make mistakes, and it can be tough to spot these if you are proofreading your own work. Therefore, make sure that you get a fresh pair of eyes to look over the plan and check it for spelling, punctuation, and grammar errors. If you can, try and find someone who is an expert, such as a professional proofreader or editor.
Unrealistic Financial Projections
Well researched financial projections are a cornerstone of a thorough business plan. Unrealistic financial projections will hurt the chances of investment and loan approval, as investors and lenders are on the lookout for overly-optimistic financials in business plans.
Trying to Cover up Areas of Weakness
Areas of weakness may be unavoidable in certain business models or business environments. While you should not overemphasis them, your business plan also shouldn’t cover up or gloss over areas of weakness.
If possible, the best route is to address these briefly and outline what contingency plans the business will take.
Now You Have a Step-by-Step Outline on How to Write a Business Plan
Now that you know how to write a business plan, the next step is getting started drawing up the initial draft. Once you have written the business plan into its finalized form, you can use it to start raising capital.
If you are considering taking out a loan to start your business, you have come to the right place. We offer businesses a quick, free, online loan application process. We match businesses up with the best loan options from our network of approved banks and other industry specific lenders.