As an entrepreneur, you might be convinced that your idea is sure to succeed. You’ve spotted a perfect business opportunity and have the skills and knowledge required to meet a need in the market. In reality, no matter how knowledgeable, skilled, and prepared you are, a business plan is a powerful tool that can increase your chance of success
A business plan can help you clarify your goals for the future, your understanding of your market, and your pitch to potential investors. Learning how to write a business plan is far less daunting than it might seem at first if you take things one section at a time. No matter what your business goals are, a business plan is well worth taking the time to write.
What is a business plan, exactly?
A business plan is a widely recognized business document that provides key information about a business, its founders and key team members, its target market, how it will operate and be structured, and how it will generate a profit.
Since this is such a commonly used document, there are very clear expectations about what information should be included. You don’t have to reinvent the wheel by coming up with a structure for your business plan; you can go through the sections below and make sure you provide the relevant information to the best of your knowledge for each of them.
Why should I create a business plan?
A business plan could have many different potential audiences. As the foundation for a new business, it will help you set, measure and adjust your goals. It’s also instrumental in securing business funding and partnerships.
Better understand your business
The first reason to create a business plan is for you to understand the feasibility of your business idea.
It requires you to think carefully and realistically about your business viability. This is a valuable exercise since it gives you a chance to address potential challenges before they become a problem.
Entrepreneurship takes a lot of dedication and resources, and a business plan helps you make sure your business idea is feasible before you sink those resources in something that wasn’t well thought out.
Further, by creating this document, when you are starting out, you have something to return to while making sure you’re meeting your business goals. If you aren’t, that’s a good sign you may need to revisit your business plan.
Secure loans or funding
If you go to the bank for a business loan, they will want to see a viable business plan first. The same goes for any potential lenders or investors in your business. A business plan shows them that you’ve done your research and have the necessary expertise to successfully launch your business.
Your business plan should convince any potential investors or lenders that your business is viable and give them a realistic projection of your growth.
Apply for grants and contests
Some grant programs require that you submit a business plan to be eligible to apply. For example, if you live in Ontario, the Starter Company Plus program requires that you create and submit a business plan to potentially receive a grant.
What should I include in my business plan?
While there are lots of business plan templates available, they all include variations of the same sections outlined here.
Ideally, you should aim to complete all of these sections when writing your business plan. If, for some reason, one section doesn’t apply to your business, note why in your business plan. This way, your audience can be assured that you didn’t leave it out because you haven’t thought about it.
The first section of a business plan is the executive summary and is ideally around a page in length. It’s designed to provide your audience with a summary of your business plan, including:
- A description of your products or services
- An overview of the market your business operates in, including why your business has a competitive advantage
- A summary of your business goals and your financial requirements to meet these goals
- Your projected growth
- For existing businesses, a snapshot of your current situation and any major milestones you’ve reached so far
This may seem like a lot to fit in one page, but remember that the goal is to give your audience a high-level understanding of what your business does and why they should care enough to read through the rest of your business plan.
Business overview and structure
The business overview section communicates your business history, your vision and mission for the future, and your ownership structure. Your audience should learn what your business does, why you’re starting it, and how you offer something unique.
Your business overview should include:
- The industry you operate in, including high-level information about market size and emerging opportunities
- A description of business activities
- Your mission statement and a description of your vision for the future
- For existing businesses, background information on what you have done so far
- Information about your team, including their salaries. If you are the only person involved, you can provide your professional background
- Your business structure, whether it is a sole proprietorship or corporation
This section is where you begin to show your audience why your business is special and a worthwhile investment for them. It should also communicate the why behind your business. Why did you choose this industry? Why will your business succeed despite competitors? What goals and values will guide your decision making as you grow?
Your products and services
This section of the business plan is your opportunity to demonstrate how great your product or service is. Go into detail about the features and benefits of your offering.
If your business involves selling a physical product, describe the steps involved in bringing your product to market. For example, if you are starting a clothing business, describe the design process, the material sourcing process and any existing suppliers, the manufacturing process, and how you plan to distribute the product.
If you provide a service, describe how your business is well-positioned to deliver the service to an excellent standard. For example, if you are starting an accounting business, include an overview of accounting services you have successfully provided in the past, and describe any specialized skills you may have that set you apart from other accountants.
This business plan section should also provide an overview of your competitive advantage. In the clothing business example, it may be that your materials are ethically sourced and carbon neutral. For the accountant example, it may be your unique experience helping clients in a niche market with their accounting needs.
Defining the target market is a critical step for any new business. You need to make sure there is a market for your product or service and show that you have thought about how you will penetrate this market.
Your market research should include the size of your target market. Be as specific as possible in your business plan. While it’s impossible to get a perfectly accurate figure, you can look for government data or industry reports relevant to your industry, research trends in your industry, and make informed guesses to show you arrive at your market size.
For example, if your business is green household cleaning products, saying that every household in Canada is part of your target market is too broad. You’ll need to think about your actual ideal customer and figure out how many people who fit that profile you can reach with your business.
An important part of this section is identifying the key competitors in your market and demonstrating that you offer something unique that differs from them.
An effective way to demonstrate your competitive position within your market is by doing a SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities, and threats.
Include a SWOT analysis in the market research section of the business plan by creating a section for each letter in a 2×2 grid.
- Under strengths, list your business characteristics that offer you a competitive edge.
- Under weaknesses, include the areas where you know you are not as developed as your competitors.
- Under opportunities, list any market trends or new developments that you can use to your advantage.
- Under threats, outline market trends or developments that disadvantage your business.
A sample SWOT analysis for a new dentist location might look like this:
S: 15 years of experience, high end facility in a new building
W: first time dental office owner, no existing clients in the area
O: a new condo development will be completed soon with many potential clients moving to the area
T: economic downturn may mean people lost dental insurance, may put off going to the dentist
You might think that including weaknesses and threats in your business plan will discourage potential investors, but the opposite is true. It shows that you can think through potential challenges, which is essential if you’re going to meet and overcome those challenges.
Marketing strategy and implementation
In this section of your business plan, you can elaborate upon your target market segments and how you plan to differentiate your product for each of these target audiences. You’ll also describe how you will take your product to market.
A target market segment is a further subsection of your target market. For example, you might segment your market by age, profession, income, or geographic location.
Explain how you will promote your business to each of your relevant market segments, and provide a comprehensive marketing plan for each segment.
Your marketing plan should consider as many marketing channels as possible: email marketing, online ads, tv ads, influencer marketing, PR campaigns, trade shows, and more can all be a part of your marketing strategy, but not all of these may be relevant to your particular target market segment. Explain why each component of your marketing strategy is the best choice for reaching your target customer and outline your marketing budget.
Finally, be sure to include how or where your product or service will be sold.
Organization and team
This section of the business plan is all about your organizational structure. If you are the only person involved in your business, provide a complete overview of your qualifications and why you are the right person to make your business a success.
If you have a larger management team, provide an overview of each role and the qualifications of each team member.
This part of the business plan can also describe where your business takes place. Provide details of your locations, and identify any third parties involved in your business operations such as contract manufacturers.
Include an overview of your daily operations.
Financial plan and pricing
A key aspect of how to write a business plan is showing you can be profitable. Provide an overview of your pricing structure, including any pricing incentives such as discounts that you plan to offer.
You should include the following:
- An income statement, showing income and expenses for a given period of time
- A balance sheet, listing all business assets against business liabilities. This shows how much equity you own in your business, which will determine the riskiness of lending to you.
- A cash-flow statement, which is similar to an income statement but factors in the timing of income and expenditures to determine if there are periods where your cash flow is negative
If you’re starting out, you will have to use educated guesses to complete this information. Come up with a realistic sales forecast for the first year of your business, and include expected variations due to things like seasonality. It’s important to be realistic with your projections. This shows you’ve done your research to arrive at reasonable estimates.
You may also include an appendix if you wish, with images of your product, packaging, retail locations, or anything else that may be relevant.
By the time you complete your business plan, you’ll be much more acquainted with your own business than when you started.
This powerful document can serve as a guiding light as you make decisions, helping you stick to your plan and vision for success, and access funding to take your business to the next level. Now you know exactly how to create a business plan that works for you and your business.