Writing a Business Plan
By Stephanie VozzaStarting a business is exciting. You’ve got a great idea for a product or service, and you’re ready to dive in and launch. Should you wait to write your business plan or dive right in?
A study of nearly 3,000 entrepreneurs by Business Plan Pro found that only about a third of people complete a plan. Of those who did, 36% were able to secure a loan or investment capital and 64% had grown their business. In the group who didn’t complete a plan, only 18% scored funding and 43% grew their business.
Going through the exercise of writing a plan helps you focus and create a roadmap for your business by answering important questions. With one-year, three-year and 10-year projections, you’ll know where you’re going, and how to get there. It’s a necessary document if you want to get others to invest in your business. And it allows you to center yourself and return to strategies if you feel overwhelmed
While there’s no right or wrong way to write a business plan, most fall into one of two common categories: traditional or lean startup, according to the Small Business Administration (SBA). The most common is a traditional plan, which goes into more detail and can include dozens of pages. This is the kind of plan you’ll need if you’re going to solicit funding from investors or banks. The lean startup plan also uses a standard structure, but it focuses on the most important elements and is often just a page or two in length. It can help you quickly describe your business to someone else and serve as a quick blueprint for moving forward.
Writing a Traditional Plan
If you choose to use a traditional plan format, the SBA suggests starting with an executive summary that provides an overview of your business, mission statement, product or service and leadership team. If you’re looking for financing, this section should also include financial information and growth projections.
Your company description section should provide detailed information, such as the problem your business solves and the customers you plan to serve. Another section to include is a market analysis with detailed research about competitors and demand for your product and services. The organization and management section should aim to cover the leadership team and the legal structure of your company. You can include an organizational chart as well as team bios.
A products and services section will describe what your business offers, how it benefits your customers and any intellectual property you own, such as a patent or copyright. The marketing and sales section can cover your strategy for going to market and retaining customers. If you plan to seek funding, you’ll need to include a funding request section that outlines your financial needs. And finally, the financial projections section should include a financial outlook for the next five years including sales projections, cash flow, expenditures and budgets — with research or statements to back up your numbers.
Any supporting documents can be put in an appendix including your credit history, resumes, photos, references, legal documents and contracts.
Writing a Lean Startup Business Plan
Your other option is to write a lean startup plan, which can be used when you’re in the early stages of starting a business and you want to swiftly change or refine your plan. This type of plan should describe your company’s value proposition and competitive advantage, infrastructure, target market and finances.
A Few More Tips
When you complete your plan, it’s tempting to be overly optimistic with projections and statements, but rein in your enthusiasm; be conservative with numbers and back up your claims. The idea is to show why your products and services are “amazing,” “awesome” and “the best” by supporting those opinions with facts.
Try to take an outsider’s point of view when deciding what to include in your plan. What would an investor or banker really want to know?
And don’t be disparaging about your competition. You can point out what sets you apart from other businesses or what you do better, but never insult someone else’s hard work or idea. Being professional will ensure that anyone who reads your plan will take you seriously.
Should You Hire a Writer?
If writing a plan seems overwhelming, you can hire a professional consultant to do all or some of it for you, but only take this step if you need to create a plan that will attract investors. A business owner should write a business’s first plan. You’re the one running the business, and you have to put its strategy into action.
A good plan is an ever-changing document that will grow and change along with you and your company. Use it as a source of information and inspiration, and you’ll likely see the growth it can bring about.
Stephanie Vozza is an experienced writer who specializes in small business, finance, HR and retail. She has been a regular columnist for Fast Company for more than four years and her work frequently appears in Inc., Entrepreneur and Parade.