How to write a solid business plan in 10 steps

Determining how to write a business plan often feels time-consuming and intimidating. But nearly 70% of business owners who have been there and done that recommend writing a business plan before starting a business. In fact, a wealth of data now exists on the difference a written business plan makes, especially for small or growing companies.

In this post, we’ll detail everything you need to know to write a solid business plan, and turn your idea into a reality. 

Your business plan should include:

10 step business plan

Start with a clear picture of the audience your plan will address. Defining your audience helps you determine the language you’ll need to propose your ideas as well as the depth to which you need to go to help readers conduct due diligence.

Now, let’s dive into the 10 key elements of your business plan.

1. Create an executive summary

Even though it appears first in the plan, write your executive summary last so you can condense essential ideas from the other nine sections. For now, leave it as a placeholder.

What is an executive summary?

The executive summary lays out all the vital information about your business within a relatively short space. An executive summary is typically one page or less. It’s a high-level look at everything and summarises the other sections of your plan.

How do I write an executive summary?

The executive summary focuses on what’s often called the value proposition or unique selling point: an extended motto aimed at stakeholders.

You can follow a straightforward problem/solution format or use this fill-in-the-blanks framework as a jumping-off point:

• For [target customers]
• Who are dissatisfied with [current solutions]
• Our [product or service] solves [key customer problems]
• Unlike [competing product], we have [differentiating key features]

2. Write your company description

Your company description should contain three elements:

1. Mission statement
2. History
3. Objectives

What is a mission statement?

A mission statement is your company’s reason for existing. It’s more than what you do or what you sell, it’s about why exactly you do what you do. Effective mission statements are:

• Inspirational to make others believe in your vision.
• Emotional to captivate readers and grab their interest.

Throughout every part of your plan, less is more. Nowhere is that truer than in your mission statement. Think about what motivates you, what experiences led you to start the business, the problems you solve, the wider social issues you care about, etc.

How do you describe a company’s history?

Don’t worry about making your company history a dense narrative. Instead, write it like you would a profile:

• Founding date
• Major milestones
• Location(s)
• Number of employees
• Executive leadership roles
• Flagship products or services

Then, translate that list into a few short paragraphs.

Why do business objectives matter?

Business objectives give you clear goals to focus on. These goals must be SMART which stands for:

• Specific
• Measurable
• Achievable
• Realistic
• Time-bound

They must also be tied to key results. When your objectives aren’t clearly defined, it’s hard for your team to work toward a common purpose. What’s worse, fuzzy goals don’t inspire confidence from investors and other stakeholders.

3. Summarise market research and potential

Outline your ideal potential customer as well as the actual and potential size of your market. Target markets identify demographic information like:

• Location
• Income
• Age
• Gender
• Education
• Profession
• Hobbies

By getting specific, you’ll illustrate expertise and generate confidence. If your target market is too broad, it can be a red flag for investors.

The same is true with your market analysis when you estimate its size and monetary value. In addition to big numbers that encompass the total market, drill down into your business’s addressable market — meaning, local numbers or numbers that apply the grand total to your specific segments.

4. Conduct competitive analysis

Competitive research begins with identifying other companies that currently occupy the market you’re looking to enter. The idea of learning about each potential competitor you have may sound overwhelming, but it can be an invaluable exercise.

Once you have your list, answer these questions about your most significant competitors:

• Where do they invest in advertising?
• What kind of press coverage do they get?
• How good is their customer service?
• What are their sales and pricing strategies?
• How do they rank on third-party rating platforms?

If your business doesn’t have any direct competition, research other companies that provide a similar type of product or service.

5. Describe your product or service

Describe the benefits, production process, and lifecycle of your products or services, and how your business offering is better than your competitors.

When describing benefits, focus on:

• Unique features
• Translating features into benefits
• Emotional and practical payoffs to your customers
• Intellectual property rights or any patents that protect differentiation

For the production process, answer how you:

• Create existing and new products or services
• Source raw materials or components
• Assemble them through manufacturing
• Maintain quality control and quality assurance
• Receive and deliver them (supply chain logistics)
• Manage your daily operations, like bookkeeping and inventory

Within the product life cycle portion, map elements like:

• Time between purchases
• Up-sells, cross-sells, and down-sells
• Future plans for research and development

6. Develop a marketing and sales strategy

Your marketing plan can be the difference between selling so much that growth explodes or getting no business at all. Growth strategies are a critical part of your business plan.

You should briefly reiterate topics such as your:

• Value proposition
• Ideal target markets
• Existing customer base

Then, add your:

• Launch plan to attract new business
• Growth tactics for established businesses to expand
• Retention strategies like customer loyalty or referral programs
• Advertising and promotional channels such as search engines, social media, print, television, YouTube, and word-of-mouth

You can also use this section to reinforce your strengths and what differentiates you from the competition. Show what you’ve already done, what you plan to do given your existing resources, and the results you expect from your efforts.

7. Compile your business financials

If you’re just starting, your business may not yet have financial data, but you’ll still need to prepare a budget and a financial plan.

If your company has been around for a while and you’re seeking investors, include:

• Income statements
• Profit and loss statements
• Cash flow statements
• Balance sheets

Other figures that can be included:

• How much of your revenue you retain as your net income
• Your ratio of liquidity to debt repayment ability
• How often you collect on your invoices

Ideally, you should provide at least three years’ worth of reporting. Make sure your figures are accurate and don’t provide any profit or loss projections before carefully going over your past statements for justification.

Avoid underestimating business costs

Costs, profit margins, and sale prices are closely linked, and many business owners set sale prices without accounting for all costs. New business owners are particularly at risk for this mistake. The cost of your product or service must include all of your costs, including overheads. If it doesn’t, you can’t determine a sale price to generate the profit level you desire.

Underestimating costs can catch you off guard and eat away at your business over time.

Once complete, create a big picture representation to include here as well as in your objectives in step 2.

8. Describe your organisation and management

Your business is only as good as the team that runs it. Identify your team members and explain why they can either turn your business idea into a reality or continue to grow it. Highlight expertise and qualifications throughout – this section of your business plan should show off your management team superstars.

You should also note:

• Roles you still need to hire to grow
• The cost of hiring experts to assist operations

To make informed business decisions, you may need to budget for a bookkeeper, an accountant, and a lawyer. An accountant can help you review your monthly accounting transactions and prepare your annual tax return. A lawyer can help with client agreements, investor contracts, and any legal disputes that may arise.

Ask your business contacts for referrals (and their fees), and be sure to include those costs in your business plan.

9. Explain your funding request

When outlining how much money your business needs, try to be as realistic as possible. You can provide a range of numbers if you don’t want to pinpoint an exact number. However, be sure to include a best-case scenario and a worst-case scenario.

Since a new business doesn’t have a track record of generating profits, it’s likely that you’ll sell equity to raise capital in the early years of operation. Equity means ownership - when you sell equity to raise capital, you are selling a portion of your company.

Most small business equity sales are private transactions. The investor may also expect to be paid a dividend, which is a share of company profits, and they’ll want to know how they can sell their ownership interest. Additionally, you can raise capital by borrowing money, but you’ll have to repay creditors both the principal amount borrowed and the interest on the debt.

If you look at the capital structure of any large company, you’ll see that most firms issue both equity and debt. When drafting your business plan, decide if you’re willing to accept the trade-off of giving up total control and profits before you sell equity in your business.

The founder can access cash by contributing their own money into the business by securing a line of credit (LOC) at a bank. If you raise cash through a LOC or some other type of loan, it needs to be paid off ASAP to reduce the interest cost on debt.

10. Compile an appendix for official documents

Finally, assemble a well-organised appendix for everything readers will need to supplement the information in your plan. Consider anything that:

• Helps investors conduct due diligence
• Gives context and easy access to you or your employees

Details to cover in an appendix include:

• Deeds, local permits, and legal documents
• Certifications that bolster your credibility
• Business registries and professional licenses pertaining to your legal structure or type of business
• Patents and intellectual property
• Industry associations and memberships
• Local, state and federal government identification numbers or codes
• Key customer contracts and purchase orders

Your appendix should be a living section of the business plan, whether the plan is a document for internal reference only or an external call for investors.

Make your business plan stand out

Investors have little patience for poorly written documents. You want your business plan to be as attractive and readable as possible.

• Keep it brief. A typical business plan can range from 10 to 20 pages. As long as you adequately cover the essentials, less is more.
• Make it easy to read. Divide your document into distinct sections, so that investors can quickly flip between key pieces of information.
• Know your margins. List every cost your business incurs, and make sure that you’re assigning those costs to each product or service that you sell.
• Proofread. Double-check for typos and grammatical errors. Then, triple-check. Don’t risk your credibility.
• Invest in quality design and printing. Proper layout, branding, and decent printing or bookbinding give your business plan a professional feel.
• Be prepared in advance. Have everything ready to go at least two weeks ahead so you have time to make revisions in case of a last-minute change.

Free business plan template

Download our free template to build your business plan from the ground up, considering all the important questions that will help your investors and employees.