Whether you’re a seasoned business owner or just beginning to think about starting a business, demands come at you fast: tasks, to-do lists, meetings and more. Amidst that rush, the idea of writing a good business plan often feels time-consuming and intimidating.
Business owners who have been there, done that recommend writing a business plan before you start a business. When done right, business plans have enormous payoffs.
And yet, more than one in 10 prospective business owners said they do not intend to write a business plan. Another one in 10 aren’t sure if they need a plan.
It’s more than the old cliche, “A failure to plan is a plan to fail.” In fact, a wealth of data now exists on the difference a written business plan makes, especially for small or growing companies.
But, first things first.
What is a business plan?
A business plan is a path for your small business’ growth and development. It communicates who you are, what you plan to do and how you plan to do it. It also helps you attract talent and investors.
But, bear in mind, a business idea or business concept is not a plan.
Business plans give investors a blueprint of what to expect from your company and tell them about you as an entrepreneur. The majority of venture capitalists (VCs) and all banking institutions will not invest in a start-up or small business without a solid, written plan.
Investors want to know you have product-market fit, a solid team in place and scalability—which is the ability to grow sales volume without proportional growth in headcount and fixed costs.
When do you need a business plan?
Before you leave a nine-to-five income, your business plan can tell you if you’re ready. Over the long term, it’ll keep you focused on what needs to be accomplished.
It’s also smart to write a business plan when you’re:
- Seeking funding, investments or loans.
- Searching for a new partner or co-founder.
- Attracting, hiring and retaining top talent.
- Experiencing slow growth and need a change.
The elements to include in your business plan
Start with a clear picture of the audience your plan will address. Is it a room full of angel investors? Your local bank’s venture funding department? Or an internal document to guide you, your leaders and your employees?
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; typically, one page or less. It’s a high-level look at everything and summarises the other sections of your plan. In short, it’s an overview of your business.
How do I write an executive summary?
Its executive summary focuses on what’s often called the value proposition or unique selling point: essentially, an extended motto aimed at customers, investors and employees.
You can follow a straightforward “problem, solution” format or a fill-in-the-blanks framework:
- 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]
That framework isn’t meant to be rigid, but instead to serve as a jumping-off point.
Example of an executive summary
Here’s an example of a brief executive summary:
Market research indicates an increasing number of wealthy consumers are interested in landscape architecture based on sustainable design. However, high-end firms in the area are scarce. Currently, only two exist—neither of which focuses on eco-friendly planning nor is certified by green organisations.
Landscapers Pty Ltd provides a premium, sustainable service for customers with disposable incomes, large yards and a love of nature.
2. Compose your company description
Within a business plan, your company description contains three elements: (1) mission statement, (2) history and (3) objectives.
What is a mission statement?
A mission statement is your business’ reason for existing. It’s more than what you do or what you sell; it’s about why. Mission statements should be inspirational and emotional. They should be rallying cries around the heart and soul of your business.
Throughout every part of your plan, less is more. Nowhere is that truer than your mission statement. Think about what motivates you, what causes and experiences led you to start the business, the problems you solve, the wider social issues you care about and more.
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 or locations
- Number of employees
- Executive leadership roles
- Flagship products or services
Then, translate that list into one or two paragraphs (see below).
Why do business objectives matter?
Business objectives give you a guiding star. These goals must be SMART: specific, measurable, achievable, realistic and time-bound. Or they must be tied to key results. When your objectives aren’t clearly defined, it’s hard for employees and team members to work towards a common purpose.
Worse, fuzzy goals won’t inspire confidence from investors. Nor will they have a profitable impact on your business.
Example of a company description
Landscape Pty Ltd’s mission is to change the face of our city through sustainable landscaping and help you create the outdoor living space of your dreams.
Founded in 2019 by sisters Sherry and Shelly Smith, we have over 25 years of combined landscape architecture experience. Our four employees work in teams of two and have already completed 10 projects for some of our cities most influential business and community leaders.
Our objectives over the next three years are to:
- Solidify a glowing reputation as a service-based business that always exceeds the customer’s expectations and honours the environment.
- Complete at least 18 projects during year one, 24 in year two and 36 in year three generated through word of mouth, referrals and home shows.
- Increase revenue from $360,000 in FY2019 to $972,000 in FY2021 based upon 10 completed projects in the last nine months.
Note: review your mission statement often to make sure it matches your company’s purpose as it evolves. A statement that doesn’t fit your core values or what you actually do can undermine your marketing efforts and credibility.
3. Summarise market research and potential
The next step is to outline your ideal potential customer as well as the actual and potential size of your market. Target markets—also known as personas—identify demographic information like:
By getting specific, you’ll illustrate expertise and generate confidence. If your target market is too broad, it can be a red light for investors. For example, if your product is perfect for people with money to hire landscape architects, listing “anyone with a garden” as your target market might not go over so well.
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’ addressable market, meaning, local numbers or numbers that apply the grand total to your specific segments.
Example of market research and potential
Landscapers Pty Ltd’s ideal customer is a wealthy baby boomer or a member of Gen X between the ages of 35 and 65 with a high disposable income. He or she—though primarily, she—is a homeowner.
They’re a working professional or recently retired. In love with the outdoors, they want to enjoy the beauty and serenity of nature in their own backyard—but don’t have the time or skill to do it for themselves.
Market research shows the opportunity for Landscape Pty Ltd has never been better:
- Total revenue for landscaping services increases year on year
- Among landscaping contractors, designing and building is the second-fastest-growing service offering
Leading indicators for interest in green, eco-friendly and sustainable landscaping have all increased exponentially over the last five years:
- Online search volume for those terms is up 467%.
- g., Ten new community organisations have been formed.
- Seventy-three high-profile projects have been covered by local media.
4. Conduct competitive analysis
Competitive research begins with identifying other companies that currently sell in the market you’re looking to enter. The idea of carving out enough time to learn about every potential competitor you have may sound overwhelming, but it can be extremely useful.
Answer these additional questions after you’ve identified 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?
When visiting your competitor’s websites, take a look at their “About Us” page or their mission and values statement. If you’re presenting to a panel of investors, distinguishing yourself from competitors is one of the most critical pieces of your business plan. If you haven’t done your homework, those investors will see right through you.
Spend some time thinking about what sets you apart. If your idea is truly novel, be prepared to explain the customer pain points you see your business solving. If your business doesn’t have any direct competition research other companies that provide a similar product or service.
Next, create a table or spreadsheet listing your competitors to include in your plan. Your business should be listed last, or on the right, which is standard practice. This is often referred to as a competitor analysis table.
Example of competitive analysis
Within the residential landscaping market, there are only two high-end architectural competitors: (1) Yard Makers and (2) Design Your Landscape. All other businesses focus solely on either industrial projects or residential maintenance.
- Average cost per project: $12,000
- Ongoing maintenance fee: $200 per month
- Google My Business: 3.1 stars from 163 reviews
- Environmental certifications: none
- Primary marketing channels: Google Ads
Design Your Landscape
- Average cost per project: $35,000
- Ongoing maintenance fee: $500 per month
- Google My Business: 3.7 stars from 57 reviews
- Environmental certifications: none
- Primary marketing channels: home shows
5. Describe your product or service
This section distills the benefits, production process and life cycle of your products or services, and how what your business offers 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: bookkeeping and inventory
Within the product life cycle portion, map elements like:
- Time between purchases
- Upsells, cross-sells and down-sells
- Future plans for research and development
Example of product or service description
Landscaping Pty Ltd’s service—our competitive advantage—is differentiated by three core features.
First, throughout their careers, Sherry and Shelly Smith have worked at and with three local leading industrial-landscaping firms. This gives us unique access to the residents who are most likely to use our service.
Second, we’re the only landscaping firm certified green by the Business Leaders for a Greener Country.
Third, of our 10 completed projects—from 2018 and 2019—seven have rated us a 5 out of 5 on Google My Business and our price-points for those projects place us within a healthy middle ground between our two other competitors.
- Average cost per project: $20,000
- Ongoing maintenance fee: $250 per month
- Google My Business: 5 stars from 7 reviews
- Environmental certifications: three (see Appendix)
- Primary marketing channels: word of mouth, referrals and home shows
6. Develop a marketing and sales strategy
Your marketing strategy or marketing plan can be the difference between selling so much that growth explodes or getting no business at all. Growth strategies here are a critical part of your business plan.
You should briefly reiterate topics such as your:
- Value proposition
- Ideal target markets
- Existing customer segments
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 promotion channels: i.e. search engines, social media, print, television, YouTube, word of mouth, etc.
You can also use this section of your business plan to reinforce your strengths and what differentiates you from the competition. Be sure to show what you’ve already done, what you plan to do given your existing resources and what results you expect from your efforts.
Example of marketing and sales strategy
Landscapers Pty Ltd’s marketing and sales strategy will leverage—in order of importance:
- Word of mouth
- Reviews and ratings
- Local Google Ads
- Social media
- Home shows
- Direct mail
Reputation is the number one purchase influencer in high-end landscape design. As such, channels 1–4 will continue to be our top priority. Our social media strategy will surround YouTube videos of the design process as well as multiple Instagram accounts and Pinterest boards showcasing professional photography. Lastly, our direct mail campaigns will send carbon-neutral, glossy brochures to houses in wealthy neighbourhoods.
7. Compile your business financials
If you’re just starting out, your business may not yet have , financial statements or comprehensive reporting. However, 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, be sure to include:
- Income statements
Other figures that can be included are:
- 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, 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.
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 not, you can’t determine a sales price to generate the profit level you desire.
Underestimating costs can catch you off-guard and eat away at your business over time. Insurance premiums tend to go up annually for most forms of coverage, and that’s especially true with business insurance. If an employee gets injured, Landscapers Pty Ltd’s workers’ compensation insurance to cover this risk will increase.
Example of business financials
Given the high degree of specificity required to accurately represent your business’ financials, rather than create a fictional line-item example for Landscaping Pty Ltd, we suggest reviewing our guides for setting up a small business budget. From there, take a look at our ultimate guide to bookkeeping article and download our small business financials excel templates for help setting up your income statement, balance sheet, and statement of cash flows.
Once you have a view into your financials, you can create a big-picture representation to include here as well as in your objectives in step two.
In the case of Landscape Pty Ltd, this big picture would involve steadily increasing the number of annual projects and cost per project to offset lower margins:
Current revenue for FY2019: $200,000
- 10 completed projects
- ~$20,000 per project
- 15% profit margins
- $30,000 net
FY2019 projections: $360,000
- 18 completed projects
- ~$20,000 per project
- 15% profit margins
- $54,000 net
FY2020 projections: $552,000
- 24 completed projects
- ~$23,000 per project
- 12% profit margins
- $66,240 net
- 36 completed projects
- ~$27,000 per project
- 10% profit margins
- $97,200 net
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. This section of your business plan should show off your management team superstars. Highlight expertise and qualifications throughout.
Also, mention the roles you still need to hire to grow your company and the cost of hiring experts. To make informed business decisions, you may need to budget for a CPA and a solicitor. CPAs can help you review your monthly accounting transactions and prepare your annual tax return.
A solicitor can help with client agreements, investor contracts (like shareholder agreements) and any legal disputes that may arise.
Ask your business contacts for referrals (and their fees), and include those costs in your business plan.
Example of organisation and management
Sherry Smith, Co-founder and CEO
- Professional background
- Awards and honours
- Notable clients
Shelly Smith, Co-founder and Chief Design Officer
- Professional background
- Awards and honours
- Notable clients
Landscape Pty Ltd’s creative crews
- Number of employees
- Cumulative years of experience
- Awards and honours
- Notable clients
9. Explain your funding request
It’s important to outline how much money your small business needs so you can make an accurate funding request. Try to be as realistic as possible. You can create a range of numbers if you don’t want to pinpoint an exact number. However, 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. Keep in mind, an equity owner may expect to have a voice in company decisions, even if they do not own a majority interest in the business.
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, and 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.
You should also put together a timeline so your potential investors have an idea of what to expect. Some customers may not pay for 30 days or longer, which means the business needs a cash balance to operate.
The founder can access cash by contributing their own money into the business, by securing a line of credit (LOC) at a bank or applying for a bank loan. If they raise cash through an LOC or some other type of loan, it needs to be paid off ASAP to reduce the interest cost on debt.
Example of a funding request
Landscape Pty Ltd has already purchased all necessary permits, software and equipment to serve our existing customers. Once scaled to $972,000 in annual revenue—over the next three years and at a 10% profit margin—our primary ongoing annual expenses (not including taxes) will total X.
While already profitable, we are requesting $100,000 in the form of either a business loan or in exchange for equity to purchase equipment necessary to outfit two additional creative crews.
10. Compile an appendix for official documents
Finally, assemble a well-organised appendix for anything and everything (1) investors will need to conduct due diligence and (2) you or your employees will need easy access to moving forward. This includes:
- Deeds, local permits and legal documents
- Business registries and professional licences pertaining to your legal structure or type of business
- Patents and intellectual properties
- Industry associations and memberships
- State/territory and federal identification numbers or codes
- Key customer contracts and purchase orders
As you include documents in the appendix, create a miniature table of contents and footnotes throughout the rest of the plan linking to or calling attention to them.
Business plan bonus tips to stand out
Investors have little patience for badly 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 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.
- Double-check for typos and grammatical errors, then triple check. Otherwise, you might come off as an amateur.
- Invest in quality design and printing. Proper layout and branding, and decent printing or bookbinding, give your business plan a professional feel.
- 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.
Revisiting and revising your business plan?
It’s good to periodically revisit your business plan, especially if you are looking to expand. Conducting new research and updating your plan could also provide answers when you hit difficult questions.
Mid-year is a good time to refocus and revise your original plans. Why not have the best second half you possibly can, right? Below are three ways to reignite your plan.
When you wrote your original business plan, you likely identified your specific business and personal goals. Take some time now to assess if you’ve hit your targets.
For example, if you planned to launch a new tips and trends video series and it hasn’t happened yet, what’s stopping you? Put a timeline together and set a launch date. This can be hard to do, though, if you’re working 18-hour days.
If you only want to work a set number of hours per week, you must identify the products and services that deliver the returns you need to make that a reality. Doing so helps you refocus your productivity on the most lucrative profit streams.
Also, use what you’ve achieved and the hard lessons you’ve learned to help you re-evaluate what is and isn’t working.
Do a gut check to determine whether all of your hard work is still aligned with your original goals and your mission statement. Are they still relevant? Have you lost sight of the big picture?
Ask yourself where you want to be a year from now and can you get there with your existing plan? Try to get offline for a while to think through these questions and realign your values. In the end, both you and your clients will reap the rewards.
If your time has become more focused on small projects rather than tangible growth and building a valuable client list, consider packaging your existing products or services differently. For example, can you bundle a few things together?
In the case of Landscapers Pty Ltd, perhaps they can offer a special pool and patio package. Doing so might help them bring in fewer, yet higher-paying, projects. Perhaps they can offer a maintenance package as well to keep that customer long term.
You must deliberately manage your revenue streams, and that might require shuffling things around a little to focus on what is working for you.
A business plan: more than a cliche
Even if you don’t plan on seeking investments early on, there are other important reasons to take the time to write a great business plan:
- Writing out your goals and action plan helps clarify what you’re trying to accomplish.
- It’s a chance to better understand your market (e.g. demographics, behaviour, etc.).
- You can establish the roles of each team member and set benchmarks for accountability.
- Team members can also refer to the document to stay on track.
- Catching errors helps you make sure financial projections are accurate.
- You’ll see the holes and blind spots that could cause future issues.
The old cliche is still true today: “A failure to plan is a plan to fail.” Only more so.
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