Below is an article from State Farm Simple Insights® about how to write a business plan.
Ready to become a business owner? Follow these steps for creating a business plan.
A new business — of any size or structure, no matter the type of product or service — needs a roadmap to get itself underway and connect with customers. But without a plan on paper (or in a file on your computer), the idea is just that: an idea. Create a business plan to take that brilliant business ah-ha out of your head and put it into a form that others — including potential investors and business partners, banks who may lend you money, and potential employees — can consume, question and ultimately buy into.
Learning how to make a business plan doesn’t have to be hard. A business plan helps you get organized, tap into your ideal market, dive deep into the competition and examine your financial situation for the tenuous but important first couple of years. And you can do all of this without months of work.
Whether you use a traditional or a lean plan format, each contains roughly the same elements — and these elements are the most time-consuming portion of developing a business plan. In many cases, your lean plan or the executive summary of your traditional plan is your business’ first impression — be sure to put in the time and energy to make it shine. So, do the research, hash out the numbers and know your audience. Avoid getting into the weeds with language that caters to industry insiders (unless that is your audience) and instead keep your message clear, concise and presented in everyday, easily digestible verbiage. Remember: Keep it simple and brief.
A Traditional business plan
This is the order of topics in a traditional business plan:
Step 1: Executive summary: The executive summary is the most important part of your plan – a one-page summary of the entire business plan. And it will probably be the part of the business plan that you circle back to and write last.
Step 2: Description: The why — your company’s purpose. It will include your mission statement, the name of your company and a brief description of the service or product that you will offer.
Step 3: Business goals: What are you going to accomplish — today and tomorrow? Then explain how you are going to reach those goals — your strategy.
Step 4: Market analysis : Research the industry, market and competitors. Where is the opportunity for your product? For growth? Who is your target customer? How can you do it better than the competition?
Step 5: Organization and management : Describe your business’ legal structure, location and history. Don’t forget to talk about your team and what positions you’d like to hire in the future. Include your Business Model, which describes how you make money and identifies your revenue streams. Then include your Target Market, basically your customers, the channels you’ll use to reach them and the interactions you’ll have.
Step 6: Products and services: What is the “problem”you are trying to solve by selling your product or service? How will your product or service benefit your customers? Explain any research you’ve done or will do.
Step 7: Marketing and sales: Develop plans to attract and retain customers — promotion, advertising, public relations, content marketing and social media. You also need to lay out how operations and distribution will work and set milestones and metrics for success. Finally, investigate your Competitive Advantage and identify key strategies, such as selling direct to consumers or using technology.
Step 8: Funding request: Outline your funding needs for the next three to five years, including projections of income, expenses, cash flow and budgets. Present details about how the money will be used. Include financial projections showing how your business will be financially successful. Providing a Financial Summary outlining expected expenses and a cost structure can help establish stability in your business.
Step 9: Appendix: Use this section for additional information such as product images or illustrations and supporting documents such as permits, patents, contracts, etc.
Lean business plan
In many cases, a business plan can be written on just one page. Known as a lean plan, it creates a summary of the key elements of your business that can be presented in bullet points.
- Problem . What problem does your product solve or what need does it fill?
- Solution . What are you selling? What is the unique value your company brings to the market?
- Business model. How do you make money? What are your revenue streams?
- Target market. Who is your customer? What channels will you use to reach them? How will customers interact with your business?
- Competitive advantage. What are your key activities? Identify strategies, such as selling direct to consumers or using technology.
- Management team. Your team matters just as much as your great idea. How will they help you succeed?
- Financial summary. The financial forecast should outline expected expenses and a cost structure.
- Funding request. Estimate your needs and describe how investments will be used.
The lean plan may be all you need — and is a great way to get your foot in the door — but be ready for lenders and investors to ask for more detailed information or a presentation. This is where a pitch deck might come into play. If you plan to request financing from traditional sources — banks, investors, business partners — you’ll need every element in a traditional business plan, detailed above.
Resources
If you still have questions, you’ll find examples and templates, calculators and detailed information about planning, launching, managing and growing your business through the U.S. Small Business Administration (sba.gov). You can also search for a local SBA office and partners for in-person assistance. Finally, build a network and continue to develop resources that you’ll need.
Update your business plan regularly
You are creating a tool to help run and grow your business, and it should be updated as things change. Think of it as a strategic planning document for short- and long-term goals, expenses and targets — all of which change over time.
Read more articles about operating, insuring and protecting your small business.
