So, you've got this crazy idea to start your own business and become a small business owner. It might seem like a big, scary world out there, but once you take the plunge in being an entrepreneur, it's like hopping on a wild rollercoaster ride. Buckle up, my friend!
Now, I know it can be overwhelming to wrap your head around everything you need to do to make your business a success. But trust me, getting your ducks in a row is super important. And one of the key things you need to do is write a business plan.
Perhaps just the thought of writing a business plan can make your knees shake. But here's the thing: most people have never written one before, so it's totally normal to feel a bit intimidated. Don't worry, I've got your back!
Before we dive into the nitty-gritty of how to write a killer business plan, let's talk about why you need one in the first place.
Having a business plan will keep you accountable, focused and growth-oriented.
It's your roadmap to success, guiding you through the twists and turns of starting and growing your business.
Now, don't worry. Your business plan doesn't have to be a never-ending novel filled with boring stats and profit predictions. It's a living document that will change and evolve as you figure out what works best for your business. Think of it as your secret weapon for staying on top of your goals and making sure you're headed in the right direction.
So if you're serious about starting your own business, grab a cup of coffee, sit down, and let's get cracking on that business plan. It's time to turn that crazy idea into a reality!
In this article:
- What is a business plan?
- Why do you need a business plan?
- Do small businesses need strategic planning?
- What's the difference between strategic plan & business plan?
- Components of a strategic plan
- Your 6-step business plan checklist
- How to write a business plan
- Business plan format
- Tips for writing a small business plan
- Business plan FAQ
What is a business plan?
So, what's the deal with business plans? Well, they're basically like your roadmap to success in the business world. It's a document that helps you plan out your business' future, including what you're all about, what you want to achieve, and how you're gonna get the word out there. Oh, and it also includes some financial predictions, because, you know, money matters.
If you're scratching your head and wondering what kind of business to start, no worries! We've got you covered with a list of small business ideas that won't break the bank. And hey, if you prefer the online route, we've got some cool online business ideas that won't cost you an arm and a leg upfront. So go ahead, dive in and start making those dreams come true!
Why do you need a business plan?
A business plan serves a bunch of different purposes. First off, it helps you outline your brilliant business idea and set some goals. It also helps you figure out your value proposition and how you're gonna achieve it. Plus, it's a chance for you to turn your wild ideas into something concrete, with a detailed plan for your company's future.
Your business plan gives you a clear picture of your business model, financial projections, and market analysis. It's like a roadmap to success, showing you exactly where you need to go. By putting all your ideas on paper, you're giving yourself the chance to really think through your plan and make sure it's gonna work.
And get this, studies have actually shown that having a business plan increases your chances of growing by 30%. That's a pretty big deal!
But it's not just about you and your dreams.
To raise money
If you need to convince investors or funders to back your business, you're gonna need a killer business plan. They wanna see that you're legit and that you're gonna make them some serious cash. You'll need to show them that you've thought about the market, your competition, and how you're going to sell your stuff. You would be expected to provide investors with a well-thought-out business plan demonstrating market awareness and financial planning.
Related: Where to find SME business loans
Attracting team members
A business plan can also help you attract the right people to join your team. You can share it with potential executives or partners to show them just how much potential your business has. This is especially important if you're a startup with no track record to brag about.
Identifying the pitfalls of your business
Oh, and here's another benefit: a business plan can help you spot the weaknesses in your grand plan. When you share it with experienced folks in your industry, they can offer up some valuable advice and help you fix any weak spots. It's like having a team of experts on your side, all before you spend a single penny. This will help you to determine and remedy the weak points of your plan — before spending a single rupee.
Related: How to open a small business in India
So, there you have it. A business plan is like your secret weapon for success. It's your roadmap, your pitch to investors, and your way to attract the best team. Plus, it helps you fix any weak spots in your plan before you dive in headfirst. So, get writing and start building the business of your dreams!
Do small businesses need strategic planning?
Only a few businesses succeed by chance. For most, careful planning and disciplined execution of growth strategies move the needle. If you want your business to grow, you need to set priorities, focus on the available resources and ensure employees (along with all the stakeholders) are working towards common goals. In short, you need strategic planning.
Before we address the parts of a smart strategic plan, let’s touch briefly on the difference between a business plan and a strategic plan.
Difference between business and strategic plans
A business plan and strategic plan are different from each other. Simply put, a business plan covers ‘who’ and ‘what’ aspects of a business, while a strategic plan covers ‘how’ and ‘when.’
The business plan
Traditionally, a business plan contains information on:
- Who is running a business
- Who its competitors are
- Who its customers are
- What products/services it offers
A business plan is a tour of your business model.
The strategic plan
A strategic plan tells how you are going to achieve your goals, including the steps along the way. A strategic plan also identifies who will be responsible for each step and when it must be completed by.
In simple words, a strategic plan is an action plan for your business.
Now let’s dig into the elements needed for any good strategic plan.
Key components of a smart strategic plan
A strategic plan is like a roadmap showing the path to reaching your business goals. Here are the critical components:
- Mission statement.
- Vision statement.
- SWOT analysis of your business.
- Action plan to achieve goals.
- Financial assessment.
1. Mission statement
A mission statement is a summary of why your business exists. It’s more than just a plaque hanging on the wall in your office.
A mission statement is important because it:
- Determines the direction of your business
- Provides a tool for decision-making
- Works as a basis for alignment of different sales and marketing plans
- Helps in shaping the overall strategy
Let’s look at the mission statement of the Adidas group:
“The Adidas Group strives to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle.”
Isn’t it powerful?
Write down a clear, powerful mission statement for your business. Make sure it tells people why your business exists.
2. Vision statement
Unlike missions statements, which are rooted in the present, vision statements are future-based. They’re meant to inspire and direct employees rather than customers.
A vision statement works like the North Star, keeping everyone pointed in the right direction to achieve the common goals.
When you are writing a vision statement for your business, think big. Ultimately, what impact would you like your business to have on your customers, your community, your world?
Needless to say, a vision statement is a peek into the future with a positive outlook. It helps your employees know what they are working towards.
3. SWOT analysis of your business
The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is an integral part of strategic planning.
Photo: Kaleidico on Unsplash
Can you plan your sales and marketing strategies if you don’t know your strengths and weaknesses? Also, your efforts at growth will not yield the optimum results if you don’t take new opportunities and looming threats into consideration.
Following is what you can include in the SWOT analysis of your business:
Strengths
Things your business does well, your unique selling proposition, skilled staff, etc.
Weaknesses
Things your business lacks, things your competitors do better, resource or funding limitations, etc.
Opportunities
Untapped markets, less competitive segments, positive press/media coverage, etc.
Threats
Emerging competitors, change in regulations, negative press, etc.
Conduct the SWOT analysis of your business by jotting down everything that comes to mind under each category. It will help you make a realistic strategic plan that is most likely to achieve your business objectives.
4. Action plan to achieve goals
You have mission and vision statements ready, and you have done the SWOT analysis of your business. Now, it’s time to make an action plan to achieve your goals.
An action plan consists of the following main things:
- Which strategies you need to achieve each goal
- What resources you require (people, financial, etc.)
- When you will execute each step
- How you will measure the success of your efforts
When you are creating an action plan, you should make sure that it is clear, complete and current.
But don’t carve your action plan in stone. It should be flexible enough to adjust to any unforeseen business challenge.
5. Financial assessment
Once you’re done creating the mission and vision statements, doing the SWOT analysis, and making a killer action plan to achieve your business goals, you should check your finances. Do you have enough funds to execute the action plan?
Be it hiring people or running marketing campaigns, you need money to run growth strategies.
If you don’t have enough resources to execute your strategic plan, you have two options:
- Raise money
- Lower your targets
It is absolutely your call. Make an informed decision after weighing the pros and cons of both the options.
Tracking the results of your strategic plan
How do you know if your strategic plan is on the right track? The answer is simple: you measure it.
The action plan you create should have associated metrics to gauge the success.
You can divide your action plan into milestones (completion of steps) and performance measures (sales, profit growth, new customers, etc.).
Also, you can have separate milestones and performance measures for each department. This will help you track the progress easily and efficiently.
Performance measures can vary from business to business, depending on the goals and the strategic plans of each. You should choose the performance measures best suited to your organization.
Your 6-step business plan checklist
Step 1: Make sure your idea is legit
For startups, this is a big deal. You need to make sure your idea is solid and that people will actually pay for your product or service. Here are some questions to ask yourself:
- Does my product or service solve a problem?
- Have people already tried it out and liked it?
- Are they willing to pay for it, and how much?
- Do I have a list of potential customers who are interested?
If you answered yes to these questions, it's a good sign that your business has a shot at success. If you want more tips on validating your idea, check out this step-by-step post on how to validate a business idea.
Step 2: Crunch the numbers for your monthly expenses
You need to have an idea how much it's going to cost to keep your business running. Consider things like license fees, investments, and hiring costs. Keeping track of your expenses will help you figure out how long you can survive without revenue and how much you need to earn to keep the lights on. It's like knowing your burn rate, which is important for your business's survival.
Editor's Note: Need help with estimating costs? Get estimates for a business website, domain and email from a GoDaddy Guide on Facebook Messenger now.
Step 3: Get organized
Now that you know your idea is solid and you've got a handle on the costs, it's time to plan out how your business will actually work. What are the day-to-day operations gonna look like? Think about things like where you'll be located, what equipment you'll need, and how your products or services will be produced and delivered. Don't forget to consider roles and responsibilities too. This will help you determine what kind of team you need to hire.
An operations plan is where you codify the daily activities that will focus, accelerate, and maintain your business.
A business operations plan stems from your start-up idea. Put simply, the operations plan outlines the physical necessities of your business's operations:
- Physical location of your business.
- Facilities, rented or owned.
- Equipment required.
This section can be divided into two parts — stages of development and production process.
Stages of development
Here you explain what the business has done “to date” to get the business operational. After that, explain what else still needs to be done.
Production process
You’ll need to explain in detail where and how your products will be produced. In this section try to demonstrate your understanding of the entire process, from manufacturing to delivery of your product or service. Remember to add information regarding equipment used, special requirements, materials, inventory and estimated pricing of your products or services.
For example, let’s say you are in a web hosting business. Then your “strategy” can look like this:
- Set up new servers
- Gain paying customers
- Support those customers
- Acquire new servers as needed
- Maintain servers and optimize performance
Your day-to-day activities should be in support of the strategy:
- Purchase and co-locate physical servers
- Purchase / subscribe cloud services
- Build a main web portal
- Build and maintain a customer web portal
- Maintain customer support teams
- Put up new advertisements
- Have sales teams process inbound and outbound calls
These items will make up your business’ daily operations and will also help determine what kind of roles you need to hire for.
This may affect your burn rate mentioned in #2. Go back there, adjust, and balance both your burn rate and your operations plan. This should at least keep your business steady in times of rough weather.
Step 4: Make sure you get paid
You can't ignore the fact that you need to get paid. Figuring out how you'll accept payments from your customers is a crucial step. Make it as easy as possible for them to pay you, because happy customers are more likely to refer others to you. Customer word-of-mouth is a powerful way to increase your sales.
Making the payments experience as easy as possible improves the customer experience, making it more likely you’ll get referrals. Customer word-of-mouth is a powerful way to increase your sales.
Editor’s note: Do-it-yourself tools like GoDaddy’s Online Store take care of this part for you. Get paid online for products, services or even collect donations on your website via Square, Stripe or PayPal.
Step 5: Know your audience
It's time to do some research and figure out who your ideal customers are. Understanding their wants and needs will help you market and support your product or service better. Keep in mind that your target market might change over time, so stay on top of it. And remember, what sets you apart from the competition is your "X" factor. Think about why people choose certain brands over others, like Coffee Bean and Tea Leaf over Starbucks. It's all about catering to your specific customer.
Step 6: Be prepared for the worst
No one likes to think about disasters, but having a plan in place is crucial. A disaster recovery plan can guide you and your team through tough times. Whether it's a fire, a data failure, or negative press, having a playbook will help you stay calm and handle the situation. It's always a good idea to have a succession plan just in case something happens to your top-level management.
How to write a business plan?
If you’re ready to get stuck in and write your business plan, the next steps will greatly help. You want to be thorough at every step, especially if you’re sharing the plan with potential stakeholders. But remember, this is your business; your plan will be unique to you. Here's a step-by-step guide on how to write each section of your business plan:
1. Create an executive summary
An executive summary is a concise overview of your business plan that grabs your reader's attention.
This section should include:
- Business name and its location.
- Summary of product/services
- Purpose of the plan (raising funds, defining goals, etc.)
- Mission statement and vision for the business.
- Key information about your leadership team and employees.
Write this section last, even though it appears at the beginning of your plan.
2. Company description: Describe your company
Give a detailed description of your company and its goals.
This section covers everything from who you are to what your goals are. Start with a short description of your industry, highlighting the present situation and future possibilities. Be clear about what you do, who your target audience is, and what problem you're solving. Don't forget to emphasize what sets your company apart from the competition.
The company description should feature:
- The legal structure of your business — for example, whether it is a sole proprietorship or public limited or whatsoever.
- A brief history of your business and what needs it will meet that are not currently being met by another company.
- Your short- and long-term business goals.
3. Organization and management: introduce team members
Introduce your team members and stakeholders, and explain the ownership structure. Include brief resumes of key members, highlighting their expertise and how they contribute to the business.
4. State your company goals
Every business needs goals, but make sure they're measurable and actionable. Break down each goal into specific steps that need to be achieved. For example, if your revenue goal is to meet projections, think about what marketing goals you need to meet to make that happen.
5. Detail values and a mission statement
When writing a business plan, it’s easy to get wrapped up in the data and the money, but your why is the lifeblood of your business.
Take the time to dig into the meaningful element of your business. What problem are you trying to solve? What values will guide your business? This section is not only important for you as a business owner, but it can also help onboard future team members and connect with your audience.
6. List products or services
Describe what you're selling and focus on the benefits it provides to customers. Include any intellectual property associated with your products/services, and provide details about suppliers, costs, and expected revenue.
- A detailed description of the products or services you are selling. Learn about product research here.
- The market position of your product or service. In other words, how is it better than similar products in the market?
- Any information about copyright, patent or trade secret data.
- Planned activities for research and development that could lead to new products or services.
7. Do market research and competitive analysis
Photo: BoldContent on CC BY
Understand your target market and identify your competitors. Conduct a thorough market analysis, showing your knowledge of the industry and your competitors' strengths and weaknesses.
A market analysis allows the entrepreneur to become familiar with all the aspects of the market.
This research will help you justify your business venture and create a sales and marketing plan. As you may have different competitors in each marketplace, this is your chance to show your knowledge of the industry, as well as conclusions based on your market research.
Your market research will help you determine if your business venture is justified and also act as support to your proposition which is especially useful when pitching to investors.
The market research section will help you see where the gaps are between your business and competitors, and it will form the beginning of your sales and marketing plan as you strategize to close the gap on leading competitors. This section should include a competitive analysis, showing how your business stands out from competitors, and an overview of your industry's outlook.
The competitive analysis usually includes:
- Detailed description of your target customers, including gender, age and other characteristics.
- Industry overview, including stats and figures.
- Historical, present and projected marketing data regarding your products or services.
- A detailed analysis of what your competitors are doing, along with their strengths and weaknesses.
8. Create a marketing and sales plan
Explain how you plan to promote your products/services, attract and retain customers. Your marketing strategy and plan will generally be built from your competitor research. It should support your business goals and have a clear strategy. Don't be afraid to seek support from marketing professionals if needed.
Also, when it comes to marketing, you are better off doing less better than trying to do more poorly, so you must factor in your budgets.
Here is what should be covered in this section:
- Details of how you plan to promote the products and/or services to your customers.
- The logistics and cost for each marketing effort.
- An explanation of the entire process, from acquiring the supplies to delivering the promotion.
- Information regarding the team, including the employees involved, the tasks required and how their success will be measured.
- Data for operating hours and facilities required.
9. Create a financial projection and indicate your funding request
When it comes down to it, finances determine a successful business from an unsuccessful one. If you're seeking funds, outline your current funding requirements, future funding needs over the next five years, how the funds will be used, and the type of funding you're seeking (debt or equity).
If you’re seeking investment, your financial forecast is everything. The one thing that investors need to know very clearly is the financial estimations and performance of your business over time. This section should convince investors that your business is stable and will be profitable. Include income statements, balance sheets, cash flow statements, and financial statements. If you're a startup, provide a sales forecast and loss statements.
In your projection, plan for:
- Sales
- Expenses including wages
- Pricing of products and/or services
- Contingency for unexpected finances
Related: Check out our detailed guides and discover what is the average cost to start a business. and how to find venture capital and funding
10. Add an appendix
This section is optional and used for any additional information, like product pictures, marketing materials, or more detailed studies. Your appendix is a compilation of supporting documentation and/or evidence. Items that might be included in the appendix include:
- Resumes of key team members
- Documentation supporting your market research and analysis. If your plan summarizes findings, include the marketing research and data here.
- Legal documents, such as incorporation papers, patents, or trademarks
- Marketing materials, such as brochures or flyers
- Customer testimonials or case studies. New businesses might not have this, but if you have conducted research or focus groups, you can include findings here.
- Product prototypes or lab tests if you have them
- Any other relevant supporting documentation that was referenced in the main body of the plan.
Types of business plan format
There are three types of business plans, traditional, lean, and nonprofit. Whilst this article focuses primarily on the most common business plan format, the traditional plan, it helps to know what might be involved in other formats.
Traditional
The traditional format provides a detailed business overview and is useful for presenting to investors or lenders. In a traditional plan, you will likely write more than you would in a lean plan. Some businesses might opt for a traditional plan and then create a lean version for specific functions.
Lean
The lean business plan format is, as you would expect, a leaner (simplified) version of a traditional business plan. The lean business plan format includes the most critical aspects of the business. If you’re writing a lean business plan and you want to pitch to investors, then you must include key sections like market analysis, revenue forecasts, etc.
Nonprofit
The nonprofit business plan is similar to the traditional business plan, but naturally, it differs as it includes items that are required to run a nonprofit organization. For example, if you were writing a nonprofit business plan, you would likely include all elements of the traditional plan, plus fundraising and development, governance, and financials.
You may also have research from the local area you’re serving to help with that market analysis section. Your aim will be to prove that there’s a public need for your nonprofit.
There are also business plan templates for you to use.
Tips for writing a small business plan
Before you start writing your small business plan, read through these tips that might not be so obvious.
Use a business plan template.
They've been around for a while, so you know they work. You can take a template and make it your own by adding your unique touch. This way, you won't feel overwhelmed and you'll have a solid structure to work with.
Check out this free business plan template that you can easily download and customize. It'll help you cover all the necessary bases and keep things looking professional.
Write for yourself, not just investors.
When you're writing your business plan, don't just think about the investors. This plan is for you too. It's your chance to get all your thoughts organized and put your ideas on paper. Once you're done, you should feel like you've created a roadmap to success that you're proud of. Of course, keep your audience and investors in mind, but don't forget to satisfy your own intent. You can always start with a traditional plan for yourself and then provide the lean version to investors later.
Demonstrate what makes you unique.
Since you're entering a crowded market, it's important to demonstrate what makes your business unique. Make it crystal clear why customers should choose your products or services over the competition. Show them what sets you apart and how you plan to disrupt the market.
Use concrete data and examples.
When it comes to supporting your ideas, don't just rely on dreams and wishes. Your business plan needs to be grounded in reality. Use concrete data and real-world examples to back up your claims. This will not only convince investors, but it will also give you confidence that your business is viable.
Be realistic in your projections.
It's crucial to have realistic projections in your plan. Sure, it's great to be optimistic, but you need to be grounded in reality. Your financial information, market analysis, and sales forecast should be based on realistic expectations. Unrealistic projections can lead to disappointment and mistrust from stakeholders. Plus, setting achievable goals will help you stay mentally sane and avoid overwhelming yourself and your team.
Keep it concise & use understandable language.
When it comes to writing your plan, keep it concise and use language that everyone can understand. Long, complicated plans can scare away potential investors. So, avoid jargon and use plain, simple language to explain your business idea and plans. Make it easy for anyone to grasp what you're all about.
Review and revise.
Don't forget to review and revise your business plan regularly. Your business is constantly evolving, so your plan should reflect that. Keep it up to date with your current situation and future goals.
Editor's Note: A business plan is just one part of the journey of starting a new business, for the entire step by step process check out our guide on how to start an online business.
Writing a business plan FAQ
Here are your most asked questions, answered.
How do I write a simple business plan?
Keep it simple and focused, while still being thorough. Cover all the important stuff without going overboard. Think short-term goals and be realistic about what you can achieve. And don't forget to back it up with solid research and data.
Can I write a business plan myself?
Absolutely! Many business owners write their own plans. But if there are areas where you're not so strong, don't be afraid to ask for help. You could seek professional guidance for things like financial projections.
How long should a business plan be?
The length of your plan will depend on your business and its complexity. But as a ballpark, aim for around 15 to 20 pages. Thorough, but not too long-winded.
How long should it take to write a business plan?
Writing the plan itself might take a few days, but don't forget about the research and editing. Give yourself a solid three months from start to finish.
What if my business doesn't go according to the plan?
Don't stress! It's completely normal for businesses to veer off course. Just make sure to regularly review and adjust your plan as needed.
How often should I update my business plan?
It's a good idea to update your plan every year or whenever there are significant changes in your business or the market. Keep it fresh and relevant!
Conclusion
Writing a business plan is an essential step for any entrepreneur or small business owner. It not only helps you validate your business idea but also allows you to identify potential challenges and opportunities.
A goal without a plan is just a wish. It's the same with a business.
Remember, a well-crafted business plan serves as a roadmap, guiding your business towards its goals and milestones. Now go forth and conquer that business plan!
Editor's Note: This article was first published on 1 April 2019 and updated on 27 November 2023, and includes content originally published here, as well as on other articles from the GoDaddy blog by Sandeep Babu, Carrie Dils, Judith Kallos and Alex Neri.
