Before starting a business, you need a business plan.
Many people think that writing a business plan is not necessary, but in fact it is one of the most important things you’ll ever do when starting a business.
It’s easy to see why having a business plan is so important.
Have you ever wondered why a lot of people set out to start a business and never actually get it started or fail within a couple of months or even weeks?
You guessed right – most times it’s because there was no plan in the first place.
A business plan doesn’t have to be complex – you can always start with a simple plan and then include more details as you go.
Basically, there should be no excuse for not writing a business plan.
A lot of people get scared away from writing a business plan because they think it’s a lot of work.
In this post, I’ll walk you through what a business plan is, why you need it, and most importantly, how to write a comprehensive business plan for your startup.
I’ll try to make it as simple and non-intimidating as possible. Are you ready?
Okay, let’s get this started.
What is a Business Plan?
A business plan is a document that walks through the different parts of a new or existing business with the intention of planning how the business as a whole will be operated.
Different businesses have specific needs and so, every business plan is unique in its own way – either by structure or content.
Now that you know what a business plan is, let’s talk about how to write a business plan.
How To Write A Business Plan
There’s no strict formula for writing a business plan, but there are a few parts that should be included.
I will walk you through all the important sections and then you can decide what sections you would like to add to your unique business plan.
With that said, here is how to write a business plan in 11 simple steps:
1. Write a Company Description
This is the first step for writing a business plan because it allows you to give a good summary of your business without having to spend too much time on the details.
Here are some key areas to include in your company description:
a. Your Business Name
Your business name should be the first thing to put in your business plan (and especially in your company description) simply because it’s what your business with be identified with.
For example, you may start by writing something like, “ABC is a fashion design business…”
That way, you easily identify your business, and then, you can go ahead to expand on what your business does – we’ll talk about that in the next step.
However, if you don’t have a business name yet, don’t have to let it hold you back from writing your business plan.
Although having your business name nailed down is very important, it is not critical to business planning at the early stages.
So if finding a name is giving you a lot of stress, you can simply use a generic name like “ABC” and skip to the next step.
b. Your Business Description
After figuring out your business name, now, you want to go a but more indepth.
In this part, you need to describe what your business will do.
Continuing with our previous example, you may say something like:
“ABC is a fashion design business which is involved in custom dress designs and tailoring. ABC also offers several other products (or services if applicable) like suit designs, costume making, cloth adjustments, and traditional outfits. ABC will allow customers to make bookings online and in-store, however, customer measurements will be done in-person. ABCs finished products will either be delivered to customers or can be picked up in-store.”
You can be more detailed than this, but in your business description, you should have some important elements such as:
- What your business does
- The products or services that your businesses offers
- How you will conduct your key operations
After writing your business description, you’re ready for the next step.
c. Write Your Mission Statement
Your mission statement outlines the core motivation for your business’ existence and what your business is trying to achieve looking at the bigger picture. It is usually very brief.
Here are some things to include in your mission statement:
- Who are you? (as a company)
- What are your values?
- Why does your business exist/what is your purpose?
- What motivated you to start your business?
A mission statement is different from a vision statement, which we’ll talk about in the next step.
The mission statement focuses on where you are right now. Basically, it answers the question “who are you?” and “what are your present goals?”
You can feel free to be creative bout your mission statement and add more things to it, but with the three main points above, you are good to go!
Let’s move to the final step – writing a vision statement
d. Write Your Vision Statement:
This is the final step in writing your company description.
Your vision statement is more of an expansion of your mission statement
According to The Balance Small Business, this is where you describe your company’s long term goals, hopes and dreams for the future.
When writing your vision statement, your focus should be on your business’ future direction.
Here are some key prompts to help you write your vision statement:
- What do you want to achieve in future? (within a given time-frame)
- Who will be positively impacted by your business
After writing your vision statement, you’ve completed your company description.
With your company description written down, you’re ready to move to the next step.
2. Set Business Goals
You can view your business goals as a roadmap for actualizing your business mission and vision statements.
Unfortunately, too many people skip this part completely which is really dangerous…
In fact, the possibility that any business will be successful without clear goals is really low.
The reason is simple.
No goal = No direction = No action
You need goals to show you what actions to take and the best way to take those actions.
In my post about how to start a business in 2022, I explained how to set effective business goals in more detail.
But just to recap, you need to set SMART goals, which means goals that are Specific, Measurable, Achievable, Realistic, and Timed.
Here are some questions you can consider for each goal:
- Specific – What exactly do you want to achieve? (give specific figures or words)
- Measurable – How will you measure your achievement of your goals? (what metrics can you use to measure your progress?)
- Achievable – What capacity are you at for achieving your goals? (don’t set impossible goals)
- Realisitic – Is the goal logical? (make sure that it makes sense to you)
- Timed – Within what time frame do you want to achieve this goal (it could be 6 months, 12 months, by a certain month or even by a certain day).
I have created to detailed worksheet to help you set effective and SMART goals. You can sign up below to have it sent directly your email.
If you’re following along, you’re making a lot of progress. Let’s move to the next step.
3. Perform a SWOT Analysis
SWOT means Strengths, Weaknesses, Opportunities, and Threats.
Performing a SWOT analysis helps you see a bigger picture of your business.
Many new business owners tend to find themselves in one of the following extremes:
- Being too either too optimistic about a business and ignoring or underestimating the important risks involved.
- Being too pessimistic and overestimating the risks but undermining the opportunities involved in a business.
Doing a SWOT analysis helps you find that perfect balance – not being too hopeful or too doubtful.
It’s pretty much one of the best ways to make an informed choice about going ahead on a business idea.
As a rule of thumb, if a business idea has significantly more strengths and opportunities than weaknesses and threats, then it’s most likely a jackpot.
But on the flip side, if it has more weaknesses and threats, then it’s a no-no (except you have a solid plan for tackling the setbacks).
But what if it has an equal ratio of weaknesses/threats and strengths/opportunties?
This is where more indepth analysis is needed, and other menthods can be used to determine if you should go ahead.
We’ll get to those soon enough.
To better understand how to write a SWOT analysis, check out this example:
In a SWOT analysis, typically, strengths and weaknesses are more internal to an organization.
This means that they can be controlled by the organization to an extent.
Opportunities and threats are more external to an organization and can’t easily be controlled by the organization.
From the example above, you can see this in play – the strengths and weaknesses are things that can be controlled by Starbucks, while the opportunities and threats are more out of the company’s grasp.
When writing your SWOT analysis down, keep an open mind while doing your research to find out about each component.
The key is not letting your biases affect the analysis that you make.
Tip: You can also work with a business partner, mentor or hire a freelancer to perform a SWOT analysis on your business idea. This will allow a second pair of eyes to look critically on your idea.
4. Conduct a Market Analysis
In this stage, this is where you find out more about your market.
You need to put your focus on 3 key areas:
- Your Customers
- Your Competitiors
- Your Industry
a. Your Customers
These are the people who will patronize your business.
You’ve probably heard that “the customer is king” in every business.
Which is why you need to find out everything possible about them.
The more you know about your customers, the better for your business.
The first thing you need to do is to profile your customers. Ask “who is my target customer?”
Here are some key things that you should find out about your ideal or target customer:
i. Demographic Info (Age, Location, Gender, Cultural Background, Education, Income)
Demographic information is more general – not very specific to individuals.
Most times, demographic information helps you discover general buyer trends but sometimes it may not.
Most times, it’s not the final stage of finding your target customer, it only helps you narrow down your search.
There’s another type of information you need when profiling your target customer.
Let’s talk about it next.
ii. Personal Preferences (Likes/Dislikes, Needs, Problems, Experiences, Preferences, Personality)
Personal Preferences are those things that uniquely differentiate one person from the other.
However, when it comes to finding out who your target customer is, you need to be specific about what type of person would need your product.
- What is the general issue that most of your target customers would have?
- What are their likes or dislikes?
- What experiences would they have in common?
- What is their most likely personality? (are they outgoing, reserved, etc)
When asking these questions, your aim should be to understand your target customer just like their best friend would.
To provide anything of value to anyone, you have to understand their needs first and this is what you’re trying to do by profiling your target customer.
Your customers are the first group of people that you want to research, however, you also need to find out about your competition and your industry in general.
Let’s talk about your competition.
b. Your Competition
These are the people that offer similar services as you.
To be better than your competition, you need to find out about them. Here are some things that you need to find out:
- Who they are – basically create a list of your competitors (both local and internatitonal)
- What they offer – find out what products or services thay offer
- What makes them unique – what makes them different from other competitors
- Their limitations – what are the areas that they could improve? What complaints do they get?
Don’t let this part scare you. You can create a spreadsheet that outlines your competitors and everything about each of them for a start.
After researching your competitors, next, you need to better understand your industry.
c. Your Industry:
Things are guaranteed to keep evolving when it comes to business which is why it is important to be on track with industry trends.
Find out how people are operating their businesses within your industry.
- What sofware are they using?
- How are they recruiting?
- How do they supply goods to the final consumer?
- What new trends are garnering attention?
When planning your business, you need to find out what is trending and create a strategy using the trends
5. Do a Competitive Analysis:
We’ve talked about competition in the previous section but I’ll just give a recap and add a few key things.
Find what your competition offers, how they operate, what makes them special, and their limitations.
When you’ve made these findings, you need to create a strategy to outperform your competition.
But there’s something else you need to do.
You need to craft your USP – Unique Selling Proposition or Unique Selling Advantage.
This is basically what makes your product superior to your competition’s products.
- What can you do differently or better?
- What pain point can you solve in a unique way?
- What customer issues have your competitors perhaps overlooked or undermined?
Creating a solid USP is only possible if you truly understand your customers, because, to offer something of value to your customers, you need to know the areas that cause them discomfort.
However, after creating your USP, you’re ready for the next step.
6. Create a Marketing Plan
Now you know quite a bit about your market, it’s time to make a marketing plan.
The main question you should ask is “how do I intend to get people interested in my products?”
The answer to that question is in your market plan.
To create an effective marketing plan, the first thing you need to do is to draft out the features and benefits of your products or services.
By doing this first, you can communicate the value of your products better.
To create a marketing plan, the AIDA model does the job pretty well.
How does the AIDA Model work?
a. Attention
At this stage, it is your focus to make your potential customers aware of your product.
So what can you do at this stage?
Think of ways to reach more people and grab their attention.
Any form of advertisement does a good job at this – if it is properly planned.
Think back to any ad that caught your attention at some point. What did that brand do to catch your attention?
Some things that you can do to grab people’s attention are:
- Create content using the latest trends – trendy content always attracts more attention
- Have a bold message – if you try to have a common message you will blend in with the crowd and lose your unique voice.
- Appeal to emotions – create a connection with your audience through your ad or content by pulling on heart strings or by pointing out a real problem that the potential buyer has.
b. Interest
By this stage, you would have caught the target customer’s attention.
Now your aim is to spark their interest.
This is where the features and benefits you outlined will come in handy.
To effectively spark their interest, all you have to do is to communicate how the features and benefits of your product can solve their specific problem(s).
See why I said you really have to know who your customer is?
Once you know your customer’s pain points, then you can create a message that speaks directly (and irresistably) to those pain points.
Okay, let’g get to the next part of the AIDA model.
c. Desire
Creating desire is all about making the customer develop positive emotions about your brand and your product.
I like to think of it as the trust-building stage.
Here, you both convince the customer that you can solve their pain points and also show that you are credible.
They need to know that you can fulfil your promise.
They will have objections, but you must be able to completely ease their minds of any doubts at this stage.
Here are some ways to do this:
- Show customer tesimonials
- Give a money-back guarantee
- Give a free trial or something free
- Give room for direct interaction with you and answer their questions
After successfully creating desire in the minds of your potential customer, it’s time for the final AIDA step.
d. Action
At this stage, you’ve been able to create desire in the customer’s mind.
However, this is not enough.
To get a customer to buy your product or service, you must give them a solid CTA – Call To Action.
Don’t assume that they know what to do, tell them what to do, and make it very easy for them to take action – too easy that they can’t say no.
Some examples of CTAs are:
- Buy Now
- Click on the button/link to [insert your desired action]
- Schedule a free call now
The trick behind a successful Call To Action is creating a sense of urgency.
For example, you can give a timed discount with a limited time (display a countdown).
With the AIDA Model under your belt, you can create an effective and irresistible marketing plan.
7. Ownership and Legal Structure
Before we go ahead, I just want you to know that if you’ve read to this point, you’re doing an awesome job, well done! I’m always glad to create these posts for people who will implement them.
Let’s continue.
The next thing you need to plan is your ownership or legal structure.
I talked about this in detail in my post about choosing a business structure.
Let me summarise what you need to know:
There are three main business structures that you could choose from, however this could be more specific depending on where you reside.
The three main structures are Sole Proprietorship, Partnership, and Corporation
a. Sole Proprietorship
Here, you are the only owner of your business.
You don’t share the profits or losses with anyone legally.
You are completely responsible if anything goes wrong and you may have to pay from your own pockets.
You are not answerable to anyone except yourself.
This is the easiest legal structure to set up because it doesn’t require any documentation or legal work.
The next business structure is a Partnership.
b. Partnership
Just as the name implies, here, you have business partners.
You have to share profits and losses with these partner(s) based on the ratio of your contributions.
You both have to sign some kind of legal document outlining the terms of the partnership – often called the “Deed of Partnership”.
You and your partners are also responsible for any damages – based on the ratio of your investments – if anything goes wrong .
You are answerable to your partner(s).
If you decide to close the partnership you have to go through a legal process.
Setting up a partnership is not as easy as a sole proprietorship, but it’s not as complex as a Corporation.
c. Corporation:
In a corporation, there are several owners called shareholders.
Profits and losses are shared between shareholders based on the amount of shares that each shareholder owns.
In a corporation, the business is a separate entity which means that if something goes wrong, the business owners are not held responsible.
Setting up a corporation requires the most documentation which makes it the most complex ownership type.
However, it differentiates the business owners from the business itself which is helpful for risky businesses.
These are the three main business types, there are definitely more depending on where you stay. If you want more details on the business structures, check out this post.
8. Management Plan/Organization Chart
After deciding on your legal structure, next, you need to decide on your management plan.
Essentially, this is a plan how you intend to manage your business.
As a business owner, most times, you have to wear all the hats, especially at the beginning when you don’t have the money to hire people.
But if you can afford to hire people, this is where your management plan is all the more important.
Here, you decide what tasks you’ll manage yourself, and which tasks you’ll outsource to other people.
Start by listing out all the business departments applicable to your business idea both now, and say, five years from now – it’s generally a good idea to plan ahead.
After listing out all the functions, assign a leader for each of them.
See the example below:
After creating a managment plan, you can move to the next step.
9. Operating Plan
In this section, your aim is to detail how you will operate your business.
Outline what a typical day at work will resemble.
Building processes for your businesses is very important. If you don’t create an operating plan the right way, you may end up seeming disorganized and incompetent.
So how can you create an effective operations plan?
- Start by outlining every step of your business operations (your business daily routine)
- Detail what steps you will take in accomplishing each of these operations
One thing that you should keep in mind is that you will need to make constant changes to your systems to improve them, so you don’t need to figure out every detail.
All you need to do is to have a rough operations plan, it doesn’t have to be perfect.
10. Financial Plan
Although there are some businesses that you can start with basically no money, it’s not always the case…
Which means that you will most likely need to make a financial plan.
Creating a good financial plan is very important because it helps you to be well informed about your business needs and to plan for any emergencies.
To create a financial plan, here are some key areas that you should consider:
a. Startup Costs
Here, you need to find out approximately how much it will cost you to get your business off the ground.
Find out every cost that you need start a business. Costs will differ from business to business. See the example below:
Here are some prompts to help you think of your startup costs:
- What tools do you need?
- What initial expenses will you have to make?
You won’t be able to know what all the costs are until you start your business, but you should at least know what the most significant costs will be.
Let’s look at another key area in your financial plan.
b. Cost of Doing Business
The next set of costs to consider are your recurring costs.
This is pretty straightforward – what are the expenses that you’ll need to pay for on a frequent basis.
For example, what raw materials or supplies will you frequently need? What subscriptions will you need?
Again, you may not know what all your recurring costs will be until you start, but you should have a good estimate – to avoid any suprises.
c. Expected Revenue
How much do you expect to make within a specific time, say, 12 months.
Creating a realistic projection helps you stay motivated, but not only that, it also helps you plan ahead.
With your projected revenue, you can decide ahead on what tools you will invest in later.
Be specific when projecting your revenue.
Take some time to think about the following:
- How many sales are you expecting to make?
- What is your pricing strategy?
11. Executive Summary
This is the final step of your business plan, but it’s also the first step…
Let me explain.
You should typically write this section after writing every other section, but it appears at the first part of your final business plan document.
The executive summary is a summary of the entire business plan in a page or two.
The idea behind an executive summary is that if investirs were to pick up your business plan, they most definitely won’t have the time to go through the entire document at a glance, so they should be able to scan through your executive summary.
The aim is to captivate them and draw them into reading the entire document by summarizing the entire document but highlighting the important points.
In every business plan, you could have more sections based on your preferences or on specific sections you think you need to provide more detail on.
But with these 11 steps, you will have a complete and fully-fledged business plan.
By now you should be convinced that writing a business plan is extremely important, however, if you’re still not convinced, let’s talk a bit more about why you need a business plan in the next section.
Why Do You Need a Business Plan?
Starting a business without having a business plan is like building a house without a plan – it is doomed to fail.
You may argue that having a business plan is not important and that not every successful business started with a plan.
While it’s true that not every successful business started with a documented plan, there had to be a vision or a plan at some point.
If you’re thinking of starting a business, then you don’t want to leave anything to chance – you have to be intentional about creating a real plan (like actually creating a business plan document) – not just keeping it in your mind.
Here are a few reasons why writing your business plan down is so important:
1. It prepares you for unseen challenges
Writing a business plan forces you to look into some crucial areas that you would’ve easily overlooked.
By paying more attention to the different parts of a business plan, you can get to see the risks involved in the business you are considering.
This helps you address those risks, make plans to manage them or to avoid the business idea completely if it doesn’t work out well.
Compare this to just jumping into a business idea without any analysis or plan – tragic is all i can say.
It’s like jumping into a pit.
Yes, being an entrepreneur means you should be able to handle risks, but not jump into them blindly.
2. It motivates you
One of the biggest issues that many people trying to start a business often face is the lack of motivation to get it started.
They have these great ideas in their minds – ideas that would probably be huge successes in few months or years – but the motivation to take the first move is just non-existent.
There’s something motivating about making a plan for anything that you’re interested in starting – this is especially the case when making a business plan.
Writing a business plan gives you something to look forward to implementing.
I know that starting a business is not very easy, but a business plan makes is 50% easier to achieve your goals and definitely gives you the extra push to go after the things that you’ve written down in the plan – if you do write them down.
3. It helps you create the right systems early
Many people wait until they have started a business before trying to figure out the best systems for their businesses.
Creating systems is something that you should’ve done even before starting a business.
If you wait too long before creating business systems, you’ll find that you’ll keep making the same mistakes over and over again – and it might cost you your business.
You may not notice it but creating the right systems saves you a lot of stress and wasted resources.
When you write a business plan, you find yourself thinking of the best ways to do things even before you get to that point.
4. It speeds up the businesses startup process
It may seem very contradictory to think that taking the extra time to write a business plan makes the business startup process faster but it does.
Let me explain how…
When you create a comprehensive plan on how to get your business started, you won’t have to pause or make a complete stop when you get to every stage of your business startup process – because you would’ve already thought it through.
Not having to make all of those stops at each juncture of your business plan will eventually save you a lot of time.
5. It saves you a lot of money
Considering that lack of planning means that everything (or almost everything) you do will be based on trial and error, writing a business plan saves you a lot of money.
In your business plan, you get to analyze every possible expense that you expect to incur when you start your business.
It forces you to think ahead.
If done correctly, you won’t need to do a lot of trial and error. You may still need to make some extra expenses, but even these expenses would be accounted for in your business plan.
I could go on and on, but writing a business plan does have so many benefits, you have nothing to lose and everything to gain from writing a business plan.
So, now we have established that writing a business plan is super important, I encourage you to take your time and follow the steps in this post to write a great business plan.
Finally, let’s talk about some tips for writing great business plans.
Tips for Writing a Great Business Plan
To write a great business plan, there are certain things that you must make sure that you are doing in your business plan.
Here are some tips for writing a great business plan:
1. Be concise
The length of a business plan isn’t what determines how well written it is.
When writing your plan, try your best to be straight to the point.
Not only does this save you a lot of time, but it also makes the whole process less complex, confusing, and boring.
It really doesn’t have to be complex, don’t make it so.
2. Keep it simple
Remember that you’re writing your business plan for yourself most importantly.
Write your plan in a way that makes it easy for you to understand and implement it.
If your business plan confuses you, that is a red flag – you need to simplify it.
If you can’t understand it, other people probably can’t either.
Stay away from big words and jargon – except you feel it’s extremely necessary to use some of them.
3. Use Guides and Templates
Though you’re already on the right path by being here, I feel like this is still worth mentioning.
What I mean here is, you don’t have to recreate the wheel when writing a business plan.
Don’t feel guilty for using business plan templates or guides, it’s the best way to go about writing a business, and the most effective way too.
While it’s good to be creative, it’s better to save your creative energy for the most tasking activities.
4. Have fun with it
If you think of writing your business plan as a boring task to be dreaded and you treat it that way, that’s exactly what it will be.
But you can make it fun too.
Just take simple steps like playing music you love in the background as you work, have a snack beside you, promise yourself a movie after writing a some sections, but most importantly…
Think of your business plan as a roadmap to the next big thing in your life.
You are going to change your life for the better very soon! It is something to be excited about!!
If you follow those tips, you’ll find that writing your business plan will be a breeze.
Writing a Business Plan – Summary
And that’s it! You now kow how to write a business plan and why it’s important.
Here are the 11 steps you need to take to write a business plan:
- Write a company description
- Set your business goals
- Perform a SWOT analysis
- Do a market analysis
- Do a competitive analysis
- Create a market plan
- Choose an ownership and legal structure
- Create a management plan
- Create an operating plan
- Create a financial plan
- Summarize your plan with an excutive summary
Writing a business plan is a lot of work, but you can do it a lot easier with this guide.
To learn more about starting a business, check out these guides:
Are you ready to take action? Start today, or early tomorrow 😉
See you in the next post!
Hi, I’m Esther – a creative and business startup enthusiast. My aim is to help several people to independently start businesses faster and more effectively, reach financial freedom, and achieve fulfillment.