All businesses need a business plan, but the question is — does every company have one? Some avoid writing a business plan because they believe it is complicated, some others don’t do it because they think it is time consuming.
However, writing a strong business plan is neither complicated nor time consuming. In this guide, we will show you how to write a strong business plan fast and easy. Let’s get to it.
Before we dive in our detailed business planning guide, you might be interested to check our premium collection of ready-made business plans with automatic financials in Excel. Our pre-written business plans in Word are tailored to your industry and they come with a detailed financial plan that you can easily customize. Try one and we guarantee you will save tons of time and efforts.
The Five Pillars of a Strong Business Plan
Whether your company is looking to raise funds to take your business to the next level or is just trying to test an idea, you need a robust business plan.
So, what makes a business plan a good one?
Let’s go through the most important elements you must include in your business plan:
1. Executive Summary
At the risk of sounding cliché, we would say that the executive summary is the most crucial part of your business plan, especially if you are looking to raise capital.
An executive summary is a preface to your report. It must have all the important details but should be free from details. Leave the charts, analysis, numbers, and reviews for the main report. An executive summary offers you an opportunity to capture the reader’s attention — to show them your business plan is worth a read and serious consideration. Don’t squander it by boring the reader with minutiae or technical details.
So how can you impress the reader with your executive summary?
Here are four tips for writing a compelling executive summary:
- List the desired goal
What will happen if you get the funding you desire or the identified problem gets solved or the listed need is fulfilled? Answer this question upfront, but be concise in your reply and use facts and figures if possible. Don’t be vague or wordy, as that may put off the reader.
Incorrect: The first two chapters show how incorporating new technology will boost our productivity.
Correct: Migrating to the cloud will increase our productivity by 17%.
- List the proposed solution
You’ve listed the desired goal upfront, so now show the reader how you plan to get there. Just like the above section, you should be concise and to-the-point here as well.
Additionally, make the text more readable and easier to digest by describing a step-by-step plan. Use small paragraphs and ensure each one points the reader to that section of the business plan where the discussed point is explained in detail. Last but not the least, avoid biz blab, technical language, or abstract examples.
Incorrect: If we leverage the novel technology, we will not only be able to enhance our tech investments but also save on retraining requirements. As a result of the latter, we will become more productive and be able to boost the bottom-line.
Correct: Here are the steps that will solve the identified problem:
First Step – Test the new technology in a controlled environment. This will allow us to find quick and effective solutions to any potential obstacles we may encounter, without negatively impacting our productivity. Section 4 of this report discusses the installation requirements in detail.
(Second Step… and so forth)
- Convince the reader of your ability to tackle risks
What are the risks you foresee? And just exactly how are you going to tackle them? Make sure you include this information in your executive summary. Like the previous section, keep things short and simple here, free from technical jargon. Use short paragraphs with each one pointing to the relevant portion of the business plan for more details. Here is an example:
Incorrect: Although the advised solution is time consuming, it is not restricted to one particular product and allows us to effectively integrate the proposed personalized scripts into all system architectures to ensure we provide a faster and better service to our customers.
Correct: An across-the-board retraining will help improve our response time, but since this is a time-consuming process, we will first create a customized training manual and update Standard Operating Procedures to boost the response time and minimize the need to retrain the entire service department. Section 5 of this document details this solution and our measures to reduce impact on productivity.
- List the desired decision
What do you want from the reader? Do you want funds? If yes, write the precise amount of money you would need.
Incorrect: Slow server speed negatively affects the speed at which the website is rendered on the end user’s screen. The latter, in turn, increases the bounce rate and reduces the overall sales. Precisely for this reason, we must move from shared web hosting to dedicated web hosting and this requires money.
Correct: We need you to fund $10k a year for dedicated web hosting. Switching to dedicated hosting will improve our sales by 17% on yearly basis.
2. The Opportunity
The opportunity section of your document contains the real meat of your business plan. It contains information regarding the problem you are solving, the solution itself, who are your customers, and how the described service or product will fit into the present market landscape.
Use the opportunity section to showcase what distinguishes your new offering from the ones already present in the market, as well as your plan for expanding your services and products in the future.
Since by now the reader already knows something about your company—thanks to your solid executive summary—this section is the perfect place to expand the initial overview, provide additional details, and answer some questions you didn’t address in the executive summary section.
3. Execution or Implementation Plan
The execution chapter should answer the all-important question—how will you to turn the defined opportunity into a sustainable business?
In this section, you will share your marketing and sales plan with the reader, along with the milestones and the metrics you will use to measure success.
Here are four tips to get this section right.
Write a thorough sales and marketing plan
Your sales and marketing plan is a crucial part of the execution chapter. It should tell the reader the following things:
- How you will reach the target segments (that is, how you plan to communicate to and attract prospects)
- What’s your sales plan? In other words, how you will sell your products or services to your potential customers?
- What sales and marketing channels will you use? Digital advertising? Traditional channels?
- What kinds of partnerships and activities you need to turn your company into a successful growing business?
It goes without saying that you must define your target market before you sit down to write your sales and marketing plan. Without having a clear understanding of your audience, your marketing plan is not likely to have any value.
Create a compelling positioning statement
How are you going to present your business to the customers? Are you a premium brand in your niche? Do you plan to offer a low-price solution? Are you offering a product or service that no other business in your market niche offers?
These are the types of questions you must answer in your positioning statement, which should come before anything else in your marketing and sales plan.
However, positioning statement is not something you write without preparation. Before you start working on one, take some time to analyze the present market and find answers to these important questions:
- What are the main needs and wants of your customers?
- What benefits or features do you provide that others don’t?
- How have your competitors positioned themselves?
- How will you differentiate yourself from the competition? Or exactly just why should customers pick you in place of another company?
Once you know the answers to these questions, you can start working on the positioning strategy and put it down in writing in the business plan.
Figure out your pricing
Now with positioning strategy done, it’s time you move to pricing.
So how can you create an effective pricing strategy? Well, honestly, there is no rule written in stone here. That said, typically, companies follow any one of these three pricing strategies.
- Cost-plus pricing – As the name suggests, this method focuses on establishing the pricing on the basis of your cost. That is, you take your cost into account and mark up your selling price from there.
- Market-based pricing – In this method, you take into account the pricing of your competitors and what the market expects. Depending on your business model, you could price your offerings at the low-end, the middle or the high-end of the market.
- Value pricing – In this method, you decide the price on the basis of the kind of value you’re offering to the end customers. For instance, if you are marketing pool care, you might be saving your clients 5 hours of work. If one hour of their time is valued at $60, you could charge them $60/hour or $300 for a standard pool care service.
Last but not the least, discuss your promotional strategy. That is, how will you communicate with your customers and prospects? Will you offer them discounts and rebates? How about some rewards for their repeat business? It’s always advisable to measure not only the cost of promoting your offerings but also the number of orders they bring.
4. Management and Key Employees
Did you know that investors and bankers look for great teams, in addition to great ideas? This section presents you with the chance to impress investors with your talent pool. Describe your current team members here, as well as who you plan to hire. You should also mention in brief your history, education, professional experience, location, and legal structure if you are already in business.
5. Financial Plan
No business plan can be complete without a solid financial plan. Often entrepreneurs struggle with this part, but it doesn’t have to be this way for you. We’ll show you show how to write a sound financial plan, and for sure, you don’t need a business degree to create an accurate financial forecast.
You should include monthly sales and revenue forecast for every month of your first year, followed by an annual projection for the next 3 to 5 years. Most investors are satisfied with a 3-year forecast but some require a 5-year projection.
So, what should be included in your financial statement?
Let’s have a look.
- Sales Forecast
What’s your sales projection for the next few years? Include this information in this section. You don’t need to go to excruciating detail, but it would be nice if you could break down the sales projection into multiple rows, with each one talking about one core service or product you’re offering.
- Personnel Plan
In this section, list how much you’ll be paying your employees. If you’re a startup, you may even list how much every job position will be getting. Larger companies, on the other hand, can list a plan for each functional group or department.
- Income Statement
This is where you’ll show if you’re making or losing money. Pull up the data from the sales forecast section and the personnel plan and add to them all other expenses of running your company to get a clear picture of where your business stands.
- Cash Flow Statement
Many people think cash flow statement is the same thing as income statement, but that’s not the case. While the income statement calculates how much profit or loss you are making, the latter is concerned with how much cash you have at any particular point in time.
- Use of Funds
How do you plan to use your investors’ money? While you don’t need to give an account of how you plan to spend every dollar, you would want to list the most important areas where you will spend money. These could be sales, marketing, R&D, fixed assets or something else.
- Exit Strategy
What is your long-term plan for this company? Do you plan to eventually sell the business to another acquirer? How about floating the business on the stock market through IPO?
Whatever your “exit strategy” is, mention it here. Investors usually like to see one.
This is an optional section, which you can use for sharing additional information. Not all business plans have an appendix, since it’s not a requirement per se. However, if you want additional space for product images, informational tables, charts or some other things, we recommend you attach an appendix section to your business plan.
Writing a business plan is not as difficult as it seems, especially if you stick to the guidelines shared in this post. If you are short on time or simply need some help writing your next business plan then we recommend you check our collection of ready-made business plans with automatic financial models. Our solution is one of the most cost-effective on the market. It allows you to build an investor-grade and robust business plan in record time. What’s more, no particular accounting or financial expertise is needed. Good luck!