Business plans are an essential building block for any start-up. They make sure you think about every aspect of your business before you launch, give you a plan to follow when things get tough (and they will), and can even help you to secure funding or a bank loan.
These are the 10 essential steps you need to follow to write a business plan that will support your start-up’s success.
Before you begin
Most business plans have ten sections. They cover everything important that you need to think about in order to launch a successful business. Some experts believe you need a robust business plan that unpacks each of these ten sections extensively. Others say that you only want a one-page business plan, and that you should refer to it every day.
We believe you need both. Writing a longer business plan gives you the opportunity to really think through your business idea, which is ultimately the point of a business plan. However, you should never write your plan and then forget about it. Many start-ups throughout history have had large binders on shelves gathering dust because founders write their business plans and then never think about them again.
Instead, a business plan should be a living, breathing document. You don’t need to refer to a large document daily, but you can use it to create a one pager that just reminds you of your core strategies, and this you can (and should) keep coming back to. It’s a great lens to ensure that everything you do, and every decision you make, aligns with your vision and goals.
Let’s get started.
Step One: Leave Your Executive Summary For Last
Many founders write their Executive Summary first because this is the document that they need to present to funders, banks, and even potential partners.
It’s an extremely important document, and in the context of a larger business plan, it’s the section that will either interest someone enough to keep reading, or it will lose their interest.
The problem is that it is only a summary, and if you do it first, you won’t think through the eight critical sections of your business plan. You’ll also ignore any issues of misalignment. Your business plan is your stress-test of your business idea, how you will take it to market, how you will attract customers and how your business model will ensure you make a profit because your cost of sales and operational costs are lower than your income. You can’t adequately answer any of these questions unless you follow the next eight steps.
Insight: Your Executive Plan is the most important part of your business plan (it could even become your one-pager), but it’s impossible to write it properly unless you work on the other sections of your business plan first.
What to include:
- This is a high-level summary of your products or services, who your customers are and why they need your solution. You should also include your unique selling proposition (USP), which is the one thing that competitors either can’t copy, or will find it extremely difficult to copy.
- Include your financial projections. You need to understand exactly how much money you need to launch your business, run your business and grow your business. Cover your sales, cash flow, and how you’ll make a profit.
- Stress-test it. Be critical. Don’t paint a glorious picture of success. Try to find all the reasons why your business won’t work (remember, you’ve done a lot of research to get to this point). The more problems and holes you can find, the higher your chances of solving them before you go to market and during your early start-up days.
Step Two: Your Company Description
This is an overview of your business and how it operates. It’s really the nuts and bolts of who you are and what you do. It includes the name of your company, the type of legal entity it is, who the owners are and if you own any significant assets. This is also where you outline your mission statement, values, business goals and objectives.
Insight: Don’t be boring. Great companies have personality. This will inform your brand, how you market and how you engage with customers. If you map it out, you can ensure that everything you do and say (and everything your future employees do and say), aligns with your brand identity.
What to include:
- An overview. Think broad strokes, not small details. The small details are in the next seven sections.
- Refer to your industry. How big is it and why do you believe you have an opportunity to win in it? Use statistics and data.
- Stress-test it. Again, how have you poked holes in your assumptions?
Step Three: Break Down Your Market
To complete this section, you’ll need to do high level research into your market. How big is your market? How fast is it growing? What opportunity have you discovered and how many customers do you believe you can reach? Is it a highly commoditised market that buys on price, or can you differentiate yourself?
You also want to look at your industry. How hard is it to start a business, who are your competitors, and what will influence your pricing? Be careful not to think you don’t have competitors – even if another business doesn’t do exactly what you’re proposing, you will still compete for your customer’s budget.
Insight: Your goal is to understand who your target market is, how much you are going to charge, and how you’ll deliver your product or service to your customers.
What to include:
- The Market. Who are you selling to?
- The Industry. Who are the other key players, and what’s happening in the industry (for example, what will shut the entire industry down?)
- The Opportunity. What gaps have you identified, and why are you the business that will solve them?
Step Four: Create Your Strategic Plan
This section is all about how you’ll compete. You need to appeal to your target market, understand what your primary competitors are doing and have a plan for how you’ll compete with them. Look at every possible scenario that could disrupt your market and plan around how you will prepare for those disruptions.
You should also make sure that you know where your unexpected competition will come from. (Tip: we’ve used the word ‘unexpected’ for a reason – think out the box, plan for the worst, and you’ll be prepared for anything).
Insight: Don’t be too committed to your strategy. Anything can happen. Entire markets can be disrupted overnight. Your goal should be to build an agile business that can adapt to change, not a business that stringently needs to follow a strategy that is set in stone.
What to include:
- Value. How you’re creating value for your customers.
- Unique Selling Propositions. What makes your business special.
- Agility. How you’ll adapt to market disruptions such as a sudden and unexpected global pandemic.
Step Five: Build Your Business Model
Your business model is how you’ll make money. It’s a breakdown of who you will sell to, your sales channel, how much you will charge, and how much it will cost you to deliver your product or service.
Business model examples include direct sales (every business with sales people), franchising (franchisors who make money selling their brand), advertising-based models (newspapers and news websites), brick-and-mortar stores (traditional retail), drop-shipping (online marketplaces) and subscription-based licensing models (software as a service).
Insight: How much money will it take to get your business off the ground? Make sure you include your main costs, how much you think you can charge and where unexpected costs might arise.
What to include:
- Total Addressable Market. Who your customers are and where you’ll find them.
- Value. How you’re offering genuine value to those customers.
- Your Profit Margins. How you’re planning to make a profit.
Step Six: Plan Your Management and Organisational Team
Every great business is started by a founder but built by a team. Who will yours be? What key roles do you need to fill, and what key skills should you have on board, versus skills that you can outsource? In today’s gig economy with experts who have become freelancers who can work from anywhere, you don’t necessarily need to only hire full time employees. You can leverage experts who would otherwise be out of your start-up’s reach on a part-time basis.
Insight: Investors care about your team, so get into the details. Who are they? What are their qualifications? Why have they joined you and what do they bring to the business?
What to include:
- Unpack the logistics. Who is your talent, what are they responsible for, and how are you ensuring they stay with the business?
- Focus on your leadership team. These are the people who ensure your strategy translates to on-the-ground action. Outline who they are and how they’re making the magic happen.
Step Seven: Create a Killer Marketing Strategy
Everything up to this point is meaningless if you don’t have a great marketing strategy in place, because how you market yourself will determine if your customers know who you are, what you do, and how to find you.
Think about businesses today who don’t have a website – will anyone find them, or trust them if they don’t have an online presence?
To get this right, you’ll need to understand what makes your product or service so important to your customers, who your target market is, how you’ll showcase your offering, and what your brand stands for (and why your customers will care).
From there, you can build a strategy that includes various ways to reach your target audience, including public relations activities, promotions, advertising and potential viral marketing activities.
Insight: Always go where your customers are. It’s not their job to find you – it’s your job to find them, and to engage with them on topics that interest them or are important to them. To do this, you need to know who you’re targeting. Business execs don’t spend all of their time on TikTok, and teenagers aren’t on LinkedIn. Where you go will be based on who you need to engage with.
What to include:
- What channels will you use to educate your customers about who you are?
- What are your long-term strategies? Remember, most people engage with a brand multiple times before buying.
- Every marketing activity should move your customers down the buying funnel, so consider the calls to action you’re making to achieve this.
Step Eight: Develop an Operational Strategy
Operations don’t sound as exciting as marketing strategies or even developing your product or strategy, but the day-to-day running of your business is how you’ll deliver your product or service and ultimately make money. This includes where your offices will be and whether you’ll have a remote workforce or need people to come in each day, what equipment you need, and how much working capital you need to keep the business operational.
Insight: All businesses have an operating cycle, which covers the development of your solution to your customer and back again. Make sure you understand exactly what that cycle is, and what can disrupt it (for example, what happens if you can’t get a key raw material?)
What to include:
- Your team: Who is involved in the operating cycle and what do they do?
- In-house or outsourced: What does your business have to do in-house (ie your IP) and what can be outsourced?
- Breakdown your cash flow cycle. How will you receive money, and when will you make payments? Focus on building a strong cash flow and work out how you’ll build cash reserves.
Step nine: Focus on Your Financial Strategy
You need to include your financial strategy in your business plan, but your detailed financials are in your financial plan. However, if you’re approaching a bank or funders, they will pay close attention to this section, and if they like what they see, they’ll review your financial plan, so don’t take this section likely. Businesses need to make money to continue operating and to support employees, so you need to understand exactly how you’ll make money, what your operational costs are and what your profit margins are.
Insight: As a start-up, your break-even calculation is critical because it’s how you know when you’ll start making money (and therefore how much you need in the bank until you get there). For growing businesses, your profit margins become important. Both will interest funders and banks.
What to include:
- Your Start-up costs: How much it will cost you to launch your business? Where are you getting this money from?
- Your 12-month profit and loss projection: You need monthly, quarterly and annual projections. While you can’t know for sure if you’re right, it’s important to have a plan you can benchmark your actual numbers against.
- What does your cash flow look like on a month by month basis, and how did you calculate it?
Step Ten: Wrap Up With An Appendix
The aim of your business plan is to tell an exciting business story. Your story is how you’ll attract top talent, customers, partners and even funders. But you can’t tell that story unless you’re building a great start-up that is solving a real problem in the market, and that takes planning and research.
Insight: Your Appendix is where you include all your research and supporting documents. It’s how you show your reader that you’ve really planned your business, but it’s also proof that you’ve thought about every angle of your start-up and considered everything that could go wrong.
What to include:
- Your research.
- What you need to run your business (equipment, office space etc).
- Customers who have tested your products or services and their feedback.
