Wonder How to Write a Business Plan that grabs an investor’s attention? Looking for a solid step-by-step guide? You won’t find a better one on the Internet.
In this guide, you’ll get clear instructions on writing and how much for each section of your Business Plan. We will cover how to conduct research and analyze the data, tools, and techniques to employ. We will explore the Marketing Mix, Organization Structure, and Financial Analysis of your business.
By the end of this guide, there will be no stone left unturned. Don’t take my word for granted, have a look at the Table of Contents below:
What is a Business Plan?
You’re about to drive to a new destination. It is a long way, and you have never been there before. You have two options: jump in the car and try to find the way by guessing, or use a GPS that gives you clear directions. Which one will you choose?
A Business Plan is a written document that lays out how a firm (usually a start-up) will go about achieving its goals and objectives from a marketing, financial, and operational perspective.
In a nutshell, it’s a road map taking you from where you are now, to where you want to be.
It is very much like planning your next trip: budget, logistics, places to visit, risks that might occur. In other words, planning everything that will make your vacation a good memory.
A Business Plan highlights all your long-range objectives and goals, routinely distilled into concrete, prioritized, and executable activities that you need to achieve regularly, weekly, yearly, quarterly, and annually to complete your business journey.
Besides, it also includes a detailed description of any potential challenges and/or roadblocks that could crop up, as well as a variety of possible ways to deal with them. This is your business contingency plan.
Key Elements of a Business Plan
If you never put together a business plan, this may look scary. Don’t let yourself be intimidated by all those fancy terms – I will walk you step by step throughout the process.
By the time you end reading, you will get a deep understanding of what is required to achieve your business goals and objectives, let alone attracting some serious attention from potential investors or business peers.
Now, you should know that writing a solid, well-documented Business Plan is not a one-day job. Heck, it is not even a week-long job. It can take some considerable time, effort, and a set of analytical business skills you need to have. But don’t worry, that’s what this guide is all about.
A solid Business Plan will contain the following key elements or chapters:
1) Executive Summary
3) Evaluation and Selection of Plan and Analysis Tools (ESPAT)
5) Industry Environmental Analysis
6) Business Description
7) Marketing Plan
8) Operation Plan
9) Management Plan
10) Financial Plan
Let’s jump into hot waters and dissect each chapter one by one.
Like every book or document you read, the first paragraphs on the very first page are the ones making the whole difference. Here the reader decided if he/she should continue reading or stop altogether.
The Executive Summary summarizes the key points in your Business Plan: project name, location, mission, vision, and how your products and services differ from other competitors in your industry.
This is not the place to write a story, keep your sentences clear and straight to the point.
Keep your Executive Summary on one page.
Chapter 1: Introduction
The Business Plan Introduction covers two main points: the Industry Overview and the Business Concept.
Here you provide details about important aspects in the past that lead to the present situation. Talk about important business trends and how they lead to future outcomes. Why investing in this particular industry is a great opportunity for the reader?
Write with a sense of urgency; highlight the importance of not missing “the train.” Make all the necessary efforts to educate the reader about this opportunity by using well-researched tables and figures – explain every bit of data you provide.
This section should cover the following points:
- The size of your industry.
- What sectors does this industry include?
- Who are the major players in your industry right now?
- Who are the customers for this industry?
- What are the markets in your industry?
- Add tables and figure with the industry’s estimated sales year for the past few years.
- Highlight the long-term outlook of this industry.
- What products/services your industry plan to sell in this industry.
- Point out any other relevant industry factors that are related to the proposed business.
This section should be 3-4 pages long.
Business Overview covers the description of your business, including its objectives and goals. The focus here is to explain why your business venture worth paying attention to.
Clearly explain what problem you’re product/service is trying to solve or why the existing solutions need something better. Explain if your product/service follows a novel approach or builds on top of a current solution.
Does your business concept involve a new revenue stream for an existing business or a unique offering to disrupt the market?
Keep in mind that you must convince the reader that your business concept is feasible to operate. Don’t shy from providing details such as the description of target customers or potential revenue streams you have in mind.
This section should cover the following points:
- A clear reason why you chose this business. Refer to Industry Overview if needed.
- Present trends, data, projections to enforce the problem/opportunity.
- Who are your target consumers? How will they buy your product/service?
- Why is your business different from others within your industry?
- How and when will your business become profitable?
Remember, the reader knows nothing about your business plan at this point; therefore, focus on giving a clear picture of what you have in mind and why?
This section should be 2-3 pages long.
Business Plan Structure
This part will list, define, and describe the sections of your Business Plan. Do not introduce any information about your business here.
Simply explain the structure of the document, main chapters, sub-chapters, and briefly what will be discussed in each of them.
This section should be 1-2 pages long.
Statement of the Problem/Opportunity
Write a fairly succinct statement of a maximum of 1 or 2 paragraphs explaining the problem and/or opportunity that your business plan to address.
Research Questions & Research Objectives
If you seriously plan to start a business, you would likely have tons of questions about finance, marketing, operations, so on.
To answer these questions convincingly, we should first set our Study Objectives (SO), which simply tells us what the study is designed to cover.
Next, we will make a list of relevant Research Questions (RQ) for our study to help us get the information we need to accomplish SO.
And finally, we will set the Research Objectives (RO) – which is the information that, if you had it, would answer the RQ.
Confused? No more after you see the following example:
Study Objectives (SO)
- Determine the customer behavior to…
- Develop a marketing plan for…
- Examine the workability of…
Research Questions (RQ)
- What is the best location for our business?
- What types of products should the company sell?
- Which market segments should be targeted?
Research Objectives (RO)
RQ1: What is the best location for our business?
RQ 1.1 A list of five good locations researched using Google search and a few recent articles on good coffee shop location for a new coffee shop in New York.
RQ 1.2 A list of criteria for a good location for a coffee shop using Google search and a few recent articles about good location factors for a new coffee shop business in New York.
Good location factors could be the number of condos, companies, residences, universities, etc., nearby.
RQ 1.3 A count of the number of people passing by each location every day, using observation.
RQ 1.4 A rating of each of the five locations obtained by using, e.g., the Fishbein multi-attribute model.
For each Research Question, you should have at least one Research Objective. In the example above, I included four Research Objectives.
Chapter 1 – Introduction should end with a paragraph to sums up what was discussed and a transition paragraph introducing Chapter 2 of your Business Plan.
Chapter 2: Evaluation and Selection of Plan and Analysis Tools (ESPAT)
This segment explains how data can be discovered in market circumstances that initiate the need for a particular type of analysis or business strategy; to find answers to research questions that help businesses address challenges and seek opportunities.
In particular, the discussions in this section are intended to enable the reader to gain expertise and relevant information about business plans and analytical tools in general – BEFORE performing your actual business analysis.⠀
You should explain to the reader why factors such as how to fund the business can contribute to entirely different business plan requirements.
For example, banks need more detail about how debt can be returned. Venture capitalists are not concerned about payback but focussed on the management team, their expertise, and abilities. Self-funded firms have business plans that rely solely on organization and operations.
In Chapter 2, you should address two main topics: The Business Plan and Analytical Tools.
Here you have the chance to show the reader that you are an expert in business plans and their proper use. Write about the following points while constantly referring to your business case:
- What is a Business Plan?
- Who needs a Business Plan?
- How, when, and why create a Business Plan, and what should be included in it?
- What do you plan to accomplish with it, and how?
- What will you do with the Business Plan once you have it done?
Specific information is needed from your RQs and ROs in Chapter 1. Most likely, you will employ multiple analytical tools to obtain and interpret the data.
Every analytical tool or technique you use (i.e., needs analysis, importance/performance analysis, competitive matrix analysis, pro forma budget, Gantt charts, etc.) should cover the following points:
- What does the tool do?
- When is it used?
- How does it work?
- What kinds of data does it need?
- What sources should you use to gather the data?
- How to use the tool properly, and what mistakes can be made?
- What kind of output does it provide?
- How do you interpret the output?
- How you plan to use the results to create a business strategy?
Don’t write in general terms; relate everything to your business case. We want to win an investor and not an academic competition.
This chapter should close with a summary of what was discussed and a transitional paragraph to what will be discussed in the next chapter.
Chapter 3: Methodology
In this chapter, we will inform the reader how the study will be conducted. The Methodology should cover the following aspects:
- Data collection and analytical tools used.
- How will the tool and technique be used?
- The required input data.
- The sources of the data and collection methods employed for this research.
- How was the analysis conducted?
- How you generated the output result?
Every idea presented in the business plan needs to be carefully evaluated and validated. You can test business ideas through various types of research methods using either Primary Data or Secondary Data.
Don’t write any stories here, just data and clear, straight to the point explanations.
Make sure you provide a well-structured research design to show enough evidence to support your business model (e.g., pilot study, interview, action research, questionnaire, and experimental design, to name a few).
The research discussed in this chapter is carried out to ensure that, by adequate analysis review, the idea of the unique new product offerings that you intend to have has met both the supply side (practicality) and the demand side (market feasibility). It also serves as the basis for nearly all strategic decisions taken in the following chapters’ business plan.
I strongly recommended a well-conducted primary research approach (e.g., polls, interviews, formal observations, etc.), as well as solid secondary research to facilitate the practicality of your business strategy and provide a framework for the strategic decisions that need to be taken later on.
Like all previous chapters, you will start by writing a brief description of what you will cover in this chapter. You can think of Methodology somewhat like a “recipe.”
If you share a recipe with your friends overseas, they should be able to replicate it with the same results: taste, texture, color, etc.
Discuss and explain the type(s) of analysis methods used in your research. Explain why the chosen method is appropriate for your research design. Naming the exact method use, e.g., experiment for quantitative research; interview, observation, or focus group for qualitative research.
Population and Sample Size
If data is to be obtained from a group of individuals or a group of items, it is important to know why this is the acceptable sample population.
For example, if you analyze electric car buyers’ purchasing behavior and the analysis is limited to Germany, you have to clarify why you chose Germany.
If sampling is to be used, there needs to be an explanation of why sampling is being used and how sampling is conducted.
Discuss and justify the type(s) of research methodology that is used in the study. Explain why what you have provided is an appropriate research design. Also, describe the exact method used, such as a survey or experiment for quantitative research, interview, observation, or focus group for qualitative research.
Sampling Design and Data Collecting Procedure
You have to clarify your approach for sampling. Are you going to use the probability or non-probability sampling method? Whichever you select, make sure you describe exactly how you plan to select the participants in your study for data collection purposes.
Why you selected one person and not the other? Explain every step in detail so anyone can replicate your methodology.
Data Collection Instruments
A Data collection instrument refers to the tool(s) you use to collect your data. Some of the most common data collection tools are interviews, paper/electronic questionnaires, checklists, surveys, etc.
My advice is to create a table, list all items to be used by each instrument for data collection and the variables they are supposed to calculate, and the analysis from which you took the items.
Here’s a sample of how your table should look like:
Note: If you plan to perform qualitative analysis, this segment should clarify the questionnaire scripts, focus group questions, or observation list. Don’t list your interview script/questions here; add your documentation in the document’s Appendix.
Here is the place you get down to crunching the numbers. You must show the descriptive statistics appropriate to your study’s needs, such as frequencies, standard deviations, and alike. The descriptive statistics relate to the Study Objectives, Research Questions, and Research Objectives discussed earlier.
Note: Just because you can calculate descriptive statistics doesn’t mean you should use them all. You can show your expertise by choosing the appropriate statistical analysis relevant to your research.
If you choose to conduct qualitative research, it is usually not required to explain how you collected the qualitative data. However, you must describe the process used to analyze the collected data, such as content analysis or data coding.
At this point, You should have already discussed most of the tools and methods employed in your study in Chapter 2. Please do not attempt to explain them here.
As usual, this chapter should end by providing a paragraph-long summary of what was discussed and a brief transition to the next chapter of your business plan.
Chapter 4: Industry Environmental Analysis
This segment explains your business concept and overviews your industry. This segment aims to persuade readers to consider the broad image of your business strategy.
We will start this chapter by explaining briefly why external environmental analysis is important to your business plan, as well as introducing the tools you chose to perform the environmental analysis. Again, don’t describe the tools and their use here.
General Environmental Analysis
Using the tools you chose for environmental analysis, describe, assess, and examine the external environment factors that could impact your firm and industry.
Don’t just make a list of factors; that’s not really analysis. Go a step further by explaining what each factor means and how it can potentially influence your company as well as your industry.
Describe the strategic consequences for the issues you noticed and analyzed. For example, how a low supply of one of your critical electronic components can push you out of business. Honesty is the key here.
Task Environment Analysis
Using the appropriate analytical instruments you described in Chapter 2, examine the industrial climate and how it will affect your proposed firm. Here is a list of what you should cover here:
- What entry barriers you expect to encounter in your industry?
- What’s your plan to overcome those barriers?
- Who are your customers?
- Who are your suppliers?
- Who is your competition – individuals or companies.
- Labour force facts and challenges
- Special interest groups or government regulations you need to address first.
Classify your direct and indirect competitors. Highlight their strengths and weaknesses and areas where the company is superior or those where it should be concerned. Here is a list of items you need to cover:
- Who are your direct/indirect competitors?
- What they have and your company doesn’t?
- What is the size of their market share?
- What is your competitive advantage in contrast with them?
- How you plan to protect your products in case of digital theft (copyrights, franchise rights you plan to get, trademarks).
Again, you must be 110% honest in your analysis. That’s no point in lying yourself. You have a chance to see clearly what you are up against, as well as rethinking your business strategy to overcome those obstacles now.
I highly recommend constructing a competitive matrix containing valid comparative reasoning about your competitors to consolidate your analysis.
You can use weights as not attributes you list are equally important. It is recommended to also check some additional studies as a guide for identifying which attributes you should include in your analysis.
We analyzed your competition, but now it is time to have a closer look at your business. Let’s use SWOT analysis to get some insights about both internal and external factors impacting your firm.
Go ahead and explain the key strengths, weaknesses, opportunities, and treats for your company. If your SWOT analysis is well done, it will provide some great insights to build a powerful business strategy.
On the other hand, uncovering some key weaknesses and threats will give you time to overcome any potential bumps in the road.
I’ll give you a hint. Go ahead and check online one of your competitors. Evaluate their business, read what others say about them. Make a list of things they are good at and what they are lacking. Focus your business strategy around areas your competition is weak.
The goal of this chapter, you as well as the reader should be able to identify the clear business opportunity derived from both internal and external factors.
End this chapter on the same note: a brief paragraph of what was discussed and what will be covered in the next chapter.
Chapter 5: Business Description
Alright. Finally, we get to something more down on Earth. Start this chapter by briefly explain what will be discussed: your Business Description and Business Model.
Here you can write all the vital details about your company and explain for each following this template:
- Company name and why you chose it?
- Mission Statement
- Objectives (use SMART format):
- Formulate your Short Term Objectives
- Formulate your Long Term Objectives
Business Model refers to how your company will create, capture, and deliver value in social, economic, cultural, or other contexts. You can use a table similar with the one below:
Don’t stop at filling the table with items. Continue and explain for each how the business model components are utilized and how they are related to other components:
- Customer Segment
- Value Propositions
- Customer Relationship
- Revenue Stream / Model
- Key Resources
- Key Activities
- Key Partners
- Cost structure
Goods & Services
In this section, you should present your goods and/or services you plan to deliver and how (online, shop, etc.). It is essential to specify your Unique Selling Point (UPS) and the key difference between your products/services.
End Chapter 5, with a short paragraph of what was covered and a transitory paragraph of what will be discussed in the next chapter: Marketing Plan.
Chapter 6: Marketing Plan
Start this chapter by writing a brief paragraph of what will be covered (namely: Marketing Objectives, Market Segmentation and Targeting, Positioning, Marketing Mix, and Marketing Budget.
Let’s discuss what you need to cover in each of them.
Use SMART to identify your marketing objectives and enumerate them in the order of priority using bullet points:
- Objective 1
- Objective 2
- Objective n
Segmentation, Target Market Selection
Market segmentation is how your firm divides its customers into smaller groups based on income, age, behavior, personality traits.
Describe the market for your goods/services and explain what the basis of your market segmentation is. Let me show you an example of using a gym:
- Networking: People who visit the gym to make new friends.
- Loose weight: People who come to work hard and lose weight.
- Get into shape: People who come to build their body.
- Top performers: People who want to keep/improve their athletic performance.
- Easy quitters: people who come a few times then stop.
- Demographic: Men/women between 18 – 55.
- Geographic: Central town.
- Body type: slim, fit, bulky.
In the “CORRECT” example, we can see clearly each market segment, consumer intends, and we can easily produce a marketing mix: some groups need a personal trainer, other groups need a place to connect, etc.
In the “WRONG” example, we just identified groups of people but know nothing about their behavior and intend.
For each segment, use variables relevant to the specific situation: psycho-graphics, demographics, spending, size, competition, etc.
You must target not all segments you identified. You can choose the segments you want to target. Make a table for each segment you chose to target and discuss its rationale (why you chose it, how you will target the marketing segment, etc.).
How will you position your company in contrast with rival brands? Write from a customer’s perspective.
I would recommend using and explaining one or more Perceptual Maps here to add extra value to your case. For example, here is the perceptual map of Price vs. Quality:
Research Findings to Support Business & Marketing Mix
Here you can show some relevant numbers based on your research findings in Chapter 3. You must use the primary data tools to validate your business idea (surveys, interviews, focus groups).
You probably heard about Marketing Mix before. If not:
Marketing Mix refers to a set of actions that your firm uses to promote your brand, products, and services in the market.
Make a table summarizing all your 7Ps as well as explain each P.
Provide a yearly-based marketing budget for your business. The budget must be realistic and feasible, based on the Marketing Mix presented above.
End Chapter 6, with a short paragraph of what was covered and a transitory paragraph of what will be discussed in the next chapter: Operation Plan.
Chapter 7: Operation Plan
How your company will operate precisely? In this chapter, we’ll take a closer look at your firm’s operation plan.
Start this chapter with a short paragraph of what will be covered: Pre-Venturing Operation Plan, your daily Operation Plan, Process Design, and Expenditure.
Pre-Venturing Operation Plan
Your company starts to operate way before you get your first customer. We call this stage “Pre-Venturing,” and it anticipates the whole set of activities that need to be accomplished before your company opens its doors to the public.
In a Pre-Venturing stage, your firm already consumes money and resources, so time is of the essence here.
Explain how the Pre-Venturing operation plan will unfold over time using GANTT, CPM, PERT charts.
In this section, you focus on the Operation Plan from the value production point of view. You should use one or two diagrams and explain how your company’s operations combined generate value for the consumer.
In this section, you basically explain in more detail your Operation Plan. If your company uses a physical location, you should provide a small scale floor plan in your Business Plan.
Also, explain the operation process. Here you have the chance to explain step-by-step, from start to finish, how your firm will operate daily.
For example, if you run a restaurant, what is the workflow from when you receive the raw materials to the point they are served to your clients?
Take note that various industries have different workflows. Use illustrations to explain yours.
Location & Layout
In this section, you will show the reader where your company is located on a map (assuming your business is a brick-and-mortar) and discuss all criteria on why you choose this location.
You have to describe the size of the area and how the area is utilized. If you have physical customers visiting your store, where will they park their cars, how far is the bus station, etc.?
Here you must explain your Operational Expenditure (OpEx) and Capital Expenditure (CapEx) for your business.
The best way is to use a table for each and explain what your major purchases, as well as day-to-day expenses, are.
End Chapter 7, with a short paragraph of what was covered and a transitory paragraph of what will be discussed in the next chapter: Management Plan.
Chapter 8: Management Plan
If we talked about the place, we also have to consider the people. In this section, we will cover the Ownership Structure, Organization Structure, Job Description, and Job Specification, as well as the Salary Structure of your firm.
Describe the ownership structure of your company: sole proprietorship, partnership, corporation, LLC, etc. Also, explain why you chose that structure.
Use this section to describe the organizational structure of your company by covering the following points:
- Provide a short definition of Organizational Structure
- How are the roles, power, and responsibilities assigned, managed, and coordinated; How will information be transferred between different management layers?
- Do you require an Internal Management Team? Name the positions.
- Do you plan to use External Management Resources? Outsourcing?
- What is your firm’s Human Resource Needs? For example, if you build a mobile app, how many software engineers you will need for frontend/backend development? How many hours will they work per day? How many shifts?
You should include an organizational chart for your firm showing the positions and chain of command.
Job Description and Job Specification
Here you get down to the skills required to run your business. It is not sufficient to just enumerate the skills. You must provide a job description for each job position.
This shows the reader that you are well aware of your human capital and skill-set required to succeed.
Write with the following specifications in mind:
- Include job title, salary range, reporting relationship, working hours/shifts, overtime/weekend work.
- Job responsibilities: job duties, key tasks, relationship with coworkers or customers.
- What qualifications are required (degrees, certificates, etc.)
- Explicit requirements – if any.
This section describes all compensations that your company will allocate to its employees: salaries, commissions, benefits, bonuses, insurance, etc.
Use a table and separate the salary structure of managers from the staff.
Chapter 9: Financial Plan
A financial plan is a document containing your current money situation and long-term monetary goals and strategy to reach them.
This section will provide a description and analysis of both the initial and ongoing financing and financial management of your company.
Like every other chapter in our Business Plan, provide a short description of what will be discussed: Financial Objectives, Initial Start-up Fund, Source of Funding, Sales/Expenditure Forecast, Estimate Investment Attractiveness, and finally, Financial Ratios.
Financial Objectives refer to your firm’s financial needs or goals for the future.
You should provide your objectives using bullet points and explanations. Here are the items I usually include (but not limited to) in my financial goals:
- Revenue growth
- Bottom-line earnings
- Profit margin
- Return on Investment
- Keep the brand alive during the “decline” stage of the product life cycle.
Initial Start-up Fund
If your company is a start-up, you will probably have some funding requirements to get things rolling. Use the following table template to demonstrate the initial fund requirements for your start-up.
Source of Funding
Here you need to specify your firm’s source of funding and explain why you choose and apply those funds.
Here is a list of possible sources of funding that can be used in combination:
- Bootstrapping (Self-funding)
- Business grants for small companies
- Lines of Credit; Loans.
- Angel Investors
- Venture Capital
Use the following table to present your source of funding:
Don’t stop here. Go an extra-mile and determine your Weighted-average cost of capital (WACC): what is the rate your firm average expected rate of paying to all its security holders to finance its assets (if any)?
Sales and Expenditure Forecast
Use my table sample below to show your forecast sales, revenue, and expenditures. Keep in mind that the forecast periods depends on the industry type as well it can be affected by a product seasonal / life cycle factors.
Create a similar table as mine to highlight your forecasts. I would advise doing it for at least a minimum of 6 months.
Estimation of Investment Attractiveness
Here is how your estimation table looks like:
- Payback period =
- Net present value =
- Internal rate of return =
This section will need to provide a transparent Financial Statement and clearly demonstrate the cash flow for your firm.
If you don’t have a Financial Statement or don’t know how to make one, WikiHow has a great guide.
This section should cover 5 points:
- Balance Sheet.
- Profit & Loss (P&L) statement.
- Statement of Changes in Equity.
- Cash Flow statement.
- Financial Statement Notes / Footnotes.
This section should include mainly tables with clear, straight point explanations.
This section will show the reader that you are skilled in crunching your business numbers in various Financial Ratios.
This helps potential investors judge the probable return on the investment – so make sure your data is plausible.
Most of my Business Plan clients prefer the following financial ratios to be calculated for their businesses:
Before meeting them, most investors will require you to present a set of specific ratios, so make sure you ask if they don’t mention this.
This is the last chapter of your Business Plan. Summarize what was discussed and end it on a nice note.
You are well prepared now. Hunt for some serious investors!
Recommendations – please read!
- Be honest will all the data you present. Don’t try to sugar coat it.
- I suggest writing your Executive Summary and Introduction of your Business Plan once Chapter 2-9 are finished. You will get great clarity and understanding of your business’s critical aspects, completing all the other critical sections of your plan. You’ll also avoid having to keep coming back to make additional changes.
- I pay extra attention to preparing a catchy Executive Summary and fluid Introduction. These are the places where the reader gets hooked (or not) by your business idea.
- Keep things clear and simple. Straight to the point, short sentences.
- If you use any academic citation, add a Biography section at the end of your Business Plan.
- Your Questionnaires, sample interviews, etc., should be part of your Business Plan’s APPENDIX, after your Biography section – if any.
- Your Business Plan is the “Bible” of your business. The Bible was not written in one day, so your Business Plan won’t be. Make sure you allocate enough time to build a strong case for your business.
I know this has been a long post. And if you read this, you probably have some questions or need help with your Business Plan. Why not leave a comment below? I can help!