Have you ever wondered how to write a business plan step by step? Mike Andes, told us
This guide will help you write a business plan to impress investors.
Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 40 locations. He has gone on to help others learn how to write business plans and start businesses, so he knows a thing or two about writing business plans.
We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!
What Is a Business Plan?
A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including:
- Finding customers
- Plans for developing a team
- Legal structures
- Key milestones you are pursuing
Get a Business Idea
Need to start adding in some 3rd party valuable research links.
Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills.
Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:
- What am I good at?
- What would I enjoy doing?
- What can I get paid for?”
If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it.
As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”
If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video
Conduct Market Analysis
Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.
Product and Service Demand
A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.
With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services.
If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.
You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager, you could get a feel for who would be interested in your product or service.
I ran a quick test of how many people between 18-65 you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.
Identify Demographics of Target Market
Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:
- Other Interests
- Marital Status
- Do they have kids?
- Job title
Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map. He told us,
“It helps you quickly evaluate what the best areas are for your business to be located.”
Writing a Business Plan
Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as the following sections will follow the business plan template.
Each of the following should be a section of your business plan:
- Business Plan Cover Page
- Table of Contents
- Executive Summary
- Company Description
- Description of Products and Services
- Marketing Plan
- SWOT Analysis
- Competitor Data
- Competitive Analysis
- Marketing Expenses Strategy
- Pricing Strategy
- Distribution Channel Assessment
- Operational Plan
- Management and Organizational Strategy
- Financial Statements and/or Financial Projections
We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go.
Depending on how you are approaching investors, the first exposure to your business will be the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.
A good business plan should have the following elements on a cover page:
- Professionally designed logo
- Company name
- Mission or Vision Statement
- Contact Info
Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.
Table of Contents
I’m sure you’ve heard that when a hiring manager reviews a job application, they spend five seconds reviewing it to decide if they want to interview you. The truth is most people are busy enough that they don’t have a lot of time. Having a table of contents makes it easy for them to find the things that are meaningful to them.
A table of contents will normally go right after the cover page, but you could also do it right after the executive summary. Putting the table of contents after the executive summary will help investors know what section of your business plan they want to review more thoroughly.
Check out Canva’s article designing … table of contents. It has a ton of great information for how to make it easy to access a specific section of your business plan. Just remember that different techniques will work differently depending on whether your business plan is going to be digital or hard copy.
The executive summary is the part of the business plan used to get the reader interested. This shouldn’t be very long. It needs to be quick and easy to process.
Mike told us,
For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches. This can also be used for the content of emails to get readers’ attention.
It consists of three basic parts:
- An introduction to you and your business.
- What your business is about.
- A call to action
One of the elevator pitches I’ve used with much success for one of my clients is:
So far that pitch has had a 5/5 success rate in achieving partnerships for when they are ready to launch.
Writing a business plan is a crucial aspect of getting financing from a bank or venture capitalist. The owner of Urbanity told us he spent 2 months writing a 75-page business plan and got a $250,000 loan from the bank when he was 23. If you are looking for financing make sure to make your business plan as detailed as possible. We’ve provided this template to help you prepare the portions of a business plan banks will expect to see.
Here’s the interview with the owner of Urbanity:
Investors are going to need much more than that though. The executive summary when trying to secure a financing or equity deal should include the same parts in more detail. It’s basically an overview of your business plan. The executive summary should include:
- Introduction of yourself and company.
- An origin story (Recognition of a problem and how you came to solution)
- An introduction to your products or services.
- Your unique value proposition. Make sure to include intellectual property.
- Where you are in the business life cycle
- Request and why you need it.
Despite being near the front of a business plan, the summary should be the last part of the business plan that should be written as inputs from the other sections will be necessary. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.
The executive summary for a business plan should not get into the details of marketing and sales processes, financial statements, organizational structure, and market analysis. These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.
Every business plan should include a section that is basically a company description. A great business plan will include the following in the company description:
- Company mission statement
- Company philosophy and vision
- Company goals
- Target market
- Legal structure
Let’s take a look at each to see how they contribute to a good business plan.
A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. It should be informative but inspiring. For a great read on mission and vision statements, check out HubSpot’s article 27 Inspiring Mission Statement.
Company Philosophy and Vision
The company philosophy is what drives your company. These are commonly referred to as core values. They are the building blocks that make you different. Communicating these helps customers, business owners, and investors know the culture you intend to drive.
Each company should be different. A new business values should rise above the standard company lines of honesty, integrity, fun, innovation and community. The standard answers are corporate jargon and may be taken as lacking authenticity. If you aren’t honest, fun, or innovative, you’ll go out of business.
One of my clients recently decided to add a core values page to their website. As a tech company they emphasized the values:
- Prioritize communication.
- Never stop learning.
- Be transparent.
- Start small and Grow incrementally.
These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start.
Make sure you genuinely make your values show who you are. Customers recognize sincerity.
In addition to values, a vision statement also helps investors and customers understand what the company is trying to accomplish. The vision statement reaches further than a mission statement. It communicates a business is trying to achieve something meaningful to the community, customer’s lives, or even the world.
The Alzheimer’s Association is a great example of a vision statement:
A world without Alzheimer’s Disease and other dementia.
It clearly tells how they want to change the world. It may not be achievable, but that means they always have room for improvement.
A business plan is not meaningful if it does not include how the business measures success. A business plan can help guide a company like a road map to your favorite travel destination. If the only goal is how much money you make, that is not inspirational.
Sure business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals help everyone involved prioritize.
Business planning should be done at least one year in advance, but many banks and investors want 3-5 year business plans. This shows that the management team of the company understands the market and knows the business is operating in a constantly shifting market. Those who plan tend to be better at adjusting to changes because they have already thought about how to handle them.
An example of long term company goals is Tesla’s Master Plan, Part Deux. Written in 2016, these goals are based on a ten year period. They are the reason that investors and the market have been so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.
If the progress matches with the business plan, then investors are likely to continue to believe in the company. Make sure these are reasonable.
You did target market research before creating a business plan. Now it’s time to put the information into the plan so that others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so documentation is critical for any information you gathered.
The links I provide are all from well-known organizations because they are recognized as experts in their field. Make sure the references you use are from respectable sources.
When applying for funding, use any data that comes from the specific lenders industry research to strengthen the position of your business plan.
This section of a small business plan is focused on the external environment. We don’t plan a business in a vacuum. Understanding the industry is crucial. Research the industry trends, competitors, and forecasts.
What is the industry outlook long-term and short-term? How will your business take advantage of projected industry changes and trends? What might happen to your competitors and how will your business successfully compete?
Some helpful resources to help you establish more about your industry are:
There are five basic types of legal structures that most people will utilize: sole proprietorships, Limited Liability Corporations (LLC), Partnerships, Corporations. and Franchises. Each has their pros and cons. An LLC is the most commonly chosen type of legal structure due to its protection of personal assets and ease of setting up.
If there is more than one owner, make sure to specify how ownership is divided and what roles each plays.
You’ll have to decide which is best for you, but we’ve gathered information on each to make it easier.
A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.
Limited Liability Corporation (LLC)
An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.
Each state has different requirements. Here’s a link to find your state’s requirements. Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.
Partnerships and Corporations
Partnerships and corporations are typically for massive organizations or legal firms. Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations here.
There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.
Products and Services
This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:
- Unique features that differentiate your business products from competitors
- Intellectual property
- Your supply chain
- Cost and pricing structure
Mike gave us a list of the most important questions to answer about your product and services:
- How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
- How do you let them know they need a product?
- How do you communicate the message?
- How will you do transactions?
- How much will you be selling it for?
- How many do you think you’ll sell and why?
Make sure to use the worksheet on our business plan template.
Sales and Marketing Plan
The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer. It should contain the following sections:
- SWOT Analysis
- Competitor Data
- Competitive Analysis
- Marketing Expenses Strategy
- Pricing Strategy
- Distribution Channel Assessment
SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.
Business owners need to do a thorough job documenting how their service or product stacks up against the competition.
If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank.
Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.
Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:
- Adding offerings that fit with your current small business
- Increase sales to current customers
- Reducing costs through bulk ordering
- Finding ways to reduce inventory
- And other areas you can improve
Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.
The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing.
Include Competitor Data in Your Business Plan
When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.
For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website.
What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.
The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.
If you haven’t already included it, Mike recommends:
He adds, “They’ll want to know about Demographics, ages, and wealth of your target market.”
Make sure to include what he calls the “Total addressable market.” The term refers to the quantity of people who need the product in the area you’ll be working.
You’ll explain what formats of advertising you’ll be using. Some possibilities are:
- Online – Facebook and Google are the big names to work with here.
- Print – Print can be used to reach broad groups or targeted markets. Check out this for tips.
- Radio – iHeartMedia is one of the best ways to advertise on the radio
- Cable television – High priced, hard to measure ROI, but here’s an explanation of the process
You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.
Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”
Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines.
This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.
Some common pricing strategies are:
Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
Competition-based pricing- Pricing based on competitors’ pricing is commonly seen at gas stations.
Freemium services – Commonly used for software, where there is a free plan, then purchase options for more functionality.
HubSpot has a great calculator and blog on pricing strategies.
Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.
This part of a business plan is focused on how the product or service is going to go through the supply chain.
For instance, lawn care companies would need to cover aspects such as:
- Suppliers for lawn care equipment and tools
- Any chemicals or treatments needed
- Repair parts for sprinkler systems
- Vehicles to transport equipment and employees
- Insurance to protect the company vehicles and people.
These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:
- Raw materials
- Shipping of raw materials
- Converting of raw materials to thread
- Shipping thread to produce garments
- Garment producer
- Shipping to company
- Company storage
- Shipping to retail stores
There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.
The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.
According to BizPlanReview, a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.
Company Organization and Operational Plan
This part of the business plan is focused on how the business model will function while serving customers. The business plan should provide an overview of how the team will manage the following aspects:
- Quality Control
- Legal environment
Let’s look at each for some insight.
Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.
If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.
Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.
Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.
There are a variety of organizations that help define quality control including:
- International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
- AICPA – Standard defined for accounting.
- The Joint Commission – Healthcare
- ASHRAE – HVAC best practices
You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets. Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.
For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.
- The size of your location
- The type of building (retail, industrial, commercial, etc.)
- Zoning restrictions – Urban Wire has a good map on how zoning works in each state
- Accessibility – Does it meet ADA requirements?
- Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
- Utilities – b.e.f. has a good energy calculator.
The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:
- Any licenses and/or permits that are needed and whether you’ve obtained them
- Any trademarks, copyrights, or patents that you have or are in the process of applying for
- The insurance coverage your business requires and how much it costs
- Any environmental, health, or workplace regulations affecting your business
- Any special regulations affecting your industry
- Bonding requirements, if applicable
Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.
Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:
- What is the current leadership structure and what will it look like in the future?
- What types of employees will you have? Are there any licensing or educational requirements?
- How many employees will you need?
- Will you ever hire freelancers or independent contractors?
- What is each position’s job description?
- What is the pay structure (hourly, salaried, base plus commission, etc.)?
- How do you plan to find qualified employees and contractors?
One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:
Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.
Financial Statements and/or Financial Projections
No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.
An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.
You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.
If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:
- Higher Revenue if expanding business
- Lower Cost of Goods Sold if purchasing inventory with bulk discounts
- Adding interest if utilizing financing (not equity deal)
- Changes in expenses
- Addition of financing information to the cash flow statement
- Changes in Earnings per Share on the balance sheet
Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.
Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.
Writing A Startup Business Plan
Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.
Mike gave the following advice in his interview:
One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.
Let’s use custom t-shirts as an example.
Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.
With that data, you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.
Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.
Here’s a table for easier viewing of that information.
The point here is to make sure your business proposal examples make sense.
You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.
Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.
Business Plan Example of Funding
What is a business plan without a plan on how to obtain funding?
The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.
In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.
Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.
Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion. There are a variety of ways to cover this. the most common are:
- Bootstrapping – Using your savings without external funding.
- Taking out debt – loans, credit cards
- Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
- Crowdsourcing – Promising a good for funding to create the product
In all scenarios, the key is to write a request that includes:
- How much to get started?
- What is the minimum viable product and how soon can you make money?
- How will the money be spent?
Mike emphasized two aspects that should be included in every plan,
Sample Business Plan
Here are some links to a business plan sample and business plan outline.
It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:
- Wise Plans – Shares a lot of information on starting businesses and is a business plan writing company.
- Optimus Business Plans – Another business plan writing company.
- Venture Capital – A venture capital thread that can help give you ideas.
We hope this overview of how to write a simple business plan step by step has been helpful. We’ve covered:
- The definition of a business plan
- Coming up with a business idea
- Performing market research
- The critical components of a business plan
- An example business plan
In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.
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