President Dwight D. Eisenhower once said, “In preparing for battle I have always found that plans are useless, but planning is indispensable.” If you’re starting a business, you should have a business plan regardless of whether you’re bootstrapping it or looking for outside funding.
The best sorts of business plans tell a clear story of what the company plans to do and how it will do it. Given the high failure rate of startups in their first year, a business plan is also an ideal opportunity to safely test out the feasibility of a business and spot flaws, set aside unrealistic projections and identify and analyze the competition.
A business plan doesn’t need to be complicated, but for it to serve its purpose and set you up for success, it must be clear to whomever is reading your plan that you have a realistic handle on the why and how your business will be a success.
To get you moving in the right direction, here’s a guide on how to write a business plan.
There’s a lot of advice in the infosphere about how to write a business plan, but there’s no single correct way. Your approach depends on your industry, who is reading your plan and what the plan is intended for. Are you trying to get funding? Sara Sutton Fell, founder of FlexJobs, a job site for flexible telecommuting jobs, says her business plan was an initiator for more in-depth conversation with potential investors. “A plan does help to see if investors and entrepreneurs are on the same page with general expectations for the business,” she says.
A business plan serves many purposes, but there is universal consensus on the following when it comes to your business plan:
Have several versions tailored for specific audiences: “One of the mistakes that inexperienced business owners make is not understanding who they’re writing the plan for,” says David Ciccarelli, a small business owner who got consultation from his local Small Business Association (SBA) when he was starting his company Voices.com, which connects employers with voiceover talent.
Your plan is a living document: Tim Berry, the founder of a business planning software company Palo Alto Software, took his company from zero to $5 million in sales in its first three years. To do so requires frequent review and close tracking, says Berry, who met with his management team every month to review the plan versus what actually happened — and then to revise. “There is no virtue to sticking to a plan if it’s not useful and responsive to what actually happens,” he cautions.
Be realistic about financial estimates and projections: “When you present a plan to bankers and financiers, or even to your employees, people will get way more excited about what’s real rather than some huge thing that’s never going to happen,” says Ciccarelli. So present an achievable sales forecasts based on bottom-upwards information (i.e. how many units per month get sold in how many stores) and stop over projecting profits.
Writing your business plan is about the process and having a blueprint: Your business plan “reflects your ideas, intuitions, instincts and insights about your business and its future,” according to Write Your Business Plan (Entrepreneur, 2015). The plan serves as a safe way to test these out before you commit to a course of action. And once you get your business going, the plan also serves as a reference point. “I still print the document,” says Ciccarelli. “You’re capturing it in time. If you’re changing it all the time, you kind of don’t remember where you were last year.”
Back up any claims: Follow up your projections and assertions with statistics, facts or quotes from a knowledgeable source to lend your plan credibility.
Presentation counts: Reading any long, text-heavy document is hard on the eyes, so format with this in mind. Consider formatting your text pages into two-columns and break up long passages with charts or graphs. Arial, Verdana or Times New Roman are standard industry fonts.
Writing your business plan isn’t busy work or a luxury; it’s a vital part of the process of starting a business and arms you with information you need to know. So, let’s get into what information goes into your business plan.