Write your business plan
Your business plan is the foundation of your business. Learn how to write a business plan quickly and efficiently with a business plan template.
- Business plans help you run your business
- Pick a business plan format that works for you
- Business plan tool
Business plans help you run your business
A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.
Pick a business plan format that works for you
There’s no right or wrong way to write a business plan. What’s important is that your plan meets your needs.
Most business plans fall into one of two common categories: traditional or lean startup.
Traditional business plans are more common, use a standard structure, and encourage you to go into detail in each section. They tend to require more work upfront and can be dozens of pages long.
Lean startup business plans are less common but still use a standard structure. They focus on summarizing only the most important points of the key elements of your plan. They can take as little as one hour to make and are typically only one page.
Traditional business plan
This type of plan is very detailed, takes more time to write, and is comprehensive. Lenders and investors commonly request this plan.
Lean startup plan
This type of plan is high-level focus, fast to write, and contains key elements only. Some lenders and investors may ask for more information.
Traditional business plan format
You might prefer a traditional business plan format if you’re very detail oriented, want a comprehensive plan, or plan to request financing from traditional sources.
When you write your business plan, you don’t have to stick to the exact business plan outline. Instead, use the sections that make the most sense for your business and your needs. Traditional business plans use some combination of these nine sections.
Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company’s leadership team, employees, and location. You should also include financial information and high-level growth plans if you plan to ask for financing.
Use your company description to provide detailed information about your company. Go into detail about the problems your business solves. Be specific, and list out the consumers, organization, or businesses your company plans to serve.
Explain the competitive advantages that will make your business a success. Are there experts on your team? Have you found the perfect location for your store? Your company description is the place to boast about your strengths.
You’ll need a good understanding of your industry outlook and target market. Competitive research will show you what other businesses are doing and what their strengths are. In your market research, look for trends and themes. What do successful competitors do? Why does it work? Can you do it better? Now’s the time to answer these questions.
Organization and management
Tell your reader how your company will be structured and who will run it.
Describe the legal structure of your business. State whether you have or intend to incorporate your business as a general or limited partnership, or if you’re a sole proprietor or LLC.
Use an organizational chart to lay out who’s in charge of what in your company. Show how each person’s unique experience will contribute to the success of your venture. Consider including resumes and CVs of key members of your team.
Service or product line
Describe what you sell or what service you offer. Explain how it benefits your customers and what the product lifecycle looks like. Share your plans for intellectual property, like copyright or patent filings. If you’re doing research and development for your service or product, explain it in detail.
Marketing and sales
There’s no single way to approach a marketing strategy. Your strategy should evolve and change to fit your unique needs.
Your goal in this section is to describe how you’ll attract and retain customers. You’ll also describe how a sale will actually happen. You’ll refer to this section later when you make financial projections, so make sure to thoroughly describe your complete marketing and sales strategies.
If you’re asking for funding, this is where you’ll outline your funding requirements. Your goal is to clearly explain how much funding you’ll need over the next five years and what you’ll use it for.
Specify whether you want debt or equity, the terms you’d like applied, and the length of time your request will cover. Give a detailed description of how you’ll use your funds. Specify if you need funds to buy equipment or materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future strategic financial plans, like paying off debt or selling your business.
Supplement your funding request with financial projections. Your goal is to convince the reader that your business is stable and will be a financial success.
If your business is already established, include income statements, balance sheets, and cash flow statements for the last three to five years. If you have other collateral you could put against a loan, make sure to list it now.
Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to clearly explain your projections, and match them to your funding requests.
This is a great place to use graphs and charts to tell the financial story of your business.
Calculate your startup costs
How much money will it take to start your small business? Calculate the startup costs for your small business so you can request funding, attract investors, and estimate when you’ll turn a profit.
- Calculate your business startup costs before you launch
- Identify your startup expenses
- Estimate how much your expenses will cost
- Add up your expenses for a full financial picture
- Use your startup cost calculations to get startup funding
Calculate your business startup costs before you launch
The key to a successful business is preparation. Before your business opens its doors, you’ll have bills to pay. Understanding your expenses will help you launch successfully.
Calculating startup costs helps you:
- Estimate profits
- Do a breakeven analysis
- Secure loans
- Attract investors
- Save money with tax deductions
Identify your startup expenses
Most businesses fall into one of three categories: brick-and-mortar businesses, online businesses, and service providers. You’ll face different startup expenses depending on your business type.
There are common startup costs you’re likely to have no matter what. Look through this list, and make sure to add any other expenses that are unique to your business.
- Office space
- Equipment and supplies
- Licenses and permits
- Lawyer and accountant
- Employee salaries
- Advertising and marketing
- Market research
- Printed marketing materials
- Making a website
Estimate how much your expenses will cost
Once you have your list of expenses, you can estimate how much they’ll actually cost. This process will be different for each expense you have.
Some expenses will have well-defined costs — permits and licenses tend to have clear, published costs. You might have to estimate other costs that are less certain, like employee salaries. Look online and talk directly to mentors, vendors, and service providers to see what similar companies pay for expenses.
Add up your expenses for a full financial picture
Once you’ve identified your business expenses and how much they’ll cost, you should organize your expenses into one-time expenses and monthly expenses.
One-time expenses are the initial costs needed to start the business. Buying major equipment, hiring a logo designer, and paying for permits, licenses, and fees are generally considered to be one-time expenses. You can typically deduct one-time expenses for tax purposes, which can save you money on the amount of taxes you’ll owe. Make sure to keep track of your expenses and talk to your accountant when it’s time to file your taxes.
Monthly expenses typically include things like salaries, rent, and utility bills. You’ll want to count at least one year of monthly expenses, but counting five years is ideal.
Add up your one-time and monthly expenses to get a good picture of how much capital you’ll need and when you’ll need it.
Use your startup cost calculations to get startup funding
It’s a good idea to create a formal report of your expected startup costs.
You want it in a format that’s clear and easy to understand. Investors and lenders compare expected costs to projected revenue and determine the potential for your business to profit.
Fund your business
It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business.
- Determine how much funding you’ll need
- Fund your business yourself with self-funding
- Get venture capital from investors
- Use crowdfunding to fund your business
- Get a small business loan
Determine how much funding you’ll need
Every business has different needs, and no financial solution is one size fits all. Your personal financial situation and vision for your business will shape the financial future of your business.
Once you know how much startup funding you’ll need, it’s time to figure out how you’ll get it.
Fund your business yourself with self-funding
Otherwise known as bootstrapping, self-funding lets you leverage your own financial resources to support your business. Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401k.
With self-funding, you retain complete control over the business but you also take on all the risk yourself. Be careful not to spend more than you can afford, and be especially careful if you choose to use tap into retirement accounts early. You might face expensive fees or penalties, or damage your ability to retire on time — so you should check with your plan’s administrator and a personal financial advisor first.
Get venture capital from investors
Investors can give you funding to start your business in the form of venture capital investments. Venture capital is normally offered in exchange for an ownership share and active role in the company.
Venture capital differs from traditional financing in a number of important ways. Venture capital typically:
- Focuses high-growth companies
- Invests capital in return for equity, rather than debt (it’s not a loan)
- Takes higher risks in exchange for potential higher returns
- Has a longer investment horizon than traditional financing
Almost all venture capitalists will, at a minimum, want a seat on the board of directors. So be prepared to give up some portion of both control and ownership of your company in exchange for funding.
How to get venture capital funding
There’s no guaranteed way to get venture capital, but the process generally follows a standard order of basic steps.
- Find an investor
Look for individual investors — sometimes called “angel investors” — or venture capital firms. Be sure to do enough background research to know if the investor is reputable and has experience working with startup companies.
- Share your business plan
The investor will review your business plan to make sure it meets their investing criteria. Most investment funds concentrate on an industry, geographic area, or stage of business development.
- Go through due diligence review
The investors will look at your company’s management team, market, products and services, corporate governance documents, and financial statements.
- Work out the terms
If they want to invest, the next step is to agree on a term sheet that describes the terms and conditions for the fund to make an investment.
Once you agree on a term sheet, you can get the investment! Once a venture fund has invested, it becomes actively involved in the company. Venture funds normally come in “rounds.” As the company meets milestones, further rounds of financing are made available, with adjustments in price as the company executes its plan.
Use crowdfunding to fund your business
Crowdfunding raises funds for a business from a large number of people, called crowdfunders. Crowdfunders aren’t technically investors, because they don’t receive a share of ownership in the business and don’t expect a financial return on their money.
Instead, crowdfunders expect to get a “gift” from your company as thanks for their contribution. Often, that gift is the product you plan to sell or other special perks, like meeting the business owner or getting their name in the credits. This makes crowdfunding a popular option for people who want to produce creative works (like a documentary), or a physical product (like a high-tech cooler).
Crowdfunding is also popular because it’s very low risk for business owners. Not only do you get to retain full control of your company, but if your plan fails, you’re typically under no obligation to repay your crowdfunders. Every crowdfunding platform is different, so make sure to read the fine print and understand your full financial and legal obligations.
Get a small business loan
If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan.
To increase your chances of securing a loan, you should have a business plan, expense sheet, and financial projections for the next five years. These tools will give you an idea of how much you’ll need to ask for, and will help the bank know they’re making a smart choice by giving you a loan.
Once you have your materials ready, contact banks and credit unions to request a loan. You’ll want to compare offers to get the best possible terms for your loan.