While informal business plans can be written in any format and in any order you like, a formal business plan that will be used to request funding for your small business should be written in a format that is familiar to the financial institutions, private investors and government agencies that will be reading it.
For the purpose of explaining how to write a business plan, this article provides an overview of the business plan sections included in a formal business plan as espoused by the U.S. Small Business Administration (SBA). Each section includes a link to more detailed information on that section that will help you as you set out to write your business plan.
Even if you are having someone else write your business plan, knowing what's expected in advance will help save you time and money in writing your business plan.
How to Write a Business Plan - Outline
- Executive Summary – A high-level overview of the document that is placed first in the finished document but that needs to be written last.
- Company Description - A high level look at how all of the different elements of your business fit together.
- Products or Services - Information on the products or services you plan to offer and how they compare to your competitors products or services.
- Market Analysis – A description of your market, your niche, and the demand for your product or service (supported by documentation). The percentage of market share you envision and conclusions of any marketing research data.
- Marketing and Sales Strategies – How you will promote your business, how you will get your product or service to your customers, the costs for distribution and promotion, and how you will measure the effectiveness of the methods you plan to use.
- Organization and Management – The legal structure of your business (sole proprietorship, LLC, C corporation, S corporation, etc.), who your key players are, who is responsible for what and how much they will cost your business.
- Financial Data – Your balance sheet, a breakeven analysis, an income statement and a statement of cash flows. You'll want to include both historical financial statements and forward-looking financial statements.
- Funding Request – This is the section when you'll be requesting funding for the business. If you are not seeking outside funds right now, you can leave this section out.
- Appendix – Contains supporting information, such as resumes, details of market research findings, estimates, and all other documentation required to support what's contained in the body of the business plan.
As you can see, this is, in large part, the information you should have gathered if you completed my 10 Steps Before You Start a Home Business. If you completed that exercise and collected some notes, you may already have a fair amount of information needed that you can plug in when you or someone else write your business plan.
What Happens Once I Write the Business Plan?
Your business plan is a valuable reference. Therefore, it needs to be a living document. Once you've learned how to write a business plan, keeping it updated should be easy.
As you operate and grow your business, it's nearly certain that you will make adjustments to how you do business, make decisions on which additional products or services to offer and/or which to discontinue, change how you market or distribute your products or services, and discover ways to improve how your business is run.
Keeping your business plan current offers some important benefits, such as:
- If you ever need to apply for additional funding through either SBA loan programs or other sources of private funding, up-to-date information will already be available. When it comes time to submitting updated business plans, you'll save time and money.
- It forces you to revisit the document, which helps keep you focused on what's important to the success of your business.
How Often Should I Update My Business Plan?You can either update your business plan on a schedule, such as quarterly or twice annually, or you can update it on a real-time basis – as changes occur.
Keeping business plans updated in real time may seem like a nuisance, but it's really ideal. It allows you to act quickly when you need funding or if you need to sell your business and it makes your business plan more useful as a road map because it keeps you on top of things at all times. And that's where you need to be to improve the chances that your home business will succeed and grow. Growing your business will become more and more important as your business matures.
Learning how to write a business plan can be a very valuable experience for you and your business. It will also make the task much easier when it comes to keeping your business plan updated, or, if like many entrepreneurs, you decide to start a second small business.
Participate in the Poll
Poll: Do You Have a Formal Business Plan?
- I have a formal business plan that I created
- I have a formal business plan created by others
- I don't have a formal business plan yet, but I'm working on one now
- I don't have a formal business plan yet, but I'll probably prepare one in the future
- I don't have a formal business and I don't plan to create one
Discuss Business Plans in the Forum
For those of you who would like to go into a bit more detail on how to write a business plan or voice your ideas, suggestions or frustrations with writing business plans, I welcome you to participate in the discussion on this topic in the Business Plans folder in the About Home Business Forum.
Next up in How to Write a Business Plan: Business Plan Example - Company Summary