Defining your audience helps you determine the language you’ll need to propose your ideas as well as the depth to which you need to go to help readers conduct due diligence. Show
Now, let’s dive into the 10 key elements of your business plan. 1. Create an executive summaryEven though it appears first in the plan, write your executive summary last so you can condense essential ideas from the other nine sections. For now, leave it as a placeholder. What is an executive summary?The executive summary lays out all the vital information about your business within a relatively short space. An executive summary is typically one page or less. It’s a high-level look at everything and summarizes the other sections of your plan. In short, it’s an overview of your business. How do I write an executive summary?Below, you’ll find an example from a fictional business, Laura’s Landscapers. (We’ll use that same company throughout this guide and within the downloadable template to make each step practical and easy to replicate.) This executive summary focuses on what’s often called the value proposition or unique selling point: an extended motto aimed at customers, investors, and employees. You can follow a straightforward “problem, solution” format, or a fill-in-the-blanks framework:
This framework isn’t meant to be rigid, but instead to serve as a jumping-off point. Example of an executive summaryMarket research indicates that an increasing number of wealthy consumers in Richmond are interested in landscape architecture based on sustainable design. However, high-end firms in the area are scarce. Currently, only two exist—neither of which focus on eco-friendly planning nor are certified by green organizations. Laura’s Landscapers provides a premium, sustainable service for customers with disposable incomes, large yards, and a love of nature. 2. Compose your company descriptionWithin a business plan, your company description contains three elements:
These elements give context to the bigger picture in your business plan, letting investors know the purpose behind your company so the goals make sense as well. What is a mission statement?A mission statement is your business’s reason for existing. It’s more than what you do or what you sell, it’s about why exactly you do what you do. Effective mission statements should be:
Throughout every part of your plan, less is more. Nowhere is that truer than your mission statement. Think about what motivates you, what causes and experiences led you to start the business, the problems you solve, the wider social issues you care about, and more. Tip: Review your mission statement often to make sure it matches your company’s purpose as it evolves. A statement that doesn’t fit your core values or what you actually do can undermine your marketing efforts and credibility. How do you describe a company’s history?Don’t worry about making your company history a dense narrative. Instead, write it like you would a profile:
Then, translate that list into a few short paragraphs (like the example below). Why do business objectives matter?Business objectives give you clear goals to focus on, like the North Star. These goals must be SMART, which stands for:
They must also be tied to key results. When your objectives aren’t clearly defined, it’s hard for employees and team members to work toward a common purpose. What’s worse, fuzzy goals won’t inspire confidence from investors, nor will they have a profitable impact on your business. Example of a company descriptionLaura’s Landscapers’ mission is to change the face of our city through sustainable landscaping and help you create the outdoor living space of your dreams. Founded in 2021 by sisters Laura and Raquel Smith, we have over 25 years of combined landscape architecture experience. Our four employees work in teams of two and have already completed 10 projects for some of Richmond’s most influential business and community leaders. Our objectives over the next three years are to:
3. Summarize market research and potentialThe next step is to outline your ideal potential customer as well as the actual and potential size of your market. Target markets—also known as personas—identify demographic information like:
By getting specific, you’ll illustrate expertise and generate confidence. If your target market is too broad, it can be a red flag for investors.
The same is true with your market analysis when you estimate its size and monetary value. In addition to big numbers that encompass the total market, drill down into your business’s addressable market—meaning, local numbers or numbers that apply the grand total to your specific segments. You may even map your customer’s journey to get a better understanding of their wants and needs. Example of market research and potentialLaura’s Landscapers’ ideal customer is a wealthy baby boomer, a member of Gen X, or a millennial between the ages of 35 and 65 with a high disposable income. He or she—though primarily, she—is a homeowner. They’re a working professional or have recently retired. In love with the outdoors, they want to enjoy the beauty and serenity of nature in their own backyard, but don’t have the time or skill to do it for themselves. Market research shows the opportunity for Laura’s Landscapers has never been better:
In Richmond, leading indicators for interest in green, eco-friendly, and sustainable landscaping have all increased exponentially over the last five years:
4. Conduct competitive analysisCompetitive research begins with identifying other companies that currently sell in the market you’re looking to enter. The idea of carving out enough time to learn about every potential competitor you have may sound overwhelming, but it can be extremely useful. Answer these additional questions after you’ve identified your most significant competitors:
Spend some time thinking about what sets you apart. If your idea is truly novel, be prepared to explain the customer pain points you see your business solving. If your business doesn’t have any direct competition, research other companies that provide a similar product or service. Next, create a table or spreadsheet listing your competitors to include in your plan, often referred to as a competitor analysis table. Example of competitive analysisWithin Richmond’s residential landscaping market, there are only two high-end architectural competitors: (1) Yukie’s Yards and (2) Dante’s Landscape Design. All other businesses focus solely on either industrial projects or residential maintenance. Yukie’s Yards
Dante’s Landscape Design
5. Describe your product or serviceThis section describes the benefits, production process, and life cycle of your products or services, and how what your business offers is better than your competitors. When describing benefits, focus on:
For the production process, answer how you:
Within the product life cycle portion, map elements like:
Example of product or service descriptionLaura’s Landscapers’ service—our competitive advantage—is differentiated by three core features. First, throughout their careers, Laura and Raquel Smith have worked at and with Richmond’s three leading industrial landscaping firms. This gives us unique access to the residents who are most likely to use our service. Second, we’re the only firm certified green by the Richmond Homeowners Association, the National Preservation Society, and Business Leaders for Greener Richmond. Third, of our 10 completed projects, seven have rated us a 5 out of 5 on Google My Business and our price points for those projects place us in a healthy middle ground between our two other competitors.
6. Develop a marketing and sales strategyYour marketing strategy or marketing plan can be the difference between selling so much that growth explodes or getting no business at all. Growth strategies are a critical part of your business plan. You should briefly reiterate topics such as your:
Then, add your:
You can also use this section of your business plan to reinforce your strengths and what differentiates you from the competition. Be sure to show what you’ve already done, what you plan to do given your existing resources, and what results you expect from your efforts. Example of marketing and sales strategyLaura’s Landscapers’ marketing and sales strategy will leverage, in order of importance:
Reputation is the number one purchase influencer in high-end landscape design. As such, channels 1-4 will continue to be our top priority. Our social media strategy will involve YouTube videos of the design process as well as multiple Instagram accounts and Pinterest boards showcasing professional photography. Lastly, our direct mail campaigns will send carbon-neutral, glossy brochures to houses in wealthy neighborhoods. 7. Compile your business financialsIf you’re just starting out, your business may not yet have financial data, financial statements, or comprehensive reporting. However, you’ll still need to prepare a budget and a financial plan. If your company has been around for a while and you’re seeking investors, be sure to include:
Other figures that can be included are:
Ideally, you should provide at least three years’ worth of reporting. Make sure your figures are accurate and don’t provide any profit or loss projections before carefully going over your past statements for justification. Avoid underestimating business costsCosts, profit margins, and sale prices are closely linked, and many business owners set sale prices without accounting for all costs. New business owners are particularly at risk for this mistake. The cost of your product or service must include all of your costs, including overhead. If it doesn’t, you can’t determine a sale price to generate the profit level you desire. Underestimating costs can catch you off guard and eat away at your business over time.
Example of business financialsGiven the high degree of specificity required to accurately represent your business’s financials, rather than create a fictional line item example for Laura’s Landscapers, we suggest using one of our free Excel templates and entering your own data:
Once you’ve completed either one, then create a big picture representation to include here as well as in your objectives in step two. In the case of Laura’s Landscapers, this big picture would involve steadily increasing the number of annual projects and cost per project to offset lower margins: Current revenue for FY2022: $200,000
FY2022 projections: $360,000
FY2023 projections: $552,000
FY2024 projections: $972,000
8. Describe your organization and managementYour business is only as good as the team that runs it. Identify your team members and explain why they can either turn your business idea into a reality or continue to grow it. Highlight expertise and qualifications throughout—this section of your business plan should show off your management team superstars. You should also note:
To make informed business decisions, you may need to budget for a bookkeeper, a CPA, and an attorney. CPAs can help you review your monthly accounting transactions and prepare your annual tax return. An attorney can help with client agreements, investor contracts (like shareholder agreements), and with any legal disputes that may arise. Ask your business contacts for referrals (and their fees), and be sure to include those costs in your business plan. Example of organization and managementLaura Smith, Co-founder and CEO
Raquel Smith, Co-founder and Chief Design Officer
Laura’s Landscapers’ creative crews
9. Explain your funding requestWhen outlining how much money your small business needs, try to be as realistic as possible. You can provide a range of numbers if you don’t want to pinpoint an exact number. However, include a best-case scenario and a worst-case scenario. Since a new business doesn’t have a track record of generating profits, it’s likely that you’ll sell equity to raise capital in the early years of operation. Equity means ownership—when you sell equity to raise capital, you are selling a portion of your company.
Most small business equity sales are private transactions. The investor may also expect to be paid a dividend, which is a share of company profits, and they’ll want to know how they can sell their ownership interest. Additionally, you can raise capital by borrowing money, but you’ll have to repay creditors both the principal amount borrowed and the interest on the debt. If you look at the capital structure of any large company, you’ll see that most firms issue both equity and debt. When drafting your business plan, decide if you’re willing to accept the trade-off of giving up total control and profits before you sell equity in your business.
The founder can access cash by contributing their own money into the business by securing a line of credit (LOC) at a bank or applying for QuickBooks Capital. If you raise cash through a LOC or some other type of loan, it needs to be paid off ASAP to reduce the interest cost on debt. Example of a funding requestLaura’s Landscapers has already purchased all necessary permits, software, and equipment to serve our existing customers. Once scaled to $972,000 in annual revenue—over the next three years and at a 10% profit margin—our primary ongoing annual expenses (not including taxes) will total $874,800. While already profitable, we are requesting $100,000 in the form of either a business loan or in exchange for equity to purchase equipment necessary to outfit two additional creative crews. 10. Compile an appendix for official documentsFinally, assemble a well-organized appendix for anything and everything readers will need to supplement the information in your plan. Consider any info that:
Useful details to cover in an appendix include:
Your appendix should be a living section of the business plan, whether the plan is a document for internal reference only or an external call for investors.
How to make a business plan that stands outInvestors have little patience for poorly written documents. You want your business plan to be as attractive and readable as possible.
3 tips to update your business planIt’s a good idea to periodically revisit your business plan, especially if you are looking to expand. Conducting new research and updating your plan could also provide answers when you hit difficult questions. Mid-year is a good time to refocus and revise your original plans because it gives you the opportunity to refocus any goals for the second half of the year. Below are three ways to update your plan. 1. Refocus your productivityWhen you wrote your original business plan, you likely identified your specific business and personal goals. Take some time now to assess if you’ve hit your targets.
If you only want to work a set number of hours per week, you must identify the products and services that deliver the returns you need to make that a reality. Doing so helps you refocus your productivity on the most lucrative profit streams. Also, use what you’ve achieved and the hard lessons you’ve learned to help you re-evaluate what is and isn’t working. 2. Realign with your goalsDo a gut check to determine whether all of your hard work is still aligned with your original goals and your mission statement. Ask yourself these questions:
These questions may be tough to answer at first glance, but they reveal your ties to your goals and what most likely needs to change to achieve new wins. 3. Repurpose your offeringsIf your time has become more focused on small projects rather than tangible growth and building a valuable client list, consider packaging your existing products or services differently. Can you bundle a few things together?
You must deliberately manage your revenue streams, and that might require shuffling things around a little to focus on what is working for you. Business plan templateEven if you don’t plan on seeking investments early on, there are other important reasons to use a business plan template to write a great business plan:
Download the following template to build your business plan from the ground up, considering all the important questions that will help your investors and employees. What is a written narrative typically 25 to 35 pages long that describes what business wants to accomplish? Is a written narrative, typically 25 to 35 pages long, that describes what a new business plans to accomplish.
What is a business plan used for?A business plan is a written tool about your business that projects 3-5 years ahead and outlines the path your business intends to take to make money and grow revenue. Think of it as a living project for your business, and not as a one-time document.
Why is a business plan called a dual purpose document?The Business Plan is a dual-purpose document. It is important, since it is both an internal document and a selling document. The plan helps the company to develop a “road map” to follow in executing its strategies and plans.
What section is generally viewed as the most important section of the business plan?Executive summary
The executive summary is the first and one of the most critical parts of a business plan. This summary provides an overview of the business plan as a whole and highlights what the business plan will cover.
|