What exactly is a business plan? A business plan is more than a document. It is a guide that helps you outline and achieve your goals. It’s also a management tool that allows you to analyze results, make strategic decisions, and show how your business will work and grow.
In short, if you’re thinking of starting a business or planning to pitch your business to investors, writing a business plan can improve your chances of success.
Writing a business plan doesn’t have to be complicated – it’s just tedious and time-consuming. In this comprehensive guide, we’ll show you how to write a business plan yourself that will get the results you want. Don’t worry, you don’t have to have a degree in business administration or accounting to write a good business plan. This guide will show you step by step how to create your plan without complexity and frustration.
Already started on your business plan and still looking for the right tips to polish it? Then we have just the thing for you: Namely, 6 tips on how to write a perfect business plan
“Can’t I just start up and run my business?” – that’s what we often hear from our clients. But unfortunately, it’s not quite that simple to build a successful business. If you start your company without planning, you will miss out on some important benefits that a business plan offers.
A business plan helps you to tackle the following entrepreneurial and strategic tasks:
Writing a business plan is about building a foundation for your business. You are not predicting the future, but rather working out the core strategy of your business that will help you stay the course for growth. This initial document is not meant to be perfect, but to be constantly reviewed and adjusted to guide you in identifying and achieving your goals.
Without a business plan as a foundation, it is much more difficult to track your progress, make adjustments, and have appropriate information to fall back on when making difficult decisions. In addition, creating a business plan ensures that you have something of an entrepreneurial road map that shows not only where you want to go, but also where you’ve already been.
Investors and lenders need to know that you have a solid idea of how to grow your business. You need to prove that there is an achievable and sustainable need for your solution, that you have a strong business strategy, and that your company can be financially stable. This means you need to have the right financial statements, projections, and a well-understood explanation of your business model ready for potential investors.
Writing your business plan helps you put all these pieces together and make connections between them to tell a cohesive story about your business.
It’s not uncommon for the biggest decisions to have to be made during volatile periods of growth or even difficult times of crisis. This requires you to make momentous decisions often much faster than you might like. Without up-to-date planning and forecasting information, these decisions can’t be as safe or strategic as they need to be.
If you have a business plan that you review regularly, you can make informed decisions. You’ll have all the information you need to know when to hire new employees, launch a new product line, or make a major purchase. At the same time, you can also plan ahead in case a decision doesn’t turn out as expected, minimizing your potential risk.
Still unsure if a business plan is worth it or not? In addition to this compact guide, we’ve compiled 21 reasons for a business plan that are sure to convince you.
Self-written business plans require an intensive examination of all levels of your planned business. However, if written correctly, they are by no means less promising than professional plans. From marketing to transportation logistics to financing, there is a lot to consider. To make sure you don’t forget any details when writing your own business plan, we have compiled a list of all chapters and a subsequent description of the key contents of each chapter.
Company and Management Overview
Probably the most convenient and fastest way to start a business is to have the business plan written by a professional business consultant. We at Unternehmenswerk stand closely by your side to work out a successful business concept together with you.
Consulting services are in many cases subsidized by the federal government. In the case of consulting by an accredited management consultant, you will receive a subsidy for your company. Thus, with professional business consulting from us, you will only have a very small personal contribution. Do you need help with financing or with the preparation of a professional business plan? Contact us – one of our professional consultants will be happy to help you.
The Executive Summary is an overview of your company and your plans. It comes first in your plan and is ideally only one to two pages long. Ideally, the Executive Summary can function as a stand-alone document that covers the highlights of your detailed business plan. In fact, it’s very common for investors to ask only for the executive summary when they evaluate your company. If they like what they see in the executive summary, they will often request a full plan and more detailed financials.
This executive summary is the first and most important chapter of your business plan. For this very reason, it is advisable to write it at the very end. Only after you have defined the details of your business in detail is it worth writing a concise summary of it. Make sure that the executive summary is short, concise and appealing to investors. The following aspects must be included in the executive summary:
Include at the top of the page, just below the company name, an overview sentence that essentially describes what your company does. This sentence is also known as a value proposition. It can be worded like a tagline or slogan. However, it usually lends itself to describing in more detail exactly what your company specializes in.
In one or two sentences, summarize the problem you solve in the marketplace. Every company solves a problem for its customers and fills a need in the market.
How do you address the problem you identified in the market? Describe how the product or service offered addresses the previously defined shortfall.
Who is your target market or your ideal customer or their ideal customer? How many people are there who would find your product appealing or use your service? At this point, it’s important to be specific and honest.
If you have a shoe company, don’t target everyone just because everyone has feet. You’re most likely targeting a specific market segment, such as “style-conscious men” or “runners.” This makes it much easier for you to target your marketing and sales efforts and attract the kind of customers who are most likely to buy from you.
Every business faces some form of competition and it’s important to provide an overview of your potential competitors in your summary. Are there alternatives or substitutes in the marketplace? How do other companies solve the market problem you describe and what differentiates your product or service from the rest?
Give a brief overview of your team and a brief explanation of why you and your staff are the right people to bring the idea to market.
Investors place enormous weight on the team – even more than the idea – because even a great idea needs great execution to become a reality.
Highlight the most important aspects of your financial plan, ideally with a chart showing your projected sales, expenses, and profitability.
If you’re writing a business plan to get a bank loan or ask venture capitalists for funding, you’ll need to include in the summary how much money you’ll need for your venture. Note: Don’t bother including the terms of any potential investment, as these will be negotiated together later.
The last core element of your executive summary is a description of the progress you’ve made so far in implementing your idea and the milestones you want to achieve in the future. Make bold but realistic predictions for the future and demonstrate foresight. What progress will your startup make in the future, what (own) momentum will it develop? If there are already interested parties for your service or even buyers for your product, you should definitely emphasize this.
Tip: Are you writing an internal business plan that is simply a strategic guide for you and your team? Then you can skip details about the management team, funding needs, and growth projections. Instead, focus on describing the strategic direction of your business.
This chapter is the real heart of your plan. It includes information about the problem you’re solving, your proposed solution, who you plan to sell to, and how your product or service fits into the existing competitive landscape.
In this section of your business plan, you also show how your solution is different from your competitors’ solutions. In other words, you define your unique selling proposition and describe how you intend to enrich the existing market.
The readers of your business plan will already have a rough idea of your business concept because they have read your executive summary. However, this chapter is enormously important because it expands your initial overview, provides details, and anticipates potential questions:
Again, begin the opportunity chapter with a description of the problem you are solving for your clients. If you can’t accurately state the problem your potential customers have, then you may not have a viable business concept. So defining the problem is the most critical element of your business plan.
To make sure you’re solving a real problem for your potential customers, you should first get away from the computer and start having actual conversations with potential customers. What is the primary shortcoming for them? Maybe all the existing solutions are expensive, cumbersome, or far away? If potential customers confirm the deficit you suspect, the next step is to present your potential solution
Your solution is the product or service you want to offer your customers. Describe the service you offer and how it addresses the shortcoming.
For some products and services, you may want to describe use cases or tell the story of users who are already benefiting from (and willing to pay for) your solution.
In this section, you pursue the question: who do I want to sell to? Depending on the type of business you’re starting and the type of plan you’re writing, you may not need to go into too much detail here. But in any case, you need to know who your buyers are and roughly estimate how many of them there are. If there aren’t enough customers for your product or service, that could be a warning sign.
A comprehensive market analysis requires a lot of research. First, identify your market segments and determine how large each segment is. A market segment is a group of people (or other businesses) that you could potentially sell to. Once you’ve defined your target market segments, it’s time to define your ideal customer for each segment. This is best done by creating a fictional buyer (called an avatar, a buyer or user persona) to whom you assign a name, gender, income level, likes, dislikes, and so on. These buyer personas, tailored to the different segments, are a good tool to calculate the marketing and sales tactics you need to use to attract these – for you – ideal customers.
In addition to customer analysis, a comprehensive market analysis also includes an assessment of the competition.
Not every company has direct competitors, i.e. competitors who offer a similar solution to the problem. However, every company faces indirect competition. Therefore, one of the biggest mistakes in your business plan is to claim that you have no competitors. A company that is trying to fill the same deficit in the market is part of your indirect competition, even if its approach to solving the problem is completely different from yours.
In this part of your business plan, describe who else offers solutions and what your competitive advantages are over the competition. Describe in detail how your solution differs from other offerings on the market and what advantages it offers. Investors will want to know how it differentiates you from your competition.
All entrepreneurs have a vision of where they want to take the company when they are successful. It is admittedly very tempting to spend a lot of time exploring future possibilities for new products and services. You shouldn’t expand too much on these visions in your business plan, however, because they are just dreams of the future and may not come to pass. One or two paragraphs about possible expansion scenarios are enough to show investors where you want to go in the long run. However, your main focus should always be on your first products and services.
Now that you’ve completed the chapter on opportunities for your business, it’s time to move on to the concrete execution of your plans. This section is about operations, your marketing and sales plans, how you will measure your success and what milestones you want to achieve.
This paragraph describes how you plan to sell to your target markets, what your pricing plans are, and what promotional efforts and partnerships you will need to establish your product or service.
The marketing plan must be preceded by a market analysis. Without having defined potential buyers (buyer personas) and their corresponding preferences in advance, a marketing plan will have little value.
The marketing and sales plan is roughly composed of the following four areas:
Positioning is how you will try to present your business to your customers. Do you offer a low-cost solution, shine with sustainability, or are you a high-end luxury brand?
Don’t worry about your positioning statement having to be very long or in-depth. You just need to explain where your company stands in the competitive landscape and what the core value proposition is that differentiates your company from the alternatives.
Price sends a very strong message to consumers and can be an important tool in communicating your strategic positioning to consumers. If you offer a high-value product, an upscale price will quickly communicate that message to consumers. Still, you need to price in line with consumer demand and expectations. A price that is too high will discourage customers. A price that is too low can cause customers to undervalue your offer.
You can use different models when setting prices:
Covering your costs: As a rule, companies charge their customers more than it costs them to deliver the product or service.
In this model, you take the cost of your product and add a markup (cost + markup). This can be effective if covering initial costs is critical to your business.
If you are offering a physical product, the packaging of that product is critical. It should be consistent with your positioning strategy and communicate your value proposition. You can also include images of the packaging in your business plan.
Your business plan should include an outline of the types of advertising you plan to spend money on. Will you advertise online or use traditional, offline media? Remember, be sure to measure how much your promotions cost and how many sales they bring in. Advertising programs that aren’t profitable are hard to sustain over time.
Popular promotional strategies you should detail at this point:
Strategic Partnerships: A partnership can give your company access to a target market segment while allowing your partner to offer a new product or service to their customers.
In the operational paragraph, you show how your business works. This is where you deal with logistics, order processing, technology, and other odds and ends. Depending on the type of business you are starting, this part can be shorter. Remember to describe only what is necessary.
If your company sells products that it buys from other suppliers, this is where you specify where the products come from, how they are delivered and processed, and how they get to the end customer after processing.
If you use a specific technique to manufacture your product or if your service is based on special machines and technologies that may not be available to your competitors, you can describe this here. Special features in logistics and order processing can also be mentioned here if they are particularly innovative or efficient.
For product companies, a sales plan is an important part of the complete business plan. Service businesses can skip this section in most cases.
Distribution is how you will get your product to the customer. Every industry has different distribution channels. The easiest way to find out which distribution model is right for your business is to ask others in your industry.
Here are a few common sales models you can consider for your business:
Most companies use a mix of distribution channels. So you don’t have to limit yourself to just one channel.
Finally, in the business plan you should list the key assumptions you have made to ensure the success of your business.
A good tactic for making projections is to think about risks. What risks are you taking with your business? For example, if you have no proven demand for a new product, hypothetically assume that people need your product and determine an estimated percentage of buyers. If you rely on online advertising as a major advertising channel, forecast the cost of that advertising and the percentage of ad viewers who will actually make a purchase.
Once you’ve made your assumptions, the next step is to set out to prove them. The more validly you can test your assumption, the more likely it is that your business will be successful.
This chapter discusses the structure of your company and introduces the key team members. These details are especially important for investors, as they want to know who is behind the company and will help turn your idea into a lucrative business.
This is where you introduce the team for turning your idea into reality. Go into the reasons that led you to assemble this team and how the different positions act together. This section should show that you have thought about the important roles and responsibilities your company needs to grow and succeed.
Include brief biographies that highlight the relevant experiences of each key team member. What’s your background? Do you have the right industry experience? Have members of the team had previous entrepreneurial success?
A common mistake that happens when describing the management team is to give each member of the team a C-level title (CEO, CMO, COO, etc.). This is often not realistic. In contrast, it is better to consider the future growth of titles and prove room for future growth and change.
The company overview is the shortest section of your business plan. For a plan that you will only share internally with your business partners and team members, skip this section.
For a complete business plan that you will share with people outside your company, this section should include the following items:
At the end of your business plan, you present your financial plan. A typical financial plan includes monthly revenue and income projections for the first 12 months and then annual projections for the remaining three to five years. Annual projections for three years are usually sufficient, but some investors also require a five-year time frame.
This part is occasionally seen as intimidating by entrepreneurs precisely because this deals with such a sensitive topic as money. But it doesn’t have to be. For most startups, financial planning is less complicated than you might think, and you don’t need to have a business degree to do it.
If you still need help, feel free to contact the professionals at Unternehmenswerk. We have the necessary experience to perform a professional and confidential financial analysis of your company
Your sales forecast is a prediction of how much you will sell in the next few years. It is usually broken down into several lines, with one line for each core product or service you offer. Don’t make the mistake of breaking down your sales forecast to the smallest detail. Just focus on higher-level areas at this point.
For example, if you’re forecasting sales for a restaurant, you might break your forecast into the following groups: Lunch, Dinner, and Beverages. If you’re a product company, you could break your forecast down by target market segment or by product category.
The first line of your sales forecast breaks down projected sales, and the second breaks down the number of expected customers. Each sales line also has a corresponding line listing the direct costs of goods sold. Direct costs include all costs associated with producing your product or providing your service. For a restaurant, for example, this would be the cost of ingredients (cost of goods sold). For a product company, it would be the cost of raw materials (also called cost of goods sold). For a consulting business, it could be the cost of paper and other presentation materials, etc. Regular business costs such as rent, insurance or salaries do not count as direct costs.
Your staffing plan indicates how much you plan to pay your employees. For a small business, you can list every position and salary in the staffing plan. For a larger company, the staffing plan is typically broken down into functional groups such as “marketing,” “sales,” “IT,” “operations,” “interns,” etc.
In addition, the staffing plan includes what is typically referred to as “employee burden,” which is the cost of employees beyond salary. This includes payroll taxes, insurance, and other necessary costs you incur each month when you have employees on your payroll.
In the income statement, you show whether you are making a profit or a loss on your business. To do this, you combine all the data from your sales forecast and your staffing plan and add current expenses such as rent, electricity and insurance. In the bottom line you subtract your expenses from your income and show the investors that your company makes a profit every month. Especially in the early days of your business, losses are perfectly realistic. Don’t be afraid to list these and document the gradual growth of your business over the following years.
If you take money from investors, for example a loan from your house bank or you depend on a start-up grant from the employment office, the liquidity of your company is immensely important.
The cash flow statement is often confused with the income statement, but these areas have very different functions. While the income statement calculates your profits and losses, the cash flow statement tracks how much cash (money in the bank) you have at any given time. The key to understanding this difference, is understanding the difference between cash and profits: If you need to send an invoice to your customers and it takes your customer 30 or 60 days to pay that invoice, you won’t have the capital from the sale immediately available. Nevertheless, you will already record the sale as a profit in your income statement. So in the cash flow statement you list only actual capital that has already been booked.
The balance sheet provides an overview of the financial health of your business. It lists the assets in your business, the liabilities, and your equity (owners’ equity). If you subtract the liabilities of the business from the assets, you can determine the net worth of the business.
The last item you may want to include in your financial plan is a section on your exit strategy. If you plan to keep your business indefinitely and are not seeking venture funding, you can omit this section.
An exit strategy is your plan for selling your business later, either to another company or to the public in an IPO. If you have investors, they will want to know your thoughts on this. After all, your investors want to get a return on their investment, and they’ll only get that if the company is sold to someone else.
Again, you don’t have to go into great detail, but you should identify some companies that might be interested in buying your company if you are successful.
A business plan is the perfect tool to validate your ideas, coordinate your resources, set goals, and successfully present your business to the outside world. Its clear structure and well-defined chapters, make it a well manageable and easy to create document. However, its content requires some prior business knowledge, solid planning and realistic future projections. To really make sure you haven’t forgotten anything, take a look at our business plan checklist for founders.