How to Write a Business Plan, Step by Step

Thinking about starting a business of your own? Good. Taking a chance is usually less frightening once you have done the homework, and a business plan is that homework. It makes you think through the good and the bad of a new venture before you put your savings into it, and it gives lenders, landlords and partners a reason to say yes.

Many people who want to start something of their own skip this step. That is a mistake. A business plan does not need to be long, but it does need to answer the questions every serious reader asks: what you sell, who buys it, how you will reach them, what it costs and how you will make money. Here is how to write one, section by section.

Before you start: pick the right kind of plan

There are three common formats. Choose based on who will read it.

• One-page plan or lean canvas. Best for testing an idea or planning a side business. Try our one-page business plan or lean canvas.
• Simple plan (5 to 10 pages). Good for small local businesses and microloans. See the simple business plan template.
• Traditional plan (15 to 30 pages). Expected by banks, SBA lenders and many investors. Start with the startup business plan template or a sample plan for your industry.

Step 1: Describe your company

Explain what the business is, where it is located, its legal structure (sole proprietorship, LLC, corporation or partnership) and why you chose that structure. Add a one-sentence mission statement and the values the business will be built on. If you are already operating, include a short history.

Step 2: Explain your products and services

Describe what you will sell, what it costs you to deliver and what you will charge. Focus on the benefit to the customer, not just the features. What makes your offer better, faster, cheaper or more convenient than what people use today? Our pricing calculator helps you set prices from your real costs.

Step 3: Research your market

No matter how good your product is, the business will not work without enough customers. Describe your target customer in detail and estimate how many of them exist in the area you can serve. Use census data, local economic development reports, trade association research and your own surveys. The market analysis template walks you through sizing the market with TAM, SAM and SOM.

Step 4: Size up the competition

List the businesses customers would choose if you did not exist, including indirect alternatives. Compare price, quality, service, location and online reviews. Then explain why customers will choose you. A competitive analysis matrix and a SWOT analysis make this section easy to read.

Step 5: Write your marketing and sales plan

Explain how customers will find you and why they will buy. Cover your positioning, the channels you will use (search, social media, referrals, partnerships, direct sales), your budget and what you expect each channel to produce. Include your promotion plan for the launch. The marketing plan template includes a channel budget and quarterly calendar.

Step 6: Describe your operations

Show how the business works day to day: location and why it suits you, equipment, suppliers, production or service process, inventory, hours, and the licenses, permits, patents or trademarks you need. If you will sell on credit, explain your credit terms. Readers want to know you have thought through the practical details. See the operations plan template.

Step 7: Introduce your team

List the owners and managers, their experience and their roles, along with advisors such as an accountant or attorney. Explain how many employees you will need and when you will hire them. For small businesses, the owner's experience is often the most persuasive part of the plan.

Step 8: Build your financial projections

This is the section readers check most closely. A complete financial plan usually includes:

• Startup costs, everything you must spend before opening. Use the startup costs calculator.
• Sales forecast, based on realistic assumptions about customers and pricing. Try the sales forecast template.
• Projected profit and loss for three years. See the P&L template and the 3-year projections template.
• Cash flow forecast, month by month for the first year. Use the cash flow forecast.
• Balance sheet, what the business owns and owes. See the balance sheet template.
• Break-even analysis, the sales needed to cover your costs. Use the break-even template.

Explain the assumptions behind every number. Readers are more forgiving of a modest forecast with clear reasoning than an impressive one with no support.

Step 9: Make your funding request

If you are raising money, say how much you need, what kind of funding (loan, investment or grant), how you will use it and how it will be repaid or how investors will earn a return. Banks will want to know how much of your own money you are investing and what collateral you can offer. Our bank loan business plan template is organized around what lenders check, and the loan payment calculator shows what the payments will be.

Step 10: Write the executive summary last

The executive summary goes first in the plan, but you should write it last. In one or two pages, summarize the business, the opportunity, your advantage, the team, key financial numbers and the funding request. Many readers decide whether to keep reading based on this page alone. Use the executive summary template.

Tips to keep in mind

• Keep it simple. Short sentences and plain language beat jargon every time.
• Do not overthink it. A finished plan you can improve beats a perfect plan you never finish.
• Show your edge. Be specific about how you will beat the competition.
• Protect your cash flow. Plan how you will cover slow months.
• Set monthly goals. Turn the plan into targets you can check every month.

Prefer to answer questions instead of starting from a blank page? Use our free business plan builder, which walks you through each section and downloads a finished Word document.

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