If you've been dreaming of starting a business lately, you’re not alone: An August 2021 Northwestern Mutual survey found that the majority of Americans want to become their own boss/become an entrepreneur. After doing market research and making sure you’re financially prepared, you’ll need to create a business plan.
A business plan can act as a roadmap for any burgeoning entrepreneur to follow — but it's also a good reference manual for understanding the vision of your business and how it’s put together. You can use it to hold yourself accountable, and it can also be a tool that helps you attract investors or future employees.
If you're ready to get started, these eight steps will help you get off on the right foot. Here’s how to build a business plan.
STEP 1: CREATE YOUR COMPANY OVERVIEW
First, clearly describe your business so that anyone who picks up your plan can understand it. Potential investors will reference this section of your plan to better understand what it is you do and the value your business provides.
Second, define your market. Give a brief introduction to your industry, how your business fits into it and why you will stand out. What are your strengths and what type of customers are you trying to serve?
STEP 2: PROVIDE A MARKET ANALYSIS
Here you will provide an in-depth analysis of the industry in which your business operates, who your potential competitors are and what makes you stand out. You can use this section to showcase your knowledge and the research you’ve done to prove your competitiveness, and as a reference for yourself when making your marketing plans.
STEP 3: OUTLINE YOUR ORGANIZATION
You may currently be a team of one, but if you have employees or multiple owners, use this section to lay out the structure of workers and ownership. This is also a good place to share your vision for your future, such as hiring, outsourcing plans or whether you’re looking for a business partner.
You should also outline how your company is structured from a tax perspective. Is it a sole proprietorship, S corporation, C corporation or partnership? If you have co-shareholders or partners, list who they are and what role each one plays in the business.
STEP 4: DEFINE YOUR PRODUCTS AND SERVICES
Break down exactly what your products or services are and how much you expect to get paid for them. Cover your sourcing, research and development and fulfillment processes, and break down your production costs and overhead as well as your profit margin projections.
STEP 5: OUTLINE YOUR SALES AND MARKETING PLAN
Your marketing and sales plan needs to define exactly how you plan to get the word out about your products. Will it be through social media? Old-school advertising? Referral programs? You should also include your strategy for retaining customers and how you will actually execute a sale.
STEP 6: SHARE FINANCIAL PROJECTIONS
Putting together a financial forecast is not only essential for potential investors but it will also help you understand your business’s potential for success. If your business has barely launched, you will have to make income and budget projections based on market research. If your business has already been operating, you’ll have to include line items such as your profit-and-loss statement, balance sheet and cash flow. Be as realistic as possible when filling out the numbers.
STEP 7: END WITH THE APPENDIX
You’ll end with an appendix, which will include any relevant supplementary materials, from legal documents (licenses, permits or patents) to credit histories, graphics, footnotes and product pictures.
You can also personalize this section. For example, you may want to share why you are passionate about starting your business or give a shout-out to your co-owner.
STEP 8: COMPLETE YOUR EXECUTIVE SUMMARY
This will actually be the first section of your business plan, but you may find it easier to write after you’ve composed the bulk of your plan. That’s because the executive summary essentially recaps sections one through seven. In this nontechnical summary statement, you provide a mission statement, a brief explanation of your services or product line, why you are starting this business and basic details about your company’s team and location.
If you’re planning to ask for financing, include financial information and high-level growth plans. Keep this section brief but compelling. Think of it like the copy on the inside of a book jacket: You want to entice your target audience to read every chapter.