How to Write a Business Plan (A Good One)

When you think of a hard-charging entrepreneur, you might picture a woman or man walking briskly to a meeting with a head full of dreams and a business plan tucked under one arm. The dreams are the easy part — coming up with a business idea that you really believe in. But the business plan is the hard part — mapping out on paper what your business will do and how it will succeed.

For that reason, many entrepreneurs agonize over how to write a business plan — a good one. They want to bring their vision to life in a way that others find compelling. But what are the steps? What are the components? What’s important and what’s not?

I’ve been through the process of launching businesses multiple times, which has given me the opportunity to create a business plan multiple times. Based on my experience, here’s a look at the purpose behind a business plan, plus best practices for creating one.

What is the Purpose of a Business Plan?

Business plans are tools that can be deployed in various ways. But, when you look closely, you’ll discover that there are only 2 simple purposes for a business plan:

1. To design a way to grow and run your business, and
2. To obtain financing

Business success doesn’t happen by accident. You need a roadmap for how your company will navigate toward its goal. And you create that roadmap knowing that you’ll need to take detours and make unexpected stops that you could never participate at the outset of your journey. Your business plan serves as that roadmap.

And business success is also impossible without financing. Some entrepreneurs can self-finance their projects, but the vast majority of us are left to seek investors. The business plan serves as a tool for winning the support of those investors.

Keep in mind that your business plan is dynamic. You can update it and tweak your roadmap based on new information, fresh decisions, changes in the market environment, etc. Just make sure it’s always updated enough for reference as a roadmap and for sharing with prospective investors.

The 10 Components of a Business Plan

You can find business plans of all shapes and sizes. There’s no single way to create one, but they tend to follow the same general outline. Here are the 10 components that I find most important — the ones that are essential for serving the 2 purposes of a business plan:

1. Executive Summary

This is your opening statement, and it might be the first and only thing that a prospective investor reads. Spend this time making your vision come to life. Convey your passion. Sway your reader.

The executive summary shouldn’t be longer than a page or 2, so every word matters. Use this space to describe your business in detail, why you chose to pursue this type of business, why you feel like there’s great opportunity in this industry, etc. You can also reference later sections in your business plan. After all, the goal is to keep your readers moving forward and exploring more of your plan.

2. Mission, Vision, Values

Every business has a higher purpose, something that goes beyond the pursuit of money. Use this section to describe your company’s higher purpose. Your mission explains how your company can (and will) make the lives of its customers better. Your vision statement is a description of where you think your company is headed in pursuit of its mission. And your values are the anchoring qualities that will keep your company focused and aligned to its mission as it grows.

For example, Warby Parker’s mission statement is “to offer designer eyewear at a revolutionary price, leading the way for socially conscious businesses.” At its founding, Microsoft’s vision statement was “a computer on every desk and in every home.” At Bumble, the values that guide the company are kindness, growth, respect, accountability, courage, equality, inclusion.

Yours will be different, naturally, but use the examples above as inspiration when you consider your own mission, vision and values.

3. Goals and Objectives

Goals and objectives are prominent when you’re working on how to write a business plan. The 2 are sometimes used interchangeably. While they do work hand in hand, there’s actually a concrete difference between them.

Goals are vision-based statements.

Objectives are specific, measurable and deadline driven.

Any business goal may have several objectives beneath it. The objectives work to bring the business goal to life.

For example, you may have the goal of becoming the industry leader in customer support. Objectives tied to that goal over a year might include an average wait time of 1 minute or less in online chat, a net promoter score (NPS) of 50 or higher, and reaching a specific number of new customers coming via referral from existing customers.

4. Target Market and Customer Profile

You must know who you’re selling to. You should know the customer profiles within your target market, you should know the challenges and frustrations that will lead them to your product or service, and you should have confirmation that they can and will pay a certain price. Understanding your target market and the problems they face will help you better connect them with your product or service.

5. Product and Service Description

There’s a reason why target market and customer profile come first on this list. Spend No. 4 describing your target market, their aforementioned challenges and frustrations. And then use the next step to make it crystal clear how your product or service will directly help customers overcome those challenges and frustrations. One flows directly into the next.

To use just one of the examples from above, Warby Parker was founded for a very simple reason: eyeglasses were way too expensive. A lost or broken pair of eyeglasses meant that someone would have to pay a large sum out of pocket or squint their way through life for a while. Those were the challenges and frustrations. And Warby Parker’s affordable, stylish eyeglasses provided a direct solution.

6. Competitive Analysis

You’ll likely be entering a competitive environment with other companies offering similar products or services. List out the companies you’ll be directly competing with. Estimate what portion of the total available market that each serves. And then estimate how much of that total available market you’ll need to acquire in order to be successful.

Dig deep into each of your competitors. Consider their strengths and weaknesses, the services and features they offer, as well as the services and features they don’t offer. You are searching for opportunities in this step — opportunities to move into the same market and to become the obvious choice for the product or service you’re offering.

7. Market Strategy and Sales Process

Use the competitive analysis in No. 6 above to inform your market strategy and sales process. It’s not enough to launch your website or fling open your doors. You need to actively acquire customers and then sell them on your product or service.

Your market strategy might include digital marketing, advertising, paid media, partnerships, referrals, content, social media and other channels.

Your sales process might include outbound calls, inbound representatives, sales collateral, trial periods, volume discounts and more.

No 2 businesses will have the same exact market strategy and sales process. Create systems that connect your target market with your products and services — the ones that will help customers overcome their challenges and frustrations. Do this effectively, and you’ll find that you have a pipeline that’s full and overflowing.

8. Revenue and Expense Projections

You won’t be profitable on Day 1. You may not even be profitable in Year 1. But you need to map out when you think you’ll be profitable, as well as the steps you’ll take to get there.

Break down how much your business will spend on operating expenses month by month and year by year as it gets started. Be as detailed as possible, outlining how much will be spent on product development, marketing, sales, support, general operations, etc.

And then break down how much your business will bring in via revenue month by month and year by year. What you spend on operations should drive more customers in the door and more revenue over time. At some point, the amount of revenue you bring in will exceed expenses. Congratulations! You’ve reached profitability. In your business plan, you’ll want ambitious-but-realistic projections that demonstrate exactly when you’ll reach profitability.

9. Operating Plans

It’s easy to get lost in the day-in, day-out rhythm of running a business. But it’s important that your operating plans are designed for execution — and that each day is pushing you toward your ultimate goals.

In this portion of your business plan, describe your team and how it will grow over time. If you already have team members with impressive resumes in place, mention them by name and share about their relevant experience. Describe your various departments/groups plus the reporting structure, and emphasize how all of it will help your business grow.

10. Business Development and Growth Schedule

Investors want to know how you will acquire new customers and how the business will grow over time. End with a description of your business development plans and, again, an ambitious-but-realistic growth schedule. If you’re too ambitious, potential investors will think you don’t know the business or industry well enough. If you’re too realistic, you won’t be able to emphasize that your company represents an opportunity that’s worth investing in.

3 Final Tips for Your Business Plan

Outside of the 10 components listed above, there are just 3 other business plan-related pieces of advice I would offer:

1. Outsource Key Components: Hire a quality writer to complete your business plan. A good writer will make the plan much easier to digest. And hire a financial expert to work on your projections. Your plan will convey a lot more excitement and energy when you bring in professionals to help with these key tasks.
2. Get Lots of Feedback: Share your business plan broadly, and make sure to invite feedback. Get opinions, welcome questions, collect ideas. This feedback will help you make the second draft of your business plan much better.
3. Keep Your Plan With You: I always keep my plan with me. It gives me an opportunity to speak to people in real-time (rather than promising to send them a copy of my plan). And it also allows me to collect as much feedback as possible.

If you have questions on how to write a business plan that aren’t answered above, I’m always glad to help. Get in touch to let me know about your business planning process, or even to send a copy of your initial draft. I love learning about new businesses and meeting new entrepreneurs.