How to write a business plan? A comprehensive guide

BusinessCategory
28 min read
Zoe Ashbridge

Launching a new business in the dynamic business ecosystem of Asia requires more than just a great idea - a business plan is in order.

So you’ve decided to start a new business. This is a time of great excitement — and you really need to get your ducks in a row in order to have the best chance for success. Enter your startup business plan, but where to begin if you’re writing a business plan for the first time? Many new business owners feel trepidation when even thinking about writing a business plan, probably because many have never written one.

Having a business plan will keep you accountable, focused and growth-oriented.

Your plan doesn’t have to be a long, drawn-out document filled with statistics and profit expectations. And your business plan will evolve when you start to gravitate toward or prioritize certain goals over others.

A comprehensive business plan is fundamental to charting a clear path to success. This blueprint serves as a roadmap, guiding entrepreneurs, and small business owners in establishing their startups, securing funding, and achieving their business goals.

In this article:

What is a business plan?

A business plan is a document that you use to strategize for your business’ future. The business plan includes an overview of your business, its goals and your marketing strategy. The document will also include financial forecasting.

Need help deciding on a business to start? Check out this list of small business ideas that are easy to launch  on a low budget. You might also consider other online business ideas that require minimal upfront investments.

Why do you need a business plan?

A business plan serves multiple purposes. You need a business plan to outline your business idea and goals, define your value proposition and the strategy to achieve them. Your business plan is also your first opportunity to create something tangible from your ideas, providing a detailed plan for your company's future. It gives a clear picture of your business model, financial projections, and market analysis. By putting ideas on paper, you’re giving yourself the opportunity to properly think through your plan and vet its likely effectiveness for business success.

Outside of your personal reasons for writing a business plan, you will need this document if you need to convince funders or investors that your business is legitimate and likely to return a profit. You would be expected to provide investors with a well-thought-out business plan demonstrating market awareness and financial planning. Moreover, it allows you to document your marketing strategy, competitive analysis, and sales strategies.

Your 5-step business plan checklist

1. Validate your idea

For startups, this is important! Your idea must first be checked, tested, and backed with data that proves your service or product is something that people will pay for.

Whiteboard validation brainstorm

As a quick and easy checklist, ask yourself these questions:

  • Does my service or product solve a problem?
  • Have people already tried my product or service?
  • Do they like it?
  • Are they willing to pay for it? How much?
  • Have I collected a list of potential customers who signed up for the product or service?

Answering yes to these questions may at least instil some confidence that your company or business will succeed. For more ideas and information, check out this step-by-step post on how to validate a business idea.

2. Estimate your monthly expenses

Part of planning your business is to determine your monthly cost of running it. For example:

  • How much will it cost to pay for licenses?
  • How much have you or will you invest into the business assets?
  • Will you need to hire workers or suppliers? If so, what are these costs likely to be?
Pen on data sheet

It pays to keep tabs on these things, especially if you’re going on your own as a business owner(s). Knowing how much it will cost to operate your business monthly will allow you to find out:

  1. How long can your business survive without any revenue?
  2. How much you’ll have to earn to sustain your business from then on?

The projected cost to operate your business with your current funds is typically called a burn rate. This should give you a target to focus on in your early months, preparing you for the worst (in case it does happen).

Editor’s note: Get annual cost estimates for a business website, domain and email from a GoDaddy Guide on Facebook Messenger now.

3. Write a simple operation plan

Hand holding pencil and notebook

Now that you’ve validated your start-up idea and have an idea how much your business will cost, the next step in our business plan checklist is to ask yourself what your day-to-day activities will be like.

An operations plan is where you codify the daily activities that will focus, accelerate, and maintain your business.

A business operations plan stems from your start-up idea.

For example, let’s say you are in a web hosting business. Then your “strategy” can look like this:

  • Set up new servers
  • Gain paying customers
  • Support those customers
  • Acquire new servers as needed
  • Maintain servers and optimize performance

Your day-to-day activities should be in support of the strategy:

  • Purchase and co-locate physical servers
  • Purchase / subscribe cloud services
  • Build a main web portal
  • Build and maintain a customer web portal
  • Maintain customer support teams
  • Put up new advertisements
  • Have sales teams process inbound and outbound calls

These items will make up your business’ daily operations and will also help determine what kind of roles you need to hire for.

This may affect your burn rate mentioned in #2. Go back there, adjust, and balance both your burn rate and your operations plan. This should at least keep your business steady in times of rough weather.

4. Figure out how you will get paid

Woman holding creditcard

Figuring out how will you get paid sounds like a no-brainer in starting a business. However, many business owners tend to leave this as an afterthought, with the mentality of “if I build it, they will come”.

But that’s not how it works. Once you have your product or service, figuring out how to enable and receive payments from your happy customers is paramount.

Have this one planned ahead and bake it into your products or services. You wouldn’t want to annoy your existing users (who are on a free tier, if you’re on beta) or potential customers with a messy way to process payments.

Making the payments experience as easy as possible improves the customer experience, making it more likely you’ll get referrals. Customer word-of-mouth is a powerful way to increase your sales.

Editor’s note: Do-it-yourself tools like GoDaddy’s Online Store take care of this part for you. Get paid online for products, services or even collect donations on your website via Square, Stripe or PayPal.

5. Do you know your customer?

Markets on paper drawing of light bulb

The final step in our business plan checklist is to identify your likely customer through research. Knowing who your target market is, or your buyer persona, will help you anticipate their wants and needs, thereby focusing your marketing and support efforts.

While you should be able to pinpoint who is likely to buy the product or service you are validating, remember your customers can evolve over time, as does your product.

Constantly monitoring your customers will help you keep your edge on the market. If your product or service is like everything else on the market, what differentiates you? This will be your “X” factor and will set your business apart in the sea of similar products and services.

A good example to think about is “Why do people prefer Coffee Bean and Tea Leaf (CBTL) products instead of Starbucks, where they are the same coffee and coffee shop?” A good hint is that: CBTL knows who their customers are, and they are able to cater their business service, products, design, and experience to that specific customer.

6. Have a disaster recovery plan

Notebook and glasses on table

Making a plan for what to do if disaster strikes is called a Disaster Recovery plan. These plans can guide you, your management, and your staff in times of duress.

At times of stress and failure, we all tend to freeze up. Having a written playbook helps in these situations. Examples of DR events include:

  • Fires (especially if the business is making firecrackers)
  • A security, data, or server failure (for businesses in the Information Technology industry)
  • Negative news coverage that affects sales
  • An accident that incapacitates top-level management (for most companies)

A prime example is that companies do not allow its C-level employees (such as the CEO, COO, and CTO) on the same flight, as the succession plan for replacing any one of those are their fellow C-level managers. This is part of Disaster Recovery, though a more proactive rather than a reactive approach.

Having a plan to recover your business is essential for you to survive. Making it and attaching it to your business plan is essential and should give you and your senior management peace of mind.

How to write a business plan?

If you’re ready to get stuck in and write your business plan, the next steps will greatly help. You want to be thorough at every step, especially if you’re sharing the plan with potential stakeholders. But remember, this is your business; your plan will be unique to you. Here's a step-by-step guide on how to write each section of your business plan:

1. Create an executive summary

Your executive summary is essentially your first impression to investors. This is a brief snapshot of your business plan.

In a few sentences, it needs to grab attention and explain what you/your business does. It wants to grab the reader's attention, so they’re compelled to read on. Your executive summary should include your mission statement, a summary of your product or service, company description, and basic information about your company's leadership team, employees, location, and legal structure, such as whether it's a sole proprietorship or a nonprofit.

2. Company description: Describe your company

Your business plan will include a description of your company and provide more details about your business. Think about your elevator pitch and write your company description into your plan. Be very clear here, think about what you do, who you do it for (target audience, customer segments), and exactly what problem you are solving.

You’re likely not the first person to create a company solving a particular problem for your audience, so try and detail what it is that makes your company stand out (competitive advantage).

3. Organization and management: introduce team members

Here, you'll detail your business's organizational structure. Include resumes of key team members and stakeholders, and clarify the ownership structure. If you have any particularly credible or expert team members, be sure to introduce them within your business plan. Write a short bio with key credentials and how they contribute to your new business.

4. State your company goals

Every business needs goals, and deciding exactly what yours are might not be so obvious. Yes, your company needs to make a profit, but the goals need to be broken down into more measurable and actionable steps.

Start with desired business goals. Then decide what you need to achieve to make each goal a success. For example, for your company to meet your projected revenue goal, then what do you need to achieve? What marketing goals does the business need to meet to satisfy business goals?

5. Detail values and a mission statement

Of course, your business is here to make money and provide the lifestyle that you want. When writing a business plan, it’s easy to get wrapped up in the data and the money, but your why is the lifeblood of your business.

Take some time to create a page that digs into the meaningful element of your business. What larger problem are you trying to solve? What values will you hold the business to? How will you create a truly meaningful layer within your business?

This section should be very useful for you as a business owner since this is what will keep you going. But, it can also be used to help onboard a team later and better understand your connection with your audience.

6. List products or services

When you write your business plan, you must include your products or services. Detail your products or services, the benefits they provide, and any intellectual property associated with them.

Within this section, write:

  • What the product or service is
  • How it helps your audience
  • How it stands out in the marketplace

For product-based businesses, include:

  • A brief introduction to costs (you’ll expand on this later)
  • Where products are sourced
  • Quantity of products owned

7. Do market research and analysis

Every business must conduct market research to identify your target market. You need to think about the local market and if you’re starting an online business, you must consider the digital market. You may have different competitors in each marketplace.

It’s crucial that you can develop comprehensive market research that shows a deep understanding of competitors and your place amongst them.

Your market research will help you determine if your business venture is justified and also act as support to your proposition which is especially useful when pitching to investors.

The market research section will help you see where the gaps are between your business and competitors, and it will form the beginning of your sales and marketing plan as you strategize to close the gap on leading competitors. This section should include a competitive analysis, showing how your business stands out from competitors, and an overview of your industry's outlook.

8. Create a marketing and sales plan

Explain your marketing plan, sales plan, and how you'll attract and retain customers. Your marketing and sales plan will generally be built from your competitor research. You can use competitive data to get a feel for what’s working. However, it’s important to remember that your brand and its audience are unique.

Also, when it comes to marketing, you are better off doing less better than trying to do more poorly, so you must factor in your budgets.

Your marketing plan should be in support of the business goals outlined previously, and have a clear goal and strategy to help achieve it. As a business owner, you are not necessarily expected to know the ins and outs of marketing, so if you need support here, you can get it. You may need to reach out to your marketing team or other professionals who can help you decipher what the business needs to succeed.

9. Create a financial projection and indicate your funding request:

When it comes down to it, finances determine a successful business from an unsuccessful one. If you're seeking funds, outline your current funding requirements, future funding needs over the next five years, how the funds will be used, and the type of funding you're seeking (debt or equity).

If you’re seeking investment, your financial forecast is everything. The one thing that investors need to know very clearly is the financial estimations and performance of your business over time. This section should convince investors that your business is stable and will be profitable. Include income statements, balance sheets, cash flow statements, and financial statements. If you're a startup, provide a sales forecast and loss statements.

In your projection, plan for:

  • Sales
  • Expenses including wages
  • Pricing of products and/or services
  • Contingency for unexpected finances

Related: Check out our detailed guides and discover what is the average cost to start a business. and how you can prepare financial projection for your business plan

10. Add an appendix

It’s not enough to simply write a business plan; every claim you make needs to be well-documented and supported. So, include an appendix.

This section is optional and used for any additional information, like product pictures, marketing materials, or more detailed studies. Your appendix is a compilation of supporting documentation and/or evidence. Items that might be included in the appendix include:

  • Resumes of key team members
  • Documentation supporting your market research and analysis. If your plan summarizes findings, include the marketing research and data here.
  • Legal documents, such as incorporation papers, patents, or trademarks
  • Marketing materials, such as brochures or flyers
  • Customer testimonials or case studies. New businesses might not have this, but if you have conducted research or focus groups, you can include findings here.
  • Product prototypes or lab tests if you have them
  • Any other relevant supporting documentation that was referenced in the main body of the plan.

Types of business plan format

There are three types of business plans, traditional, lean, and nonprofit. Whilst this article focuses primarily on the most common business plan format, the traditional plan, it helps to know what might be involved in other formats.

Traditional

The traditional format provides a detailed business overview and is useful for presenting to investors or lenders. In a traditional plan, you will likely write more than you would in a lean plan. Some businesses might opt for a traditional plan and then create a lean version for specific functions.

Lean

The lean business plan format is, as you would expect, a leaner (simplified) version of a traditional business plan. The lean business plan format includes the most critical aspects of the business. If you’re writing a lean business plan and you want to pitch to investors, then you must include key sections like market analysis, revenue forecasts, etc.

Nonprofit

The nonprofit business plan is similar to the traditional business plan, but naturally, it differs as it includes items that are required to run a nonprofit organization. For example, if you were writing a nonprofit business plan, you would likely include all elements of the traditional plan, plus fundraising and development, governance, and financials.

You may also have research from the local area you’re serving to help with that market analysis section. Your aim will be to prove that there’s a public need for your nonprofit.

There are also business plan templates for you to use.

Now, let’s talk about how you can determine the basic questions your plan should answer so you can put pen to paper.

The 5 W’s for writing your first business plan

As you write your first business plan, here is a set of questions designed to help you think through the basics of your business.

1. Who?

Writing A Business Plan Woman Sitting in Shopping Cart

Photo: Hanson Lu on Unsplash

We can assume that one of your primary business goals is to get people to buy what you’re selling.

Whether you’re selling a product or a service, on the other side of that transaction is a person who is going to hand you money.

But who is that person? Have you identified your ideal client or target market? Think about who your target customers are. Jot down some notes with all the information you have that can help identify who they are. Gender, income, location, habits — you get the idea.

If you don’t know what types of customers you want, you’ll have a hard time finding them.

Whether your goal is acquiring more clients and creating a team of employees under you, or working freelance until you save enough money to start developing courses, put it on paper.

Track your business activities and fees as your customer base grows

Now add a timeline to keep yourself on track. As you gain new clients, keep this timeline in mind and see if any distractions are preventing you from reaching your goals. Then use that new information to update your business plan.

Maybe you want to work with small startups who need your advice. If you work fast, you might prefer operating on a project rate instead of an hourly rate.

Define what a perfect client means to you and keep this in mind when you’re developing your income stream for your plan.

You might also want to write down ideas for how you’ll attract these clients (other than your website). Will you go out and hit the pavement? Or will you use social networking sites to find new customers? How about advertising, and where?

Then, add these details to the section that outlines the marketing agenda you will use to attract new business.

Going through this process when developing your business plan will also help when you’re looking for clients.

2. What?

Here is where you determine specifically what it is you are offering the market.

You want to be able to state in a clear and compelling way why your product or service is the solution the market needs and the benefits your product will provide.

Imagine you are at a party and you’re introduced to someone new. After exchanging names, you’ll likely be asked, “What do you do?” Do you have a good answer? That’s known as your elevator pitch — short, sweet and concise, so that anyone can understand.

If I were to tell people that I work with PHP, JavaScript and servers their eyes start to glaze over and they’d probably be sorry they asked. What if instead I answered, “I help small brick-and-mortar retailers establish themselves online by creating websites and training people how to use them.”

That’s a much better answer, don’t you agree? I’ve stated exactly who it is I serve, what service I offer, and how I go about it.

Determining income after the “what”

Once you determine your “what,” you’ll need to know how much money you can make.

Most of us would love to earn an unlimited amount of money, however, for our business plan we need to nail down some financial projections. The general rule of thumb is, if you want to earn just as much as you did before starting your own business, take your previous salary and add 25 percent to it to create what is called an “accrual goal.”

This buffer takes unexpected cyclical downturns into account so you’re not left scrounging for money when, for example, a big customer suddenly goes elsewhere. So, let’s say you made $40,000 a year. That’s your salary goal. Adding 25 percent to that would make a total of $50,000 a year, which is your accrual goal.

Now if you break that goal down into manageable targets, you need to earn $12,500 every quarter, or about $4,200 every month to meet that accrual goal.

If you’re just working to put food on the table every week, you might be surprised by how far your actual revenue is from your accrual salary.

Don’t let this just be a pipe dream — make it happen by adding realistic income projections to your business plan.

3. When?

I know from experience that the “fun” part of starting a business is the creative process of refining your idea and day-dreaming about the possibilities.

The hard part is when you have to work through the drudgery of filling out paperwork, researching vendors and doing those hundreds of little tasks you don’t want to do but need to do to get your business idea out of your head and into reality. Your business plan, for example.

That stuff can take the wind out of your sails and bring you to a dead halt.

How do you get past it? By setting realistic target and launch dates.

After launching, you can continue to refine and look to the next target date.

Put follow-up dates on your calendar to review how things are going and make any necessary adjustments.

4. Where?

Deciding where you’ll sell your products or services is pretty easy. There are two places you can sell: online and offline.

For both of those places, you have the additional options of selling: on your own property or someone else’s.

For example, you could sell from your own website (online, on your property) or you could sell on Etsy (online, on someone else’s property). Or you might sell from both.

The “where” is extremely important to think through for your expense calculations.

How and where you will offer your products or services will trigger a whole series of new decisions.

You’ll want to compare monthly fees, determine whether you need a credit card processor, estimate costs for your own website, and figure out who you need to talk to about business permits.

5. Why?

Owning and operating a business takes serious commitment.

There will be days you’re exhausted, days you’re frustrated, and days you’re stressed to the max. What makes you want to get out of bed on those mornings and go to work? That’s your “why.”

For example, are you running your freelance business like a serious business, or more like work you’re just doing for extra cash on the side?

There is nothing wrong with the latter, but that’s the mark of a hobbyist, not a business owner.

Successful businesses start out with a business plan.

Whether you’re a freelance developer, copywriter or just selling widgets, you know how to create a product that clients are willing to pay for. But that doesn’t guarantee that your business will be profitable.

Setting your vision with your “why”

Your why is that overarching factor that drives what you do.

It might be directly related to your products or services. Or maybe your products and services are just the means to an end.

“There are only two ways to influence human behavior: you can manipulate it or you can inspire it.” ~Simon Sinek

That quote is from Simon Sinek’s book “Start With Why” and the premise is that customers are attracted to WHY we do what we do, not WHAT we do.

TOMS shoes is a perfect example of this. Their “what” is selling shoes. Their “why” is to improve lives by helping people in need. That’s compelling and attractive.

Customers give them business because they believe in what they’re doing. When you know your why, you can attract customers that understand and believe in your why, too. If you’re using your website to pitch your product, you should already have an “about” page to describe your business to your potential customers.

Essentially, this is the vision you want customers to have of your products, services and skills. This is your why.

You need to answer some questions about your business and your “why” in order to set your vision. For example:

  • Do you want to keep a few clients and have free time to develop online courses?
  • Do you want to work nights and home-school your kids?
  • How long before you expand your offerings? Is there an end goal?

The answers to these types of questions will guide you in creating your first business plan.

Tips for writing a small business plan

Before you start writing your small business plan, read through these tips that might not be so obvious.

Use a business plan template.

Business plans are not new, so why not start with a tried and tested template? There’s plenty of space to turn the template into something unique that feels like yours. Using a template avoids overwhelm and provides structure. Check out this free business plan template you can download and customize in a cinch. A free business plan template can help to ensure you include all necessary information and maintain a professional structure.

Write for yourself, not just investors.

Your business plan is yours. Writing your business plan is your chance to organize your thoughts and get your ideas on paper. Upon completion, you should feel satisfied with your robust roadmap to success. Of course, consider your audience and investors and give them everything they need, but don’t forget to satisfy your own intent. Remember the business plan formats; you can always start with a traditional plan for you, then provide the investors with the lean version.

Demonstrate what makes you unique.

You’re likely joining a busy marketplace, and you want to go in ready to disrupt and stand out. Clearly articulate what sets your business apart from the competition, and explain why customers should choose your products or services.

Use concrete data and examples.

Your business plan is no longer your place to dream. Writing your plan takes dreams and helps you turn them into something tangible and achievable. Within the business plan, you should be able to support your ideas with concrete data and real-world examples. You need to prove to yourself - and investors - that this business is viable.

Be realistic in your projections.

As above, writing your business plan is about creating something achievable, You must be realistic with your projections. Whilst being optimistic is exciting — and you can still be optimistic — you must be realistic in your plan. Your financial information, market analysis, and sales forecast should be realistic. Unrealistic projections can lead to disappointment and mistrust from stakeholders.

Realistic projects are better for you mentally, too. If you’re more likely to achieve your goals, you’re less likely to get overwhelmed. Plus, goals that are not realistic will heap pressure on you and your team, and that’s the last thing a new business needs.

Keep it concise & use understandable language.

Your business plan should be clear and concise. Overly long or complicated plans can deter potential investors. Avoid jargon and use plain, understandable language to explain your business idea and plans.

Review and revise.

Regularly review and update your business plan to reflect your business's current situation and future goals.

Editor's Note: A business plan is just one part of the journey of starting a new business, for the entire step by step process check out our guide on how to start an online business.

Writing a business plan FAQ

Here are your most asked questions, answered.

How do I write a simple business plan?

You will write a simple business plan if you keep focused and aim to be thorough but concise. Aim to cover all important aspects and don’t over-plan. Focus on shorter time frames and be realistic about what can be done. Rely on research and data to help shape the plan.

Can I write a business plan myself?

Yes, you can write a business plan yourself. Business owners often write their business plans. That said, if your plan covers areas of business where you’re not so strong, you might need support. For example, you may seek professional help for certain sections, like the financial projections.

How long should a business plan be?

Your business plan will be as long as it needs to be, but the aim here is to create something thorough but concise. As a guide, aim for around 15 to 20 pages. However, the length can vary depending on the complexity of the business and the purpose of the plan.

How long should it take to write a business plan?

Writing your business plan will probably take a few days, but you’ll need to do a lot of research behind the scenes. You also need to step away from the plan, return and edit it to ensure it is accurate and void of errors. A business plan should take three months from beginning to end.

What if my business doesn't go according to the plan?

It's normal for businesses to deviate from their initial plans. Regularly review and adjust your business plan as necessary.

How often should I update my business plan?

It's a good practice to update your business plan annually or whenever significant changes occur in your business or the market.

Conclusion

Writing a business plan is an essential step for any entrepreneur or small business owner. It not only helps you validate your business idea but also allows you to identify potential challenges and opportunities. Remember, a well-crafted business plan serves as a roadmap, guiding your business towards its goals and milestones. Happy planning!

Editor's Note: This article includes content originally published on the GoDaddy blog by Carrie Dils, Judith Kallos and Alex Neri.