How to write a Business Plan (Step by Step)

This article will walk you through each step in completing a traditional business plan, from the executive summary to the financial projections.

Overview

Traditional business plans typically adhere to the following format:

Executive Summary
Company Description and Elevator Pitch
SWOT Analysis
Breakdown of Goals and Objectives
Breakdown of Products and Services
Market Research and Competitive Analysis
Leadership and Key Personnel
Marketing & Sales Plan
Operations Plan
Financial Analysis and Projections

Scroll to the next section to begin piecing together your business plan.

Executive Summary

The executive summary comes first in the document, but is the last step you should complete. This is because it summarizes all the sections after it. When writing the executive summary, think of it as if you needed to convey all the key information contained in your plan to a busy CEO who only can only spare 2 minutes to skim through it. You want everything in this section to be clear and concise. Don’t beat around the bush, just get straight to the point and don’t use a bunch of words. This is not the section to try to showcase your writing skills.

Company Description & Elevator Pitch

In this section you’ll describe your company in detail and state your elevator pitch.

An elevator pitch is a brief verbal description of your company and your value proposition. Think of it as if you were literally on an elevator with someone, how would you get them to understand what you do and why it’s important in 60 seconds or less? A good rule of thumb for elevator pitches is to keep them between 20-100 words. Less is more when it comes to an elevator pitch, as the goal is simply to spark interest and get a second conversation, not to make a sale or land an investment right there on the spot. Some examples of good elevator pitches are:

Most tourists booking online care about price, and hotels are one of the highest costs for when traveling. On the other hand, platforms like Couchsurfing have proven that over half a million people are willing to lend their couches or spare bedrooms. We have created a platform that connects travelers with locals, letting them rent our rooms, or even entire places. Travelers save money, and locals can monetize their empty rooms- we just take a 10% commission.
Rick’s Bridal sells high-end wedding gowns and accessories to brides in New York City. For twenty years, Rick’s has served over 25,000 satisfied brides through our six locations.
Merchant Machine helps small businesses quickly and easily save money on their credit card processing costs by comparing the leading options in the market. It’s completely free to the end user, there are no obligations and takes just one minute to do.

Once you’ve nailed your elevator pitch, you should be able to complete the rest of your company description fairly easily. Just list your business name, briefly describe what you do (you will go into greater detail about your products and services later), and throw in your mission statement if you have one.

SWOT Analysis

I like to knock this part out early in the plan, as the results from your SWOT analysis can provide valuable insight and have an impact on other sections, particularly your goals and objectives.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and a SWOT analysis is exactly what it sounds like. SWOT analysis is usually done using a matrix style worksheet. See the image below for reference.

You can use a template to type your SWOT analysis up or you can simply use a piece of scratch paper and a pen. The important thing is getting it done. For strengths and weaknesses you’ll want to focus on internal items. Things that are unique to you, such as competitive pricing or exclusive patents, that are not influenced by external factors. For opportunities and threats, you’ll want to look outwards and consider both external and environmental factors.

Once you’ve feel you’ve completed a decent SWOT analysis, go ahead and add it to your business plan, either as subsections with bullet points, or simply copy and paste your worksheet as an image if you’ve typed it up.

Feel free to download and use our template below:

Goals and objectives

In this section you’ll outline the various goals and objectives you hope to achieve. The SWOT analysis should help you in completing this section.

Use the SMART method for determining your goals, SMART goals are:

Specific. Make sure your goals are specific and not too vague.
Measurable. Arguably the most important part. Goals mean nothing if you can’t regularly track your progress.
Achievable and Realistic. A goal of $5M in sales during your first year sounds nice, but is most likely not achievable or realistic. Maybe start with $50K
Time-bound. A good business plan will have different goals for different time periods. You should have monthly, quarterly, 1-year goals, and 5-year goals.

Once you’ve worked out some solid goals, go ahead and add them to your business plan.

Breakdown of products and services

In this section you’ll describe the various products and services you sell, including product descriptions, price, cost, etc. You’ll also want to describe any future products/services you plan to launch to the best of your ability.

This part is pretty straightforward. If your business sells a lot of different SKUs then you can just list general information about each product.

Once this is done, you can move on to the next step.

Market Research and Competitive Analysis

This is arguably the most difficult and time consuming section of the business plan. Market research refers to gathering information about the size and trends of the market your business operates in. For businesses like e-commerce businesses that aren’t confined to a specific local area, this might mean the size of the “widget” market for the entire country, which is fairly easy to determine. For local businesses on the other hand, like a local handyman or painter, this is going to be more difficult, as data isn’t always readily available for smaller markets like a single city.

There is a standard method to conducting market research which involves desk work (googling), quantitative (surveys) and qualitative research (1 on 1 interviews), however, most small businesses don’t have the time or the funds to conduct in-depth market research. For the sake of your business plan, just spending a little time googling and reading published reports should give you a good enough idea of the size and trends of your market.

Competitive analysis is basically spying on your competition. Your goal in this section is to figure out everything you can about your closest competitors. You want to know everything from their prices to their intake and onboarding procedures, to their strategic partnerships, their leadership and key personnel, the number of employees they have on payroll and how much they pay, their annual revenue (if you can find it), etc.

For this section, you can have a little fun. Give someone you know a couple dollars to be a secret shopper for you. Have a friend call their phone number as a prospective customer and document it. Do some scouting on their website and see if you notice anything that pops out as a strength or a weakness.

Once you’ve done a fair amount of digging into your competitors, you’ll want to start to try to carve out a unique competitive advantage. Your competitive advantage is whatever gives you a leg up on your competition, and you’ll need one if you hope to break into any market. For example, our competitive advantage over LegalZoom for LLC formation is our pricing strategy.

Once you’ve got the research done and you’ve figured out what gives you a competitive advantage in your market, go ahead and add this information to your business plan.

Leadership and key personnel

This is another fairly straightforward section. You’re just listing the key players on your team, along with their skill sets and plans for further development.

For most new businesses this will be a very short section, as there may only be one or two key players involved. That’s okay! Once you’ve listed the key players on your team, move on to the next section.

Marketing and sales plan

In this section you’ll describe in-detail your desired brand positioning along with the various marketing and promotion tactics you’ll use.

Some things to consider:

Brand image
Products, services, and prices
Promotional methods
Place/distribution methods
Social media strategy
Customer value maximization
Marketing partnerships and joint ventures

Operations plan

This section is going to depend heavily on your business goals and objectives. The key here is to identify the major projects that need to be completed in order for your business to advance towards its goals, then, break those goals up into smaller actionable steps. A Gantt chart is helpful for this section and should be included in your business plan.

Some things to consider:

Opportunities listed in your SWOT analysis
Goals and objectives that can be accomplished within the next 12 months
Leadership development opportunities highlighted in your key personnel section
Marketing & promotional objectives outlined in your marketing plan

You’ll want to start with the broad objectives and then break them down into smaller steps. For example, the objective “Increase social media presence” can be broken down into the following steps:

Create social media pages
Hire a social media manager
Post 10 times per month on each platform, etc.

Once you have your broad objectives broken down a bit, try to break down the individual steps into even smaller baby steps. For example, step 2 on the list above can be broken down further into:

Define job description and compensation for new position
Post ad on indeed
Conduct interviews, etc.

Once you’ve broken down all your key objectives into step by step processes, you can begin to develop timelines for these tasks, which you will then plot on your Gantt chart.

Once finished, you’ll have something that looks like this:

This might look confusing if you’ve never worked with Gantt charts before, but I recommend doing a bit of research on how they work and how to use them as they are highly effective project management tools. The basic idea behind the Gantt chart is that it gives you a high level overview, at glance, of all the various projects you have in motion at any given time, broken down by their individual steps. In the sample chart above they have the chart broken down by phases. Each color coded box on the timeline represents an individual step in the process of a specific phase in their overall plan.

In your case, you’ll replace “phases” with your key objectives, and when you plot the steps you’ve broken down for each key objective according to their respective timelines, you’ll be able to see from a birds-eye view exactly how each step factors into the bigger picture, as well as where you’re currently at in the midst of things.

Another strength of using a Gantt chart to map out your operations plan is that it allows for easy delegation across teams. Instead of trying to assign a broad and complex task like “developing a new product” to one of your team members, you can map out the individual steps in that process and then assign them on a granular level. And if you’re using project management software, your entire team will always be on the same page knowing exactly what’s in progress, what’s been completed, and what still needs to be done.

Financial Projections

If you’ve made it this far, congratulations! This has been a very long article. Fortunately, we’re almost done here. The last step (before going back to complete your executive summary) is to provide some financial projections.

There are multiple ways you could go about completing your financial projections. My preferred method is to create a 3 statement model in excel, but you could also project your income statement, balance sheet, and cash flow statement separately, or if you’re just doing this for yourself and aren’t looking to get funding, you could even skip the balance sheet and cash flow statement and just do a basic P&L forecast. For the sake of this article, we’re going to go with the latter, as explaining how to project all three financial statements would be an entire article by itself. I’m also not going to explain how to format a P&L in excel, as this article assumes you are familiar enough with the basic financial statements to accomplish this on your own. If not, that’s okay, but you’ll want to stop here and brush up on those subjects a bit before circling back to this section.

The key to calculating accurate projections is to ensure that your projections are based on accurate assumptions, the most important of which being your revenue and COGS assumptions. Your top line revenue is essentially what drives a large portion of your other projections, so it is absolutely crucial you get this one right. The tricky part is that new businesses don’t have any historical data that they can reflect on to get an idea of what future revenues will look like, and growth rates for new businesses are often extremely volatile during the first few years.

Entrepreneurs starting brand new businesses will want to take a bottom up approach by looking directly at your products and services and reasonably estimating the sales you’ll be able to achieve for each product/service over the forecast period.

Once you’ve gotten a good idea of what your top line revenue is going to look like for the next year. You’ll want to move on to COGS. COGS is a variable cost that increases relative to your revenue, so in order to estimate your COGS you’ll want to follow the same method and use the same assumptions you used for your revenue.

After estimated revenue and COGS figures have been calculated, you’ll want to begin projecting your expenses by account. This is fairly straightforward, you just need to add up the estimated cost of your overhead expenses including rent, utilities, computers, software, etc. including sales, general and administrative (SG&A) payroll. Your SG&A payroll is likely going to be the most difficult expense to estimate for a new business, as its hard to gauge how fast you’ll grow and how much help is going to be needed during the initial planning stages. You’ll get a better idea of this once you’ve been in the mix of things for a while.

After calculating estimates for your revenue, COGS and expenses, you’re done number crunching. From here you’ll want to transfer those figures to your preformatted excel spreadsheet (if you haven’t been working directly in the file). The final result should look like a P&L statement and should give you your estimated gross and net profit margins. Once you’ve gotten the excel file all cleaned up and formatted correctly, just go ahead and tack this on to your business plan, and you’re done!