6 steps to complete your business plan

Women in white blouse sitting at the desk holding a document in her hand .

Why a business plan?

A goal without a plan is just a wish!

Antoine de Saint-Exupery

Got you! Did you google “do I need a business plan?” Well, you might get away without one, but will you run your business as best as you could? Peer-reviewed research showed us more than ten years ago that business plans positively affect company performance.

The Business plan is your business!

As serial entrepreneur Rob Adams puts it, your business plan is even more important than having a better product or service than your competitors!

More than 20% of businesses fail in the first year and more than 50% do not make it through the fifth year (Bureau of Labour Statistics, 2021). They fail, also because they do not have a business plan.

Top reasons why businesses fail.

Top reasons why businesses fail.

Don’t be deterred by the disheartening statistics. See your business plan as:

  • A motivation to stick to your goals
  • The key to find and fully show your potential
  • An introduction to your company for future partners and employees
  • A proposal that you show to investors
  • An opportunity for fast market adoption

Short and sweet

Would you read the Lord of the Rings Trilogy more than once? Your business plan does not need to be a tome, ending up as a flower stand or, in a better after-life in your filing cabinet.

The simpler and more concise you keep the plan, the easier it will be to put it together and modify it to the dynamics of the market. A short outlook (6 months – 1 year) presented under 10 pages is more realistic and will be read. You only need to complete 6 steps to draft your version.

Plan B for everyone

Before you dive into the guidelines below, take a deep breath. Put your calculator and doubts aside. For now, it does not matter if you create the business plan for yourself or for investors. Every business is different. Thus, your business plan differs. There is no right or wrong. Conveniently, there is a framework with must-haves. In the following sections, you will find the major ingredients of a lean business plan.

6 Step Plan

Click below to download the business plan template, so that you can already scribble down your notes while you continue to fly through the next steps.

We recommend starting with chapters 2-6 and coming back to the executive summary later. Investors like to see this summary on the top though. It is your (sales) pitch. The olive in your martini. Anyone who is interested in doing business with you is expecting to taste the olive.

1) Executive summary

What for?

Investors, partners, employees or the big company that buys you out in the future

As an affirmation for yourself, your team, and your business.

Requirements:

Keep it down to one golden page.

Highlight your positive sides, e.g.:

  • The benefits of investing in your business
  • How your business can improve a person’s quality of life

State the following, by writing only one sentence for each, your:

MISSION

It describes your business idea and why your company exists, e.g. IKEA:

“Offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”

VISION

Shows how your company will contribute and make the world look., e.g. IKEA:

“Create a better everyday life for people.”

VALUE

Focus on the actions of your mission and visions and describe how they will make an impact, e.g. IKEA:

Leading by example, will power and humbleness, differentiation, desire for innovation and creativity, enthusiasm and togetherness, and consciousness for cost.

Extra tip: 

Do not give away too much but spike up some interest. Speak simple and in laymen’s terms. 

2) Business Description

What for?

To present the details of your business and describe its purpose.

Requirements:

  • What?
    • The name of your business, location, and brand.

  • Why are you starting a business?
    • Write the reasons down as a story. Your story.
    • Explain your purpose, mission, and value in more detail.

  • How will you make money?
    • Present your business model by describing how your business specifically makes money.
    • Name your target (group)
    • Give an overview of the current market situation
    • Showcase what products or services you are going to provide, how you deliver these and how much these costs

  • Mention your goals by shortly describing
    • Where you see yourself in 3-5 years, for example: In 3 years we aim to open another branch in a bigger city.
    • Your exit strategy: If you want to sell your business, describe how you would achieve that.

3) Organization & Management

Culture is who you are. Brand is what you are.

Michael Chernow (The Meatball Shop)

What for?

To present the strengths of all people involved in your business. Furthermore, the strengths ideally reflect your core values, mission, and mottos. It is all about your people. To them, investors will lend their money.

Requirements:

  • Business structure

Explain your business structure and ownership. Are you sharing your company, or are you a start-up? Define the legal structure of your business, e.g. limited liability company (LLC) or holding group.

  • Introduce all staff

This includes everyone involved, also those you outsource. Put down all participants’ names, roles, experiences, and skills. Include resumes of key persons (no matter if they are shareholders or not). Display their hierarchy in an organigram.

Organigram example of a restaurant

Organigram example of a restaurant

Extra tip:

Nourish your company’s culture. Your team must come first. When it stands behind your mission and thus is fully motivated, outsiders (customers and newcomers) will feel this on the spot and are more inclined to do business with you.

4) Market Analysis

What for?

42% of US businesses fail because of a lack of market demand (CB Insights, 2019). Like using Google Maps trying to find the quickest way to the station not to miss the last train, a map of the market topography will guide you on what to do and what not. This way, you and those who read your business plan will know where your business fits in.

Market topography of a beer & ice cream parlour

Requirements:

Create a market topography guide by answering these questions:

Who is your target audience or buyer persona?
Example of a persona

Example of a persona

Who is your competitor?
  • Define who they are
  • Describe what they are doing and how they solve the same problem you’re trying to solve
  • Find what you would make better
What is my positioning?

You may need to justify your choice of location, for example, if you happen to be another beauty parlour near an existing hairdresser up the high street. Define your virtual pace too. For example, if you have an online-workout programme, will you use YouTube and/or create an app.

Extra tip:

Do not just copy, concentrate on how your business is different.

5) Marketing & sales

Marketing is a lot of trying

Robin& Jesper (Best-Selling Instructors)

What for?

Based on your market analysis, this chapter will tell

  • How you will position yourself in the market

and

  • How you will reach your customers so that you keep them

Requirements:

Foremost, explain and describe the 7 Ps:

PRODUCT

Describe what your product is and what it does. List the key features. What are the actual benefits that will make someone choose your product over one of your competitors? Highlight what problems your product will solve for the potential customers. If you offer many products or services, divide them into categories and describe these here.

Mention here, if your idea is patented, and if you have a trademark or other intellectual property to protect.

PRICE

Once you presented the value of your product or service, it is easier to justify your prices. What will the format be, e.g. fixed fee, subscription? Will the price cover all your costs (from production to delivery)?

How many sales (per product line or unit) are you going to do with your product or services within the next months? In case your business is running for a couple of months already, show your progress here in the form of a sales forecast chart. Continue to track these sales.

Sales forecast chart. On the y-axis is the number of products, on the x-axis the time, dashed line shows the predicted sales

Sales forecast chart. On the y-axis is the number of products, on the x-axis the time, dashed line shows the predicted sales

PROMOTION

How will you promote your product or service? Which channels, methods and tools will you use offline and online?

PLACE

Make sure you are in the supply area of your market and describe in detail how you distribute your products to your customers. For example, will it be online shopping only with delivery and pick up points, or will you also sell in a store up the high street?

PACKAGING

Unpacking is part of the customer experience. Make it as pleasant as stretching your legs on the couch. Zero-waste stores are a great concept, but not necessarily convenient. Balancing between safe and break-free shipping and environmentally friendly packaging still requires improvement.

POSITIONING

How will you position your product or service in the customers’ minds? Here it is crucial to know the state of awareness of your customers, e.g., if they are:

  • Unaware (that they may need your service or product, thus they do not seek a solution)

  • Problem aware (know they have a problem, and they are seeking a solution)

  • Solution aware (know solutions exist but not that you offer one)

  • Product aware (know solutions exist and that you offer one, but are not sure if it is the right one)

  • Most aware or brand aware (know exactly where to find their solution, and don’t look any further. You know, these Apple addicts would never go for a Samsung phone).
PEOPLE

Your marketing message and brand should resonate with your target group. People buy from people.

Moreover, provide an outlook on how you see your business adapting to (sudden) changes in the market, e.g. more competitors are rising in the market and you need to expand your target group. The idea here is to stay flexible and foster innovation.

Extra tips:

  • Do not be afraid to come up with crazy ideas, like the umbrella leash for dogs.

  • Understand your customers. You need to know your team and train them so that everyone is on the same page when it comes to speaking to customers. More tips on how to treat your customers can be found here.

6) Finances & risk management

What for?

29% of US businesses fail because of a lack of finances (CB Insights, 2019). A financial overview is critical for your survival. It furthermore ensures that your business is taxed properly. Investors want to know how profitable a business is. Your numbers will be the fountain of truth.

Requirements:

  • Explain how much money the business requires
    • Write down all your spendings on your business (equipment, employees, rent, programmes, outsourced people)

  • Sales
    • Write down all your sales profits (not shipping)

  • Over which period is the funding needed?
  • What do you use the funding for?
  • Summarize assumptions made for this business plan. Mention the risks and their impacts, and if you’re willing to accept the risk, mitigate it or share it.
Documents to add:

Balance sheet

Illustration of a balance sheet. Total assets equal liabilities plus equities. The equities are calculated by subtracting the liabilities from the total assets. 

The balance sheet displays your total assets. These need to equal your liabilities plus equities. Liabilities are what you legally owe to someone. Equity is something you partially owe to someone. Imagine, someone drives a vintage 90s Audi cabriolet worth 38.000 USD but paid for it with a loan of 20.000. Here, the difference is 18.000 USD in equity (or less painful thoughts). A detailed way to calculate your balance sheet would be with Excel. For a quick insight, balance sheet calculators are useful.

Cash flow statement

Summarizes the entire amount of cash entering and leaving a company in the form of a table. This encompasses every single expense in detail. Microsoft Office provides you with templates for cash flow statements.

Profit & Loss statement

Also known as an income statement summarizes your revenues, expenses, profits and losses over a given time. It has the same function as the cash flow statement, as it will tell you if you are making any money and if you can manage your expenses, but only operating expenses and no loans or credit card bills. Templates can be found here.

Define months to break-even point

Example graph of a break-even point

Example graph of a break-even point

It is the point in time when your business no longer is making a loss, and therefore shows investors how valuable your business is. No point investing in a business that will make more than 1-year of losses before turning a profit, right? To calculate this point, there are various methods online. This one explains how you can do this in Excel.

Extra tips:

1) Investors will not fund you if you have not invested yourself!

They will

  • More likely invest when others invested.
  • Avoid investing if the balance sheet is not clear or the company is not solvent.

They want to

  • Know if funding is used to reward shareholders
  • See sustainable growth of the business
  • Know what the potential exit plan will look like
  • See your business plan well-constructed

2) Overview of popular business loans in the US.

3) Track all income and expenses, and let yourself be helped by an accountant

Done is better than perfect!

Nick Amstrong (WFT Marketing)

If you’re now thinking, this is a lot of work, remember the Business Plan Template will give you an easy start.

You now have an easy-to-follow business plan that can be quickly changed if depression hits, you introduce a new product niche or acquire new clients.

Are you planning to create your own website? Try this step-by-step guide.