How to Create a Business Plan
Behind all great business ideas lies a vision—that motivating "why" that helps guide your strategic decisions and gives your business a sense of purpose. Learning how to create a business plan is a key part of making that big-picture vision an on-the-ground reality.
A business plan provides an opportunity to identify any weaknesses in your idea, explore its possibilities and envision how you'll deal with challenges. Having a formal plan in place can make a big impact on a business's likelihood of success.
What goes into a great business plan?
Business plans can vary in length. Your plan should be long enough to accomplish three goals: excite the financing source, prove that you truly understand the market and detail the execution strategy.
Draw up a brief, one- to two-page description of your business's mission and why it will be successful. You might even consider writing the executive summary last, after you've gone through all the other sections.
It should include:
- An overview of your offerings and the problems you are solving
- Goals for the business and proposed target market
- A brief description of the competition and why your business is different or unique
- Company and leadership team structure
- Financial projections, explaining exactly how much money you want, how you'll use it and how it will make your business more profitable (especially important if you're using the business plan to secure outside investors or financing)
One of the main purposes of your business plan is to outline the basic elements of your business. A good place to start is by describing what problem your company plans to solve.
Some other components you might include are:
- Mission statement: Explain why your business exists
- Company philosophy: Highlight what business values are important to you
- Company goals: Detail your short- and long-term goals for the business and how you'll measure progress
- Target market and industry: Give a brief summary of the info you'll present in the market analysis section
- Legal structure: Note whether your business will be a sole proprietorship, a limited liability company or a partnership or a corporation
Products and services offered
Next, you'll want to describe the product or service you sell, how it's created and the problem it solves. You can include information about any patents, copyrights, licensing agreements or any exclusive agreements with suppliers or vendors. You want to illustrate any competitive advantage and unique selling proposition to prospective investors.
Finally, describe what it costs to create the product and service, how much you'll charge for it and how that pricing strategy compares to competitors.
You'll need to show that you know your industry, your competition and your customer or target market. The goal is to show why your company or product is a good idea and how it will fit into or stand out in the existing marketplace.
Include trends and themes in your industry, market size and demand, location, pricing, industry risks and opportunities, and projected revenues. You can find a lot of market research information, particularly on the size of specific industries and products, through the US Census or the Small Business Administration.
Marketing and sales
Explain the marketing and advertising tactics you plan to use to get your product or service in front of the right customers. Advertising and social media marketing strategies, potential partnerships and plans to boost sales or scale efficiencies, including plans for expansion, should all be included. It's also a good idea to give some estimates on what you think you'll need for promotional and advertising budgets.
Funding and financing
If it's available, include the most recent three years of cash flow statements, income statements, balance sheets and current financial data. If you're just starting out and don't have this information yet, outline your plan for how you'll fund the first three years of your operations. In addition, you'll want to include a list of all outstanding debts, and a five-year forecast of income and expenses.
If you're seeking a loan or investment, you'll want to explain how much funding you need and why, and how you will pay it off.
Your business's North Star
Knowing how to create a business plan will help you illustrate why you're passionate about the project and why you think it will succeed. It's an opportunity to impress loan officers, investors and funding partners, but it's also more than that. Done well, a business plan provides a road map to help ensure you're on the right path to the goals you've set out for your new company.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.