You may have heard that writing a business plan is essential when starting a new business. But what is a business plan, and how do you write it?
A business plan is a written document on how you’ll run, grow, and operate your company. It outlines your business goals and how you will accomplish them, creating a solid framework for your new business. Essentially, your business plan serves as a road map to starting a new, successful company.
A business plan is especially important when it comes to raising capital for your company. Many lenders and investors will ask to review your business plan to decide whether to invest in your business. One of the best ways to make a case for your business is to write a strong business plan.
But how do you create a great business plan that catches your audience’s attention? Let’s walk you through the basics.
Before You Get Started
You can’t start a business plan without some preparation. To start, take some time to identify your company’s mission and vision statements. Your mission statement explains your goal and what you hope to accomplish with your business, while your vision statement defines your desired long-term results. Identifying your mission and vision statements will help you think about what you want your business to be and what its future will look like.
Another piece of information to prepare is your company’s purpose. A purpose is a statement that explains why you built your business. It’s the answer to your “why” — why you want to start your business in the first place.
It’s also a good idea to research your potential market. Conduct research on your market size, profitability, and competition to determine if your potential market can sustain your company. If you’re unsure how to conduct market research, our Write a Market Research Report guide lays out all the steps to starting your investigation.
The Most Important Part of Your Business Plan
Once you’ve gathered all of your prep materials, it’s time to put them together in what’s called the executive summary.
An executive summary is the introduction of your business plan that provides an overview of your business and outlines your action plan. Use this section to highlight your mission and vision statements, company purpose, and market research. Some people like lenders and investors will only look at this section to gauge whether or not they will read your entire business plan. Try to create a strong impression with readers in your executive summary!
What Lenders and Investors Are Looking For in a Business Plan
If you’re looking to raise capital for your company, a business plan is vital to have ready when speaking to lenders and investors.
Lenders and investors want to make sure that you know what you’re talking about when it comes to your business model, so be prepared to discuss the ins and outs of your industry, products and services, and competitors. They will also want evidence that backs up your claims through market research. If you also have evidence or documentation that could help lenders and investors understand your business better, add them to the appendix section of your business plan with links or references to the documentation.
The most important information that lenders and investors will look at is your financials. They want to make sure that you’re running a viable business.
How to Avoid Common Business Plan Mistakes
A frequent mistake many entrepreneurs make about their business plans is not setting a goal. Figure out the objective and purpose of your business plan and think about your story behind your business. By finding the objective of your business, you’ll be able to express your mission and vision statements, which will help you create a strong business plan.
Another common mistake is writing lengthy business plans. A good rule of thumb is to keep your business plan concise and impactful like a resume — just include the key information that your audience will need to understand your business.
Where to Get a Second Opinion
Getting feedback from fellow owners can help you create an even more robust business plan. Check out the Centro Business Planning App from our partners at Centro Community Partners, where you can create and share your business plan with others and be connected to local microlenders and business support services. The Hello Alice Business for All community is also available to provide feedback and advice on your business plan from fellow owners.