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How to create an effective Business Plan – Step by Step Approach
- August 14, 2020
In this creative world everyone has an impressive idea that could take the business world by storm. But turning a business idea without a business plan into an actual business is a different ballgame right?
Since decades, we have seen that when you approach with a business idea without a business plan and no one will entertain you. It’s like shooting an arrow in the dark.
Even your friends and family, or the angel investors would run away and not take you seriously. Having a plan will help you gauge the feasibility of your Business Idea
There is a simple motto in Business – Where there is a Plan, there is a way
Every entrepreneur and startup company needs a plan. Before deciding its outline and how to create it, there are some critical questions to answer and factors to understand.
You may think you’re ready to launch a startup. That’s great news, and you should be excited about it. But what is the first step?
Knowing how to create a good business plan guides you through each stage managing your entire business and understands different aspects of it. Business plan acts as a roadmap for how to structure, run, and grow your new business.
The perks of a good business plan is that it can help you get funding or bring on new business partners. Investors also feel confident they see a return on their investment with facts and figures.
Your business plan is simply a tool you use to convince people who might work with you or invest in your company.
Sometimes with great timing, solid business foundation, entrepreneurial drive, a little luck , some founders build a business without creating even an informal business plan. Don’t be one of them because the odds of these entrepreneurs failing are greater.
But does a business plan make startup successful? Absolutely not. But with great planning and preparation it does make a difference between success and failure right?
Search Active-Investors Across The World At One Place and Get Funding For Your Startup Today.
When it comes to your entrepreneurial dreams you should do everything possible to set the stage for success.
Writing a business plan takes you to every step of starting your company so you can better prepare and handle any challenges that will come afterwards.
Different companies require different types of business plan; it depends on your financial model, your revenue structure and many more factors.
Therefore before you start seeking legal advice, renting office space, forming an LLC or meeting investors you need to put your thoughts on paper and create an outstanding unmatched business plan.
This is with each line so appealing that investors are keen to know when the date of investment is.
Types of Business plan :
Traditional business plan.
This type of plan is very detailed, takes more time to write, and is comprehensive. Lenders and investors commonly request this plan.
Lean startup plan
This type of plan is high-level focus, fast to write, and contains key elements only. Some lenders and investors may ask for more information.
Business plan examples you must read before you create your own:
Here are four real life business plan examples which will get you prepare to make your next business plan.
While you may use your business plan to attract investors, partners, suppliers, etc… Always remember you are here to make a change, the goal of your business plan is to convince you that your idea makes sense.
Remember it’s your idea, you time, your money, and ultimately your effort which on the line.
A Simple yet effective business plan Format:
In this complex business world you will get thousands of Business plan outlines. Get one of the simplest and most effective business plan outline which is easy to create and exactly what investors need when he is reading a Business Plan.
The formats are many, so it is imperative that you choose the right ones, pertinent to your idea. You must look for the right examples of business Plan to gain an understanding.
A good Business Plan Template will help you get clarity on your corporate strategy.
Creating a business plan can:
- Help you discover any weaknesses in your business idea so you can address them before you open for business.
- Identify business opportunities you may not have considered and plan how to take advantage of them.
- Analyze the market and competition to strengthen your idea.
- Give you a chance to plan strategies for dealing with potential challenges so they don’t derail your startup.
- Convince potential partners, customers and key employees that you’re serious about your idea and persuade them to work with you.
- Force you to calculate when your business will make a profit and how much money you need to reach that point, so you can be prepared with adequate startup capital.
- Determine your target market and how to reach them.
Writing a Business Plan is as important as drinking water to live:
Have an exquisite idea in mind that will change millions of life? Let’s write a business plan then.
Important here is to break your idea into different parts. Let’s focus on writing a business plan:
Have an appealing executive summary:
This section will explain what your business does, where you want to take your business in next 3-5 years and why you’ll be successful.
Keep this section short and not more than 1 page because you still have plenty of time to get into the details later. At this point it’s important to show readers what they’re getting into and why need to consider this Business plan over other business plans.
Add Company overview:
Although this step kind of sound similar to executive summary, the company overview gives a bird view of your business and what you do. It is also necessary to answer questions like:
What does your business do?
Where do you fit in? (Industry and marketplace of your business)
What is the legal structure of your business? (S-Corp or C-Corp, or LLC)
This section should also not be explained in detail. Make sure that this company overview gives a quick—but catchy—pitch about what you do, who you serve, and why you’ll be able to serve them.
The point here is to keep the reader interested and keen to know more.
Perform your Market Analysis:
The purpose of the market analysis is to make investors confident about you and the business owner have an in-depth understanding of your industry, market, and competitors.
To show this understanding, your market analysis should include the following sections:
Industry description:
The reader must get look into your industry. Show how big it is, how it is growing rapidly compared to past and how are industry leaders predicting it will grow in the future also important trends and characteristics and skillsets. List out the top league players in your industry.
Target market overview:
Here provide insights and solution about your target market. Some important questions to consider are:
How big your target market is?
Who are the customers in your target market, and what are their needs?
Who is currently trying to serve those needs?
Where is your target market located?
What’s the key demographic you’re serving?
Therefore by conduction market research you can also give the best estimate of how you should be pricing your product/service.
Additionally also include barriers to enter the market and competitors research. Considering so much of data, research, and amount of information involved in this section, this section may take the longest.
However this section is very crucial to your overall business plan, therefore it is important to make sure it contains all the necessary details.
This is because a well-researched plan will show readers that you’re knowledgeable and have done homework about your target market and your business.
Define your business organization:
This section shows your organization’s expertise in your business domain.It explains who does what in your business and background of staff.
Organization structure, Ownership structure also needs to be added in this section to show who is owner of company, and different stakeholders who are involved in the company.
Also show background of entire staff right from top management this will highlight what your team will be bringing on table in terms of experience.
Core service of business:
This section will have complete description of your product/service. Therefore make sure you highlight your product/service in such a way that it is different from the competitors.
Also if you rely on different vendors/manufacturers who will be providing you product/service it’s important to add in business plan.
Sales and Marketing plan:
Till now you have given crucial information of your product/service and what you will be offering to market. But now let’s see how you will offer.
Positioning:
The first step is to show how you are going to showcase your product or position it? Because the way you position your brand will eventually determines how customers find and interact with you. So mentioned in business plan whether:
Are you a free service?
Does your service guarantee quality? If yes what is duration?
This explains your positioning in the market.
Explain how you are going to reach your customer. By which medium and process, so explain if currently you have any plans for packaging the product and how will you advertise the product.
Advertising can be done through offline or online medium. Depending on your product find out the most useful channel for advertising your product.
Explain sales plan and if possible explain sales procedure you will be using. Showing the expertise of Sales will make investor know your experience because Sales makes you profit and sales gets you going. Sales is the fuel if business journey.
Although you might not know exactly how your sales and marketing will turn or which channels will be most successful, nevertheless you should give a clear and concise overview of how you plan on selling your product.
This is because preparation shows that you are well aware of future and shows your confidence.
Financial Plan and Projections:
Consider this is most important part of the entire document. With this step you’ll detail your financial plan & projections, depending upon current state of your finances and mapping where you will be need of finances.
Financial projections are either supported by past data, or determined by research and analysis on the industry and top competitors.
You need to include these essential documents:
- Statements of projected income
- Cash flow forecasts
- Balance statements
- Capital expenditure budgets
- The last part of financial plan should include whether you need any funding right now or in future.
- It’s important to mention whether you plan to get funding through equity financing with angel investors or venture capital firms, or through debt financing with small business loans.
- This information of financial plan will get idea to investor about how his financial contribution makes impact on business and ultimately his ROI.
Although the appendix will be at the very end of your business plan, it will have all the supporting information you didn’t include in your document.
Like if have any additional data points, charts, footnotes, or further explanations that are essential to creating a complete plan. You can also add any contracts, legal documents, permits, and product pictures which is not included elsewhere.
Appendix begins with a table of contents that breaks entire section of your business plan, followed by the supporting information to each section.
Small Business Plans Explained
In it’s simplest form, a business plan is a document that outlines the basics about your business, products, and services; the market you are targeting; the goals you have for your business; and how you will achieve those goals.
A business plan is one of several important plans you should have when you are starting a business, the others being a marketing plan and a financial plan.
Your business plan should pull all three of these plans together, incorporating elements of your marketing plan and your financial plan into a comprehensive document.
Think of your business plan as a map or blueprint that will guide your business from the start-up phase through establishment and eventually business growth.
Why You Really Do Need a Business Plan
Reasons for having a Business Plan vary by the type of business you are starting and your intention to use it. But the common thread for all businesses is that a business plan Outline is necessary.
After all, how can you get your business launched and thriving without any type of written plan to help you?
Some of the reasons you need a small business plan that may apply to you include:
It is essential when you apply for a bank loan, pitch your business to investors, or bring in business partners.
You won’t truly be able to qualify your business idea without understanding your target market, researching the competition, and conducting a feasibility analysis — all parts of a business plan outline.
A good small business plan not only outlines where you are and where you want to be, but also helps you identify the specific actions you need to take to get there.
A business plan can provide essential background information and Business strategy. It showcases culture to employees, including managers and staff, as your business grows.
The financial section of your business plan can be the basis of your business budget. It is a useful tool for managing cash flow on a monthly basis.
So, you know you need a business plan. The next question to consider is what type of plan is the best fit for your small business.
Conclusion:
A business plan still plays a critical role in launching a profitable and sustainable venture today. New data shows us that the best time to complete a robust plan may now come later in the journey than it used to.
It is much more important to get started, test and secure funding first.When it comes to business plan outline, there are now more templates and streamlined formats available to meet today’s needs to accommodate faster moving, leaner startups.
Just don‘t let this part of the process slow you down. No matter how you do it, make sure to have someone with experience review it for you.
Take a look at Alcor’s free reports on Venture Capital funding analysis . So, get your business assessed on our high-end AI platform to get maximum results and funding from our global investors
What Are the Different Types of Small Business Phone Systems?
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Look no further – this book is packed with the insights, tips, and strategies you need to become a successful entrepreneur. Discover the two most significant driving forces of successful entrepreneurship, examples of the best entrepreneurial leaders, and why focus and tenacity matter more than strategies, business plans, and techniques.
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How To Write A Business Plan (2023 Guide)
Reviewed By
Updated: Aug 20, 2022, 2:21am
Table of Contents
Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.
Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.
Drafting the Summary
An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.
Ask for Help
When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.
After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business.
The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.
Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.
Numbers-based Goals
Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.
Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.
Intangible Goals
Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.
The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.
If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.
This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.
You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.
Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.
Business Operations Costs
Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.
Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.
Other Costs
Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.
Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.
How do I write a simple business plan?
When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.
What are some common mistakes in a business plan?
The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.
What basic items should be included in a business plan?
When writing out a business plan, you want to make sure that you cover everything related to your concept for the business, an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.
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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.
Kelly is an SMB Editor specializing in starting and marketing new ventures. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. Additionally, she manages a column at Inc. Magazine.
How to Make an Effective Business Plan
Every business, no matter the size, needs a plan. Without an effective business plan , it’s difficult to strategize about your future goals and needs. Frankly, without a good business plan in place, you’re making it up as you go along, and that is a recipe for failure, not success. Plus, you’ll also need a good business plan to show lenders if you require funding. Fortunately, putting together an effective business plan isn’t hard, especially if using business plan software or templates. While this does take some time, it’s time well spent. This step forces you to think about your business in a way you may not consider when you’re dealing with the daily demands of your company. A business plan is never finished – this is a document that requires revisiting on at least an annual basis. You want to see how you’ve measured up and what needs to be changed to optimally run your business.
Critical Business Plan Elements
Every business has its own needs, but there are universal elements to every business plan. Start your plan by outlining your particular industry and the niche your business occupies. What product or service does your business provide within that industry? Explain how that product or service is used by consumers or clients. Are your products copyrighted or patented? How is your business structured – are you a sole proprietor, LLC, partnership, S corporation?
The Marketing Plan
You’ve addressed the basics of your business and determined why your product or service is valuable. Now, your business plan must show how you intend to market that product or service. What is your target demographic? Include that demographic’s age, income level, gender, etc. If your demographic is other businesses, include the types of businesses your company serves.
How will you provide information about your business to your target market? Depending on your business and your capitalization, that might include social media marketing, direct mail, SEO marketing, billboards, radio and local TV advertising or extensive networking. How do you expand your brand awareness? Of course, you’ll need a website, but what about blogging and other ways to increase your website’s search engine rankings? Whatever forms of marketing you choose, it’s crucial to show what gives you a competitive advantage.
Your marketing plan must include the ways you intend to grow your business, not just advertise it.
You and Your Team
Your business plan must include your experience and skills and those of your team. That doesn’t mean including a complete biography, but it does mean providing the educational and professional experience of each team member, showing what each person brings to the table. Include management and organizational structure, along with key responsibilities and the particular expertise each person has.
While putting together your business plan, you may find that you are lacking some essential industry expertise elements; you now realize you must find someone to provide it.
Goals and Strategy
Your goals for the business, and your strategy on how to attain them are a vital part of your plan. How realistic are these goals, based on current economic trends? That’s a question a potential lender will ask. Do your due diligence and be specific when writing down your goals and how you intend to reach them. It’s not enough to state you plan to grow your business by 10 percent annually without clarifying exactly what steps you will take to do that. Include ways you may have a competitive advantage, such as location, operations efficiency or superior customer service.
Financial Plan
If your business is established, your financial plan should include expenses and profits. The best way to provide this information, especially to a lender, is via a profit and loss statement. From your current expenses and revenue, project your future expenses and revenue for a specified time period, such as the next five years. Stay conservative in your forecasts. Your plan must reflect reality, and you don’t want to overreach. Include any collateral your business has in the financial plan. State whether your accounting is done on an accrual or cash basis.
If you’re a startup, you don’t have a financial history to fall back on, but your plan should include quarterly projections. With a startup, you can’t provide actual numbers, but you should provide well-researched, educated assumptions based on reputable sources. Have these sources available, should the lender ask questions.
The Executive Summary
The length of a business plan varies, but figure that a plan may consist of 10 to 25 pages. If you’re a sole proprietor with a straightforward business, you may need just a few pages. Note that every business plan needs an executive summary. This summary highlights all of the document’s main points. You’ll write the executive summary last, after you’ve completed all salient points of the plan, and place it at the beginning of the document. With the executive summary, you’re putting your best foot forward, so do more than just taking extra time to work on it. Show it to a business advisor or knowledgeable business person to receive feedback, and tweak it as necessary. From a lending perspective, your executive summary is the best way to make a good impression.
The Annual Review
As noted, you should review and update your business plan at least once a year. The beauty of the annual review is that you can see what is and isn’t working with your business plan and make adjustments accordingly. As a living document, your business plan shows where you are meeting goals and objectives and where you might fall short. The annual review allows you to assess the direction your business is going. Perhaps you’ll need to revise your business plan significantly each year, or just make a few alterations. No matter whether you are course correcting with major or minor changes, your business plan reflects the options you have for continuing growth and success.
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PESTLE Analysis
SWOT and Business Analysis Tools
7 Tips for Creating Effective Business Plans
Aug 1, 2016 by Thomas Bush
A business plan is a written set of achievable goals and the means to attaining them. Business plans can be a great way to keep your business on track and maximize productivity in the workplace, but only if done correctly! In this article, we’ll be going over 7 tips that will help you create more effective business plans.
1. Choose Your Audience
Before you even begin writing a business plan, you should decide who it will be targeted at. Business plans can be “externally focused”, which is to say that they target people outside of the company (e.g. investors or lenders), or they can be “internally focused”, which is to say that they target people inside the company (e.g. managers or workers). Knowing the target audience of your business plan will help you keep the information inside both relevant and appropriate to the reader.
You might like: How to Use SWOT in Business Plans
2. Build A Clear Vision
If you don’t already have a strong vision for your business, then it’s important that you build one before starting work on a business plan. A vision is an image of where you want your organization to be in the future (a goal, per se ), which even determines the actions that you take. Naturally then, having a strong, clear vision is very important in creating a well-guided business plan.
3. Use Business Analysis
Using various different business analyses allows you to discover a number of different internal and external factors which you might have otherwise not considered. SWOT, PEST, and STEEPLE analyses, for example, can help you find gaps in the market, foresee various different threats, and leverage strengths and opportunities which you already have or face. For more information about this topic, be sure to check out this article about how these analyses are key elements of any good business plan.
4. Set Realistic Goals
While it’s good to be optimistic, make sure that the goals you set are realistic and attainable. Not only will achieving more goals (even if they are a bit easier) improve the morale of those immediately inside the business, but it will also ensure that potential investors can see the consistent progress which you are making.
5. Consider Different Time Frames
Business plans are normally set over a certain time period. They explain what the organization wants to achieve, and how it will do it, over a predetermined time frame . When creating your own business plan, it can be valuable to take into account various different time frames to see which business plan would be of most value to external and internal audiences.
You might like: What Is Strategic Planning?
6. Be Logical, Rational, and Conservative
Similarly to point number four, your business plan should be logical, rational, and conservative. Aside from setting realistic goals, this can mean:
- Properly supporting any claims or assumptions
- Fully fleshing out the means to achieving goals
- Considering the possibility of worst-case scenarios
- Minimizing the amount of ‘fluff’ or ‘empty words’ included in the plan
7. Periodically Review Your Plan
Finally, you should periodically review your plan to make sure that your business is going in the right direction. Sometimes, your business plan might even need to be reworked if you see new opportunities or threats in the market. Either way, it is good to make sure that what your organization is doing is consistent with your plan, which should be both well thought out and up-to-date.
That concludes our list of 7 tips you can employ to help create effective business plans! If you’re looking for more information about business planning and analysis, be sure to read through the articles linked throughout this guide, explore our website, and subscribe to our mailing list on the left-hand side.
Have we left you with any questions or comments? Don’t be afraid to leave them just down below!
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How to Write a Business Plan, Step by Step
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1. Write an executive summary
2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. add additional information to an appendix, business plan tips and resources.
A business plan is a document that outlines your business’s financial goals and explains how you’ll achieve them. A strong, detailed plan will provide a road map for the business’s next three to five years, and you can share it with potential investors, lenders or other important partners.
Here’s a step-by-step guide to writing your business plan.
» Need help writing? Learn about the best business plan software .
This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.
Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.
» MORE: How to write an executive summary in 6 steps
Next up is your company description, which should contain information like:
Your business’s registered name.
Address of your business location .
Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.
Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.
» MORE: How to write a company overview for a business plan
The third part of a business plan is an objective statement. This section spells out exactly what you’d like to accomplish, both in the near term and over the long term.
If you’re looking for a business loan or outside investment, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.
For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result.
In this section, go into detail about the products or services you offer or plan to offer.
You should include the following:
An explanation of how your product or service works.
The pricing model for your product or service.
The typical customers you serve.
Your supply chain and order fulfillment strategy.
Your sales strategy.
Your distribution strategy.
You can also discuss current or pending trademarks and patents associated with your product or service.
Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.
Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.
» MORE: R e a d our complete guide to small business marketing
If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.
You may also include metrics such as:
Net profit margin: the percentage of revenue you keep as net income.
Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.
This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.
» NerdWallet’s picks for setting up your business finances:
The best business checking accounts .
The best business credit cards .
The best accounting software .
This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.
Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.
List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.
Here are some tips to help your business plan stand out:
Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well. Providing unreasonable sales estimates can hurt your chances of loan approval.
Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.
Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. You can search for a mentor or find a local SCORE chapter for more guidance.
The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.
How to write a business plan in 7 steps
With this step-by-step guide, learn how to write a well-written professional business plan that can help you successfully start your business, apply for funding, and grow.
Writing a business plan doesn’t have to be complicated. You don’t need to have a business or accounting degree to put together a viable business plan. Business planning can be simple—even fun!
This guide will show you how to get your plan done without any complexity or frustration. By the time you’re done, you’ll be better prepared to start, run, and grow your business. Here are the 7 steps to write a business plan:
- Executive summary
- Products & services
- Market analysis
- Marketing & sales
- Company organization and management team
- Financial projections
Be sure to download our free business plan template to start writing your own business plan as you work through this guide. For a more detailed guide to writing a business plan, download our free ebook : The Easy Way to Write Your Business Plan.
What is a business plan?
A business plan is a document that describes your business, the products and services you sell, and the customers that you sell to. It explains your business strategy. How you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.
Most business plans also include financial forecasts for the future. Setting sales goals, expense budgets, and predictions for cash flow.
Now, a business plan can be far more than just a static document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. A management tool to analyze results, make strategic decisions, and showcase how your business will operate and grow. In short, if you’re thinking of starting a business or plan to pitch to investors or venture capitalists, writing a business plan can improve your chances of success.
Why do you need a business plan?
You likely already have a good idea of your business strategy in your head. So you may be wondering, “Why should I spend my time making a business plan?” Here are the top reasons why you should invest in planning:
Businesses that plan grow 30% faster.
A surprising amount of research has been done on business planning and has shown that companies that take the time to write a plan and review it regularly grow 30% faster than those businesses that don’t plan. Not only do these companies grow faster, but they perform better and are less likely to fail in the long run.
Lenders and investors need business plans
If you’re growing your business and plan on getting a business loan or raising money from investors, you’ll need a business plan. Most lenders and investors will ask for a plan, but even if they don’t want to see the actual document, they will ask you questions that only a solid business plan will be able to answer.
Business plans reduce risk
Starting and running a business is always risky. Instead of flying by the seat of your pants, you can use a plan to forecast potential cash flow issues and get ahead of any potential roadblocks so you aren’t caught off guard. A business plan will help you reduce your risk and help you navigate the future.
Business planning helps you make smart spending decisions
Before you make a big spending decision for your business, you need to know the potential impacts on your finances. With a business plan in place, you can easily explore different scenarios and see what impacts a new hire or an expansion to a second location will have on your business.
Need more reasons for why you need a business plan? Read our full list of reasons why having a business plan is important for small businesses .
How to write a business plan step-by-step
Whether you’re building a business plan to raise money and grow your business or just need to figure out if your idea will work, every business plan needs to cover 6 essential sections. Here’s an overview of each section:
1. Executive summary
The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally only one to two pages. Most people write it last, though.
Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. In fact, it’s very common for investors to ask for only the executive summary when they are evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation, and more in-depth financials.
Your executive summary should include a summary of the problem you are solving, a description of your product or service, an overview of your target market, a brief description of your team, a summary of your financials, and your funding requirements (if you are raising money).
Learn more about writing an effective executive summary .
2. Products & services
The products & services chapter of your business plan is where the real meat of your plan lives. It includes information about the problem that you’re solving, your solution, and how your product or service fits into the existing competitive landscape.
Start the products & services chapter by describing the problem that you are solving for your customers and what your solution is. This is a description of your product or service.
Next, you should outline your competition . Who else is providing solutions that try to solve your customers’ pain points? What are your competitive advantages over other businesses?
If you happen to have any competitive advantages, such as specific intellectual property or patents that protect your product—this chapter is a great place to talk about those things.
Finally, review your milestones and metrics. This is an overview of the next steps that you need to accomplish to get your product or service ready to sell, with target dates. If you’ve already achieved some key milestones, such as landing a crucial customer or taking on pre-orders, discuss that here.
3. Market analysis
This section is where you will showcase all of the information about your potential customers. You’ll cover your target market as well as information about the growth of your market and your industry.
First, describe your target market . Your target market is the group of people that you plan on selling to. Try to be as specific as possible. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers.
Next, provide any market analysis and market research that you have. You’ll want to explain how your market is growing over time and also explain how your business is positioned to take advantage of expected changes in your industry.
4. Marketing & sales
The marketing and sales plan section of your business plan details how you plan to reach your target market segments, how you plan on selling to those target markets, what your pricing plan is, and what types of activities and partnerships you need to make your business a success.
Some businesses that distribute their products and reach their customers through stores like Amazon.com, Walmart, Target, grocery store chains, and other retail outlets should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles that the business may have to overcome.
The marketing & sales chapter of your business plan can also be a good place to include a SWOT analysis . This is purely optional but can be a good way to explain how your products and services are positioned to deal with competitive threats and take advantage of opportunities.
5. Company organization and management team
Investors look for great teams in addition to great ideas. Use this chapter to describe your current team and who you need to hire. You will also provide a quick overview of your legal structure, location, and history if you’re already up and running.
Include brief bios that highlight the relevant experiences of each key team member. It’s important here to make the case for why the team is the right team to turn an idea into a reality. Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before?
Your company overview should also include a summary of your company’s current business structure. The most common business structures include:
- Sole proprietor
- Partnership
Be sure to provide a review of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.
6. Financial projections
Last, but certainly not least, is your financial plan chapter. This is often what entrepreneurs find most daunting, but it doesn’t have to be as intimidating as it seems. Business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. That said, if you need additional help, there are plenty of tools and resources out there to help you build a solid financial plan.
A typical financial plan will include:
Sales and revenue projections
A monthly sales and revenue forecast for the first 12 months, and then annual projections for the remaining three to five years. Three-year projections are typically adequate, but some investors will request a five-year forecast.
Profit and loss statement
An income statement , also known as the profit and loss (or P&L), is where your numbers all come together and show if you’re making a profit or taking a loss.
Cash flow statement
A cash flow statement . While the income statement calculates your profits and losses, the cash flow statement keeps track of how much cash (money in the bank) you have at any given point.
Balance sheet
A balance sheet lists the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business.
Optional sections to include when seeking funding
If you are raising money from investors, you should include a brief section of your business plan that details exactly how you plan on using your investors’ cash. This is typically just called, “Use of Funds.”
Investors will also want to see a short section on your exit strategy. An exit strategy is your plan for eventually selling your business, either to another company or to the public in an IPO. If you have investors, they will want to know your thoughts on this. If you’re running a business that you plan to maintain ownership of indefinitely, and you’re not seeking angel investment or VC funding, you can skip the exit strategy section.
For more information, read our guide on the different types of exit strategies .
Finally, discuss any assumptions and important risks for your business. Knowing what your assumptions are as you start a business can make the difference between business success and business failure. When you recognize your assumptions, you can set out to prove that your assumptions are correct. The more that you can minimize your assumptions, the more likely it is that your business will succeed.
7. Appendix
An appendix to your business plan isn’t a required chapter by any means. However, it is a useful place to stick any charts, tables, definitions, legal notes, or other critical information that either felt too long or too out-of-place to include elsewhere in your business plan. If you have a patent or a patent-pending, or illustrations of your product, this is where you’d want to include the details. For more details, read about what to include in your business plan appendix .
Business plan writing tips
To help streamline the business plan writing process here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .
Determine why you are writing a business plan
Knowing why you are writing a business plan will determine your approach to your planning project. For example, if you are writing a business plan for yourself or just for use inside your own business, you can probably skip the section about your team and organizational structure.
If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the money you want and exactly how you’re going to use those funds. So, before you start writing your plan, think about why you are writing a business plan and what you’re trying to get out of the process.
Keep things concise
Probably the most important tip is to keep your business plan short and simple . There are no prizes for long business plans. In fact, the longer your plan, the less likely it is to be read.
So, focus on trimming things down to the essentials that your readers need to know. Skip the extended descriptions of your target market and instead focus on creating a plan that is easy to read.
Have someone review your business plan
Writing a business plan in a vacuum is never a good idea. It’s helpful to zoom out from time to time and make sure that your plan is logical and makes sense. You also want to make sure that it’s easy to read and understand. Don’t wait until your plan is “done” to get a second look, though.
Start sharing your plan early and find out from your reader what questions the plan leaves unanswered. This early review cycle will help keep you on track. If you need a more detailed review, you may want to explore hiring a professional plan writer to give it a thorough examination.
Use a free business plan template to get started
Knowing what information you need to cover in a business plan sometimes isn’t quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. If you’re looking for a free downloadable business plan template to get you started, download the template that’s been used by more than 1 million businesses.
Or, if you just want to see what a completed business plan looks like, check out our library of over 500 free sample business plans .
How do I write a simple business plan?
If you’re not ready to work on a detailed business plan and want to start with something shorter and simpler, we recommend starting with a simple one-page business plan . You’ll be able to put together an initial plan in less than 30 minutes. For many businesses, this is a great way to get started. And, if you’re not raising money from investors, this may be all the plan you need.
Next steps for writing your business plan
Whether you’re writing a plan to explore a new business idea, establishing steps to start a business, looking to raise money from investors, seeking a loan, or just trying to run your business better—a solid business plan will help get you there.
Business planning is a continuous process that can help you validate your idea, set goals, manage, and successfully pitch your business. One of the most helpful things you can do to build a successful business is to jump in and start planning. If you’re looking for a more comprehensive step-by-step walkthrough for writing a business plan, check out our Business Planning Guide .
If you need more than a template, we recommend exploring business planning software, such as LivePlan. It features step-by-step guidance that ensures you include only what you need in your plan and reduces the time you spend on formatting and presenting.
You’ll also get help building solid financial models that you can trust, without having to worry about getting everything right in a spreadsheet. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. This makes it easy to track your progress and make adjustments as you go.
Business plan FAQ
A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investor, and identify areas for growth. Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.
The seven steps to writing a business plan include: 1. Write a brief executive summary. 2. Describe your products and services. 3. Conduct market research and compile data into a cohesive market analysis. 4. Describe your marketing and sales strategy. 5. Outline your organizational structure and management team. 6. Develop financial projections for sales, revenue, and cash flow. 7. Add any additional documents to your appendix.
There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid: 1. Not taking the planning process seriously. 2. Having unrealistic financial projections or incomplete financial information. 3. Inconsistent information or simple mistakes. 4. Failing to establish a sound business model. 5. Not having a defined purpose for your business plan.
Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan. However, these are the key questions you should ask and answer with your business plan: – How will your business make money? – Is there a need for your product or service? – Who are your customers? – How are you different from the competition? – How will you reach your customers? – How will you measure success?
The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place. If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan or a 3-10 page Lean Plan to get all of the necessary information in place.
While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering. Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business. Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.
A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision. However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.
The core elements of business planning are the same for nonprofit organizations and for-profit businesses. The main difference between the two is that nonprofits are primarily driven by a specific mission or purpose. While a for-profit organization is typically driven by growth and improved performance. Additionally, nonprofit organizations will need to intently focus on their promotional, partnership, and fundraising strategies. While some of this is present in for-profit businesses, the need to thoroughly outline how and who you will continue to receive funding is far more important as a nonprofit.
Noah Parsons
Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan. You can follow Noah on Twitter .
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Home > Knowledge > Running a business
How to create an effective business plan in 2023
Table of contents.
The mere thought of putting a business plan together can send even the most enthusiastic entrepreneur into a tailspin, but writing one can help you work out whether you actually have a viable business idea on your hands.
First and foremost, the person who must be convinced by your business plan is you. After all, if you’re not persuaded by it, why should anyone else be?
Once you’re sold on the basics, you can use your business plan to convince potential sources of finance, investors, partners, and employees that you’re the real deal.
This jargon-free article will give you a better idea of how to get the ball rolling.
Executive Summary
The executive summary highlights and emphasises the main points of your business. No more than a page in length, the executive summary needs to be succinct, compelling, and engaging - you want the reader / potential investor to be interested enough to read on and, even better, buy into your business.
This section should help the reader understand the purpose and passion behind your business. You’ll need to include brief outlines of:
- Your business name and location
- A short, simple summary of your business concept
- When were you founded?
- A description of your business’ competitive advantages
- Proof that there’s a market for your product or service
- A summary of the management team you’ve assembled
- A brief description of at what stage of development your business is in
- What is your background and experience, if any?
- What was your decision making process?
- When did the initial idea occur?
- Where will the business operate?
- How long is the lease, if you have one?
- Why - the mission statement of your business
You’ll be elaborating on most of these themes throughout the document, so keep it fairly succinct. Revisit the content once you’ve finished the rest of the business plan - you might find better ways to express your ideas.
Products and services
This is your opportunity to really wax lyrical about the core aspect of your business: what you’re going to be selling. You want complete belief from the reader that your product is the best out there, and for them to see why they should invest.
Here’s what you need to include:
- What is your product or service?
- Why should customers purchase from you?
- How do you aim to sell your product or service?
- How are your products manufactured?
- Do you have any exclusive deals or partnerships?
- What is your pricing strategy?
- What problems, if any, do you see with your product or service? What are the benefits to the customer?
- How will the product be sold - online or retail?
- What makes your product or service stand out?
Management team
Your business plan needs to detail specifically who is involved in your business.
You want this particular section of your business plan to highlight that you have a more-than-capable team running your business, a team that will use their expertises to make the business work and profit.
Make a list or tree diagram of people's responsibilities, and attach CVs as appendices if you feel this supports your choices.
You’ll need to include:
- Who owns the business?
- Who are the directors and shareholders?
- Who will be involved in the day-to-day running of the business?
- What experience do these people have and how will this benefit the business?
- Who is your management team?
- What experience do they have?
- Who has direct reports?
- Do you have any vacancies yet to be filled?
- What is your recruitment process?
The marketing section is key in showing a potential investor that you know how you will bring in custom. It needs to show you’ve thought about how to get people interested in your business, and what makes it different from competitors in your market or area.
How you promote your business will differ depending on how you’ll make sales. If you’re opening a shop you’ll need to employ some local marketing techniques (think print adverts, flyers, broadcast media etc.) but if you’ll be selling online you should consider search marketing and social media promotion.
What to include can be broken down into four sections - the four P’s:
Who are you aiming your product at? Who is your target market? For example, “22-34, London based, interested in photography and male”.
What is the price of your product/service? How did you arrive at this price point?
How does this compare with other products in your market? What budget have you set aside for marketing?
How and where are you going to distribute your product/service? Retail, wholesale or online? For e-commerce, you’ll need to show you can drive traffic to your website, and with retail you’ll need to show you understand the importance of putting your product in the right shop/area.
Promotion
How are you going to promote your business? How and where will you advertise?
Think about the methods mentioned in the opening paragraph - will any of these help get your business noticed?
The operations section of your business plan deep-dives into the logistical side of your idea. It highlights that you have thought concisely about the day-to-day running of your business. It needs to highlight and set clear expectations of exactly how your business will operate, and include details of the following:
Now is the time to be more specific about where you are based. Are there any works that need carrying out? Is there adequate parking? What licence do you need (if any)?
Facilities and utilities
Does your location have internet access? Who will supply your water, gas and electricity?
How will you store and track your assets, stock, equipment?
What are your hours of trading? Are these flexible?
What payment systems will you have in place? Do you accept AmEx or contactless?
Do you need to invoice clients?
How many members of staff will you need? What will their duties be?
What is the customer journey? What is your refund policy? How will customer complaints be handled?
Financial Plan
A financial plan helps a potential investor think about whether they are likely to get a healthy return on investment (ROI). For this reason, it’s likely to be the most scrutinised section of your business plan.
If your business is brand new, think about how you’ll show predicted earnings. You could even look at a company similar to yours and what their earnings have been to compare. You’ll also need to include details of the following:
Profit and loss
Also known as an income statement, the profit and loss statement measures just that: the profit and loss of your business over a specific period. This takes information from the following equation:
Revenue - Cost of goods - Expenses = Net
Cashflow shows how much money is going in and out of your business. Think of cashflow as money management. Much like your personal finances, you need money coming in before you can take money out. If you spend money you don’t have coming in, this will amount to debt - this isn’t something an investor will look favourably upon.
Balance sheets
Compiled on an annual basis, the balance sheet gives a picture of the financial state of your business. Include assets, liabilities, and equity (see glossary on next page).
Sales forecast
Forecasting shows the depth of knowledge of your business. Break this section down into manageable parts, showing estimated sales by month over 12 months, then each year over five years. As with profit and loss, it’s important to be realistic, otherwise you will lose credibility.
Glossary of terms
Unsure of the difference between cash-flow and capital? While we do our best to avoid jargon, it’s important to understand the terminology when starting a business. To help you write your business plan, we’ve compiled a glossary of the most-used business terms and have provided easy-to-understand definitions.
An item owned by a business that has monetary value, for example, property, cash in the bank or inventory.
Lists the assets, liabilities, and equity of a business in order to calculate net worth.
An organisation that trades in goods or services.
Wealth owned by a person or business that is available for reinvestment in the company.
The amount of money being transferred in and out of a business.
A person who runs a limited company, often owning shares in the company.
A person who works for wages or salary in a business.
A person who employs people and pays them a wage or salary.
The value of the shares issued by a company.
Financial forecasts
A calculated estimation of future financial outcomes for a business.
A business licence granted by a company that enables a party (franchise) to market its products or services. For example, Ben and Jerry’s is the company, and the parlours where you buy the ice-cream are a franchise.
The items or stock owned by a business.
A person who invests money or capital into a business with an expectation of future financial return.
A company’s legal debts, for example, loans, mortgages or accounts payable.
Limited company
An organisation set up to run a business, which is responsible for everything it does. Finances are separate from personal finances, and Directors are responsible for decisions which affect the company.
Total assets of a business minus total liabilities. Determines the value of a company, for example, a business has £50,000 in cash, £200,000 of inventory and £20,000 in savings = £270,000 in assets. The business also has a £100,000 mortgage and £10,000 credit card debt (liabilities). Therefore the total net worth is £160,000.
An account showing a businesses net profit and loss over a given time frame.
Prediction of future sales.
Shareholder
A person who owns shares in a company or business, whose rights are often governed by a Shareholders’ Agreement.
A portion of the company’s ownership divided amongst shareholders, giving the owner a proportion of the company.
Sole trader
A person who is exclusively the owner of a business and solely responsible for all profits and losses of that business.
A new business.
Target market
A group of consumers at which a product is aimed. For example, sweets are often aimed at a target market of small children.
Umbrella company
A company that acts as an employer to agency contractors and processes their payments.
Keeping track of your accounting & finances
Ensuring you have a great accounting and financial plan is essential. Using a simple to navigate accounting system can be a perfect option. Why not consider using Crunch’s software ? Not only is it easy to use, but it also comes with support from our experts who can guide you through your accounting tasks and tracking your finances. We also have a ton of Crunch integrations , providing our clients with even more tools to run their businesses efficiently. For example, our integration with financial forecasting software Brixx allows you to project your business's financial future so you can test scenarios and be prepared for any eventuality. This is also a great tool to have when preparing your business plan.
To find more ways that Crunch can help make running your business effortless, join us online for 14 days completely free , or get in touch with our friendly advisors at a time that suits you.
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We have no hidden fees, no limitations, but a wide range of accounting software features that help you easily manage your business. If you need more information, you can talk to our expert online accountants , payroll experts and even VAT specialists.
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5 Steps in Establishing an Effective Business Plan
You’ve got a great idea, and now it’s time to put it into action. You have the next big thing on your mind — but how do you know if your idea is good enough? How can you tell if someone will buy what you are selling? And most importantly, how do I make sure that my business plan is effective? Well here are 5 steps that will help:
1. Establish your goals
Decide what you want to accomplish and then set a goal for it..
A lot of people don’t bother with this step because they think that their business plan will take care of all their needs, but if you want to be successful in your new venture, then setting goals is an absolute necessity.
The first step towards achieving success is knowing where you’re going and why, so let’s start there!
2. Identify your target audience
Know who and where your market is, so that when it comes time to do business you can be sure you’re putting your product or service out there where people can easily find it..
The first step in creating an effective business plan is to identify your target audience. Who are the people that you want to sell your products or services to? Your market may be defined by age, gender, income level or location, and other factors. The goal of this step is simply to get a sense for what types of people might be interested in your product or service before diving into detail about how it will work.
3. Do the research
The first step in creating an effective business plan is to do the research. It’s important to understand who your audience is, what they want, and how you can meet their needs. In addition, you should consider your competition and their products or services. You should also research the market where you plan to sell your product or service—the more information about it that you know, the better able you’ll be at creating an effective marketing strategy for it.
You’ll want to find out as much information as possible about yourself before starting on any project: who are my strengths? What areas do I need to improve on? How can I make myself and my business more marketable? These questions will help guide all aspects of planning your business venture so that it will succeed!
4. Create a financial plan
Without breaking out the calculator (yet), decide up front whether you have the cash to put this into action, and whether or not you need investors or a loan..
The financial plan is a roadmap for your business. It shows how much money it will take to achieve your goals, including how much time it will take and what kind of equipment is needed. The goal of creating this document should be to clearly define what success looks like at every stage of development: from startup through expansion as well as retirement after selling off assets/competitors/employees (or all three).
Setting aside enough resources in advance allows you time—and money!—to make adjustments along the way when things don’t work out exactly as planned; otherwise, unexpected things could appear that require new strategies before long-term plans can be implemented successfully into practice.
Create a development strategy
This is the step where most people drop the ball, mainly because they don’t understand how important it is..
You must have a clear understanding of what you want your company to be and how you plan on getting there. You need to know exactly what kind of product or service you will offer, as well as how much money you’ll need and when those funds will be available for use. Think about who your customers are and what they want out of their experiences with your company before starting any work on this document!
You can create an effective business plan by following these 5 steps.
- Define your company’s mission, vision, and values
- Analyze the market for your product or service
- Decide whether you’re going to be a sole proprietorship or a corporation (or both)
- Create a financial plan that spells out how much money you’ll need to get started and how long it will take you to reach profitability
Final Thoughts
After fully analyzing and establishing your business plan, it’s time to plan out the next steps in effectively handling your business’ finance! The good thing is we’ve got a FREE guide that will help you manage your business better and create a financial strategy that can future proof your business.
Download your FREE EBook now!
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
7 Steps to Create an Effective Business Plan
Do you know how to create an effective business plan? Great planning often draws the line between success and failure. Failure to plan only results in more failure . Your business plan should foremost be able to convince you that your idea is a solid one before you can convince any other person.
Your business plan does more than guiding you and other important stakeholders on your business’s growth. It also shows potential investors and partners where your business is headed.
Therefore, a great business plan is a prototype for a successful business . Writing a business plan might seem tasking, but it’s not, as long as you don’t forget to include essential information.
Top 7 Essential Steps to Creating a Business Plan
Step 1: develop your executive summary.
This is the first chapter of your business plan . It explains what your business is all about. Your business’s current stance, where you aspire to take your business in the next two to five years, and why you’re business would be a success. You can explain briefly with the following points:
• Mission Statement This explains why your business exists and where you want it to be in the future.
• Overview of company’s information The date your company was formed, the founders of the company, the number of employees. This gives an insight into the numbers of manpower at the company.
• Company Highlights This will show your business’s success growth and give investors more reason to partner with you. It can be shown in graphs and charts.
• Products and Services Describe what you sell and who your market audience is. If you don’t have any products yet, describe your plans for what you intend to sell.
• Finances An estimate of how much money the business will need and a breakdown of how it will be used. However, if you are looking for financial assistance, be sure to add this to your executive summary.
Step 2: Execute Your Market Analysis
This is the quantitative and qualitative assessment of a market. It looks at the volume and value of market size, the customers, the buying and selling pattern, the competition, and the economic environment.
You have to perform an in-depth analysis to show your investors that you know your market and that the market is big enough to build sustainable economic growth. To give a proper analysis, you have to follow these plans:
• Demographics and Segmentation • Target Market • Market Need • Competition • Barriers • Regulation
Step 3: Defining Your Business Organization
This section explains the function of your company’s employees and what they offer to the team. The start of this section should include your business’s organizational structure, showing who manages an aspect of your business.
Also, explain the background of your team, partners and board of directors. These backgrounds will convince potential investors that your business is surrounded by business-minded individuals to make your business a success .
If you’re thinking of expanding your team, list out essential hires you’ll need to achieve your goals.
Step 4: Describe Your Products and Services
A description of your products and services should be detailed here. Your product should be able to meet the needs of the consumers. You should be able to cite the reasons why your service stands out from other competitors.
Describe your products’ current status; is it just in the idea stage, or do you have a final product ready to go in the market?
If your product is still in the idea stage, discuss how you will bring it to the finalized stage. If there are any future products, give notes on how you would like to develop them.
Step 5: Expound Your Marketing and Sales Plan
After explaining what products and services your business renders, you should expound on your marketing and sales plan.
How will you get customers to be interested in your business? With the right marketing and sales strategy, you would attract many potential customers in the long run.
You can employ the 5 P’s of marketing
• Product • Price • Place • Promotion • People
Step 6: Detail Your Financial Plan
Your financial statement should include:
• Income Statements • Cash flow statements • Balance sheets • Accounts receivable statements (if applicable) • Accounts payable statements (if applicable) • Documentation of debt (if applicable)
This part of your business plan should show the current level of your company’s finances and where you’d like to be financially in the future. The last part of your financial statement should include any funding your business might need in the future.
Step 7: Make It a Living Document
After drafting out your business plans, you should make it into a living document. This will help to keep track of your business growth. You can also readjust your strategy as the need may be.
However, share your business plan with your business mentor for revision and get professional guidance from someone who has had the experiences.
How to Create an Effective Business Plan Video
If you’re starting a new business or have been in the business for years, it’s likely that at some point you’ve considered writing a business plan. A well-written and researched plan can help you navigate all kinds of obstacles along the way. They are also extremely valuable when looking for financing, as they help investors see how your company will grow and make money.
About the Author: Brian Morten
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Business · March 7, 2023
How to write a effective business plan.
How To Write A Effective Business Plan – A business plan is a document that details the goals of a company and how it plans to achieve its goals. A business plan is a written roadmap for a firm from a marketing, financial, and operational perspective. Both startups and established companies use business plans.
A business plan is an important document focused on the external and internal audience of the company. For example, a business plan is used to attract investment before the company has established itself. It can also help secure lending from financial institutions.
In addition, the business plan can serve to ensure that the company’s executive team is aware of the strategic actions and strives to achieve the set goals.
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While they are especially helpful for new ventures, every company should have a business plan. Ideally, the plan is periodically reviewed and updated to reflect goals that have been achieved or changed. Sometimes a new business plan is created for an established business that has decided to move in a new direction.
A business plan is the main document that any new business must have before starting its activities. Indeed, banks and venture capital firms often require a viable business plan before deciding whether they will provide capital for new ventures.
Working without a business plan is usually not a good idea. In fact, very few companies can survive very long without it. There are benefits to creating (and following) a good business plan. These include the ability to think through ideas before investing too much money in them and overcoming potential roadblocks to success.
A good business plan should outline all the expected costs and potential pitfalls of every decision the company makes. Business plans, even among competitors in the same industry, are rarely identical. However, they may share the same basic elements, such as a summary of the business and a detailed description of its operations, products and services, and financial projections. The plan also specifies how the business intends to achieve its goals.
Effective Tips For Business Plan Designer To Write Great Plan
While it’s a good idea to give as much detail as possible, it’s also important to keep the outline short to keep the reader’s attention until the end.
A well thought out and well written business plan can be of tremendous value to a company. While there are templates that you can use to write your business plan, try to avoid getting the general result. The plan should include an overview and, if possible, details of the industry that the business will be a part of. He must explain how the business will be different from its competitors.
Start with a basic structure: resume, company description, market analysis, product or service description, marketing strategy, financial projections, and appendices (which include documents and data supporting the main sections). These sections or elements of the business plan are described below.
When you write your business plan, you don’t have to strictly follow a specific plan or business plan template. Only use the sections that are most appropriate for your specific business and needs.
How To Write An Effective Executive Summary
Traditional business plans use some combination of the sections below. Your plan may also include any funding requests you make. Despite this, try to keep the main part of your plan to no more than 15-25 pages.
The length of a business plan varies greatly from business to business. Consider fitting key information into a 15 to 25 page document. Then other important elements that take up a lot of space, such as patent applications, can be listed in the main document and included as annexes.
As mentioned above, no two business plans are the same. However, they tend to have the same elements. Below are some general and key parts of a business plan.
The best business plans are not general plans based on readily available templates. The company must engage readers with a plan that demonstrates its uniqueness and potential for success.
Music Business Plan Template
Business plans help companies define their goals and stay on track to achieve them. They can help companies get started, manage themselves, and grow after launch. They also act as a means to attract lenders and investors.
While there is no right or wrong business plan, they can be divided into two different categories – traditional and lean startup. According to the Small Business Administration (SBA), the traditional business plan is the most common. It contains many details in each section. They tend to be longer than the Lean Startup plan and require more work.
On the other hand, lean start-up business plans use an abbreviated structure that highlights key elements. These business plans are not as common in the business world because they are short – just one page – and lack details. If a company uses such a plan, it must be prepared to provide more detailed information at the request of an investor or lender.
A complete business plan should include a set of financial projections for the business. These pro forma financial statements are often referred to as pre-financial statements or simply “pro forma”. These include the overall budget, current and projected funding needs, market analysis, and the company’s marketing strategy.
How To Write A Franchise Business Plan: 10 Solid Steps
The main purpose of a business plan is to give owners a clear idea of the goals, objectives, resources, potential costs, and downsides of certain business solutions. The business plan should help them change their structures before implementing their ideas. It also allows owners to plan for the type of funding needed to start their business.
If there are any particularly interesting aspects of the business, they should be identified and used to attract funding, if necessary. For example, Tesla Motors’ electric car business started as a business plan.
It is important to note that a business plan should not be a static document. As the business grows and changes, the business plan must change as well. An annual review of the company and its plan allows the entrepreneur or owner group to update the plan based on successes, failures, and other new information. This provides an opportunity to evaluate the plan’s ability to help the company grow.
A business plan is a document created by a company that describes the company’s goals, operations, position in the industry, marketing goals, and financial projections. The information it contains can be a useful guide in the management of the company. Moreover, it can be a valuable tool for attracting investors and obtaining funding from financial institutions.
Why The Executive Summary Is A Critical Part Of Your Business Plan
Even if you have a good business plan, your company can still fail, especially if you don’t stick to the plan! Having strong leadership focused on the plan is always a good strategy. Even if you follow the plan, if you had the wrong assumptions in your forecasts, you could run into cash shortages and an out of control budget. Markets and economics can also change. Without the flexibility built into your business plan, you won’t be able to move to a new course as needed.
The Lean Startup Business Plan is an option when a company prefers a quick explanation of its business. The company may decide that it does not have much information to provide since it is just getting started.
Sections may include: value proposition, company core activities and benefits, resources such as personnel, intellectual property and capital, list of partnerships, customer segments, and revenue streams.
Requires authors to use primary sources to support their work. These include white papers, government data, original reports, and interviews with industry experts. We also cite original research from other reputable publishers where appropriate. You can learn more about the standards we follow when creating accurate and unbiased content in our editorial policy.
Business Plan Executive Summary Examples & Tips To Write One
The proposals presented in this table come from partnerships from which they receive compensation. This compensation may affect how and where ads appear. does not include all offers available on the market.
By clicking “Accept all cookies”, you consent to the storage of cookies on your device to improve site navigation, analyze site usage, and assist in our marketing efforts. Now that you’ve understood the importance of having a business plan in Part 1 of our business plan series, let’s move on to how to write one.
Writing a business plan can be a daunting task for most, but it’s as important as it is intimidating. But how exactly do you do it? Where to begin? What do you include? We are here to help you with just that. Here’s how to get started with your business plan and what each section of your plan should focus on.
This is considered the most important section of a business plan as it gives you a quick overview of your entire business plan and touches on your company’s profile and goals. Focus on giving an idea of where your company is, where you would like it to be, and why you think your business will be successful. Remember that your resume is your first chance to get potential investors interested in your business. Although this section comes first in your business plan, it’s probably wiser to write a summary at the end, because this is where you need to highlight your strengths, and very often you have a better idea of u200bu200bwhat to do.
How To Write An Effective Business Plan: Competitive Strategy
How to write an effective lesson plan, how to write an effective business proposal, how to write an effective press release, how to write effective emails for business, how to write an effective business report, how to write an effective marketing plan, how to write effective resume, how to write effective emails, how to write an effective resume, how to write effective business emails, how to write an effective action plan, how to write effective business letters
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How to Write a Winning Business Plan
- Stanley R. Rich
- David E. Gumpert
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds. Too many entrepreneurs, though, continue to believe that if they build a better mousetrap, the world will beat […]
The Idea in Brief
You’ve got a great idea for a new product or service—how can you persuade investors to support it? Flashy PowerPoint slides aren’t enough; you need a winning business plan. A compelling plan accurately reflects the viewpoints of your three key constituencies: the market , potential investors , and the producer (the entrepreneur or inventor of the new offering).
But too many plans are written solely from the perspective of the producer. The problem is that, unless you’ve got your own capital to finance your venture, the only way you’ll get the funding you need is to satisfy the market’s and investors’ needs.
Here’s how to grab their attention.
The Idea in Practice
Emphasize Market Needs
To make a convincing case that a substantial market exists, establish market interest and document your claims.
Establish market interest. Provide evidence that customers are intrigued by your claims about the benefits of the new product or service:
- Let some customers use a product prototype; then get written evaluations.
- Offer the product to a few potential customers at a deep discount if they pay part of the production cost. This lets you determine whether potential buyers even exist.
- Use “reference installations”—statements from initial users, sales reps, distributors, and would-be customers who have seen the product demonstrated.
Document your claims. You’ve established market interest. Now use data to support your assertions about potential growth rates of sales and profits.
- Specify the number of potential customers, the size of their businesses, and the size that is most appropriate to your offering. Remember: Bigger isn’t necessarily better; e.g., saving $10,000 per year in chemical use may mean a lot to a modest company but not to a Du Pont.
- Show the nature of the industry; e.g., franchised weight-loss clinics might grow fast, but they can decline rapidly when competition stiffens. State how you will continually innovate to survive.
- Project realistic growth rates at which customers will accept—and buy—your offering. From there, assemble a credible sales plan and project plant and staffing needs.
Address Investor Needs
Cashing out. Show when and how investors may liquidate their holdings. Venture capital firms usually want to cash out in three to seven years; professional investors look for a large capital appreciation.
Making sound projections. Give realistic, five-year forecasts of profitability. Don’t skimp on the numbers, get overly optimistic about them, or blanket your plan with a smog of figures covering every possible variation.
The price. To figure out how much to invest in your offering, investors calculate your company’s value on the basis of results expected five years after they invest. They’ll want a 35 to 40% return for mature companies—up to 60% for less mature ventures. To make a convincing case for a rich return, get a product in the hands of representative customers—and demonstrate substantial market interest.
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds.
Too many entrepreneurs, though, continue to believe that if they build a better mousetrap, the world will beat a path to their door. A good mousetrap is important, but it’s only part of meeting the challenge. Also important is satisfying the needs of marketers and investors. Marketers want to see evidence of customer interest and a viable market. Investors want to know when they can cash out and how good the financial projections are. Drawing on their own experiences and those of the Massachusetts Institute of Technology Enterprise Forum, the authors show entrepreneurs how to write convincing and winning business plans.
A comprehensive, carefully thought-out business plan is essential to the success of entrepreneurs and corporate managers. Whether you are starting up a new business, seeking additional capital for existing product lines, or proposing a new activity in a corporate division, you will never face a more challenging writing assignment than the preparation of a business plan.
Only a well-conceived and well-packaged plan can win the necessary investment and support for your idea. It must describe the company or proposed project accurately and attractively. Even though its subject is a moving target, the plan must detail the company’s or the project’s present status, current needs, and expected future. You must present and justify ongoing and changing resource requirements, marketing decisions, financial projections, production demands, and personnel needs in logical and convincing fashion.
Because they struggle so hard to assemble, organize, describe, and document so much, it is not surprising that managers sometimes overlook the fundamentals. We have found that the most important one is the accurate reflection of the viewpoints of three constituencies.
1. The market, including both existing and prospective clients, customers, and users of the planned product or service.
2. The investors, whether of financial or other resources.
3. The producer, whether the entrepreneur or the inventor.
Too many business plans are written solely from the viewpoint of the third constituency—the producer. They describe the underlying technology or creativity of the proposed product or service in glowing terms and at great length. They neglect the constituencies that give the venture its financial viability—the market and the investor.
Take the case of five executives seeking financing to establish their own engineering consulting firm. In their business plan, they listed a dozen types of specialized engineering services and estimated their annual sales and profit growth at 20%. But the executives did not determine which of the proposed dozen services their potential clients really needed and which would be most profitable. By neglecting to examine these issues closely, they ignored the possibility that the marketplace might want some services not among the dozen listed.
Moreover, they failed to indicate the price of new shares or the percentage available to investors. Dealing with the investor’s perspective was important because—for a new venture, at least—backers seek a return of 40% to 60% on their capital, compounded annually. The expected sales and profit growth rates of 20% could not provide the necessary return unless the founders gave up a substantial share of the company.
In fact, the executives had only considered their own perspective—including the new company’s services, organization, and projected results. Because they had not convincingly demonstrated why potential customers would buy the services or how investors would make an adequate return (or when and how they could cash out), their business plan lacked the credibility necessary for raising the investment funds needed.
We have had experience in both evaluating business plans and organizing and observing presentations and investor responses at sessions of the MIT Enterprise Forum. We believe that business plans must deal convincingly with marketing and investor considerations. This reading identifies and evaluates those considerations and explains how business plans can be written to satisfy them.
The MIT Enterprise Forum
Organized under the auspices of the Massachusetts Institute of Technology Alumni Association in 1978, the MIT Enterprise Forum offers businesses at a critical stage of development an opportunity to obtain counsel from a panel of experts on steps to take to achieve their goals.
In monthly evening sessions the forum evaluates the business plans of companies accepted for presentation during 60- to 90-minute segments in which no holds are barred. The format allows each presenter 20 minutes to summarize a business plan orally. Each panelist reviews the written business plan in advance of the sessions. Then each of four panelists—who are venture capitalists, bankers, marketing specialists, successful entrepreneurs, MIT professors, or other experts—spends five to ten minutes assessing the strengths and weaknesses of the plan and the enterprise and suggesting improvements.
In some cases, the panelists suggest a completely new direction. In others, they advise more effective implementation of existing policies. Their comments range over the spectrum of business issues.
Sessions are open to the public and usually draw about 300 people, most of them financiers, business executives, accountants, lawyers, consultants, and others with special interest in emerging companies. Following the panelists’ evaluations, audience members can ask questions and offer comments.
Presenters have the opportunity to respond to the evaluations and suggestions offered. They also receive written evaluations of the oral presentation from audience members. (The entrepreneur doesn’t make the written plan available to the audience.) These monthly sessions are held primarily for companies that have advanced beyond the start-up stage. They tend to be from one to ten years old and in need of expansion capital.
The MIT Enterprise Forum’s success at its home base in Cambridge, Massachusetts has led MIT alumni to establish forums in New York, Washington, Houston, Chicago, and Amsterdam, among other cities.
Emphasize the Market
Investors want to put their money into market-driven rather than technology-driven or service-driven companies. The potential of the product’s markets, sales, and profit is far more important than its attractiveness or technical features.
You can make a convincing case for the existence of a good market by demonstrating user benefit, identifying marketplace interest, and documenting market claims.
Show the User’s Benefit
It’s easy even for experts to overlook this basic notion. At an MIT Enterprise Forum session an entrepreneur spent the bulk of his 20-minute presentation period extolling the virtues of his company’s product—an instrument to control certain aspects of the production process in the textile industry. He concluded with some financial projections looking five years down the road.
The first panelist to react to the business plan—a partner in a venture capital firm—was completely negative about the company’s prospects for obtaining investment funds because, he stated, its market was in a depressed industry.
Another panelist asked, “How long does it take your product to pay for itself in decreased production costs?” The presenter immediately responded, “Six months.” The second panelist replied, “That’s the most important thing you’ve said tonight.”
The venture capitalist quickly reversed his original opinion. He said he would back a company in almost any industry if it could prove such an important user benefit—and emphasize it in its sales approach. After all, if it paid back the customer’s cost in six months, the product would after that time essentially “print money.”
The venture capitalist knew that instruments, machinery, and services that pay for themselves in less than one year are mandatory purchases for many potential customers. If this payback period is less than two years, it is a probable purchase; beyond three years, they do not back the product.
The MIT panel advised the entrepreneur to recast his business plan so that it emphasized the short payback period and played down the self-serving discussion about product innovation. The executive took the advice and rewrote the plan in easily understandable terms. His company is doing very well and has made the transition from a technology-driven to a market-driven company.
Find out the Market’s Interest
Calculating the user’s benefit is only the first step. An entrepreneur must also give evidence that customers are intrigued with the user’s benefit claims and that they like the product or service. The business plan must reflect clear positive responses of customer prospects to the question “Having heard our pitch, will you buy?” Without them, an investment usually won’t be made.
How can start-up businesses—some of which may have only a prototype product or an idea for a service—appropriately gauge market reaction? One executive of a smaller company had put together a prototype of a device that enables personal computers to handle telephone messages. He needed to demonstrate that customers would buy the product, but the company had exhausted its cash resources and was thus unable to build and sell the item in quantity.
The executives wondered how to get around the problem. The MIT panel offered two possible responses. First, the founders might allow a few customers to use the prototype and obtain written evaluations of the product and the extent of their interest when it became available.
Second, the founders might offer the product to a few potential customers at a substantial price discount if they paid part of the cost—say one-third—up front so that the company could build it. The company could not only find out whether potential buyers existed but also demonstrate the product to potential investors in real-life installations.
In the same way, an entrepreneur might offer a proposed new service at a discount to initial customers as a prototype if the customers agreed to serve as references in marketing the service to others.
For a new product, nothing succeeds as well as letters of support and appreciation from some significant potential customers, along with “reference installations.” You can use such third-party statements—from would-be customers to whom you have demonstrated the product, initial users, sales representatives, or distributors—to show that you have indeed discovered a sound market that needs your product or service.
You can obtain letters from users even if the product is only in prototype form. You can install it experimentally with a potential user to whom you will sell it at or below cost in return for information on its benefits and an agreement to talk to sales prospects or investors. In an appendix to the business plan or in a separate volume, you can include letters attesting to the value of the product from experimental customers.
Document Your Claims
Having established a market interest, you must use carefully analyzed data to support your assertions about the market and the growth rate of sales and profits. Too often, executives think “If we’re smart, we’ll be able to get about 10% of the market” and “Even if we only get 1% of such a huge market, we’ll be in good shape.”
Investors know that there’s no guarantee a new company will get any business, regardless of market size. Even if the company makes such claims based on fact—as borne out, for example, by evidence of customer interest—they can quickly crumble if the company does not carefully gather and analyze supporting data.
One example of this danger surfaced in a business plan that came before the MIT Enterprise Forum. An entrepreneur wanted to sell a service to small businesses. He reasoned that he could have 170,000 customers if he penetrated even 1% of the market of 17 million small enterprises in the United States. The panel pointed out that anywhere from 11 million to 14 million of such so-called small businesses were really sole proprietorships or part-time businesses. The total number of full-time small businesses with employees was actually between 3 million and 6 million and represented a real potential market far beneath the company’s original projections—and prospects.
Similarly, in a business plan relating to the sale of certain equipment to apple growers, you must have U.S. Department of Agriculture statistics to discover the number of growers who could use the equipment. If your equipment is useful only to growers with 50 acres or more, then you need to determine how many growers have farms of that size, that is, how many are minor producers with only an acre or two of apple trees.
A realistic business plan needs to specify the number of potential customers, the size of their businesses, and which size is most appropriate to the offered products or services. Sometimes bigger is not better. For example, a saving of $10,000 per year in chemical use may be significant to a modest company but unimportant to a Du Pont or a Monsanto.
Such marketing research should also show the nature of the industry. Few industries are more conservative than banking and public utilities. The number of potential customers is relatively small, and industry acceptance of new products or services is painfully slow, no matter how good the products and services have proven to be. Even so, most of the customers are well known and while they may act slowly, they have the buying power that makes the wait worthwhile.
At the other end of the industrial spectrum are extremely fast-growing and fast-changing operations such as franchised weight-loss clinics and computer software companies. Here the problem is reversed. While some companies have achieved multi-million-dollar sales in just a few years, they are vulnerable to declines of similar proportions from competitors. These companies must innovate constantly so that potential competitors will be discouraged from entering the marketplace.
You must convincingly project the rate of acceptance for the product or service—and the rate at which it is likely to be sold. From this marketing research data, you can begin assembling a credible sales plan and projecting your plant and staff needs.
Address Investors’ Needs
The marketing issues are tied to the satisfaction of investors. Once executives make a convincing case for their market penetration, they can make the financial projections that help determine whether investors will be interested in evaluating the venture and how much they will commit and at what price.
Before considering investors’ concerns in evaluating business plans, you will find it worth your while to gauge who your potential investors might be. Most of us know that for new and growing private companies, investors may be professional venture capitalists and wealthy individuals. For corporate ventures, they are the corporation itself. When a company offers shares to the public, individuals of all means become investors along with various institutions.
But one part of the investor constituency is often overlooked in the planning process—the founders of new and growing enterprises. By deciding to start and manage a business, they are committed to years of hard work and personal sacrifice. They must try to stand back and evaluate their own businesses in order to decide whether the opportunity for reward some years down the road truly justifies the risk early on.
When an entrepreneur looks at an idea objectively rather than through rose-colored glasses, the decision whether to invest may change. One entrepreneur who believed in the promise of his scientific-instruments company faced difficult marketing problems because the product was highly specialized and had, at best, few customers. Because of the entrepreneur’s heavy debt, the venture’s chance of eventual success and financial return was quite slim.
The panelists concluded that the entrepreneur would earn only as much financial return as he would have had holding a job during the next three to seven years. On the downside, he might wind up with much less in exchange for larger headaches. When he viewed the project in such dispassionate terms, the entrepreneur finally agreed and gave it up.
Investors’ primary considerations are:
Cashing out
Entrepreneurs frequently do not understand why investors have a short attention span. Many who see their ventures in terms of a lifetime commitment expect that anyone else who gets involved will feel the same. When investors evaluate a business plan, they consider not only whether to get in but also how and when to get out.
Because small, fast-growing companies have little cash available for dividends, the main way investors can profit is from the sale of their holdings, either when the company goes public or is sold to another business. (Large corporations that invest in new enterprises may not sell their holdings if they’re committed to integrating the venture into their organizations and realizing long-term gains from income.)
Venture capital firms usually wish to liquidate their investments in small companies in three to seven years so as to pay gains while they generate funds for investment in new ventures. The professional investor wants to cash out with a large capital appreciation.
Investors want to know that entrepreneurs have thought about how to comply with this desire. Do they expect to go public, sell the company, or buy the investors out in three to seven years? Will the proceeds provide investors with a return on invested capital commensurate with the investment risk—in the range of 35% to 60%, compounded and adjusted for inflation?
Business plans often do not show when and how investors may liquidate their holdings. For example, one entrepreneur’s software company sought $1.5 million to expand. But a panelist calculated that, to satisfy their goals, the investors “would need to own the entire company and then some.”
Making Sound Projections
Five-year forecasts of profitability help lay the groundwork for negotiating the amount investors will receive in return for their money. Investors see such financial forecasts as yardsticks against which to judge future performance.
Too often, entrepreneurs go to extremes with their numbers. In some cases, they don’t do enough work on their financials and rely on figures that are so skimpy or overoptimistic that anyone who has read more than a dozen business plans quickly sees through them.
In one MIT Enterprise Forum presentation, a management team proposing to manufacture and market scientific instruments forecast a net income after taxes of 25% of sales during the fourth and fifth years following investment. While a few industries such as computer software average such high profits, the scientific instruments business is so competitive, panelists noted, that expecting such margins is unrealistic.
In fact, the managers had grossly—and carelessly—understated some important costs. The panelists advised them to take their financial estimates back to the drawing board and before approaching investors to consult financial professionals.
Some entrepreneurs think that the financials are the business plan. They may cover the plan with a smog of numbers. Such “spreadsheet merchants,” with their pages of computer printouts covering every business variation possible and analyzing product sensitivity, completely turn off many investors.
Investors are wary even when financial projections are solidly based on realistic marketing data because fledgling companies nearly always fail to achieve their rosy profit forecasts. Officials of five major venture capital firms we surveyed said they are satisfied when new ventures reach 50% of their financial goals. They agreed that the negotiations that determine the percentage of the company purchased by the investment dollars are affected by this “projection discount factor.”
The Development Stage
All investors wish to reduce their risk. In evaluating the risk of a new and growing venture, they assess the status of the product and the management team. The farther along an enterprise is in each area, the lower the risk.
At one extreme is a single entrepreneur with an unproven idea. Unless the founder has a magnificent track record, such a venture has little chance of obtaining investment funds.
At the more desirable extreme is a venture that has an accepted product in a proven market and a competent and fully staffed management team. This business is most likely to win investment funds at the lowest costs.
Entrepreneurs who become aware of their status with investors and think it inadequate can improve it. Take the case of a young MIT engineering graduate who appeared at an MIT Enterprise Forum session with written schematics for the improvement of semiconductor-equipment production. He had documented interest by several producers and was looking for money to complete development and begin production.
The panelists advised him to concentrate first on making a prototype and assembling a management team with marketing and financial know-how to complement his product-development expertise. They explained that because he had never before started a company, he needed to show a great deal of visible progress in building his venture to allay investors’ concern about his inexperience.
Once investors understand a company qualitatively, they can begin to do some quantitative analysis. One customary way is to calculate the company’s value on the basis of the results expected in the fifth year following investment. Because risk and reward are closely related, investors believe companies with fully developed products and proven management teams should yield between 35% and 40% on their investment, while those with incomplete products and management teams are expected to bring in 60% annual compounded returns.
Investors calculate the potential worth of a company after five years to determine what percentage they must own to realize their return. Take the hypothetical case of a well-developed company expected to yield 35% annually. Investors would want to earn 4.5 times their original investment, before inflation, over a five-year period.
After allowing for the projection discount factor, investors may postulate that a company will have $20 million annual revenues after five years and a net profit of $1.5 million. Based on a conventional multiple for acquisitions of ten times earnings, the company would be worth $15 million in five years.
If the company wants $1 million of financing, it should grow to $4.5 million after five years to satisfy investors. To realize that return from a company worth $15 million, the investors would need to own a bit less than one-third. If inflation is expected to average 7.5% a year during the five-year period, however, investors would look for a value of $6.46 million as a reasonable return over five years, or 43% of the company.
For a less mature venture—from which investors would be seeking 60% annually, net of inflation—a $1 million investment would have to bring in close to $15 million in five years, with inflation figured at 7.5% annually. But few businesses can make a convincing case for such a rich return if they do not already have a product in the hands of some representative customers.
The final percentage of the company acquired by the investors is, of course, subject to some negotiation, depending on projected earnings and expected inflation.
Make It Happen
The only way to tend to your needs is to satisfy those of the market and the investors—unless you are wealthy enough to furnish your own capital to finance the venture and test out the pet product or service.
Of course, you must confront other issues before you can convince investors that the enterprise will succeed. For example, what proprietary aspects are there to the product or service? How will you provide quality control? Have you focused the venture toward a particular market segment, or are you trying to do too much? If this is answered in the context of the market and investors, the result will be more effective than if you deal with them in terms of your own wishes.
An example helps illustrate the potential conflicts. An entrepreneur at an MIT Enterprise Forum session projected R&D spending of about half of gross sales revenues for his specialty chemical venture. A panelist who had analyzed comparable organic chemical suppliers asked why the company’s R&D spending was so much higher than the industry average of 5% of gross revenues.
The entrepreneur explained that he wanted to continually develop new products in his field. While admitting his purpose was admirable, the panel unanimously advised him to bring his spending into line with the industry’s. The presenter ignored the advice; he failed to obtain the needed financing and eventually went out of business.
Once you accept the idea that you should satisfy the market and the investors, you face the challenge of organizing your data into a convincing document so that you can sell your venture to investors and customers. We have provided some presentation guidelines in the insert called “Packaging Is Important.”
Packaging Is Important
A business plan gives financiers their first impressions of a company and its principals.
Potential investors expect the plan to look good, but not too good; to be the right length; to clearly and cisely explain early on all aspects of the company’s business; and not to contain bad grammar and typographical or spelling errors.
Investors are looking for evidence that the principals treat their own property with care—and will likewise treat the investment carefully. In other words, form as well as content is important, and investors know that good form reflects good content and vice versa.
Among the format issues we think most important are the following:
The binding and printing must not be sloppy; neither should the presentation be too lavish. A stapled compilation of photocopied pages usually looks amateurish, while bookbinding with typeset pages may arouse concern about excessive and inappropriate spending. A plastic spiral binding holding together a pair of cover sheets of a single color provides both a neat appearance and sufficient strength to withstand the handling of a number of people without damage.
A business plan should be no more than 40 pages long. The first draft will likely exceed that, but editing should produce a final version that fits within the 40-page ideal. Adherence to this length forces entrepreneurs to sharpen their ideas and results in a document likely to hold investors’ attention.
Background details can be included in an additional volume. Entrepreneurs can make this material available to investors during the investigative period after the initial expression of interest.
The Cover and Title Page
The cover should bear the name of the company, its address and phone number, and the month and year in which the plan is issued. Surprisingly, a large number of business plans are submitted to potential investors without return addresses or phone numbers. An interested investor wants to be able to contact a company easily and to request further information or express an interest, either in the company or in some aspect of the plan.
Inside the front cover should be a well-designed title page on which the cover information is repeated and, in an upper or a lower corner, the legend “Copy number______” provided. Besides helping entrepreneurs keep track of plans in circulation, holding down the number of copies outstanding—usually to no more than 20—has a psychological advantage. After all, no investor likes to think that the prospective investment is shopworn.
The Executive Summary
The two pages immediately following the title page should concisely explain the company’s current status, its products or services, the benefits to customers, the financial forecasts, the venture’s objectives in three to seven years, the amount of financing needed, and how investors will benefit.
This is a tall order for a two-page summary, but it will either sell investors on reading the rest of the plan or convince them to forget the whole thing.
The Table of Contents
After the executive summary include a well-designed table of contents. List each of the business plan’s sections and mark the pages for each section.
Even though we might wish it were not so, writing effective business plans is as much an art as it is a science. The idea of a master document whose blanks executives can merely fill in—much in the way lawyers use sample wills or real estate agreements—is appealing but unrealistic.
Businesses differ in key marketing, production, and financial issues. Their plans must reflect such differences and must emphasize appropriate areas and deemphasize minor issues. Remember that investors view a plan as a distillation of the objectives and character of the business and its executives. A cookie-cutter, fill-in-the-blanks plan or, worse yet, a computer-generated package, will turn them off.
Write your business plans by looking outward to your key constituencies rather than by looking inward at what suits you best. You will save valuable time and energy this way and improve your chances of winning investors and customers.
- SR Mr. Rich has helped found seven technologically based businesses, the most recent being Advanced Energy Dynamics Inc. of Natick, Massachusetts. He is also a cofounder and has been chairman of the MIT Enterprise forum, which assists emerging growth companies.
- DG Mr. Gumpert is an associate editor of HBR, where he specializes in small business and marketing. He has written several HBR articles, the most recent of which was “The Heart of Entrepreneurship,” coauthored by Howard. H. Stevenson (March–April 1985). This article is adapted from Business Plans That Win $$$ : Lessons from the MIT Enterprise Forum, by Messrs. Rich and Gumpert (Harper & Row, 1985). The authors are also founders of Venture Resource Associates of Grantham, New Hampshire, which provides planning and strategic services to growing enterprises.
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How to Write a Successful Business Plan: 12 Tips for Success
- August 2, 2022
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If you’re starting a business, one of the most important things you’ll need to do is write a good business plan. A business plan is your roadmap to success, and it will help you stay on track during tough times. In this blog post, we will discuss 12 tips for writing a successful business plan. Stay tuned, and make sure to bookmark this page so you can come back to it later!
What is a successful business plan, and why do you need one?
A business plan is a document that outlines your business goals and how you intend to achieve them. Having a business plan is important because it will help you stay organized and focused on your goals. Additionally, if you ever need to raise money for your business, investors will want to see your business plan.
How long should a business plan be?
How long your business plan should depend on the size and scope of your business. If you’re a solopreneur, you can probably get away with a one-page business plan. However, if you have a more complex business, you’ll need a longer, more detailed plan. There’s no hard and fast rule for how long your business plan should be, but generally speaking, the more complex your business is, the longer your business plan will need to be.
The 12 tips for writing a successful business plan
Now that you understand what a business plan is and why you need one, it’s time to roll up your sleeves and get started. Here are 12 essential tips for writing a good business plan:
– Keep it short and simple
The last thing you want to do is overwhelm potential investors with too much information. They’re not going to read a 100-page document, so make sure your business plan is concise and to the point.
– Do your research
Before you start writing, you need to do your homework. This means conducting market research and feasibility studies to ensure that there’s a demand for your product or service.
– Write it yourself
While it’s tempting to hire a professional business plan writer, it’s best to tackle the task yourself. This way, you’ll have a better understanding of your business and what it takes to make it successful.
– Be realistic
It’s important to be realistic when writing your business plan. Don’t try to overly optimistic in order to make your business look more appealing to investors.
– Include a market analysis
Your business plan should include a detailed market analysis, which will show potential investors that you have a good understanding of the industry you’re entering.
– Know your competition
Investors will want to know who your main competitors are and how you plan on differentiating yourself from them.
– Set realistic financial goals
When it comes to financial projections, it’s important to be realistic. Don’t try to inflate your numbers in an attempt to make your business look more successful than it actually is.
– Have a solid marketing strategy
A good marketing strategy is essential for any business, so make sure you include one in your business plan.
– Get expert feedback
Before you finalize your business plan, it’s a good idea to get feedback from industry experts or mentors. They can offer valuable insights that you may not have thought of.
– Be prepared to answer questions
When presenting your business plan to potential investors, be prepared to answer any questions they may have.
– Don’t forget the appendices
Your business plan should include all of the supporting documentation, such as market research reports, financial projections, and more.
By following these tips, you’ll be well on your way to writing a solid business plan that will help you launch and grow your business.
How to follow your business plan and achieve success
Now that you know how to write a good business plan, it’s time to put it into action. Here are a few tips to help you implement your business plan and achieve success:
– Set realistic goals
Don’t try to accomplish too much in the beginning. Start small and gradually grow your business as you reach your goals.
– Delegate tasks
As your business grows, you’ll need to delegate tasks to employees or contractors. This will free up your time so you can focus on other aspects of running your business.
– Stay organized
It’s important to stay organized as you implement your business plan. This will help you keep track of progress and make necessary changes along the way.
– Be flexible
Things will inevitably change as you start to implement your business plan. Be prepared to make adjustments as needed in order to achieve success.
By following these tips, you can ensure that your business plan is executed successfully and that your business grows and thrives.
Questions to ask before starting your own business
Starting your own business is a big decision. Before you take the plunge, it’s important to ask yourself a few key questions:
– Do I have what it takes?
Running your own business requires a lot of hard work, dedication, and determination. Be honest with yourself and make sure you’re up for the challenge before proceeding.
– Is there a market for my product or service?
Make sure there’s a demand for what you’re selling before starting your business. Conduct market research and talk to potential customers to gauge interest.
– Can I afford it?
Starting a business can be expensive, so make sure you have the financial resources in place before moving forward.
– Do I have a solid business plan?
As we’ve discussed, a good business plan is essential for any successful business. Make sure you take the time to develop a comprehensive and well-thought-out plan before proceeding.
By asking yourself these questions, you can make sure you’re making the best decision for you and your business.
How to create a winning sales pitch
If you’re in business, then you know that the key to success is sales. And a big part of making sales is having a winning sales pitch. Here are a few tips to help you create a pitch that will close the deal:
– Know your product or service inside and out
Before you can sell anything, you need to be an expert on it. Know all the features and benefits and be able to answer any questions that come up.
– Keep it short and sweet
Your sales pitch should be concise and to the point. Don’t try to cram too much information into a short period of time.
– Focus on the customer’s needs
When creating your sales pitch, always keep the customer’s needs in mind. What are they looking for and how can you help them?
– Use persuasive language
Your sales pitch should be persuasive and convincing. Use strong language that will make the customer want to take action.
By following these tips, you can create a winning sales pitch that will help you close more deals and grow your business.
How to market your new business
Starting a new business can be expensive, but you don’t need to break the bank to market it effectively. Here are a few tips for marketing your new business on a shoestring budget:
– Use free or low-cost marketing channels
There are many marketing channels that are either free or low-cost, such as social media, blogging, and email marketing. Utilize these channels to get the word out about your new business.
– Get creative with your marketing
There are many creative ways to market your business without spending a lot of money. For example, you can offer free samples, create a loyalty program, or host a contest or giveaway.
– Take advantage of word-of-mouth marketing
One of the most effective forms of marketing is word-of-mouth. Encourage your customers and clients to spread the word about your new business to their friends and family.
How to handle difficult times in your business
No business is immune to difficult times. Whether it’s a slowdown in sales, the loss of a key client, or some other challenge, every business will face adversity at some point. Here are a few tips for handling difficult times in your business:
– Don’t panic
When tough times hit, it’s important to stay calm and level-headed. Don’t make any rash decisions and take the time to assess the situation before taking action.
– Communicate with your team
During difficult times, it’s important to keep your team in the loop. Let them know what’s going on and involve them in finding solutions to the problem.
– Focus on your customers
Even when times are tough, it’s important to keep your customers and clients happy. Do whatever you can to provide a great customer experience and keep them coming back.
– Stay positive
It’s easy to get down when things aren’t going well in business, but it’s important to stay positive. Remember that difficult times don’t last forever and things will eventually turn around.
How to manage employees effectively
As a business owner, it’s important to know how to manage your employees effectively. After all, they are the backbone of your business and play a vital role in its success. Here are a few tips for managing employees effectively:
– Set clear expectations
It’s important to set clear expectations for your employees from the start. Let them know what is expected of them in terms of their work and performance.
– Give feedback regularly
Giving feedback is a key part of being an effective manager. Make sure to give both positive and constructive feedback on a regular basis.
– Be available when needed
Your employees will need your support from time to time, so make sure you are available when they need you. Whether it’s a problem with their work or something personal, be there for them.
– Reward good performance
Recognizing and rewarding good performance is a great way to motivate your employees and encourage them to do their best. Whether it’s a bonus, raise, or simply a pat on the back, letting your employees know that you appreciate their hard work is crucial.
By following these tips, you can be an effective manager and get the most out of your employees. Good luck!
If you’re looking for a business loan, Silver Mountain Finance can help. We offer a variety of loan products to help businesses grow and succeed. To learn more, visit our website today.
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How to create an effective Business Plan
“If you fail to plan, you are planning to fail”
You’ve probably all heard this quote before, but take a second to let it sink in. It’s actually by Benjamin Franklin and it's a good one. When you are just starting out in business it is so exciting, and the ideas are flowing, but it can be easy to get lost in the middle of everything and become overwhelmed. A business plan will be so beneficial at that point as it can help you declutter your thoughts and provide a roadmap for the future of your business. It goes without saying that the plan will change over time, and you will have to come back to change it again and again. However, the process of writing it will force you to think through the complexities relating to your business ahead of time.
What do I mean when I refer to a business plan?
Well, I’m not talking about a twenty-page document that must be submitted to the bank for a loan! My goal in this blog is to help guide your thinking about your business by asking the right questions and creating an effective business plan which will help you to take action.
So, grab a pen and paper and get ready to answer some of these questions:
This is fundamental. Often, people start a business and lose motivation along the way especially when things start to get difficult and quickly give up on their business. Money is an excellent motivator for starting any business, however, for most people money alone is not strong enough. Companies like Apple and Nike that revolutionised industries had passionate founders who had a powerful purpose for their entrepreneurial journey. They had a “why” for their business.
Why do you want to start a business?
In simple terms – a business exists to meet a need or solve a problem. The need or the demand for your solution or service is determined by the market you are targeting. If there is no need for what you are offering, or people are not attracted to your solution, no one will be interested in your business. Simple as that! So you need to ensure that does not happen. To do this you have to determine two vital things.
1. Your value proposition and unique selling point. In other words, why should people buy from you? Are you genuinely giving them something of value? How will your product or service make their life better? What is different about your product or service?
2. Your ideal client. In other words, know who you want to be serving. Who is your product or service for? Is it for men or women or maybe both? What is their income profile? In what age group do they belong? What type of jobs do they have?
Competition
Analysing the current landscape of the market will help you gain insights about your competitors. Looking closely at your competition will help you identify trends in the industry. You always want to have a competitive advantage, and you can only achieve this by keeping a close eye on your competitors.
1. Who are your top three competitors?
2. Can you find some reviews about them online?
3. What are their best and worst reviews?
Do not blindly follow the competition. Learn from your competitor’s mistakes and fill the gaps in the market that they are not currently serving. Looking at their negative reviews can provide you with insights on where you should build your strengths.
This is the foundation of your business and answering these questions will help guide your thinking and allow you to take actions.
1. Distribution: Think of the word “distribution” in a broader sense. How will you deliver value to your customers? Is it an online course? Or through a retail shop? Or maybe it is delivered right to their homes?
2. Customer Relationship: How will you maintain your relationship with your customers? Will you need customer relationship management software? How will you gather feedback from them?
3. Core Activities: What will your day to day business activities look like? What are the core activities that will drive sales and bring in more customers? Try to automate any weekly repetitive activities.
4. Supporting Resources and Partners: Do you need any special software for managing your inventory? Do you need to build a website? Do you need to hire employees? Is there any software in the market that can help scale your business? Can you partner up with an influencer to drive growth of your business? Do you need a business coach to guide you?
In the world of business, everything has a price tag. It is essential to keep track of costs, to make sure that your business is making money at the end of the day. The costs will also help guide pricing for your products and services. You can break down each element of what you do and figure out how much each will cost , allowing you to price your service or product accordingly so you will make more than you spend.
When you are just starting out, you’ll need to estimate the number of people who may buy the service or product that you will offer. This will allow you to forecast your total revenue. You should also keep an eye on your cash flow. Do you have enough cash to operate your business? If not, you may need to take a loan, or maybe get a business credit card to cover some of your expenses and pay the balance back once you receive cash from your customers. It may be a tedious job, but it is crucial that you keep track of all your earnings and expenses. Hire a bookkeeper and accountant if necessary.
Financial insights will help you understand your business better, and though I understand it’s not the creative bit we all love, it must never be neglected. For your business plan, you need to create a budget outlining your income and expenses for a year and take note of all your assets and liabilities for that year.
If you’re ready to take your business to the next level, click the button below to learn about how my Fabulous Foundations course can help.
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How to Write a Business Plan: Beginner’s Guide (& Templates)
Written by: Chloe West
Thinking about starting a business? One of the first steps you’ll need to take is to write a business plan. A business plan can help guide you through your financial planning, marketing strategy, unique selling point and more.
Making sure you start your new business off on the right foot is key, and we’re here to help. We’ve put together this guide to help you write your first business plan. Or, you can skip the guide and dive right into a business plan template .
Ready to get started?
Here’s a short selection of 8 easy-to-edit business plan templates you can edit, share and download with Visme. View more templates below:
8-Step Process for Writing a Business Plan
What is a business plan, why is a business plan important, step #1: write your executive summary, step #2: put together your company description, step #3: conduct your market analysis, step #4: research your competition, step #5: outline your products or services, step #6: summarize your financial plan, step #7: determine your marketing strategy, step #8: showcase your organizational chart, 14 business plan templates to help you get started.
A business plan is a document that helps potential new business owners flesh out their business idea and put together a bird’s eye view of their business. Writing a business plan is an essential step in any startup’s ideation process.
Business plans help determine demographics, market analysis, competitive analysis, financial projections, new products or services, and so much more.
Each of these bits of information are important to have on hand when you’re trying to start a business or pitching investors for funds.
Here’s an example of a business plan that you can customize to incorporate your own business information.
We’re going to walk you through some of the most important parts of your business plan as well as how to write your own business plan in 8 easy steps.
If you’re in the beginning stages of starting a business , you might be wondering if it’s really worth your time to write out your business plan.
We’re here to tell you that it is.
A business plan is important for a number of reasons, but mostly because it helps to set you up for success right from the start.
Here are four reasons to prove to you why you need to start your business off on the right foot with a plan.
Reason #1: Set Realistic Goals and Milestones
Putting together a business plan helps you to set your objectives for growth and make realistic goals while you begin your business.
By laying out each of the steps you need to take in order to build a successful business, you’re able to be more reasonable about what your timeline is for achieving everything as well as what your financial projections are.
The best way to set goals is using the SMART goals guidelines, outlined below.
Reason #2: Grow Your Business Faster
Having a business plan helps you be more organized and strategic, improving the overall performance of your business as you start out. In fact, one study found that businesses with a plan grow 30% faster than businesses that don’t.
Doesn’t that sound reason enough alone to start out your business venture with a solidified plan? We thought so too, but we’ve still got two more reasons.
Reason #3: Minimize Risk
Starting a new business is uncharted territory. However, when you start with a roadmap for your journey, it makes it easier to see success and minimize the risks that come with startups.
Minimize risk and maximize profitability by documenting the most important parts of your business planning.
Reason #4: Secure Funding
And finally, our last reason that business plans are so important is that if you plan to pitch investors for funding for your new venture, they’re almost always going to want to see a detailed business plan before deciding whether or not to invest.
You can easily create your business plan and investor pitch deck right here with Visme. Just sign up for a free account below to get started.
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The executive summary is a brief overview of your entire business plan, giving anyone who reads through your document a quick understanding of what they’re going to learn about your business idea.
However, you need to remember that some of the people who are going to read your business plan don’t want to or have time to read the entire thing. So your executive summary needs to incorporate all of the most important aspects of your plan.
Here’s an example of an executive summary from a business plan template you can customize and turn into your own.
Your executive summary should include:
- Key objective(s)
- Market research
- Competitor information
- Products/services
- Value proposition
- Overview of your financial plan
- How you’re going to actually start your business
One thing to note is that you should actually write your executive summary after the rest of your business plan so that you can properly summarize everything you’ve already created.
So at this point, simply leave a page blank for your executive summary so you can come back to it at the end of your business plan.
The next step is to write out a full description of your business and its core offerings. This section of your business plan should include your mission statement and objectives, along with your company history or overview.
In this section, you may also briefly describe your business formation details from a legal perspective.
Mission Statement
Don’t spend too much time trying to craft this. Your mission statement is a simple “why” you started this business. What are you trying to achieve? Or what does your business solve?
This can be anything from one single quote or a paragraph, but it doesn’t need to be much longer than that. In fact, this could be very similar to your value proposition.
What are your goals? What do you plan to achieve in the first 90 days or one year of your business? What kind of impact do you hope to make on the market?
These are all good points to include in your objectives section so anyone reading your business plan knows upfront what you hope to achieve.
History or Overview
If you’re not launching a brand new business or if you’ve previously worked on another iteration of this business, let potential investors know the history of your company.
If not, simply provide an overview of your business, sharing what it does or what it will do.
Your third step is to conduct a market analysis so you know how your business will fit into its target market. This page in your business plan is simply meant to summarize your findings. Most of your time should be spent actually doing the research.
Your market analysis needs to look at things like:
- Market size, and if it’s grown in recent years or shrinking
- The segment of the market you plan to target
- Demographics and behavior of your target audience
- The demand for your product or service
- Your competitive advantage or differentiation strategy
- The average price of your product or service
Put together a summary of your market analysis and industry research in a 1-2 page format, like we see below.
Your next step is to conduct a competitive analysis. While you likely touched on this briefly during your market analysis, now is the time to do a deep dive so that you have a good grasp on what your competitors are doing and how they are generating customers.
Start by creating a profile of all your existing competitors, or at the very least, your closest competitors – the ones who are offering very similar products or services to you, or are in a similar vicinity (if you’re opening a brick and mortar store).
Focus on their strengths and what they’re doing really well so that you can emulate their best qualities in your own way. Then, look at their weaknesses and what your business can do better.
Take note of their current marketing strategy, including the outlets you see a presence, whether it’s on social media, you hear a radio ad, you see a TV ad, etc. You won’t always find all of their marketing channels, but see what you can find online and on their website.
After this, take a minute to identify potential competitors based on markets you might try out in the future, products or services you plan to add to your offerings, and more.
Then put together a page or two in your business plan that highlights your competitive advantage and how you’ll be successful breaking into the market.
Step five is to dedicate a page to the products or services that your business plans to offer.
Put together a quick list and explanation of what each of the initial product or service offerings will be, but steer clear of industry jargon or buzzwords. This should be written in plain language so anyone reading has a full understanding of what your business will do.
You can have a simple list like we see in the sample page above, or you can dive a little deeper. Depending on your type of business, it might be a good idea to provide additional information about what each product or service entails.
The next step is to work on the financial data of your new business. What will your overhead be? How will your business make money? What are your estimated expenses and profits over the first few months to a year?
There is so much that goes into your financial plan for a new business, so this is going to take some time to compile. Especially because this section of your business plan helps potential cofounders or investors understand if the idea is even viable.
Your financial plan should include at least five major sections:
- Sales Forecast: The first thing you want to include is a forecast or financial projection of how much you think your business can sell over the next year or so. Break this down into the different products, services or facets of your business.
- Balance Sheet: This section is essentially a statement of your company’s financial position. It includes existing assets, liabilities and equity to demonstrate the company’s overall financial health.
- Income Statement: Also known as a profit and loss statement (P&L), this covers your projected expenses and revenue, showcasing whether your business will be profitable or not.
- Operating Budget: A detailed outline of your business’s income and expenses. This should showcase that your business is bringing in more than it’s spending.
- Cash Flow Statements: This tracks how much cash your business has at any given point, regardless of whether customers or clients have paid their bills or have 30-60+ days to do so.
While these are the most common financial statements, you may discover that there are other sections that you want to include or that lenders may want to see from you.
You can automate the process of looking through your documents with an OCR API , which will collect the data from all your financial statements and invoices.
The next step is coming up with a successful marketing plan so that you can actually get the word out about your business.
Throughout your business plan, you’ve already researched your competitors and your target market, both of which are major components of a good marketing strategy. You need to know who you’re marketing to, and you want to do it better than your competition.
On this page or throughout this section of your business plan, you need to focus on your chosen marketing channels and the types of marketing content you plan to create.
Start by taking a look at the channels that your competitors are on and make sure you have a good understanding of the demographics of each channel as well. You don’t want to waste time on a marketing channel that your target audience doesn’t use.
Then, create a list of each of your planned marketing avenues. It might look something like:
- Social media ( Facebook, Instagram, Pinterest)
- Email newsletter
- Digital ads
Depending on the type of business you’re starting, this list could change quite a bit — and that’s okay. There is no one-size-fits-all marketing strategy, and you need to find the one that brings in the highest number of potential customers.
Your last section will be all about your leadership and management team members. Showcasing that you have a solid team right from the start can make potential investors feel better about funding your venture.
You can easily put together an organizational chart like the one below, with the founder/CEO at the top and each of your team leaders underneath alongside the department they’re in charge of.
Simply add an organizational chart like this as a page into your overall business plan and make sure it matches the rest of your design to create a cohesive document.
If you want to create a good business plan that sets your new business up for success and attracts new investors, it’s a good idea to start with a template.
We’ve got 14 options below from a variety of different industries for you to choose from. You can customize every aspect of each template to fit your business branding and design preferences.
Template #1: Photography Business Plan Template
This feminine and minimalistic business plan template is perfect for getting started with any kind of creative business. Utilize this template to help outline the step-by-step process of getting your new business idea up and running.
Template #2: Real Estate Business Plan Template
Looking for a more modern business plan design? This template is perfect for plainly laying out each of your business plans in an easy-to-understand format. Adjust the red accents with your business’s colors to personalize this template.
Template #3: Nonprofit Business Plan Template
Creating a business and marketing plan for your nonprofit is still an essential step when you’re just starting out. You need to get the word out to increase donations and awareness for your cause.
Template #4: Restaurant Business Plan Template
If your business plan needs to rely heavily on showcasing photos of your products (like food), this template is perfect for you. Get potential investors salivating at the sight of your business plan, and they’re sure to provide the capital you need.
Template #5: Fashion Business Plan Template
Serifs are in. Utilize this template with stunning serif as all the headers to create a contemporary and trendy business plan design that fits your business. Adjust the colors to match your brand and easily input your own content.
Template #6: Daycare Business Plan Template
Creating a more kid-friendly or playful business? This business plan template has bold colors and design elements that will perfectly represent your business and its mission.
Use the pages you need, and remove any that you don’t. You can also duplicate pages and move the elements around to add even more content to your business plan.
Template #7: Consulting Business Plan Template
This classic business plan template is perfect for a consulting business that wants to use a stunning visual design to talk about its services.
Template #8: Coffee Shop Business Plan Template
Customize this coffee shop business plan template to match your own business idea. Adjust the colors to fit your brand or industry, replace photos with your own photography or stock photos that represent your business, and insert your own logo, fonts and colors throughout.
Template #9: SaaS Business Plan Template
A SaaS or service-based company also needs a solid business plan that lays out its financials, list of services, target market and more. This template is the perfect starting point.
Template #10: Small Business Plan Template
Every startup or small business needs to start out with a strong business plan in order to start off on the right foot and set yourself up for success. This template is an excellent starting point for any small business.
Template #11: Ecommerce Business Plan Template
An ecommerce business plan is ideal for planning out your pricing strategy of all of your online products, as well as the site you plan to use for setting up your store, whether WordPress, Shopify, Wix or something else.
Template #12: Startup Business Plan Template
Customize this template and make it your own! Edit and Download
This is another generic business plan template for any type of startup to customize. Switch out the content, fonts and colors to match your startup branding and increase brand equity.
Template #13: One-Page Business Plan Template
Want just a quick business plan to get your idea going before you bite the bullet and map out your entire plan? This one-page template is perfect for those just starting to flesh out a new business idea.
Template #14: Salon Business Plan Template
This salon business plan template is easy on the design and utilizes a light color scheme to put more focus on the actual content. You can use the design as is or keep it as a basis for your own design elements.
Create Your Own Business Plan Today
Ready to write your business plan? Once you’ve created all of the most important sections, get started with a business plan template to really wow your investors and organize your startup plan.
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About the Author
Chloe West is the content marketing manager at Visme. Her experience in digital marketing includes everything from social media, blogging, email marketing to graphic design, strategy creation and implementation, and more. During her spare time, she enjoys exploring her home city of Charleston with her son.
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Premier Agent Toolkit
How to create a real estate agent business plan.
In this article:
Why agents need a real estate business plan
How to write a real estate business plan, free real estate business plan template.
Every agent needs a plan to succeed. A real estate business plan keeps you accountable and on track. An optimal business plan for real estate agents includes firm goals, but it’s also fluid — you’ll want to update your real estate business plan as you grow and the market evolves.
A real estate business plan allows you to stay current with market trends and ahead of the competition. It also helps you track results over time, test lead generation strategies and develop new marketing approaches. Zillow’s Bret Calltharp, a former training leader for a large brokerage group, saw his agents’ business increase by an average of 27% when implementing a business plan for the first time.
Here’s what a good real estate agent business plan will show you:
- Where you are today
- Where you want to be
- How you’ll get there
- How to measure your performance
- When and where to make a course correction
The benefits are clear, and you’re convinced — but where do you start? Here are our recommended steps for creating a business plan for real estate agents:
Write an executive summary
Real estate business planning should always start with a summary of who you are, what services you offer, where you operate and who you serve.
Define your mission statement
Your mission statement is the foundation that supports your entire real estate business plan. It should clearly state your guiding principles and goals.
Create a team management summary
If you’re working with a team, include all members who contribute to your success and how they help. Create a table that shows their roles, responsibilities and time frames for specific tasks.
Know your target client
Determine who your target client is and figure out their story. The more personal you can get, the better you’ll serve your clients.
Who, specifically, is your target client? This could be a first-time home buyer, a home seller, a renter — or a more specific subset like retirees or investors.
What is your target client’s story? Ask your clients specific questions and create a strategy based on their answers. Where do they want to live? What is their annual household income? What do they want from their home?
Outline SMART business goals
Your goals should be specific, measurable, attainable, realistic and timely — in other words, SMART . Once your real estate business goals are SMART, break down each goal into objectives. These should be the specific tasks and activities required to accomplish the goal.
Map out your keys to success
Every real estate agent business plan template should include a table that lists the top three ways to achieve business success — and more importantly, the actions required to fulfill them.
Breakeven analysis
A critical part of real estate business planning is determining your breakeven point. What average commission rate do you need to achieve per unit to break even each month? How many homes must you sell at your average commission rate to break even by your target goal?
Understand your market
It’s crucial to stay on top of your target client’s market. A successful agent will know how the market has behaved in the past few years, as well as where it’s headed (and why).
Segment your market
Let’s look at a target client in a sample real estate business plan.
Suppose the target client is a first-time home buyer. How can we segment that market further to include even more detailed and relevant information? Here are two potential market segments for our first-time home buyer:
- First-time home buyers, single family
- First-time home buyers, multigenerational
Plan for market growth
Map out how much growth you anticipate in your market, and use it to forecast the number of potential clients over the next few years.
Track market trends in your real estate business plan with a table listing possible outcomes on the right and trends on the left.
Track market trends
What market trends do you foresee impacting your business and market segments? Here’s a real estate business plan sample that projects a possible outcome for a rise in multigenerational living:
Develop a SWOT analysis
Every business plan needs a SWOT analysis: strengths, weaknesses, opportunities and threats. Some sample real estate business plan SWOT questions include:
- What sets me apart from my competition?
- What skills need improving?
- Are there any opportunities I’m overlooking?
Recognize your competition
Who’s your primary competition in your target market, and what makes them your primary competition? How will you outperform them?
Create a marketing strategy
Every real estate business plan template needs a marketing strategy table. Highlight your resources and key features, like this sample:
List ways to generate leads
Always keep a list of effective methods to generate leads , and always update the list when new strategies come up. The lead generation list in your real estate development business plan is as simple as this:
Project yearly sales forecast
Use market growth, trends and other real estate marketing strategies to predict your annual sales for the next three years. Here’s an example table from our real estate business plan PDF:
Outline your personnel expenses
Knowing what you’ll spend in a year will help you determine your breakeven point and set reasonable expectations for growth. A simple expense table, like this one from our free real estate business plan, allows you to project your personnel expenses through the next three years:
Measure client experience
Keep track of all the services you offer — and measure how quickly you deliver them. This is crucial in any real estate business planning document, as it helps you build a strong client relationship and track the results over time. Here’s an example for measuring response time:
Use a client relationship management (CRM) tool
There are many CRM tools out there, so it’s easy to find one that fits your needs. Do you want to track analytics? Use it for email marketing? Keep track of property and listing details? Automate your marketing efforts?
As a Zillow Premier Agent , you can use a CRM to manage all your leads and connections, along with their progress through the real estate journey. You can prioritize leads who are actively looking, submitting offers and under contract. Jot down other tools you’re using, especially transaction management tools and their specific functions.
Calculate your business plan performance
The final step in your real estate business plan template is measuring the plan’s performance. Track performance-related questions and how you’ll measure them. Here’s a sample question and measurement example that many agents use for real estate business planning:
Our customizable template helps you create a real estate business plan that outlines what success looks like — for you and your clients — so you can have your best year yet. This sample real estate business plan gives clear examples and allows for complete customization to your personal goals and your real estate market. Jot down your real estate business goals, clarify the state of your finances, profile your target customers and track other data that’s vital to successful real estate business planning.
Best of all — you can get started today! Just download our free real estate business plan template and add your own goals, projections, expenses and data. Don’t forget to update it regularly to accurately track your progress, evolve with the market and stay current with your target client’s needs.
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onEntrepreneur
How to write an effective business plan.
Why do you need to write a business plan ? Well, for starters, an effective business plan can help you acquire funding from investors and banks because it demonstrates that you have done some research and thought about marketing, operations and finances. It’s a great starting point to build off of.
Some successful entrepreneurs with experience in launching startups, a rolodex of powerful connections and a proven track record may get away with not having a plan, but if you’re opening your first business, a business plan is almost always a prerequisite.
Another thing to remember is that an effective business plan is never written in stone. It is an educated guess at why the business can be successful and an outline for you business model. Historically speaking, every single business plan has had to be changed at least once since the business started, simply because the real world is much different than the world detailed by the plan. Sales cycles could be longer, the market could be different, or the price of your good or service has to be changed.
A well-written plan, however, will help keep you focused on your business objectives and the marketing and sales endeavors that will lead you to success. To write an effective business plan, you’ll need to have the following elements, all of which will need to be well-researched and detailed.
Executive Summary
This section is probably the most important part of your plan because it’s the only section most will read before deciding to meet with you or actually making an offer. If it’s not written well, your plan will be dead on arrival, as a poorly conveyed business plan is ineffective and leads to nothing.
Business Description
In this section, you will paint a full picture of your business. Include information about the current state and outlook of your industry, and describe your average customer. Next, go into detail about your products or services and how your offerings will improve customers’ lives or solve the problems they deal with on a regular basis.
Market Analysis
Provide an overview of the location or community and demographics of your customers, explaining how you can meet specific needs for people in that area and why you will be successful there. Be sure to back up any statements with hard data and statistical evidence. In order to get this data, be sure to do a lot of primary research, which will require going out and actually talking to people, whether they are experts, customers, competitors, manufacturers or anything else. The more research you do on your potential market, the more credible your numbers will be in the financial section.
Competitive Analysis
In this section, your goal is to set yourself apart from the competition. List your top competitors, and explain how you differ from them and why customers will choose your offering over another. Go into detail about competitor weaknesses that you can exploit with better pricing, higher quality or stronger service. In addition, be honest about the areas where competitors beat you, and provide ideas for how you plan to overcome these deficits and still attract customers.
Thoroughly describe your plans for marketing your business, including your plans for traditional and online advertising, social media advertising and so on.
Operations Plan
In this section, you will lay out a plan for running your business. Start by listing basics like your hours of operation and details about your location and workspace. Then provide a list of equipment and supplies you will need to purchase or lease upfront, along with a list of materials you expect to purchase on an ongoing basis and the estimated cost of those supplies.
Financial Projections
Besides the executive summary, this is an extremely important section for an effective business plan. In this section, you will focus on your sales potential and show any potential investors how your business will make money for both yourself and your partners.For the next three to five years, provide a:
Request for Funds
If you are seeking funding, use this section to clearly state how much money you are asking for and when you need the money. Then briefly summarize how you will use the money to meet your financial objectives and overall goals for the business.
Writing an effective business plan can be the single best thing you do for your business, regardless of whether you haven’t yet opened up shop or have been operating for a while.
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The small business guide to email marketing
An effective email marketing strategy is an essential part of any business, no matter the size of your business. It’s a surefire way to help nurture and retain existing customers and generate new ones. Best of all, you don’t need a massive marketing budget to build an effective email marketing strategy.
Here are five ways to create an effective email marketing strategy.
1. Have confidence in the plan
Before you begin an email marketing strategy, learn how and why this will impact your business. Also, you must have confidence in its potential. Don’t just start sending out emails without buying into your own plan.
If you have any doubts, consider a relevant survey found most customers like getting promotional emails. A whopping 96% of people who earn $75,000 – $99,900 say they would like to receive promotional emails from companies they do business with. Also, 92% of those earning $100,000 or more agree with this sentiment.
Email marketing is also a great way to reach customers on mobile devices. The most popular activity for mobile users (59%) is checking and sending emails. Email marketing is cost-effective , too. The average return of around $40 for every dollar spent.
2. Build an email list
You need an email list to reach your customers and target audience. You can collect these in a variety of ways:
- Do it is in person during checkout or via an in-store sign-up sheet.
- Get contact info through printed materials, or online via your website and social media channels.
When customers say they want to receive emails from your businesses, they’re saying they want to gain value. Be ready to address their common concerns:
- What’s in it for me? Let them know how signing up to receive your emails benefits them—whether it’s through coupons and promos, rewards, product or service updates, contests, exclusive offers, or valuable content.
- Can I control the emails? Assure them that they can choose the frequency at which they receive emails. They should also know they can opt-out at any time. Let them choose the types they receive, like newsletters, blogs, discount offers, or electronic receipts.
- What happens next? Tell them what to expect now that they’ve signed up (e.g., you’ll be getting a verification email; you’ll be getting 20% off your next purchase).
If your customers are signing up in person, you can relay this information first hand. If you’re targeting online customers via your website or through social media, you can capture potential subscribers in several ways. Standard practices often use bright and clear call-to-action (CTA) buttons or a well-placed contact form.
Don’t feel tempted to purchase email lists from third-parties. Relying on an outside list is a risky move because the people on that list haven’t necessarily done business with you. Receiving another unsolicited email will likely be annoying and ineffective. It may also violate General Data Protection Regulation (GDPR) rules .
Once you’ve started to build your email list, it’s time to write targeted email content. In most cases, expect a slow start since it requires a bit of background information on your customers. But soon, you’ll be able to categorize email contacts into groups based on similar interests or attributes, like:
- Past-purchase behavior
- Demographics (age, gender, location, income level)
- Customer loyalty
Using customer management software is a suitable way to gather this type of information. Until then, a simple, straightforward email with a clear CTA button will suffice. Make sure it’s responsive so that viewing on a desktop, tablet, or mobile device is easy.
3. Set up drip email campaigns
Customers should be able to choose the type and frequency of emails they get from your business. That’s where a drip campaign comes in handy. The name gets its inspiration from drip irrigation methods used in farming, in which small amounts of water are used over long periods to water plants or crops.
In other words, you’re nourishing your crops in hopes of creating a bounty. In email marketing, it means you’re nurturing your relationships by sending out a series of automated emails. The drip campaigns can be based on a specific campaign schedule or based on actions customers take.
Drip campaigns work for someone who fits into a specific category or segmentation. That helps ensure they’re receiving the right email at precisely the right time, and eventually leading them to purchase. Most small businesses have a go-to email drip campaign for new customers and another one for existing customers.
A new customer drip campaign might look something like this:
- Welcome email
- Promo email for first-time purchase
- Relevant content of interest
- Cart abandonment (reaching out to customers who add items to cart, but leave before checking out)
- Thank you for your purchase
An existing customer drip campaign may look something like this:
- New product release/updates
- Regular content marketing emails (sending valuable, non-advertising content to build trust and brand loyalty.
- Social promotions
- Seasonal promotions
4. Test and learn
As you gain experience with email marketing, you’ll be able to experiment with different tactics to see if small changes can impact your results. For example, you can send half your email list a message with one subject line and half another subject line and then compare results.
These tests should be side-by-side comparisons, also known as A/B testing. For example, comparing one subject line versus another subject line. You run into problems if you’re testing things that aren’t comparable like a subject line vs. a discount offer.
How do you know if your email program is working? As a small business owner, you may be able to notice the results first hand. You’ll also learn to start tracking key performance indicators like conversion, which means your email inspired an action. That action may be getting a customer to open an email, click a CTA button, fill out an online form, or purchase a product.
5. Make email marketing social and mobile
Email and social media play nicely together, especially on mobile devices. If you have some compelling, high-performing social content, try including it in emails to increase visibility.
You can also do this by adding social logos in your emails, which encourages people to follow your other channels. If you have a website, you should also include a link to that.
Making emails mobile-friendly matters. There’s nothing worse than opening an email and having to pinch and resize to try to see the content. A recent survey found that 40 percent of respondents say the marketing emails they receive are not optimized for their mobile device.
Here is your chance to set yourself apart from the rest. Optimizing email for various devices will only increase your open-rates. In turn, this raises your opportunities to convert content to revenue.
If you’re interested in learning more best practices for small business digital marketing, check out The Complete Guide to Content Marketing and Four Hacks for Entrepreneur’s Social Media Marketing.
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How to Write an Effective Business Plan
A good business plan is an invaluable tool for any business owner, whether you are just starting your new enterprise, expanding or changing strategic direction.
Not only does it provide potential creditors, investors and business partners with essential information about your business, but it also provides you, the entrepreneur, with a clear “roadmap” to follow and a tool to measure your performance.
This guide is an outline of the basic business plan for a small business.
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How to Write a Business Plan (Plus Examples & Templates)
- 2 years ago
Have you ever wondered how to write a business plan step by step? Mike Andes, told us:
This guide will help you write a business plan to impress investors.
Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses. He knows a thing or two about writing business plans!
We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!
What Is a Business Plan?
A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including:
- Finding customers
- Plans for developing a team
- Competition
- Legal structures
- Key milestones you are pursuing
If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .
Get a Business Idea
Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills.
Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:
- What am I good at?
- What would I enjoy doing?
- What can I get paid for?”
If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it.
As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”
If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video
Conduct Market Analysis
Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.
Product and Service Demand
A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.
With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services.
If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.
You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.
I ran a quick test of how many people between 18-65 you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.
Identify Demographics of Target Market
Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:
- Other Interests
- Marital Status
- Do they have kids?
Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,
“It helps you quickly evaluate what the best areas are for your business to be located.”
How to Write a Business Plan
Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan.
Each of the following should be a section of your business plan:
- Business Plan Cover Page
- Table of Contents
- Executive Summary
- Company Description
- Description of Products and Services
SWOT Analysis
- Competitor Data
- Competitive Analysis
- Marketing Expenses Strategy
Pricing Strategy
- Distribution Channel Assessment
- Operational Plan
- Management and Organizational Strategy
- Financial Statements and/or Financial Projections
We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go.
How to Write a Business Plan Step 1. Create a Cover Page
The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.
A good business plan should have the following elements on a cover page:
- Professionally designed logo
- Company name
- Mission or Vision Statement
- Contact Info
Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.
How to Write a Business Plan Step 2. Create a Table of Contents
Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.
A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.
Check out Canva’s article about creating a table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.
How to Write a Business Plan Step 3. Write an Executive Summary
An executive summary is where your business plan should catch the readers interest. It doesn’t need to be long, but should be quick and easy to read.
Mike told us,
How long should an executive summary bein an informal business plan?
For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches . This can also be used for the content of emails to get readers’ attention.
It consists of three basic parts:
- An introduction to you and your business.
- What your business is about.
- A call to action
Example of an informal executive summary
One of the best elevator pitches I’ve used is:
So far that pitch has achieved a 100% success rate in getting partnerships for the business.
What should I include in an executive summary for investors?
Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:
- Introduction of yourself and company.
- An origin story (Recognition of a problem and how you came to solution)
- An introduction to your products or services.
- Your unique value proposition. Make sure to include intellectual property.
- Where you are in the business life cycle
- Request and why you need it.
Successful business plan examples
The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.
Here’s the interview with the owner of Urbanity:
When to write an executive summary?
Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.
What mistakes do people make when writing an executive summary?
Business owners commonly go into too much detail about the following items in an executive summary:
- Marketing and sales processes
- Financial statements
- Organizational structure
- Market analysis
These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.
How to Write a Business Plan Step 4. Company Description
Every business plan should include a company description. A great business plan will include the following elements while describing the company:
- Mission statement
- Philosophy and vision
- Company goals
Target market
- Legal structure
Let’s take a look at what each section includes in a good business plan.
Mission Statement
A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements.
Company Philosophy and Vision
The company philosophy is what drives your company. You’ll normally hear them called core values. These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.
What makes your company different?
Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity.
Examples of core values
One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:
- Prioritize communication.
- Never stop learning.
- Be transparent.
- Start small and grow incrementally.
These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .
What is a vision statement?
A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.
Example vision statements
The Alzheimer’s Association is a great example of a vision statement:
A world without Alzheimer’s Disease and other dementia.
It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.
Business Goals
You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.
Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.
How far in advance should a business plan?
Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.
Example of great business goals
My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.
If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).
You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources.
Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.
A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:
- What is the industry outlook long-term and short-term?
- How will your business take advantage of projected industry changes and trends?
- What might happen to your competitors and how will your business successfully compete?
Industry resources
Some helpful resources to help you establish more about your industry are:
- Trade Associations
- Federal Reserve
- Bureau of Labor Statistics
Legal Structure
There are five basic types of legal structures that most people will utilize:
- Sole proprietorships
- Limited Liability Companies (LLC)
Partnerships
Corporations.
- Franchises.
Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.
You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.
Sole Proprietorship
A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.
To start a sole proprietorship, fill out a special tax form called a Schedule C . Sole proprietors can also join the American Independent Business Alliance .
Limited Liability Company (LLC)
An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.
Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.
Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.
Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .
There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.
How to Write a Business Plan Step 5. Products and Services
This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:
- Unique features that differentiate your business products from competitors
- Intellectual property
- Your supply chain
- Cost and pricing structure
Questions to answer about your products and services
Mike gave us a list of the most important questions to answer about your product and services:
- How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
- How do you let them know they need a product?
- How do you communicate the message?
- How will you do transactions?
- How much will you be selling it for?
- How many do you think you’ll sell and why?
Make sure to use the worksheet on our business plan template .
How to Write a Business Plan Step 6. Sales and Marketing Plan
The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer. It should contain the following sections:
SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.
Business owners need to do a thorough job documenting how their service or product stacks up against the competition.
If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .
SWOT Examples
Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.
Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:
- Adding offerings that fit with your current small business
- Increase sales to current customers
- Reducing costs through bulk ordering
- Finding ways to reduce inventory
- And other areas you can improve
Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.
The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing.
Include Competitor Data in Your Business Plan
When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.
For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .
What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.
Marketing Strategy
The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.
If you haven’t already included it, Mike recommends:
“They’ll want to know about Demographics, ages, and wealth of your target market.”
Make sure to include the Total addressable market . The term refers to the value if you captured 100% of the market.
Advertising Strategy
You’ll explain what formats of advertising you’ll be using. Some possibilities are:
- Online: Facebook and Google are the big names to work with here.
- Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
- Radio : iHeartMedia is one of the best ways to advertise on the radio
- Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
- Billboards: Attracting customers with billboards can be beneficial in high traffic areas.
You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.
Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”
Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .
This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.
Some common pricing strategies are:
- Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
- Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
- Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
- Freemium services – Commonly used for software, where there is a free plan, then purchase options for more functionality.
HubSpot has a great calculator and blog on pricing strategies.
Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.
Distribution Plan
This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.
Supply Chain Examples
For instance, lawn care companies would need to cover aspects such as:
- Suppliers for lawn care equipment and tools
- Any chemicals or treatments needed
- Repair parts for sprinkler systems
- Vehicles to transport equipment and employees
- Insurance to protect the company vehicles and people.
Examples of Supply Chains
These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:
- Raw materials
- Shipping of raw materials
- Converting of raw materials to thread
- Shipping thread to produce garments
- Garment producer
- Shipping to company
- Company storage
- Shipping to retail stores
There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.
The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.
According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.
How to Write a Business Plan Step 7. Company Organization and Operational Plan
This part of the business plan is focused on how the business model will function while serving customers. The business plan should provide an overview of how the team will manage the following aspects:
Quality Control
- Legal environment
Let’s look at each for some insight.
Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.
If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.
Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.
Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.
There are a variety of organizations that help define quality control including:
- International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
- AICPA – Standard defined for accounting.
- The Joint Commission – Healthcare
- ASHRAE – HVAC best practices
You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.
For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.
- The size of your location
- The type of building (retail, industrial, commercial, etc.)
- Zoning restrictions – Urban Wire has a good map on how zoning works in each state
- Accessibility – Does it meet ADA requirements?
- Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
- Utilities – b.e.f. has a good energy calculator .
Legal Environment
The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:
- Any licenses and/or permits that are needed and whether you’ve obtained them
- Any trademarks, copyrights, or patents that you have or are in the process of applying for
- The insurance coverage your business requires and how much it costs
- Any environmental, health, or workplace regulations affecting your business
- Any special regulations affecting your industry
- Bonding requirements, if applicable
Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.
Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:
- What is the current leadership structure and what will it look like in the future?
- What types of employees will you have? Are there any licensing or educational requirements?
- How many employees will you need?
- Will you ever hire freelancers or independent contractors?
- What is each position’s job description?
- What is the pay structure (hourly, salaried, base plus commission, etc.)?
- How do you plan to find qualified employees and contractors?
One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:
Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.
How to Write a Business Plan Step 8. Financial Statements
No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.
Provide All Financial Income from an Existing Business
An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.
You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.
If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:
- Higher Revenue if expanding business
- Lower Cost of Goods Sold if purchasing inventory with bulk discounts
- Adding interest if utilizing financing (not equity deal)
- Changes in expenses
- Addition of financing information to the cash flow statement
- Changes in Earnings per Share on the balance sheet
Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.
Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.
Financial Projections For A Startup Business Plan
Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.
Mike gave the following advice in his interview:
Financial Forecasting Mistakes
One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.
Let’s use custom t-shirts as an example.
Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.
With that data, you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.
Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.
Here’s a table for easier viewing of that information.
The point here is to make sure your business proposal examples make sense.
You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.
Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.
How to Write a Business Plan Step 9. Business Plan Example of Funding Requests
What is a business plan without a plan on how to obtain funding?
The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.
In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.
Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.
Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.
Ways to get funding for a small business
There are a variety of ways to cover this. the most common are:
- Bootstrapping – Using your savings without external funding.
- Taking out debt – loans, credit cards
- Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
- Crowdsourcing – Promising a good for funding to create the product
Keep reading for more tips on how to write a business plan.
How funding will be used
When asking for business financing make sure to include:
- How much to get started?
- What is the minimum viable product and how soon can you make money?
- How will the money be spent?
Mike emphasized two aspects that should be included in every plan,
How to Write a Business Plan Resources
Here are some links to a business plan sample and business plan outline.
- Sample plan
It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:
- Wise Plans – Shares a lot of information on starting businesses and is a business plan writing company.
- Optimus Business Plans – Another business plan writing company.
- Venture Capital – A venture capital thread that can help give you ideas.
How to Write a Business Plan: What’s Next?
We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:
- The definition of a business plan
- Coming up with a business idea
- Performing market research
- The critical components of a business plan
- An example business plan
In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.
Don’t forget to check out the rest of our business hub .
Have you written a business plan before? How did it impact your ability to achieve your goals?
Brandon Boushy
Brandon Boushy started his company after years of working in customer service, engineering, and project management. After receiving his MBA, he turned his diverse skills into a business helping other small business owners find resources and strategies that further their business objectives. He focuses on assisting businesses with their marketing, communication, and research needs.
Related posts
- August 3, 2022
Free Business Plan Template (With Examples)
- May 3, 2022
How to Get a Business License (In 3 Steps)
- April 21, 2022
Market Validation: 7 Steps to Validate Your Business Idea
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My Name is PRETTY NGOMANE. A south African female. Aspiring to do farming. And finding a home away from home for the differently abled persons in their daily needs.
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Write a business plan
Download free business plan templates and find help and advice on how to write your business plan.
Business plan templates
Download a free business plan template on The Prince’s Trust website.
You can also download a free cash flow forecast template or a business plan template on the Start Up Loans website to help you manage your finances.
Business plan examples
Read example business plans on the Bplans website.
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Get detailed information about how to write a business plan on the Start Up Donut website.
Why you need a business plan
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A business plan helps you to:
- clarify your business idea
- spot potential problems
- set out your goals
- measure your progress
You’ll need a business plan if you want to secure investment or a loan from a bank. Read about the finance options available for businesses on the Business Finance Guide website.
It can also help to convince customers, suppliers and potential employees to support you.
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Free Printable Executive Summary Template to Streamline Your Success
In today’s fast-paced business world, decision-makers require succinct and impactful information to stay ahead of the curve. An effective Executive Summary is an essential tool that provides a quick overview of a business plan, project report, or any other complex document. It highlights the key points, objectives, and outcomes, and offers a glimpse into the essence of the document.
A well-written Executive Summary serves as an attention-grabbing introduction that can make or break an opportunity for success. In this article, we will delve into the essential components of an Executive Summary and provide tips for crafting an impactful summary that will leave a lasting impression.
Table of Contents
Why is it important to write an executive summary?
An executive summary is an important tool because it provides a quick overview of the key information contained within a larger document, such as a business plan, project report , or research paper. This summary is intended for busy executives, investors, and stakeholders who may not have the time to read through the entire document but still need to understand its main points. Writing an executive summary allows you to effectively communicate the most important aspects of your work in a concise, clear, and memorable way.
Additionally, an effective executive summary can help build credibility, showcase your expertise, and set the tone for the rest of the document. It can also be used to capture the reader’s attention and persuade them to take a particular action, such as making an investment or approving a proposal. In short, a well-written executive summary is a valuable asset that can help you achieve your goals and reach your target audience more effectively.
What to include in an executive summary
An executive summary should include the following key elements:
Objectives: A clear statement of the purpose and goals of the project, business plan, or other document being summarized.
Background: A brief overview of the context and background of the project or business, including relevant history and current situation.
Key findings: A summary of the main findings, results, or recommendations from the document being summarized.
Recommendations: A brief explanation of the proposed course of action or solution to the problem addressed in the document.
Benefits: A clear and concise description of the expected outcomes and benefits of the proposed solution.
Key data: Highlighting the most important data and statistics used to support the findings and recommendations in the document.
Methodology: A brief description of the methods and techniques used to gather and analyze data, if applicable.
Next steps: A discussion of the next steps or actions to be taken in implementing the solution or plan.
Conclusion: A final statement summarizing the main points and outlining the significance of the findings and recommendations.
It’s important to note that the length and detail of each section will depend on the specific purpose and audience of the executive summary . The goal is to provide a clear and concise overview that accurately reflects the key information contained in the full document.
What should you avoid in an executive summary?
When writing an executive summary , it’s important to avoid the following:
Technical jargon: Keep the language simple, clear, and easy to understand. Avoid using technical terms or specialized language that may be confusing to the reader.
Overloading with details: Remember that an executive summary is a condensed version of a larger document, so only include the most important information. Avoid including too many details or going into excessive depth.
Exaggerating or misleading information: The executive summary should be truthful and accurate, and not overstate the results or benefits of a proposal or project.
Ignoring the target audience: Consider the specific audience for the executive summary and tailor the content to their needs and expectations.
Leaving out key information: Make sure to include all of the key information that the reader needs to understand the purpose and significance of the document being summarized.
Being too brief: While it’s important to keep the executive summary concise, make sure to include enough detail to give the reader a complete understanding of the document.
Ignoring the design: The executive summary should be well-designed, visually appealing, and easy to read. Use headings, bullet points, and other formatting tools to make the information easy to digest.
By avoiding these common mistakes, you can ensure that your executive summary is clear, concise, and effective in communicating the key information and messages of your document.
How to write an executive summary
Writing an effective executive summary can be a challenging task, but with the right approach, it can be done easily and efficiently. Here is a step-by-step guide to help you write an effective executive summary:
Step 1: Read the full document carefully
Before you start writing the executive summary, you need to understand the content of the document you are summarizing. Read the full document carefully and take notes on the key points, objectives, and results. This will help you identify the most important information to include in the executive summary.
Step 2: Identify the purpose and audience
Consider the purpose and audience of the executive summary. Who will be reading the summary and what is their primary interest in the document ? Understanding the purpose and audience will help you determine the tone and style of the executive summary, and ensure that it meets the reader’s expectations.
Step 3: Outline the main points
Organize the information you have gathered into a clear and concise outline. Identify the main points and results from the full document, and prioritize them in order of importance. Use headings and bullet points to make the information easy to read and understand.
Step 4: Write the introduction
The introduction should provide a brief overview of the purpose and background of the document being summarized. It should also set the tone for the rest of the executive summary, and grab the reader’s attention. Keep the introduction concise and avoid going into too much detail.
Step 5: Summarize the key findings
In the next section, provide a brief summary of the key findings and results from the document. Highlight the most important information, and use statistics and data to support your points. Be concise, and focus on the main results, rather than the methods used to obtain them.
Step 6: Present the recommendations
Explain the proposed course of action or solution to the problem addressed in the document. Be clear and concise, and avoid going into too much detail. Highlight the expected benefits of the solution, and use data and evidence to support your recommendations.
Step 7: Include key data
Include key data and statistics that support the findings and recommendations in the document. Use charts, graphs, and other visual aids to make the information more engaging and easier to understand.
Step 8: Conclude with next steps and significance
Conclude the executive summary with a discussion of the next steps and the significance of the findings and recommendations. Provide a final statement summarizing the main points and the purpose of the document.
Step 9: Review and revise
Once you have completed the executive summary, review it carefully to make sure it is clear, concise, and easy to understand. Check for spelling and grammar errors, and make sure that the information is accurate and up-to-date. Revise the executive summary as needed to ensure that it effectively communicates the key information and messages from the full document.
Important tips for writing an effective executive summary
Here are some tips for writing an effective executive summary:
Keep it concise: An executive summary should be brief and to the point. It should be no more than one or two pages in length and should avoid using excessive technical jargon or complex terms.
Highlight the key information: The executive summary should provide a clear overview of the business idea, target market, competition, marketing and sales strategy, and financial projections.
Use a clear and compelling tone: The executive summary should be written in a professional and engaging tone that inspires confidence in the reader. It should clearly communicate the potential benefits of the business and why it is a good investment opportunity.
Be specific and quantify results: Whenever possible, use specific and quantifiable data to support your claims. For example, instead of saying “we expect to grow quickly,” specify “we expect to grow at a rate of 20% per year.”
Showcase your expertise: The executive summary is an opportunity to showcase your expertise and knowledge of the industry. Demonstrate your understanding of the market, the competition, and what it takes to succeed.
Review and revise: Finally, be sure to review and revise your executive summary several times to ensure that it is clear, concise, and effective. Get feedback from others, including potential investors, to help refine and improve your executive summary.
Executive summary/business plan example:
Here is an example of an executive summary for a fictional business plan:
Executive Summary
Introducing [Company Name], a start-up that aims to revolutionize the [Industry Name] industry with its innovative approach and cutting-edge technology. Our goal is to provide [Customers] with [Product/Service] that is not only of the highest quality, but also affordable and accessible.
Company Overview
[Company Name] was founded by [Founders Names], a team of experts in the [Industry Name] industry with a passion for improving the way [Product/Service] is delivered. Our team has extensive experience in [Key Skills/Expertise] and a track record of success in the industry. We are committed to providing [Customers] with a [Product/Service] that is designed to meet their specific needs and requirements.
Market Opportunity
The [Industry Name] industry is growing rapidly, with a projected annual growth rate of [X%] over the next five years. However, despite this growth, there is a significant gap in the market for [Product/Service] that is affordable, accessible, and of high quality. Our market research has shown that [Customers] are looking for a better solution, and we are confident that [Company Name] is well-positioned to fill this gap.
Product/Service
[Company Name] offers a [Product/Service] that is designed to meet the specific needs and requirements of [Customers]. Our product/service is unique in the market, as it combines [Key Features] with [Key Benefits]. We are committed to using the latest technology and innovative approaches to ensure that our [Product/Service] is of the highest quality and provides [Customers] with a superior experience.
Marketing and Sales Strategy
[Company Name] will focus on a multi-channel marketing and sales strategy, leveraging [Key Marketing Channels]. Our marketing and sales efforts will be focused on building awareness and generating leads among [Target Market], with a particular emphasis on [Key Segments]. We will also work to establish strategic partnerships with [Partners] to reach new customers and expand our reach in the market.
Operations and Management
[Company Name] will be headquartered in [Location], with a team of [Number of Employees] dedicated to delivering the highest quality [Product/Service]. Our team is composed of experienced professionals with a proven track record of success in the [Industry Name] industry. We are committed to providing a supportive and collaborative work environment that fosters innovation and growth.
Financial Projections
[Company Name] is seeking [Funding Amount] in seed funding to support the launch and growth of the business. Our financial projections show that we will reach break-even in [Timeframe] and generate [Revenue] in the first year of operations. Over the next five years, we anticipate significant growth, with projected revenue of [X] and a net profit margin of [X].
[Company Name] is poised to revolutionize the [Industry Name] industry with its innovative approach and cutting-edge technology. With a talented team of experts, a focus on customer satisfaction, and a commitment to using the latest technology, we are confident that we will achieve our goal of providing [Customers] with [Product/Service] that is affordable, accessible, and of the highest quality.
This executive summary provides a high-level overview of [Company Name] and our plans for the future. With the support of our investors, we are confident that we will be able to bring our vision to life and make a positive impact in the [Industry Name] industry.
Q: Who should write an executive summary?
A: The executive summary should be written by the person or team responsible for the larger document. In the case of a business plan, this might be the entrepreneur or the business owners.
Q: How long should an executive summary be?
A: An executive summary should be no more than one or two pages in length. It should be concise and to the point, avoiding the use of excessive technical jargon or complex terms.
Q: Can an executive summary be used as a standalone document?
A: An executive summary can be used as a standalone document, but it is typically used in conjunction with a larger document, such as a business plan or a research report. The executive summary serves as an introduction and overview of the content of the larger document.
Q: Can an executive summary be used for marketing purposes?
A: Yes, an executive summary can be used for marketing purposes. It can be used to provide a brief overview of a business or product and to highlight its key features and benefits. This can be useful in attracting potential customers or investors.
Q: How often should an executive summary be updated?
A: The frequency with which an executive summary should be updated depends on the purpose of the document. If it is part of a business plan, it should be updated whenever there is a significant change to the business, such as a new product launch or a change in market conditions. If it is part of a research report, it may be updated when new data becomes available.
Q: Can an executive summary be used as an elevator pitch?
A: Yes, an executive summary can be used as an elevator pitch, which is a brief and concise pitch that can be delivered in the time it takes for an elevator ride. An executive summary can be used to quickly and effectively convey the key information about a business or product.
Q: Is an executive summary the same as an abstract?
A: No, an executive summary is not the same as an abstract. An abstract is a brief summary of a research article, thesis, review, conference proceeding, or any in-depth analysis of a particular subject or discipline, and is often written for academic purposes. An executive summary is a brief, comprehensive summary of a larger document, such as a business plan or a research report, and is written for a more general audience.
Q: What is the difference between an executive summary and a conclusion?
A: An executive summary provides an overview of the key information and main points of a larger document, serving as an introduction and overview of the content. A conclusion provides a summary of the main points and findings of a document, and often includes recommendations for future actions or steps to be taken. While an executive summary serves as an introduction, a conclusion serves as a wrap-up of the content of the document.
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How to Write an Effective Business Plan
The journey of entrepreneurship begins with a single step, but the ones that follow often determine how successful your small business will be!
A business plan is a critical foundation when you are starting a new business or developing the potential of your existing company.
In this hands-on workshop, we will demystify the process using case studies and exercises. You will also develop a template for your own business that covers:
- Products/Services
- Organization
- Market Research
Come prepared to write your own business plan.
About the Instructors:
Marvin Brook 's expertise in teaching as well as in financial analysis and planning should be helpful to business owners who need to align their business plan with their personal financial goals. Marvin is a SCORE mentor and does email counseling.
Frances Bellows has 20+ years of business experience both here and abroad, with businesses that were starting up or expanding. These business covered many industries and ranged in size from international to one person in their living room. After improving over a thousand business plans, there is one thing that stands like stone the better the planning the more likely your chance of success. The instructor, Frances Bellows is a consultant, MBA Adjunct Professor, and Entrepreneurship Educator.
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Contracting corner: how to prepare an effective capabilities statement.
Learn how to create a one-page 'resume' for your business to better market its performance and capabilities.
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Fri, March 24, 2023 , 12:00 PM – 1:00 PM CDT
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Business News
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Retirement Planning for Couples: Joint or Individual Approaches
No matter how long you have been married or how many anniversaries you’ve celebrated, you’re sure to know that you’re stronger together than you are apart. Retirement savings are no...
By John Rampton • Mar 6, 2023
This story originally appeared on Due
No matter how long you have been married or how many anniversaries you’ve celebrated, you’re sure to know that you’re stronger together than you are apart. Retirement savings are no different. When it comes to retirement planning specifically, they still need to keep an eye out for ways to manage it as a couple — even if a couple keeps some aspects of their finances separate.
In order to make retirement as enjoyable as possible for you and your spouse, here are some things to consider.
A Couple’s Guide to Combining Retirement Accounts
Your retirement accounts cannot be combined with your spouse like your joint checking account. The reason? 401(k) accounts are linked to an individual’s employment at a company. Therefore, only those individuals can enroll and contribute.
What IRAs? As the name implies, these are “individual retirement accounts.” In other words, the account only has one owner.
There is, however, a caveat. Retirement accounts allow spouses to designate the other as a beneficiary. Your spouse cannot contribute to your plan if he or she was named a beneficiary. However, if something were to happen to you, your account and funds would be accessible to them.
When one spouse passes away, the other spouse would inherit the account and could roll it into their own 401(k) or IRA. In short, both of you are taken care of in the future by making each other the beneficiaries of your retirement accounts.
Spousal IRAs are also available. Despite sounding like joint retirement accounts, they aren’t. The purpose of spousal IRAs is more for unemployed or low-income partners.
Basically, spousal IRAs are traditional or Roth IRAs that a working spouse contributes to in the name of their non-working spouse with the intention of using the funds for their retirement. Individuals can typically contribute to IRAs only if they have earned income. Also, spousal IRAs can only be applied for by couples filing joint tax returns.
The Benefits of Opening a Separate IRA for Each Spouse
The best way to receive the highest tax benefits is to maximize your contribution to both IRAs while you can. There is no difference in contribution limits between traditional IRAs and Roth IRAs:
- Individually, you can contribute $6,500 to your IRA in 2023 if you’re younger than 50, and $7,500 if you’re older than 50.
- If you both open accounts, you can contribute a total of $13,000 each year. You can also contribute $1,000 each per year as a “catch-up” contribution if either of you is over 50, bringing your combined contribution to $15,000.
There is an income limit for Roth IRAs, so people earning above this threshold can make reduced contributions. In turn, those making above that threshold are ineligible.
Those whose income falls between $138,000 and $153,000 will be phased out starting in 2023. In the case of married couples filing jointly, the amount is $218,000 and $228,000.
IRAs can be opened at brokerages such as Charles Schwab or Fidelity. If you prefer robo-advisors , check out Wealthfront, SoFi, and Betterment, which construct and manage customized portfolios for investors based on their age, risk tolerance, and investment goals. Besides traditional and Roth IRAs, each offers retirement planning tools to help you and your spouse prepare for retirement.
How Couples Can Plan Together for Retirement
Managing retirement plans as a couple may not be straightforward, but there are ways to make it work. Here are a few tips for combining retirement forces to make your golden years as fulfilling as possible.
As a couple, discuss your retirement goals.
To build a healthy financial plan, you need to talk openly and honestly about your finances. Getting your significant other to understand your retirement goals is a great first step. During your retirement years, do you plan to stay in the same house? Perhaps you would like to travel internationally once a year or travel across the country in a camper.
You should also decide how much you want to retire with. The retirement number for each couple depends on their standard of living, but a Retirement Calculator can give you an idea.
To find your target number today, subtract your current income from your estimated Social Security benefits, and divide the result by 0.04. Based on your numbers, you can calculate how much you can withdraw safely to make your retirement last as long as possible.
Establish a retirement date for both of you.
When will you and your partner retire? If you are under age 59 ½, you cannot withdraw penalty-free from retirement plans like 401(k)s and IRAs. With that in mind, putting some of your retirement funds into a taxable brokerage account that you can access at any time might make sense if you or your partner plan to retire earlier than 59 ½.
You might think it would be best if both of you retired at the same time. But depending on your circumstances, you might want to retire separately.
The size of Social Security benefits can be also affected considerably by being able to earn for a few more years during your peak earning years. By retiring early, you could lose out on this money.
It is also important to consider whether both of you are eligible for Medicare. You might want to consider holding on to your job until you are eligible for Medicare if one of you is eligible and the other is not.
Additionally, a 2019 study by Boston College’s Center for Retirement Research found that households with two incomes don’t save more for retirement. In most dual-earner households, only one member has a 401(k). The study suggests that dual-earner households with only one saver are saving less than they should.
You shouldn’t assume that saving money through work is enough just because one of you does it. Consider making bigger 401(k) contributions if one of you does not have access to an employer’s plan.
Choose an investment option and determine your contribution amount.
Your retirement plans, goals, and needs need to be discussed as a couple. At the same time, couples disagree over how much to save for retirement and when to retire their partners. When these issues are not addressed, retirement plans can be derailed. It is particularly true if savings amounts are not calculated together.
The only way to make sure you and your partner can enjoy your retirement is to talk with each other and come up with a plan.
Ideally, you should decide on a budget amount that you both can afford and stick to consistently. However, there is no need for both of you to follow the same set of rules. But, if your company offers 401(k) plans with company matching, you should contribute the minimum.
Each account is unique, so you should keep this in mind. As such, compare them carefully to see which one offers the most advantages. For instance, lower management fees and a greater variety of investment options. The better of the two should be prioritized. And don’t copy each other’s investments. You can better diversify your overall portfolio if you know what your partner invests in.
Having trouble choosing a retirement plan? Well, here are some joint retirement accounts worth exploring.
However, before moving on to a different retirement vehicle, it is ideal to maximize one type of retirement account first. By doing so, you will get the maximum benefit from the retirement account.
Also, making the most of individual retirement accounts can be done in a variety of ways. From Roth IRAs to 401(k)s, here are the specific benefits and strategies for each.
401(k) plans
Retirement plans sponsored by employers are available only to employees, so you are the only one eligible to enroll. You can make your spouse a beneficiary, but they won’t be able to make contributions.
When both of your 401(k) plans are maxed out, you can defer taxes as a couple. The money you contribute to a 401(k) account is tax-deferred until you retire and begin withdrawing it. Contributions to 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans will be limited to $22,500 in 2023, up from $20,500 in 2022.
Roth IRAs and Traditional IRAs
Whether a traditional or Roth IRA is right for you depends on your personal circumstances. However, there is one universal truth. An individual retirement account, such as a traditional or Roth IRA, can only be owned by one person. Although you cannot have a joint IRA account, you can designate your partner as a beneficiary, so that if you pass away, their funds would be distributed to them.
Is it possible for married couples to combine their IRAs? Unfortunately, no. However, if both of you are interested in making the most use of IRAs, each of you can open an IRA and contribute up to $6,500 annually, for a combined $13,000.
It’s important to note that some couples may not be able to deduct the full amount of their traditional IRA. The amount depends on their income and whether they are covered by a retirement plan at work.
Those filing as singles will have an income phase-out range of $138,000 to $153,000 in 2023. For married couples filing jointly, it’s $218,000 and $228,000.
If only one is covered by a retirement plan, the deduction is reduced if their modified AGI is more than $198,000; the deduction phases out at a modified AGI of $208,000.
Spousal IRAs
In IRS rules, a spouse without income or employment can fund an individual retirement account called a spousal IRA. Be aware that IRAs are not specifically designed for spouses. Instead, the rule permits nonworking spouses to contribute to a traditional IRA or Roth IRA as long as their spouse is working.
Under spousal IRA rules, individual retirement accounts are not co-owned. The working spouse owns an IRA under his or her own name, and the non-working spouse owns an IRA under her or his name. The accounts may have been opened before they got married, while they were married and both working, or by the non-working spouse.
In 2021 and 2022, spouses contributed the same amount to an IRA as any other individual: $6,000 per year. The the limit increased to $6,500 in 2023. In 2021 and 2022, the annual contribution limit for people 50 and older was $7,000 and increased to $7,500 in 2023.
As per the IRS , “Each spouse can make a contribution up to the current limit.”
For 2023, spousal IRA contributions will be limited to $13,000 for couples where one spouse works and $15,000 for couples over 50. Each account’s contribution limit is determined by its individual annual IRA contribution limit.
Brokerage Accounts
A brokerage account is not technically a retirement-only vehicle. However, you can surely use one (or several) to fund a joint retirement.
In brokerage accounts, you can use the same funds as in 401(k)s and IRAs. Despite not offering tax benefits, these accounts offer the following benefits:
- When you withdraw your investment earnings in retirement, you will not be taxed on them.
- The money can be accessed or withdrawn at any time without additional penalties.
Also, you can own a joint brokerage account with your partner equally. So, if money is moved or sold among some accounts, the other owner must also approve any transactions. In other accounts, though, one account holder can make a decision without the other’s approval.
Choose the best health coverage.
For families, health insurance is expensive. Based on a survey by the Kaiser Family Foundation , the average annual premiums for employer-sponsored health insurance in 2022 were $22,463. In the event that you and your spouse have access to health insurance through your work, you’ll need to decide whether to keep your own individual plans or join together under one plan.
What if you have children? They can be covered under just one parent’s plan or under a family plan. In fact, a growing number of employers are tiering their coverage options. “Employees plus children,” for example, is often a cheaper category than “employees plus spouses” or “employees plus family.”
The annual premiums for each option can be reduced by your employer’s incentives, such as HSA deposits for high-deductible plans. Large companies generally charge a $100 spousal surcharge per month. Ensure that you know the deductible and out-of-pocket maximum. If one spouse has better dental and vision coverage than the other, consider those options as well.
Be sure to check for niche benefits, such as fertility treatments, mental health treatment, and special needs therapies. You should also make sure your preferred doctors are included in the
Finally, consider your family’s frequency of seeking treatment. The best choice for your family may be a high-deductible policy that is eligible for an HSA if your family has a few ongoing medical issues. In general, these policies have lower premiums than preferred provider organizations (PPOs). Those who are eligible for a family HSA-eligible high-deductible plan will have to meet the deductible before the plan begins paying out benefits. For 2023, self-only HSA contribution limits are $3,850 and family contribution limits are $7,750.
Pay attention to taxes.
A married couple may file their federal income tax return jointly or separately. By extending several tax breaks to couples who file jointly, the IRS strongly encourages most couples to file joint tax returns . While most married couples should file jointly, there may be a few instances in which it is better to file separately.
Advantages of filing jointly.
Filing a joint tax return with your spouse has many advantages. When calculating their taxable income, joint filers receive one of the largest standard deductions each year.
A couple filing jointly can usually qualify for multiple tax credits, including:
- Earned Income Tax Credit
- American Opportunity and Lifetime Learning Education Tax Credits
- Exclusion or credit for adoption expenses
- Child and Dependent Care Tax Credit
Tax deductions and taxes are generally higher for joint filers, which allows them to earn more income and still be eligible for certain benefits.
Consequences of filing your tax returns separately.
Tax benefits are typically reduced for couples who file separately, on the other hand. It is possible that filing separate tax returns will result in more taxes.
- The standard deduction for married taxpayers filing separately in 2022 will be $12,950, compared to $25,900 for those filing jointly. As of 2023, single filers and married persons filing separate returns will have a standard deduction of $13,850, joint filers will have a standard deduction of $27,700, and heads of households will have a standard deduction of $20,800.
- Many of the tax deductions and credits mentioned above are automatically disqualified if you file a separate return from your spouse.
- In addition, separate filers usually have a smaller deduction for IRA contributions.
- They also cannot take the deduction for student loan interest.
- When filing separately, capital loss deductions are limited to $1,500, instead of $3,000 when filing jointly.
When you might file separately.
You may be able to save on your tax return by filing separately in rare circumstances.
- Suppose you have $10,000 in medical expenses and $50,000 in income. This would be in compliance with the 7.5% threshold ($10,000 ÷ $50,000 = 20% of your income).
- In contrast, if both of you make $135,000, you cannot claim these medical expenses ($10,000 ÷ $135,000 = 7.4% of your income).
- If your incomes are not the same, filing separate returns may allow you to claim more medical deductions by applying the threshold to only one income.
- The standard deduction must be taken by both spouses when filing separately, or itemized deductions must be claimed by both spouses. The standard deduction cannot be taken by one spouse while the itemized deduction is taken by the other.
- If both spouses paid for the expense, each deduction can only be used by one spouse when itemizing deductions. If the total deduction claimed by both spouses does not exceed the total deduction, deductions can be split between spouses filing separately.
Make your spouse a beneficiary.
Unfortunately, there are no options that automatically operate as joint retirement accounts, despite the fact that there are many ways to start saving for retirement. The best way to prevent this is to make your spouse the beneficiary of your retirement account or make him/her the power of attorney for your account.
That means your accounts and the money in them would be accessible to the other person even if one of you died.
1. What is the average retirement income for a couple?
There is no simple answer to this question. In order to determine how much money you will need in retirement, many factors need to be considered. Among these factors are your age, health, lifestyle, and where you intend to reside.
People who are young and healthy may be able to make do with less money than those who are older and have health problems. Nevertheless, the amount of money you need will also depend on your lifestyle. The amount of money you will need depends on your lifestyle, for example, if you plan to travel the world or enjoy a luxurious lifestyle.
You should speak with a financial advisor to determine how much you will need for retirement. In order to create an effective retirement plan for you, they will take into account all the unique circumstances that you face.
2. For a couple, what is a good monthly retirement income?
This is another question that cannot be answered in a one-size-fits-all manner. A person’s age, health, lifestyle, and where they intend to live all play a role in what is a good monthly retirement income. A few general guidelines can, however, be followed.
To be able to retire comfortably, you should aim to have at least 70% of your pre-retirement income each month. You would need at least $3500 per month in retirement income if you bring in a combined income of $5000 each month with your spouse.
It is important to note that this is just a general guideline. There is a possibility that you will need more or less money based on your exact circumstances.
3. Is it possible for both spouses to contribute to a 401(k)?
A 401(k) account can only be contributed to by one spouse. The employee’s 401(k) plan is tied to his or her employment with the company offering the plan.
It is possible, however, for a spouse to be a beneficiary of the plan. An inherited 401(k) can be rolled into an IRA or 401(k) of the spouse if the original plan holder passes away.
Furthermore, 401(k) plans are individual plans, with each account being contributed to by only one individual – along with their employer, in some cases. In 2023, the maximum 401(k) contribution is $22,500 ($30,000 for those age 50 or older). Based on those numbers, a married couple can each contribute $22,500 a year to a 401(k) plan, for a total contribution of $45,000.
4. How many IRAs can a married couple have?
IRAs can be contributed to by each partner of a married couple filing jointly. However, there is a limit. Both IRA contributions “may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less,” according to the IRS.
The annual contribution limit is $6,500, so the total limit is $13,000.A $1000 “catch-up” contribution is available to those over age 50.
In addition, Spousal IRAs can be traditional or Roth IRAs. Roth IRAs do not offer tax-free investments. Instead, the money comes from taxable income but can grow tax-free, so when you retire, you don’t have to pay taxes on the money taken out of the account. Although contribution limits vary depending on your tax filing status and income, they are typically the same as with traditional IRAs.
5. What are the best ways to provide an income for a couple that will last their entire lives?
There is only one guaranteed option: purchasing an annuity. You will receive an income for the rest of your life from an annuity or insurance company. And, with a guaranteed lifetime income rider will provide payments for as long as you both live, no matter how long that may be.
For example, a couple aged 60 who wants to retire at 65 buys an annuity for $500,000 with a lifetime income rider. For the rest of their lives, they would receive $3,300 a month, or about $40,000. The remaining surviving spouse will receive a $3,300 monthly payment after the first spouse dies. Beneficiaries will receive a lump sum after both spouses pass away.
It is also possible for lifetime payments to increase each year as inflation increases.
The post Retirement Planning for Couples: Joint or Individual Approaches appeared first on Due .
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