Writing an effective business plan is an important part of starting a business. Whether you’re writing a business plan for a small business, large corporation, or anything in between – these dos and don’ts of writing an effective business plan can help walk you through the process.
What is the purpose of a business plan? A business plan aims to show the inner workings of a business for both internal and external use. This is what investors and financial institutions want to see prior to providing support through funding. It really is the backbone, and the heart of your organization put down on paper.
Let’s take a look at the dos and don’ts of writing an effective business plan so you can start brainstorming what to incorporate for your business’s success.
When creating a business plan, research will be a key component. While the bulk of your business plan will be about your own business, you will still need to know a lot of information about the industry and competitors. Research into business plans can also give you ideas about how to write your own.
“Writing a business plan is a point of pride for many business owners, and it can be hard to admit you need to learn more, but you do,” says Chris Gadek, Head of Growth at AdQuick. “Even those of us who have written dozens of business plans in the past still have to research new business plan methods and market comparisons.
Research doesn’t mean you’re not aware of the industry or you don’t know what you’re doing. It means you’re doing your absolute best to make sure your business plan is relevant and accurate for your readers.”
Don’t: Use Too Many Words
Business plans should be comprehensive, but you don’t want to confuse others with your language or indirect phrases. Rather than aiming for length, be intentional with your wording. Spend time proofing and condensing your business plan to be descriptive but concise.
“Too many words can make your business plan difficult to understand or make things seem more complicated than they are,” says Dr. Michael Green, Chief Medical Officer at Winona. “Cut to the chase and use specific and intentional words to clearly communicate the message. Whether it’s your market analysis or mission statement, you should be using language that is effective and communicates your intended message without the fluff.”
Do: Know Your Audience
Why are you writing a business plan? This is an important thing to understand. A business plan for a small business is going to be very different from a corporation, and both of those will be completely unique when compared to a nonprofit business plan. Who are you writing this for, and why do they need it? Knowing the answer to this can help with writing an effective business plan.
“If you’re looking for support from donors, financial institutions, or sponsors, you’ll need to write a business plan tailored to them,” says Phillip Akhzar, CEO of Arka. “If this business plan is going to be presented to a small board meeting, you’ll probably be preparing it a bit differently than if you’re going to go before a large gathering of donors. Make sure you are tailoring your business plan to your audience to make it as effective as possible.”
Don’t: Forget to Examine the Competition
While you may know your competitors, extra research into their business models and products or services can help you write up more accurate comparisons and goals to include in your business plan. If you’re going to be successful in the market, you’re planning to enter, and you’ll need to have a firm grasp on the competition and how you’re going to stand out.
“Knowing exactly what you’re going to pitch to compete and succeed in your market segment is important,” says Fred Gerantabee, Chief Experience Officer at Readers.com. “While it is important to share information about your business in your business plan, it’s also important to give some specific statistics and research to show that you’ve done your homework and have a plan in terms of how you’re going to compete well in the professional arena.”
Do: Write an Executive Summary
Your executive summary is the real start of your business plan. This is typically the first thing investors look at, or you will present during a pitch. Your executive summary should really share the heart of your business. Show them what makes you unique and why you’re passionate about your product or service. This is an important first step in writing an effective business plan.
“Executive summaries are where you’ll find a business’s mission statement or core values,” says Nick Wallace, Co-Founder, President, and Chief Farm Officer at 99 Counties. “This isn’t necessarily a slogan or a catchphrase – it is what sets you apart from the competition and draws people to your brand. Show your reason for pursuing this business venture and be vulnerable with your audience.”
Don’t: Forget the Market Analysis
Market analysis is an important step in explaining your business to others. The market analysis shows where the competition is and how you plan to disrupt the market with your product or service to either fill a gap or fill a need your consumer base has that other businesses aren’t fulfilling.
“Your market analysis is where you can go more in-depth to explain your company’s history, inspiration, and purpose,” says Mina Elias, CEO, and Founder of Trivium Group. “This is also a great place to plug any specific advantages you have, such as senior-level staff and the experience they’re bringing to your brand. This gives you more credibility and allows them to have more confidence in your team.”
Do: Explain the Company Organization
While the organization and structure of the business may be clear to you, it can be a bit more difficult for people on the outside to understand the hierarchy of your business. Rather than letting them make assumptions or causing confusion, make sure you clearly explain the company organization.
“I always recommend being very clear about your company organization and responsibility division within the business,” says Brian Munce, Managing Director of Gestalt Brand Lab. “This helps others understand your company, but it also holds your team accountable to the responsibilities they’re committed to fulfilling in their position.”
Don’t: Skim Over Products or Services
As you’re creating a business plan, it’s easy to get wrapped up in the business jargon and the intricacies of finances and human resources within your business. However, it’s still important to highlight the products and services you plan to offer customers.
These sales are what will fuel your company and allow you to pay back any loans that you might receive as you’re getting your business off the ground. “Investors, partners, and donors want to know about your products and services in great detail,” says Sumeer Kaur, CEO of Lashkaraa. “A simple overview isn’t going to cut it here. You need to have specifics ready to go as you
Do: Create a Financial Outline
Creating a financial outline is pretty standard practice when you’re writing an effective business plan. Because this contains estimates, it’s a good idea to do as much forecasting as possible. This will be much easier and provide more accurate results if you’ve tracked data and researched the relevant financial reports for your industry.
“Financial outlines are great for presenting an effective business plan to investors, banks, or donors,” says Jae Pak, Founder of Jae Pak MD Medical. “They want to see any prior financial success, anticipated financial standings, and where their money will be used. Outlining things like supply costs, overhead, and anticipated sales can help you paint a clear picture for them to see how their investment will pay off.”
Don’t Forget a Conclusion
The last portion of writing an effective business plan is the conclusion. This is essentially the summary of the document where you can revisit the big ideas from each section and remind the reader of the exciting plans that lie ahead with your business. Again, be concise but provide a thorough overview that summarizes your business plan well.
“While the executive summary is a great step to let the people know what they’ll be reading before the business plan is presented, the conclusion is where you can really drive your main points and call to action,” says Juan Pablo Cappello, Co-Founder, and CEO of Nue Life. “It’s a great way to wrap up your presentation, pitch, or documents in a way that lets the reader know what you need from them going forward.”
In conclusion, there are many intricate details that form an effective business plan. If you find yourself preparing to write one of these documents, we hope these tips have helped. Research and analysis of the market and competition are going to be great places to start in your business plan process.
Knowing this information will help you to create a relevant business plan that explains your knowledge and goals in comparison with other companies in the market. It’s also a good idea to know your audience and venue for presenting the business plan, as this can change how you go about the writing and organization process. Make sure you outline things clearly and concisely so they can understand each position, decision, and product or service, as well as the thought process behind them.