A comprehensive guide — How to write a robust business plan for 2022?

You have chosen a great business idea and are prepared to take it to great heights. To guarantee your business’ success, you should know your next move. 

Nonetheless, how are you supposed to remember every strategy you have planned for your company? By drafting a business plan.

Having a business plan is essential before starting a new business so you can identify potential stumbling blocks and understand your business better. 

You can use a good business plan to clarify your strategy, identify potential barriers, determine what resources you’ll need, and evaluate the sustainability of your idea.

Creating a business plan is not as difficult as it may seem. With a prior understanding of its structure and a few tips, you will be all set to embark on the journey to write a precise and flawless business plan.

In this article, we will explain what a business plan is, the format of a business plan, tips for creating a business plan, and much more.

What is a Business Plan?

A business plan is a formal written document containing the goals of your business, the methods for attaining those goals, and the time frame for the achievement of the goals.

A business plan contains the information about:

• Your company
• Products or services
• How it earns or will earn
• Its leadership and staffing
• Finances
• Operations, marketing, and sales strategy

(Organisation chart)

Why should you write a business plan?

Many entrepreneurs do not consider writing a business plan when establishing a business, and many of these businesses find plenty of success.

Given the success of these businesses, why should one consider the concept of writing a business plan? Why should you spend your crucial time writing a business plan?

A business plan is of great importance. As the studies show, the companies that write a business plan grow 30% faster than those that don’t write a business plan.

The same study shows that companies with 92% growth in their sales from one year to the next usually have a business plan, and 71% of the fast-growing companies have a business plan.

Moreover, a business plan helps:

• To analyse the viability of your business ideas.
• You plan your marketing, sales, and operations 
• You identify obstacles and create a plan to overcome them.
• You determine your goals and devise a strategy to achieve them.
• You draft a well-thought-out plan for collecting investment.

An effective business plan helps you identify your high-priority and less-priority work, allowing you to devote more time to higher priority tasks. 

Additionally, a business plan is vital for securing financing from banks or investors. Investors or the bank will want to know why they should invest in your business idea — Is the idea good enough?

Writing a detailed and information-packed business plan helps attract investors to your idea. And, if you want to make a substantial impact on your audience and investors, having a business plan is an excellent way to do so.

Business Plan Formats

Here are the different formats you can use to draft a business plan. 

Traditional business plan

In a traditional business plan, you can cover a long list of topics to help you make future business projections. 

Traditional business plans consist of eight sections.

1. An executive summary
2. Company description
3. Products and services
4. Market analysis summary
5. Strategy summary
6. Management summary
7. Financial plan
8. An appendix

The traditional business plan is useful when looking for capital or a bank loan. It can take you months to create a traditional business plan and can be a formal document of 30-40 pages long.

Here are some of the traditional business templates that you can use.

Lean business plan

Consider a lean business plan as the shorter version of the traditional business plan. You can use this concise business plan to educate new hires or modify the existing business plan aiming for a specific target audience.

A lean business plan doesn’t contain detailed information that overwhelms your new hires or your target audience with too much information. 

Just include the necessary information that gives them an idea of what your business is doing and what it aims to achieve.

The lean business plan consists of seven sections.

1. Executive summary
2. Company description
3. Market analysis
4. Products and services
5. Customer segmentation
6. Marketing strategy
7. Logistics and operation 

Here are some lean business plan templates you can make use of.

Non-profit business plan

The non-profit business plan applies to only not-for-profit organisations such as Habitat for Humanity, Red Cross, United Way, etcetera.

A non-profit business plan is for public and social benefits, so make sure you explain the impact your company is promising to create and back it up with proof.

The structure of a non-profit business plan consists of eleven sections.

1. Executive summary
2. Organisation Description
3. Market analysis
4. Management and organisation
5. Programs, products, and services
6. Customer segmentation
7. Marketing plan
8. Logistics and operations plan
9. Impact plan
10. Financial plan
11. Make a positive change with your nonprofit organisation

Here are some non-profit business plans you can make use of. 

Choose the business plan format that fits best for your business. Once you select a format, it’s time to move on to the crucial step, that is, writing a business plan.

Critical tips for writing a Business Plan

• Ensure that you keep the business plan’s voice, tone, and format consistent. Either let a single person work on drafting a business plan or draft guidelines that the writer strictly obeys.

• Your business plan should be short. It usually takes 30-40 pages to complete a business plan, but try to keep it more concise.

• Be prepared to invest a lot of your time in researching. Everything you will include in your business plan needs thorough research for your target audience or marketing, sales, operations, and logistics strategy.

• Have a clear understanding. What is your purpose behind writing a business plan? Keep that in mind and put in the work and time to deliver a thorough business plan.

• Writing a business plan isn’t easy; that is why you can leverage business plan software to draft a plan. These tools assist you with everything from planning to writing, graphics, financial data synchronisation, etcetera.

Here are some of the business plan software you can make use of.

• LivePlan
• IdeaBuddy
• Bizplan
• GoSmallBiz

How to write a business plan?

There are eight steps to writing a clear and in-depth business plan that could get all that investment in your pocket and build a strong foundation for your business. You can take your business to the heights you have planned for.

The most important thing about writing is creating an outline, no matter what type of content you are writing. Here we provide you with the elements that will help you create a high-level overview of your business plan.

Executive summary

An executive summary is the beginning of your business plan, but no one starts writing with the executive summary. It summarises your business plan; it makes more sense to write it once you draft the complete business plan.

You will have to write the summary so that the readers can rapidly become familiar with a large body of your business plan without having to read it all.

Executive summary: 

• is precise and short
• is a high-level overview of your business to hook readers
• highlights the key points from each section of the business plan
• starts with a strong statement and includes numbers to back the statement

At this point, everything will seem important to you to include in the summary. You might feel a bit stressed as you will have to accumulate all the information covered by you in the business plan in just one page.

Here are some elements you need to mention in your executive summary.

• What does your business do?
• Your vision and future business goals
• What product do you sell, and how is it different from the similar products in your market?
• Who is your target audience?
• What will be your marketing strategy to reach out to your target audience?
• What is your current financial state?
• What will be your set future financial state?
• How much investment do you want?
• About your company team

Here is an example of writing an executive summary for a business plan.

Company description

In a company description, you will have to answer two crucial questions.

1. What is your company about?
2. What do you plan to achieve by running the company?

You need to answer these two questions straightforwardly. As you lay out these answers, it should become apparent to the investors why your business is a good investment for them.

Here are some of the components you can include in writing a crisp and clear company description.

• Business infrastructure; Are you a sole proprietorship, limited partnership, or incorporated company?
• Business model
• About your chosen industry
• Your businesses mission and vision
• Background of your business
• Long and short term business objectives
• Short term goals should be achievable in 1 year, and long term goals will be the ones that will be achievable over five years
• Your goals should be SMART — Specific, measurable, attainable, realistic, and time-bound
• Your team, their specialisation, and their salaries

Here, you will get a strong understanding of why your business exists, what pillars does your business stand on, and what are your accomplishments for the future.

Market analysis description

This section is all about explaining your industry trends and the direct competitors. You should know which companies you’re up against.

Market analysis helps you determine if you’re entering the right market for your products or services. It is essential to find the market where customers understand and require the products you sell because that will serve as the ideal market.

Market analysis description includes:

• How big is the estimated market for your business?
• At what position do you stand in the market
• Competitive landscape overview

Evaluate your potential market

It is vital to validate everything you are writing in a business plan. Mentioning that you expect your sales to go skyscraping in the future is fine, but including this statement without actual data around it won’t be a good idea. You need relevant data to prove that your sales will be high in future.

Here are some ways you can conduct thorough research to evaluate your potential market.

Know your ideal customer

If you know what your ideal customer or prospects look like, you can create a good marketing strategy keeping them in mind. 

Suppose you’re a company with a product in high demand among GEN-Z consumers. You can start by looking for the government data and find the group born between the year 1997 – and 2012.

You can also figure out their current habits and how they can change over the few years.

Follow relevant trends

What is the latest and most popular trend in your Industry? You need to be up-to-date on the relevant industry trends. 

Let’s suppose you’re a company selling fitness equipments. You must start by researching the membership trends and health and fitness trends among your target audience.

Once you figure out the trends, the next thing is to look for the trajectory of your Industry. Will the industry keep growing, or will it decline over the next few years?

Make well-informed guesses

Upon collecting the right market size and Industry trends, foot your estimates on provable data for a reasonable guess.

You can use abundant sources to fetch the market data — government statistics office, industry associates, academic research, and news channel that mainly covers your industry.

Another way to evaluate your potential market is by performing a SWOT analysis.

SWOT Analysis

It is essential to find out the strengths, weaknesses, opportunities and threats your company bears.

To perform a SWOT analysis, you can present each element in a grid with bullet points containing relevant information under each section.

With this grid presentation, your audience can quickly see the factors that affect your business and your advantage in the market.

Management and the organisation

Introduce your team members and tell readers who will be responsible for running your business.

Present the legal hierarchy structure of your organisation. To show your company’s internal network, lay out an organisational chart that includes all the team members, their designation, their role (what are they responsible for?), and how they are adding to the success of your business.

Moreover, you will have to mention your business type — Will you establish your business as a sole proprietorship, partnership, or limited company?

Products and services

Even though you will briefly cover all of your products and services in many sections, the dedicated products and services section is a must.

Outline the critical details of your products and services and let the readers know what your products are and how can your prospects use them.

If you sell multiple product items, ensure you give a one-line description for each product, and in case you are planning to develop and sell a new product in future, mention that product too.

Explain how each product contributes to your business profitability and create a section to let the readers know how you manufacture all the products.

Customer segmentation

Your ideal customer is the foundation of your business plan as you will be creating all the strategic decisions with keeping your target audience in the frame.

You will have to thoroughly research and understand your target audience and describe them to your readers in the business plan.

You can use demographics and segmentation to know your target audience better. Find out:

• Which region do they belong to?
• What is their age range?
• What is their level of education?
• their Common behavioural pattern
• What do they do in their free time?
• Technology they use
• Their financial status
• Their beliefs and opinions

Demographics and segmentation will help you convey a crystal clear image of the audience that you’re trying to reach.

Marketing and Sales Plan

For this section, you will be stating your current and future sales and marketing strategy and explaining how you wish to carry out both approaches. Ensure these strategies are fit for your ideal customer.

Example: If you want to try a social media marketing approach, don’t go on and pick all the social media platforms possible to market your product. It would make more sense to find out where your target audience engages the most — Is it Facebook, Instagram, Snapchat, LinkedIn, etcetera. 

If they don’t engage much in the social media platform of your choice, rethink and analyse where your target audience spends most of their time.

Include the underlying four critical components in your marketing plan as they act as a strategic lever for creating a marketing strategy.

Price: What is your product cost, and how did you set the price for the product?

Product: what’s your product and your selling strategy in the market?

Promotion: How will you present the product in front of your target customer and spread awareness about your product?

Place: Where do you want to sell your product — In-store or online?

Logistics and Operation Plan

Logistical services include moving and storing products from their origin to their final destination. Alternatively, operation planning refers to the organisation’s strategy that affects all aspects of production, including workforce activities and product delivery.

Here are some sections you will have to cover to describe your logistics and operation plan.

Production

• What is the expected production time for your product?
• Do you intend to manufacture, wholesale, dropship, or outsource your product production?
• How long will be the shipping process?
• How will you handle business during peak seasons or times of high demand?

Suppliers

• From where will you supply raw materials to get your product manufactured?
• Where will you produce your products after you acquire all the raw materials?

Facilities

• Do you have an office building where your team members gather and work?
• Will you have a retail store or an online store?
• If you have a physical retail building, where will it be located?
• Are your business premises suitable for your current and future needs?
• How committed are you to the property over the long term?
• Is the current location advantageous or disadvantageous? Should the business expand or relocate?

Shipment

• Will you have In-house fulfilment tasks, or will you assign the work to a third-party fulfilment partner?
• What will the shipping cost be when you partner up with the third-party fulfilment company?
• If necessary, how will you ship your products to your partners?

Equipment

• Is the equipment modern?
• What technology will you use excessively to keep your business up and to run?
• Is the technology easy to access or complicated?
• Will there be more than one technology you will be using?
• Are the equipments reliable and possess business stability?

Inventory

• What will be your approach to inventory management?
• Where do you plan to store the products?
• How many products will you be keeping in hand?

Write all the information in a straightforward way so that the readers sense that you have a stronghold on your logistics and operations approach.

Financial plan

Essential things to keep your business well-functioning include spending time and much effort into establishing your business and having substantial funds.

And, to let your readers know that your financial health is at its peak, you will have to do financial planning.

Be it your friend or a potential investor; no one will want to tie up with a company that can go bankrupt and is doomed to collapse.

Here are the pointers you should include in your financial strategy.

Income statement

• Inform your readers about your significant capital expenditure and revenue.
• Mention the profit margins for each product.
• How will you manage your accounts, sales, stock control and quality control?

An income statement will help them figure out your profit and loss ratio.

Balance sheet

• The balance sheet should show the equity of your business.
• Indicate how stock, trade debtors, and creditors are doing regarding working capital to show how much your company is worth.
• On one side, you can add your business assets and liabilities on the other, and it provides an idea of your business shareholder equity.

The formula for calculating equity is:

Assets – Liabilities = Equity

Cash flow statement

Your cash flow statement is somewhat similar to your income statement, and the differentiator is that cash flow considers when you collect the revenues and pay your expenses.

There are two cases to consider: positive cash flow and negative cash flow.

• When your cash inflow is greater than the cash outflow, your cash flow is positive.

Cash inflow > cash outflow = Positive cash flow

• When your cash outflow is greater than cash inflow, your cash flow is negative.

Cash inflow < cash outflow = Negative cash flow

It helps you identify the status of your cash flow, and you can adjust your operations accordingly to avoid negative cash flow.

Include financial forecasts

• Mention how much you see your business earning in the next 3-5 years.
• Moreover, explain the assumptions underlying the forecasts to appear realistic.
• Take a variety of ‘what-if’ possibilities into account. For example, consider what will happen to your cash flow if sales are 20% lower than expected or 15% greater than expected.
• Mention how much financing you are expecting and what will be the interest rate you will pay.

Accepting payments

• How will you accept your business payment — traditional payment methods (cash) or online payment methods?
• Will you partner up with a merchant service provider to keep daily track of your finances?
• How will you accept recurring payments from customers, if any?

What are the common mistakes entrepreneurs make when writing a business plan?

You need to avoid a scenario where your business plan might seem like a failed attempt to your investors or whoever will be reading your plan. Here are the common mistakes you can avoid to make a perfect business plan.

Business Idea

You should aim for a business idea that requires low investment as you are freshly starting of. You can start with a bit of money and then grow eventually.

Choosing a business idea with high investment seems a bit risky, due to which you might find it challenging to acquire the funding.

Including fewer numbers

Your investors are interested in knowing just one thing — will they make a profit out of your business? 

Show your investors a business plan that talks in numbers and prove that they will leave with maximum profits in their hands. If they find an excellent value for themselves in the business plan, your chances of acquiring generous capital are a given.

Moreover, include your break-even analysis and ROI calculations to write a successful business plan.

Error-free business plan

You don’t want to look unprofessional and immature in front of your investors. Avoid making spelling and grammar mistakes in your business plan.

Before submitting the final draft of your business plan, ensure that it doesn’t contain any typos. You can either edit the whole draft on your own or hire an editor and let the editor review your documents.

Unsteady teams

Having a talented, incredible team with a great bond will help your company to the top. 

Your investors are very interested in knowing about the team and who handles different operations. 

A well-trained and efficient team is crucial for the smooth working of your business. For example, if you are setting up a marketing firm, you need to have experienced marketing affiliates, graphics designers, and writers in your company.

Appendices

Appendices are the last section of your business plan. This section includes supporting documents that will help your reader understand the information you have included in your business plan body.

It is not compulsory to add an appendix to your business plan. But, what if your investors or bank requests the source of the specific information they feel did not fit well in the framework.

Generally, the appendix includes Charts, graphs, tables, Market research, Competitor information, Illustrations of products, Designs, legal documents, organisational and personal details, testimonials, or achievements.

Good luck with your new venture!

We hope this article will prepare you to astound your investors and target market with a perfect and thorough business plan. 

Here is a business plan template you can use to get started.

Key takeaways

• A business plan sets a solid foundation for your business growth.
• A business plan may help you establish the next steps for your company, and it can help you uncover gaps in your strategy before they become problems.

A business plan serves three primary purposes:

• to explain your growth ambitions
• to comprehend your financial needs
• to obtain capital from investors, and banks

The business plans formats fall into three categories

• Traditional
• Lean
• Nonprofit

The general business plan structure includes:

• An executive summary
• Company description
• Products and services
• Market analysis summary
• Strategy summary
• Management summary
• Financial plan
• An appendix

• Research is the key to making your business plan a hit.