Writing a business plan can seem intimidating, especially when you don't know how to get started. It helps to know that it doesn't need to be long—we aren't talking about high school term papers here, particularly if it's just for internal purposes. And the writing process is also a lot easier when you know where to find some of the information you need.
Here's advice that will help you write a thorough, accurate document.
1. Begin With the Easy Sections
The typical business plan includes these elements:
- Executive summary
- Company description with the mission statement
- Products and services
- Target audience
- Market analysis
- Competitive analysis
- Operations and management
- Sales and marketing strategy
- Financial plan
You probably know some of this off the top of your head, so warm up by starting with those pieces.
2. Create a Target Audience Persona
Also known as an "avatar," the process of creating a target audience persona helps give you clarity about who will buy your product or service. It starts with research. This is important because target audience specifics will influence and guide your sales and marketing strategy.
"If you operate a brick and mortar business serving local customers, go to the U.S. Census Quick Facts page and enter your ZIP code to find the demographic profiles of the areas you are serving," he adds.
Use the demographic information you find about potential customers at these sites, along with other research such as surveys, one-on-one conversations, and focus groups, to create that single person—your customer persona—that best represents your target customer.
3. Get Smart About Your Industry and Market
"What's the market value, how does it operate, what are the needs, and who are your direct and indirect competitors? You need to understand the ins and outs of how the market works, and how the profit is made," says Zohar Gilad, CEO and co-founder of InstantSearch+.
Start with the local library reference desk, advises Linda Murray Bullard, chief business strategist at LSMB Business Solutions. "The local Small Business Administration office or small business development center has a wealth of information that can help, too, and some will even do the market analysis for you," she says.
Lavinsky also recommends looking for market information on industry association websites and in research reports available online. In addition, check trade journals as well as the Bureau of Labor Statistics and the Census Bureau.
4. Know, Understand, and Analyze Your Competition
Your research into competitive products or services and pricing, combined with knowledge of how customers perceive them, will help shape your product and positioning.
Reuben Yonatan, founder and CEO of GetVoIP, recommends categorizing competitors as primary and secondary. Learn as much as you can about your primary competitors because they often represent your end goal, but don't overlook the others. "With secondary competitors, extract as much insight as possible. For example, try to determine why they are not at the top of the food chain. Could it be their pricing?" he says.
Talk to their vendors and customers, and study their website, marketing materials, and press releases. How are their offerings different from yours? How are they the same? This information will help you explain your differentiation in the business plan.
5. Dig Into the Numbers
The primary purpose of the financial plan, says Phil Santoro, co-founder of startup studio Wilbur Labs, is to document how much money you need to start the business, and how or when the business will generate revenue and profit.
When creating the financial plan, he determines where the company wants to be in three to five years, then builds a roadmap to get there. "Working backwards like this allows you to look at the different workstreams required for each phase of the business," he says. "Most importantly, working backwards lets you create projections based on achievable assumptions. A plan is only as good as the assumptions that go into it."
This is not a situation where you want to guess. In addition to working with an accountant, base your financial projections on verified data from Dun & Bradstreet Business Ratios reports, says marketing consultant Marsha Kelly of Best4Businesses.com. "This verifiable information is dependable to make business projections and to assure banker investors of the trustworthiness of the business plan," she says.
Additionally, consider getting help from professionals, especially regarding regulatory or legal issues and financial planning. You want to get it right, especially if you will use your business plan to secure bank or investor funding.
After you've written the plan, don't tuck it away. Think of it as an organic document that grows with the business. For this reason, you'll want to update and refine it as you learn and succeed.