Key Takeaways:
- Discover the impact of a solid business plan in driving startup success, informed decisions, and attracting essential partners and funding.
- Follow our step-by-step guide to create a winning business plan, addressing key components like your compelling idea, competent team, cash flow projections etc.
- Utilize our practical guiding questions, do’s and don’ts, frameworks, and hands-on examples for each business plan chapter.
- Craft a persuasive executive summary that captures your audience’s attention and makes them want to read more.
- Masterfully polish your business plan with our 7 essential tips (e.g., regarding formatting and storytelling techniques) for a clear, concise, and compelling document.
- Leverage the power of AI and other online resources to efficiently create a professional plan that outshines the rest.
Why should you care about a business plan in a constantly changing environment where agility is key to succeed? A thoroughly analyzed and persuasively articulated business plan provides a strong basis for your startup success. It helps you navigate through the uncertainties of the market and win over investors.
In this comprehensive guide of the “From Idea to Startup” series (click on the image to see all articles), we dispel common myths around business plans/proposals being antiquated bureaucratic relics, and give you step-by-step instructions to write it: We’ll cover all important elements (topics/chapters) of business plans like defining your mission, relevant market trends, projecting financials etc. and bringing it all together in a compelling executive summary.
For each of the business plan chapters, I’ll equip you with practical guiding questions, tips, and examples for your own business plan. Finally, we’ll also discuss the “art” of polishing your business plan for the right look and feel and using innovative tools to streamline the whole creation process.
Note that the principles outlined in this article are useful for both start-up entrepreneurs and corporate intrapreneurs. The latter may pitch their idea to their executive board and the business plan is then called “business proposal” or “board paper” etc.
Why You Should Care About Business Plans
Done right, the business plan can be the backbone of your successful venture (or a massive waste of time, if done wrong). It shouldn’t be a suffocating corset but rather provide a clear roadmap to help you stay on track with your startup and achieve your goals. Before we dive into the how-to let’s first have a look at the question of why a well-made business plan can make the difference for your venture.
Your business plan is your startup’s compass. It should empower rational decisions and allocation of scarce resources in a data-driven way. It allows you to stay concentrated on what truly matters and thus navigate the unpredictable world of startups without getting overwhelmed or distracted.
Articulating your vision, deriving goals and milestones and devising strategies to achieve these while navigating a complex landscape of chances and risks is at the heart of business planning. Studies show such strategic, process-like thinking is a key determinant of long-term success (in all life areas!). It helps you and your team stay aligned to work in unison towards shared goals.
A comprehensive business plan is a powerful tool to manage chances and challenges. Anticipating relevant opportunities and risks, deriving contingency plans for the most important ones allows you to be proactive and agile in the ever-changing entrepreneurial arena. The result is a helpful communication instrument to show your key stakeholders that you understand the good, the bad and the ugly of your business and market – which is one key criterion they use to inform their decision whether to work with you.
Overall, a strong business plan is your MVP when it comes to attracting strategic partners and financial investors. Frankly, this is the main reason you are writing this comprehensive document, and why you should also write from their perspective and not only yours. Highlighting your idea’s value, team’s horsepower, business’ viability and growth potential, stakeholders’ desirability, technical feasibility etc. in a persuasive way can help you secure the funding and partners needed for your venture.
As you work through this guide, keep in mind the wise words of Eisenhower: “Planning is everything, the plan is nothing.” Thoroughly analyzing your business is crucial in preparing you to confront the future and surmount any obstacles that may arise. Your business plan, therefore, is simply a tool for communication to showcase to stakeholders that you have done your due diligence.
Consider your business plan a living document and revisit the strategic planning process on a regular basis – i.e., whenever significant factors in your business/market change – to stay ahead of the game. Let’s now delve into the core of business planning.
Writing Your Business Plan/Proposal Step-by-Step
The following sub-chapters follow the typical structure/chapters of a business plan, ensuring that you cover all necessary components and present a coherent, persuasive narrative to stakeholders.
Some good news upfront: If you have done your duty for the first two articles of this series on generating and validating your business ideas from a desirability, viability and feasibility perspective, you can recycle most of your insights for the corresponding business plan chapters – how convenient.
Chapter #1: Identifying the Problem and Defining Your Mission
Purpose of this chapter:
For your venture to be valuable and attract potential investors and partners, you want to show that it solves an important problem (in a better way than alternative solutions). Use this chapter to prove that you identified and validated a gap in the market that you want to fill.
Follow these guiding questions:
- What specific need or gap does your venture aim to address and for whom?
- Why is this problem important to solve, i.e., what are its implications and what would happen if it remained unsolved?
- What are the driving factors behind this problem (#FiveWhys)?
- How is the problem currently solved and why is that insufficient?
To effectively address these questions, follow these tips:
- Conduct thorough market research: Identify “pain points” and unmet needs by analyzing your target market, talking to potential clients, and checking existing solutions.
- Validate the problem empirically: Use factual evidence and examples to prove the existence and urgency of the problem. Avoid falling for the bias/assumption that it’s “universally understood”.
- Tie it all together in a captivating mission statement: Your mission statement should encapsulate your business’s purpose, values, and commitment to solving the identified problem. Consider using a standard template (which you can quickly find online) to ensure its clarity, conciseness, and focus.
Example snippets for a “Fictional food delivery service” business plan:
“The problem we address is that busy professionals having a tough time finding convenient yet healthy meal options […]. Our mission is to promote a more balanced lifestyle without compromising convenience by providing nutritious, tasty, and easy-to-make meals for busy professionals […].”
Chapter #2: Showcasing Your Winning Value Proposition
Purpose of this chapter:
Your innovative idea/solution is the centerpiece of your business plan and startup. In this chapter, you want to present your value proposition as the answer/puzzle piece to the question/“market gap” introduced in the first chapter.
Follow these guiding questions:
- How does your solution specifically address the identified market gap?
- What unique features make it better than the existing solutions?
- How will customers (and other stakeholders!) benefit from using your solution?
To effectively address these questions, follow these tips:
- Describe your product or tech in clearly and concisely: If it’s a tech startup, don’t overdo the “tech deep dive” in the business plan; the reader doesn’t care half as much about your tech as you do, and they’ll just assume it works. Don’t bore them with details (or at least put them in the appendix); if they want to know more, they’ll ask.
- Don’t be vague about what your solution is or can do: It should be clear which steps of the “value chain” your solution covers (i.e., where your product “ends” and where your suppliers’/partners’/etc. products “begin”). For example, if your product is thermal energy storage, don’t describe it as a “heat recovery system” just because it can be coupled with a heat recovery unit (from another supplier). Describe it as what it is (a storage) and highlight heat recovery as a potential use case (that requires third-party tech). Avoid confusion.
- Provide a development timeline: Outline your key milestones (e.g., when you plan to achieve which TRL (technology readiness level) etc.), stages of growth, and progress to date, so your readers know where your technology and business development is standing.
Example snippets for a “Fictional food delivery service” business plan:
“Finding healthy, convenient meal options is (still) difficult for busy professionals […]. Our solution is a meal delivery service that supplies fresh, tasty meals straight to your door prepared with local, natural ingredients […]. Among our unique features are personalized meal plans, flexible shipping options, and an intuitive online platform […].”
Chapter #3: Analyzing Your Market and Competition
Purpose of this chapter:
You want to prove that you really understand the market you’re intending to do business in as this is one of the key selection criteria of potential investors/partners. You also want to showcase the market potential and competitive landscape to prove that the pie is sufficiently big, and that you can grab a sizeable portion of it.
Follow these guiding questions:
- Who are your target segments and why?
- How big is the market, and what is your expected share of it?
- What are the key market trends and drivers (e.g., what makes customers buy)?
- Who are the main competitors, and how do you stand out?
To effectively address these questions, follow these tips:
- Benchmark your business with key competitors: Objectively analyze their strengths and weaknesses and use a tool like the “value curve” to compare your value proposition to theirs. Try to avoid competing on price and risking a race to the bottom but carve out your own unique niche by differentiating your value proposition (i.e., blue ocean strategy).
- Use frameworks handy like “personas”: Succinctly summarize the key characteristics (demographics, psychographics, socioeconomics, etc.) of your target segments during your research, but include only the key takeaways in the body and leave the rest in the appendix.
- Calculate key market metrics: Outline your target market’s expected size and growth (CAGR) and your venture’s share (period after period) etc. Most importantly though, explain the underlying drivers and validate your calculated metrics through market research.
Example snippets for a “Fictional food delivery service” business plan:
“Health-conscious millennials (LOHAS) are our primary target segment, with an estimated market size of 5 mio. people in the U.S., of which ca. 100k are in our current service area (before we expand nationally) […]. To reach our 5% market share goal, we estimate a CAC (cost of acquisition) of $50 per customer with a 1st-year marketing budget of $250k. With targeted online ads, we expect to acquire 5k customers (=$250k/$50) in the 1st year […]. Local, organic ingredients and a personalized menu help us stand out from competitors […].”
Chapter #4: Developing Winning Marketing and Sales Strategies
Purpose of this chapter:
You want to demonstrate that you have both the right market entry strategies as well as subsequent growth strategies in place to attract and retain customers sustainably. Outline here how you want to capitalize on the market insights from the previous chapter.
Follow these guiding questions:
- Which marketing channels can best reach your target audience?
- What is your branding strategy and how does it resonate with your target segments?
- How will your go-to-market strategy help you overcome the identified market-entry barriers and drive initial traction?
- How does your growth strategy look like (e.g., how will you conquer further customer segments after the first one)?
To effectively address these questions, follow these tips:
- Your key guiding principle should be “where do your customers want to be reached/informed/buy/etc.” (it’s not about which marketing channels you like or are trendy right now) and establish a corresponding sales funnel (#AIDA).
- Don’t underestimate the power of a strong brand strategy; use practical tools like “brand ladders” and “brand positioning statements” as practical frameworks (which you can find online).
- Design a relevant go-to-market strategy that includes market segmentation and prioritization and your marketing mix (i.e., product, pricing, distribution, and promotion). Relate that to market-entry barriers and how to overcome them, e.g., economies of scale or brand loyalty of incumbents, high capital needs, access to distribution/supply channels, IP, regulation, network effects, switching costs of customers etc.
- Use tools like the “Ansoff Matrix” to devise growth strategies in terms of further market or product/tech development – this should of course be aligned with your product roadmap.
Example snippets for a “Fictional food delivery service” business plan:
“Our plan is to reach our digitally savvy target audience through social media ads and influencer marketing […]. Our brand strategy emphasizes health benefits and ethical sourcing […]. Offering a limited-time discount to 1st-time customers is part of our go-to-market strategy […]. Our growth strategy focuses on expanding our product line to include meal kits, partnerships with local grocery stores, and a national roll-out […].”
Chapter #5: Assembling a Winning Team and Efficient Operations
Purpose of this chapter:
Demonstrate that you have the A team/management, and that any investor or partner is betting on the right horse. Highlight that your team has the right skills and knowledge of the market and technology and a relevant track record. Include in this chapter also that you have the right organizational setup (structures, processes, systems etc.) in place for your venture; if your organization is already complex now (#KISS), dedicate its own chapter to it…
Follow these guiding questions:
- What relevant qualifications and experiences should/does your founding team have?
- What is the best legal structure for your business?
- What are the critical activities, partners, and resources needed for efficient operations?
To effectively address these questions, follow these tips:
- Build a diverse team with complementary skills, experiences, and views. Consider the key functions of your business, and make sure you have expertise in each area (marketing, tech, finance etc.).
- Choose the legal structure that best fits your business objectives, taxation situation, and governance preferences etc. Consider consulting with a legal expert to ensure you make the right decision here.
- Use frameworks like Porter’s “value chain” or flow charts to identify the activities/functions of your business. Adapt such generic frameworks to your specific case by including more specific functions, e.g., reliable cooling chains for food businesses etc.
Example snippets for a “Fictional food delivery service” business plan:
“We have a team of experienced chefs, nutritionists, logisticians, and marketers […]. We choose a limited liability company (LLC) as our legal structure to limit personal liability […]. Critical activities include sourcing ingredients, cooking, packaging, and delivering meals, and partnering with local farmers and delivery companies to perform these tasks efficiently and effectively, etc. […].”
Chapter #6: Crafting a Robust Financial Plan
Purpose of this chapter:
A strong financial plan is critical to demonstrating the financial viability of your business and convincing investors of its potential for growth and profitability. Your cash flow projections (i.e., how much money flows in and out of your business each period) in this chapter are also the basis for justifying the money you request to “bridge the gap” (until your business makes more than it burns or gets follow-on funding).
Follow these guiding questions:
- What is your business model and how will it generate revenue?
- What are your sales forecasts and profitability metrics (e.g., IRR, unit economics) projections per period?
- What are your funding requirements (i.e., how much money do you need from investors, creditors etc. and why from them)?
To effectively address these questions, follow these tips:
- Synthesize (the key takeaways of) the “business model canvas” for the qualitative description of your business model; and use Excel models for the quantitative analysis (in that order). I will soon make a quick guide for basic financial modelling in Excel. Also, there are many templates online for that (check out this YT Playlist by Slidebeans).
- Cash is king: Provide a “cash flow statement” for the profitability analysis. Unless your business plan entails fancy joint ventures or SPVs, there is typically no need for other financial statements (balance sheet or income statement). Break cash flows down for the first 1-2 years monthly, and for the next 2-3 years (so in total ~3-5 years) quarterly.
- Show a conservative, neutral and optimistic scenario for your cash flow projections. Avoid “hockey stick” diagrams though; nobody believes them. Explain your assumptions for revenues and costs and be clear about which key assumptions are validated or not.
Example snippets for a “Fictional food delivery service” business plan:
“We are using a subscription-based model where our clients can select from different meal plans and delivery frequencies […] If we invest $250k, we expect to gain 5k customers and generate $500k in sales in the 1st year. Operational expenses, which include ingredient costs, delivery fees, and payroll, are expected to be $400k, resulting in a net profit of $100k and an IRR of X%, as shown in the table below [which you then provide] […].”
Chapter #7: Creating an Implementation Roadmap
Purpose of this chapter:
You want to demonstrate that you are a (wo)man with a plan. Show how your big ideas translate into a concrete timeline with key milestones and activities. Use this chapter to show what the funding you’re asking for will be used for.
Follow these guiding questions:
- What are key activities (e.g., marketing campaigns, product development etc.) and milestones (e.g., product launch, company registration etc.) to achieve your business goals?
- How do these activities fit into your schedule, i.e., what needs to be accomplished by when, and which activities/work packages build on each other?
- How will you use your resources and funding to support these activities? Does your plan match what you’re asking for ($)?
To effectively address these questions, follow these tips:
- Use handy frameworks like a GANTT chart to visualize your project timeline and the dependencies between work packages/activities/milestones concisely.
- Show the first year on a more detailed basis (i.e., monthly), the second year on a quarterly basis and then 1-3 more years on an annual basis (even though the latter falls under the category of “crystal ball gazing”).
- Consider the “Magic Triangle” of project management: Scope, time and costs are in conflicting relationships. Speeding up development typically leads to higher costs or worsens the quality; cutting costs usually means higher time investment or worse output etc. Be realistic.
Example snippets for a “Fictional food delivery service” business plan:
“Establishing relationships with local farmers for organic ingredients, launching an e-commerce platform, hiring chefs, establishing delivery logistics, creating a marketing plan, and reaching 5,000 customers in the first year […] are key activities and milestones in our roadmap […].”
Chapter #8: Assessing and Mitigating Risks (and Chances)
Purpose of this chapter:
This is a catch-all for “the good”, “bad”, and “ugly” which aren’t sufficiently covered in the other chapters. Obviously, you already talk about, e.g., key market risks in the market chapter, but there may also be further factors to consider like succession risks etc. Overall, demonstrate for your venture that in the grand scheme of things, “the good” (chances, strengths) (hopefully) outweighs “the bad” (risks, weaknesses), and you have contingency plans for “the ugly”.
Follow these guiding questions:
- What are the key risks your business might face, and how will you prevent or mitigate them?
- What are the main opportunities your business can get tailwind from and how will you do it?
- How will you address founder or succession risk and ensure a running business in case of unforeseen events?
To effectively address these questions, follow these tips:
- Use the “SWOT” framework to analyze your venture’s internal and external environment, i.e., its relevant strengths and weaknesses (internal view) and opportunities and threats (external view). The magic then lies in correlating these insights, i.e., how can you use your strengths to mitigate the critical risks or seize the opportunities etc.
- Use tools like the “risk matrix” and analyze the identified risks by impact and probability, and then develop concrete contingency plans at least for the higher priority ones.
- Develop succession plans, and also face inconvenient risks like “What happens if the founder (or another key player) gets (terminally) ill/dies?” etc. This is even more important for smaller teams or solopreneurs…
Example snippets for a “Fictional food delivery service” business plan:
“Our key risks include supply chain disruptions, food safety concerns and intense competition from established meal delivery services, etc. […] Mitigation strategies entail diversifying our suppliers, implementing strict quality control measures, and developing a unique brand identity to differentiate from competitors […]. For succession planning, this would include cross-training team members and documenting standard operating procedures (SOPs) to ensure a smooth transition if key personnel departures, etc. […]”
Chapter #0: Writing a Compelling Executive Summary
Purpose of this chapter:
“You only get one chance to make a first impression!” That’s where your executive summary comes in – written last, shown first. Provide a clear, concise, and compelling overview of your entire business plan in a nutshell, including your call to action (i.e., your funding request). This chapter should grab your audience’s attention and set the stage for the rest of the document.
Follow these guiding questions:
- Going through all your chapters again, are they still all coherent (e.g., after some edits or iterations here and there)?
- What are the key points of each chapter of your business plan?
- How can you weave these key points into a winning storyline?
To effectively address these questions, follow these tips:
- Keep your executive summary brief and to the point, focusing on the most important aspects of your business plan. It should really be no more than a “one pager”. Use relevant tools like the Business Model Canvas or “One-Page Business Plan” to check whether you forgot any important topics.
- Use a fitting storytelling framework (which you can find in the next chapter in tip 3) like the “3 Cs”, i.e., focus on your compelling idea, competent team, and cash flow projections.
- Include your funding requirements/recommendation for action (CTA), as this is critical information for potential investors/partners. Be clear about what’s in it for them (WIIFT) and for you (WIIFY). After all, this whole document is about facilitating transactions.
Example snippets for a “Fictional food delivery service” business plan:
“We are a meal delivery service offering fresh, organic meals sourced from local farmers […] With a target market of health-conscious, time-strapped consumers […] We expect to serve 5,000 customers in the first year […] with revenues of $2 million and an IRR of X% […] We are seeking $500,000 in funding to scale our operations and expand our marketing efforts […]”
Bonus: The 7 Sins and Wins of Polishing Your Business Plan
“You eat with your eyes first!” Like so often in life, the packaging is just as important as the content (#perceptionisreality) for business plans, too: How you package your content affects how others perceive it (#framingbias). No worries – just follow these 7 actionable tips to polish your business plan from the outside and the inside:
Tip #1: Maintain consistent visual appeal and readability.
- Use a professional tone and fact-based writing, while incorporating storytelling elements. Prioritize brevity and key points for busy executives.
- Consistently apply formatting, font type (Calibri, Arial, or Times New Roman), font size (11 or 12), and line spacing (1.5) throughout the document.
- Utilize white spaces to avoid information overload, and incorporate visualizations (diagrams, tables) to clarify complex concepts.
- Create a simple cover page (logo, brand name, catchy slogan) and include a table of contents, and aim for a total length of ca. 8 to 25 pages, with fewer pages being preferred without sacrificing content quality.
- Save your document as a PDF file to ensure consistent formatting across devices.
Tip #2: Don’t be overly rigid with the chapters/structure (#FormFollowsFunction).
- While you can view the previous chapters as a standard framework, please still adapt the chapters to fit your venture’s unique context.
- For example, you may want to create a separate chapter for competition (or legal stuff etc.) if it’s a bigger aspect of your business.
- The goal is to ensure that you…
Tip #3: …tell a compelling story.
- Frame your venture as a captivating narrative focusing on the problem you solve (“always start with why”), your innovative solution, the great benefits it brings to the world (especially for customers and potential investors/partners) and you’re a team.
- As a handy framework, try the “3 Cs” of great business plan stories: write about your compelling idea (i.e., problem-solution fit), competent team (i.e., why you have what it takes, e.g., right skills, track record or market knowledge) and cashflow projections.
- Another great framework is the trinity of “customer/stakeholder desirability”, “business viability” and “technical feasibility” because the sweet spot of successful innovations lies at the intersection of these (which should be the case for your idea).
- If you’re creative, you can even turn it into a so-called “Hero’s Journey” which is the magic sauce of almost every Hollywood movie, and sprinkle in some subtle AIDA logic. There are many frameworks – better just pick one, preferably the “3 Cs” (#KeepItSimple).
Tip #4: Utilize ready-made business plan templates.
- There are countless templates, tools and exemplary business plans online just waiting to inspire you (like this guide here or this resource by SBA).
- Generally, learn to stay on the “shoulders of giants” instead of reinventing the wheel. Copy, adapt and improve with pride!
Tip #5: Don’t half-as* the executive summary.
- Even if motivation is low at the end of this exercise, put in the needed effort to make it clear, concise, and compelling: It’s typically the first (and sometimes only) sections your stakeholders will read and base their (preliminary) decisions on!
- It should convey the gist of your other chapters. That’s why A) you should write it last and B) use a “top-down”/”pyramidal” writing style (i.e., always put the key takeaways into the first sentence of each chapter/paragraph) in all your chapters.
- This writing style also makes it easier to understand your business plan for the receiving side. In general, it is good practice in the business world to write this way, i.e., to “frontload” the important information.
Tip #6: One size usually doesn’t fit all.
- You want to tailor your plan to your target audiences (investors, partners etc.) so it “speaks to them”, i.e., adapt its content and style to their individual needs and expectations.
- Remember, persuading your audience is the main goal of this document and the reason why you should also write it from their perspective.
- If needed, create multiple versions of your business plan.
Tip #7: Automate boring stuff, focus your brains on tough nuts.
- Leverage generative AI tools like ChatGPT to streamline the entire process of creating your business plan (and lots of other “written stuff” like marketing material, job ads etc.)
- ChatGPT helps you structure the chapters, provides guiding questions, accelerates your research and ideation (#FactChecking), challenge ideas, turn bullet points into flow text, write the executive summary, proofread the document etc. Total game-changer.
- Also explore other generative AI systems like text2image (MidJourney is great) to visualize your ideas etc.
Bringing it All Together: Your One-Stop-Shop for Business Plans
This article (hopefully) made a case for the dreaded business plan as a valuable tool for aspiring entrepreneurs to enable funding, partnerships, and a strategic approach to starting and growing your business.
Furthermore, you now have all ingredients to craft your own “readable” business plan: We covered everything from your compelling idea to your competent team to your cashflow projections and more. We also discussed best practices to polishing your business plan for professional appeal (#KISS) and streamlining the creation process (#GenerativeAI).
As a treat on top, in this series’ next article, I’ll show you how to turn your business plan into a persuasive pitch (deck) to win investors and partners. As always, please share your experiences and views in the comments, so we can all grow and learn together entrepreneurially.
Cheers, John.
Recommended Resources for the Go-Getters
Here are some resources for the hungry ones to dive deeper into today’s topics:
- “The Business Plan Workbook” by Colin Barrow, Paul Barrow, and Robert Brown – With step-by-step instructions, tutorials, and case studies, this handy guide takes you through the process of writing a strong business plan.
- “The Personal MBA” by Josh Kaufman – For those who want to succeed in business without a formal MBA degree, this self-study guide distills essential business concepts and principles to provide a solid foundation.
- “Venture Deals” by Brad Feld and Jason Mendelson – To help entrepreneurs better understand the fundraising process and negotiate deals that benefit both themselves and their investors, this extensive guide demystifies the complex world of venture capital.
- “HBR Guide to Building Your Business Case” by Raymond Sheen and Amy Gallo – This resource provides a comprehensive framework for researching, analyzing, and communicating key elements of your business case.
- “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne – This excellent book introduces the concept of “Blue Oceans” (creation of uncontested market niches) and provides a methodology (the mentioned “value curves”) for identifying and creating such opportunities.