I just realized in more than six years of running a company that writes business plans, I’ve never written a general overview of how to write a business plan!
Time to fix that.
For every business plan and pitch deck that I create for my clients, I follow the same process.
And it doesn’t matter if the goal is a business bank loan, or equity crowdfunding, or love money.
Yes I customize the outline and headings, and focus research in different places depending on the business owner’s needs and what they want to track. The outcome will look a little different depending on the purpose of the plan. But the approach is the same. I follow these five steps, and the plan comes out great every time. So check out the post below and follow this process to get your business plan done, get your money and get a hang of this entrepreneurship thing.
The 5 Essential Steps to Writing a Business Plan that actually gets you Funded
1. Get into the Planning Headspace
There’s no quicker road to writer’s block than failing to prepare yourself for an intense session of concentration and focus. Seriously. A business plan is a meaty, complex document, not a glorified form-filling exercise. So switch your mindset and think about what having this plan will do for you. Will it let you finally meet with your banker about a loan? Talk to that investor whose business card is fading and eroding in your empty wallet? Show your friends and family that you’re fricking serious about this thing? Okay. Now that you’re thinking about the outcome, it should be easier to start the process. Go to the place where you know you’ll be most productive, and get ready to work.
2. Define Your Perfect Customers
If you’ve done any reading on entrepreneurship then you’ve heard this concept before. When you’re first starting out, the straightest road to success is to find a niche group of customers who make up the perfect, ideal buyers for whatever you’re selling. Visualize your best possible customer as if they were sitting in front of you waving their Visa card in your face. Describe them, physically, demographically, and behaviorally. What are they like? What’s important to them? What problem does your business solve for them? Be super, super specific and write your entire business plan with that person in mind.
3. Research Your Perfect Customers
Now that you can visualize who your best customers are, you need to go and find out how many people like them exist. Yes, this is the demographic research, the statistical analysis, the market size estimate. If you’re looking for financing, you have to do this.
Stick to as narrow a definition of your target market as possible to keep the research from becoming overwhelming. If you find data you’re not sure you’ll need, bookmark it for later and focus on those ideal customers first. When you’ve estimated how big that segment of your market is, then you can research other types of customers to show how your business might appeal to each one and be able to evolve to meet their needs, too.
4. Determine People and Resource Requirements
One of the most common mistakes I see when I review business plans is that entrepreneurs underestimate their staffing and resource requirements. From bookkeeping and administrative support to cashiers and sales reps, we all have a tendency to think we can do everything on our own and that days will magically expand to let us work more, and more and more.
The trick to figuring out who your business really needs to function efficiently is to draw an organizational chart that shows all the positions your business should have 2-3 years from today. List all the functions you can think of, and then group them into logical job titles. When you can see how many responsibilities need to be covered in your growing business, you’ll quickly see where you’ll eventually need to hire. Then it’s up to you to budget for each of those positions as your business grows.
5. Forecast Your Finances
Financial forecasting can’t be explained in a paragraph, but I will say this: the most important thing you can do when creating financial projections is to distill it down to its most basic components: revenue, direct costs, and operating costs.
- Revenue is the top line income coming into your business. You need to be conscious of this number, but don’t let it define success for you. Be reasonable about how much money your company should earn. You have little experience to base your assumptions on, so be conservative. Figure out what you need to earn to turn a profit and make that your expected scenario (but you have to know your costs first, so keep reading).
- Direct Costs are the costs of producing whatever you sell. That’s parts, ingredients, packaging and inventory if you sell physical products. For services it could be contract labor or an online tool that you only have to pay for when you have a client. This is money that you only spend when you sell something.
- Operating Costs are the expenses you have regardless of whether your revenue is $1 or $1 million a month. Think rent, internet, marketing, bookkeeping. It’s not always a fixed number (for example you might only need to travel twice a year for business so some months your travel expense is $0 and sometimes it might be a couple thousand).
Government web sites should be able to provide averages for your industry that you can use to create educated guesses for your costs. Then subtract your direct and operating costs from your revenue to determine your expected profit. If that number is negative, revise your revenue projections – but make sure your plan outlines how you’re going to reach those targets.
Clear as mud? This should help simplify the process of writing your business plan, which I know can get really overwhelming and take way longer than you thought it would. But this is a high level approach; if you need more guidance, check out my DIY Business Planner program. It’s a quick, affordable download that will walk you through all of these steps and more in lots of detail and link you to research resources and templates you can use to create your own business plan.
Questions? Hit me up in the comments below and I’ll guide you.