How To Write A Business Plan

A business plan explains in writing what your business idea is, why the market needs it, how it will succeed and who will make it happen. What are your company’s goals? How will it achieve them? A business plan can be a brief, informal document for internal use or a detailed, formal document used to attract investment capital or secure a business loan. In this tutorial, we’ll teach you how to create the latter.

Many people start successful businesses without a formal, detailed business plan. Indeed, a school of thought called the lean startup methodology eschews lengthy, forward-looking business plans in favor of quickly and cheaply finding out whether potential customers, purchasers and partners are interested in a product or service, then redirecting or refining that idea based on their feedback before investing too much time and money developing something that might be a huge failure.  

This methodology absolutely has merit, and it may be one that your company can follow initially. But at some point, you will likely be forced to create a formal business plan to get a loan or secure backing from investors in order to grow your company. Those potential sources of money for growing your business will be more likely to help you if you’re already engaged in product testing and have made improvements based on what you’ve learned, however.

Whether you run a startup or a well-established firm, writing a business plan will not only help you get capital, it will also help to reveal any flaws in your business concept or its execution. And it will give you a chance to correct those issues before you or anyone else invests too much time or money. It will force you to examine every aspect of your company in great detail and think hard about what’s working and what might not be. For example, you might discover that you haven't really thought enough about your marketing budget or you haven't done enough research on the government regulations that affect your bottom line.

Furthermore, writing a business plan forces you to examine your company from the viewpoint of a skeptical potential lender or investor, not just from your perspective as an enthusiastic entrepreneur. (Learn to assess how businesses generate their revenue in Getting to Know Business Models.)

In the following chapters, we’ll explain the different sections of a formal business plan and what each section should include to give your company the best shot at getting the capital it needs.