How to Write a Business Plan

Whether you’re looking to attract investors or provide direction, every business can benefit from a plan. But where should you start? Read on for our guide on how to write a business plan.

Nic Redfern, Connor Campbell Last updated on 20 April 2022.
How to Write a Business Plan

A business plan is a written document that describes your business, usually covering strategies, objectives, marketing, sales and financial forecasts. More than that, it can be a way to provide a clear roadmap designed to take your business from where it is today to where you want it to be in the future.

But if you haven’t created one before, it can be hard to know where to start. That is why we have put together a guide on how to write a business plan, including the elements you might want to include, and the different small business plan formats you may want to consider.

Why should I write a small business plan?

By writing a business plan, you will be able to:

  • set out your goals
  • clarify your business idea
  • spot potential problems
  • measure your progress

A business plan will also be essential if you’re looking to secure a business loan or other form of credit from a bank. It can also help convince suppliers, customers and employees to support you in your endeavour.

There is no right or wrong way to set out your business plan. What matters is that it suits your needs. That being said, most business plans can be categorised as either traditional or lean start-up.

How to write a traditional business plan

A traditional business plan is comprehensive and detail-oriented. For these reasons, it is the format most commonly requested by lenders and investors.

Let’s go through the sections you would expect to see in a traditional business plan – but remember, you don’t need to stick to an exact outline. Instead, use the sections that make the most sense to your business and its needs.

Executive summary

Outline briefly what your company is and why it will be a success. Include your mission statement, your product or service and basic information about your location, workforce and leadership team. And if you’re seeking funding, lay out your high-level growth plan and financial information.

Company description

In this section, you can elaborate on the points laid out in your executive summary. Explain the problems your product or service solves, and list the specific organisations, businesses and consumers your company intends to serve.

Furthermore, lay out the competitive advantages that will help your business prosper. Perhaps you have industry experts on your team or have sourced the perfect location for your store. There is no need to hold back on your company’s strengths.

Don't be afraid to mention key risks to the business. Any lender or investor will likely identify them for themselves and will be reassured by the fact that you have identified them and have plans in place to protect the business.

Management and organisation

Who will be running your business? How will it be structured legally? Will it be a limited company, limited liability partnership, or partnership, or will you work as a sole trader?

An organisational chart may help illustrate who will be in charge of what, and take the opportunity to describe how their credentials will contribute to your venture’s prosperity. You may even wish to include the CVs of key players.

Market analysis

You’ll need a solid understanding of both your target market and your industry outlook. Competitive research will shed light on trends and themes, as well as what other businesses are doing well, and how you could do it better.

Marketing and sales

There is no single way to approach your marketing strategy because it should evolve and adapt to your business’s individual needs as they arise. The goal in this section is to lay out how you will attract, and retain, a customer base. You’ll also need to describe how sales will actually happen.

You’ll likely need to refer to this section of your business plan later when you lay out your financial projections, so make sure your marketing and sales strategies are described in thorough detail.

» MORE: How to promote your small business online

Service or product line

Describe what you’re selling or what service you’re offering, as well as how it will benefit customers and what its life cycle will look like. If you have plans for intellectual property, such as patent filings or copyright, make sure that you share them. And if you’re conducting research and development for your product or service, explain it in detail.

Funding request

If you’re looking for funding as part of your small business plan, you’ll need to outline your requirements, preferably with a five-year projection and your future strategic financial plans, such as selling the business or paying off debt.

You’ll need to specify whether you require equity or debt, the terms you wish to be applied and the length of time your request will cover. Describe what your funds will go towards, such as paying salaries, purchasing materials and equipment or covering bills, until such time as revenue increases.

Financial projections

It’s a good idea to supplement your funding request with financial projections in order to convince readers that your business will be stable and successful.

If your business is already established, then include balance sheets, income statements and cash flow statements, preferably from at least the last three years, if not the last five. Be sure to list any other collateral you could secure against when applying for a business loan.

Provide a prospective financial outlook for the next five years, including forecast income statements, capital expenditure budgets and cash flow statements. For the first year, be even more specific, and break it down to quarterly, or even monthly, projections. Explain these clearly, and ensure they match your funding requests.

Appendix

Your appendix can be filled with supporting documents and any other materials that have been specially requested. Items commonly added to the appendix include:

  • product pictures
  • credit histories
  • resumes
  • licences
  • letters of reference
  • patents
  • permits
  • legal documents
  • contracts

How to write a lean start-up business plan

This less traditional business plan format has a solely high-level focus. It is quick to write and contains only key elements. For these reasons, you may prefer a lean start-up business plan if you wish to explain or start your business in a short timeframe, or if your business is relatively simple.

It may also be a good format to use if you envisage regular change for your business or your business plan being regularly redefined.

These kinds of business plans are most applicable where you are building a business based on a new concept or product and people can understand that it is impossible to project exactly how it will develop at a more granular level of detail. However, many lenders will not consider such a high level plan sufficient for the approval of a loan.

A lean start-up business plan is a useful summary of your infrastructure, value proposition, finances and customer base. As with the traditional business plan, it has commonly used elements, but they are not essential; you should mould your plan to your business’s particular needs.

» COMPARE: Start-up business loans

Value proposition

You need to make a concise and compelling statement regarding the unique value that your company will bring to the market.

Key partnerships

Make note of the other companies you’ll work alongside in bringing your business to fruition, be they suppliers, manufacturers, sub-contractors or other strategic partners.

Key activities

List the ways your business will gain a competitive advantage in the market, highlighting such factors as selling direct to consumers or leveraging tech to tap into the sharing economy.

Key resources

List any resource you’ll use to maximum advantage in creating value for your customers. Your key assets may include capital, staff and intellectual property.

Customer segments

Specify your target market and remember: your business won’t be for everyone. Enter into your small business plan with a clear sense of who you will actually serve.

Customer relationships

Lay out how your customer base will interact with your business. Will it be automated, face-to-face or online? Consider the customer experience from start to finish.

Cost structure

Will your company focus more on maximising value or reducing cost? Define your strategy, then list the most significant costs you’ll face.

Channels

How do you intend to talk to and communicate with your customers? Most businesses make the most of a combination of channels and optimise them over time.

Revenue streams

How will your company make money? Will it be through direct sales, advertising space or membership fees? If you envisage multiple revenue streams, be sure to list them all.

» MORE: How to create a small business budget

Get your small business off to a great start

A well-written small business plan can be critical in helping secure funding and bring on new business partners. Remember, investors need to feel confident that they will see returns. Your business plan is the perfect tool to convince people to work with you, so put in the time, research and effort that your business deserves. Not only will a plan help you be taken more seriously if you’re starting a business with little funding, but it will also help you understand every element of your business, better preparing you for the market.

About the authors:

Finance Director at NerdWallet UK and business adviser to SME's Nic is spokesperson for small and growing businesses with a strong understanding of the financial needs of business Read more

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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