The ultimate guide to writing a business plan
Updated: May 17, 2022
A business plan is a document that outlines your business goals and strategies, and it’s essential for all stakeholders in the business, employees, customers, and investors.
Writing a business plan can be daunting, especially if, like many, you have run your business without one previously. We’ve put together this simple, step-by-step guide to help you write a great business plan.
What is a business plan?
A business plan is a roadmap for your business. It lays out your target market, business goals, and a plan to achieve them. A good business plan will also include detailed financial projections, marketing and sales strategy, and a description of your business operations.
If you’re thinking about starting a business, or you’ve been in business for a while but haven’t written a business plan yet, now is the time to do it. A business plan can help you secure financing, define your business goals and strategies, and keep you on track as your business grows.
Why write a business plan?
A business plan is a document that describes your business's purpose, ambitions and how management will operate the business to achieve those. It covers everything from its mission and objectives to marketing strategies, investment plan, financial forecasts, leadership and organisational information.
Engage existing employees and attract new team members: A clear, well-written business plan is the best way to communicate your vision and culture. In addition, business plans are for all stakeholders, so they see how they are contributing to the company’s success as part of a bigger team.
A great example of this is the story of President John F. Kennedy when visiting NASA headquarters for the first time in 1961. The president introduced himself to a janitor mopping the floor and asked him what he did at NASA.
“I’m helping put a man on the moon!”
The janitor got it. He understood the vision, he was part of it, and his work had a purpose.
Focus: A business plan can help a business stay organised and focused by outlining the goals and strategies for the business. Therefore, assisting firms to prioritise projects that will help them achieve success the quickest. This can be especially helpful for new businesses or expanding businesses with many competing business opportunities. Management teams can quickly and objectively evaluate options against company goals, passing on opportunities which don’t create value.
Track progress: A business plan is a valuable tool to help track progress by outlining specific goals and objectives and the steps needed to achieve them. This can help businesses stay on track and progress towards their goals.
A business plan can also help you measure your success over time “Are we doing what we say we are doing?”. This can help determine where the business is thriving and identify areas/initiatives that aren’t contributing to the achievement of business strategies or goals.
Realistic goals: Setting realistic goals is essential. Historical data should be used, and the goal-setting process should be reasonably granular. Pulling together data from across the business and validating assumptions with the teams directly responsible for achieving the goals/targets is critical.
Attract investment: A well-crafted business plan is essential when trying to secure funding from investors or lenders. It can show them that you have a clear vision for your business and how you plan to achieve your goals. It can also help attract customers or clients, as it can give them an overview of what your business does and what you can offer them. Customers will often want to understand a company’s vision to see if both businesses are heading in the same direction.
Create Alpha: Alpha is an investing term which means the ability to beat the market. In our experience, companies with a clear strategy and plan perform better than those without. As a result, they perform better than their competitors and the market. They can make business decisions faster, quickly decide which business opportunities to pursue and which ones to leave, and effectively review business performance, therefore maximising opportunities for success.
How to conduct business planning
The planning process must involve stakeholders beyond the executive management team. Stakeholder involvement is essential in business planning because it allows for different perspectives to be considered when making decisions about the future.
Involving more people can help to build support for the plan and increase the likelihood of its success. It also helps ensure that all interested parties get heard, and that management can address their concerns.
Talking to existing customers and conducting a net promoter score (NPS) assessment is very insightful. Talking to customers can provide:
High quality, honest insights about a business.
Feedback on the quality of its products and services.
Validation of competitive advantages.
Help with competitive analysis and feedback on customer relationships.
How long should the plan be?
There are a few schools of thought on this. There is no one-size-fits-all answer in terms of what a business plan should include. However, the overarching principal is that a business plan should be long enough to cover all the important aspects of your business, but not so long that it becomes overwhelming or bogged down in details.
Traditional business plans: A traditional business plan is a comprehensive document covering all the company’s aspects and requirements. They can be long documents and very time-consuming to write.
While creating the plan is essential, the risk with long business plans is that once produced, they are never looked at again. In addition, long plans take a while to read and are difficult to share with stakeholders.
A lean business plan: is like the stripped-down version of your traditional company blueprint. It follows the same format but only includes vital information relevant to your company’s goals and needs for success.
A leaner approach can be more efficient than writing a lengthy document with all sortsa fluff - unnecessary details aren’t just dull reading; it takes up valuable time away from the team who have plenty on their plates already!
Hybrid Approach: In our experience, very few companies follow a plan or have an up to date business plan. One exists during the start-up or investment phases. Then companies revert to operating without a planning process or companies have a plan but, they don’t use it as a guide. Therefore, we prefer a hybrid approach. Key sections that underpin the plan (e.g. business model, target customers, value proposition, marketing plans, business financials, competitor landscape) are shared amongst stakeholders to own and maintain. The actual plan is a simple 1 - 2 page document which brings all these inputs together to outline:
Company strategies to achieve the goals
The measurable actions that need to be taken to make the strategy happen.
This process doesn’t shortcut the background work (data gathering) that is needed. But, the final plan is straightforward to share, very easy to review & update and it allows all stakeholders to identify how they are contributing quickly. Google uses a framework called OKR (Objectives and Key Results), which is cascaded across the business.
Whichever route you choose, make sure your business plan is clear, concise, and provides all the information needed to make a decision about your business.
Tips for writing strong business goals and strategies
The first step in writing a business plan is to develop an understanding of the company’s current situation. This includes an analysis of the company’s financial performance, cash flow, market position, and competitive advantage.
The next step is to set goals and objectives for the company. These should be specific, measurable, achievable, relevant, and time-bound. Once goals are set, management can develop strategies to achieve them. Finally, the plan should highlight key performance indicators to track progress towards the goals.
When writing your business plan, it’s important to remember that the goal is to create a road map for your business. The plan should be clear, concise, and easy to follow. Here are some tips for writing good business goals and strategies:
Make sure your goals are realistic and achievable.
Set specific deadlines for each goal, and plan how you will achieve them.
Create measurable milestones so you can track your progress and business success.
Ownership and Accountability: Clearly identify owners for each section of the plan and ensure those that are accountable for delivering elements of the plan are involved in the planning process.
Remember, a business plan isn’t set in stone. Be prepared to adjust your goals, financial projections and strategies as your business grows and changes.
A successful business plan is a live document. Update it regularly and revise it as needed.
Components of business planning.
The planning process can be broken down into two parts.
The business strategy document itself outlines the company’s goals, strategies, and tactics.
The research: a detailed investigation into different areas of the business that informs the overall plan.
Writing a business plan for the first time may take time, however, things will not change materially each year, and updating the plan will become faster and more efficient. Therefore, businesses often develop a business plan template or framework to make the process repeatable.
Typical business plans are derived from the following components:
An executive summary (a plan on a page)
Try to summarise the business plan on a page. This is a great way to share the company plans and ambitions with stakeholders such as employees, potential customers, investors and business partners.
This brief overview should include the company’s vision/mission statement, growth objectives, strategies to achieve these and measurable tactics against these. Keep the executive summary concise and certainly no more than two pages long.
Describe your company
A clear company overview and vision statement can be the driving force behind a solid business plan. It outlines the company’s purpose, where it wants to go and what it wants to achieve.
Without a clear vision, employees may not be sure of their goals or how to achieve them, leading to frustration and stagnation. A well-crafted vision statement inspires employees and customers alike and gives everyone a common goal to strive for.
Perform market analysis
Whether you include market research in the plan or not, market analysis remains a fundamental business planning process.
Market research looks at the target market segment in which the company operates, outlines the firm’s competitive advantage and analyses the potential customer base. It should include information on market trends and an assessment of the competition.
Outline the management and organisation
Suppose the business is expanding or entering into new markets. It is essential to outline the management team and any organisational changes within the existing business within the plan. The management team and organisation structure are fundamental to how you’ll achieve success plus, it helps stakeholders understand how the company will operate and who is responsible for what.
Detail the customer segmentation
Customer segmentation is an integral part of the planning cycle and feeds into the marketing plan. For each target market, identifying who the customers are and their buying processes is essential. For example, selling to government agencies is very different from selling to private businesses.
Within the customer:
Who are the buyers
Who holds the budget and;
Who has the power to block a sale?
Customer segmentation and understanding potential customers are critical parts of any business’s operations.
Define a marketing plan.
The sales and marketing strategy outlines the marketing efforts a business will undertake to achieve its goal, e.g. raise awareness, generate leads, drive website traffic, and grow its customer base. It should include information on who the buyer is (customer persona), pricing, promotions, advertising and distribution channels.
Companies should prepare battle cards outlining the competitive differences in products and services and the value proposition.
Make a financial plan.
This section includes financial projections that show how the company plans to achieve its financial goals. What are your expected revenues and expenses? What are your goals for profitability?
Your financial plan should answer these questions and more, including:
How much revenue do you expect to generate?
What are your estimated expenses?
How profitable will the business be?
How much capital do you need to get started?
Financial projections (two-three years out) will help you understand cash flow, profit margins, whether your business model is viable, the company’s financial health, and whether it will need to raise investment. In addition, a financial model allows business leaders to evaluate how much new business the company needs to generate, which in turn supports sales management.
Lastly, it allows senior management to evaluate business ideas (investment opportunities), track progress over time and make necessary adjustments.
How to research your industry and competitors
When writing a business plan, it is essential to do your research and know your industry inside and out. You should also be aware of your competitors; what they are doing and how their products and services differ from yours. Factor this intelligence into your plan and strategy.
One way to research your industry is to read trade journals or online articles. You can also attend conferences or meetups related to your industry. Then, explore their websites, read their press releases and follow them on social media.
Doing this research will identify any weaknesses that you can exploit in your business plan. However, don’t obsess about your competitors and don’t feel the need to react and mimic every move. Like motor racing, drivers who focus too closely on the car in front, run the risk of following the same car off the track if they make a mistake.
Close relationships with your customer will also give you a valuable understanding of your competitors and the current trends and issues affecting your industry.
A guide, not a rule
A business plan is a living document that should be regularly updated and tweaked as the company grows and changes. However, it’s also crucial that a business plan is seen as a flexible guide rather than a rigid set of rules that the business must follow.
There is flexibility in any strategy to break from or adjust the plan and act spontaneously with opportunities that suddenly appear. The key is to stay true to your overall vision while being open to making small changes as things change. This allows your business to grow and evolve without sacrificing its original goals or values.
Communicate the plan
It is vital to communicate a business plan to all stakeholders because it provides a clear roadmap for the company and its shareholders. In addition, when employees are aware of the company’s business plan, they can understand the goals and objectives of the company and how their work contributes to these overall objectives.
Additionally, having a written business plan that is shared with employees helps ensure that everyone is on the same page and working towards common goals. This can lead to a more cohesive and efficient workplace culture.
Be creative when communicating the plan. This can be achieved through company videos celebrating success and posters outlining elements of the plan. In addition, linking company activities and successes back to the plan can help it become embedded in the business culture.
Business planning is an important process for any business, large or small. A well-written business plan can help you organise your thoughts, set realistic goals, and develop a strategy for reaching those goals. It can also help you obtain financing, track your progress, and assess your overall success.
A well-crafted business plan is an essential tool for any business. By developing a comprehensive plan, leadership teams can ensure that a company has a clear direction and purpose that business stakeholders can identify with.
It’ll better equip you to achieve your long-term goals and build a successful enterprise with a solid foundation in place.
About Lighthouse Advisory Partners
We provide business and corporate strategy services to Executive teams as part of our strategic development process. Lighthouse supports leadership teams, investors, and Private Equity firms in developing growth strategies and creating alpha. Our process involves conducting due diligence (a business x-ray) on the target business so we can identify its current position.
We provide customer referencing services to help our clients better understand and gain feedback about their products, services, or overall customer experience. As part of this process, we calculate the Net Promoter Score (NPS), the overall likelihood that a customer will recommend a business, product, or service to a friend or colleague.
Our process involves competitive analysis, including talking to customers to understand each target market’s market dynamics fully. We work with key business stakeholders to facilitate strategy development and growth planning.
We understand technology businesses, and we know what good looks like. So for more information or help with your business growth, don’t hesitate to contact us today.