How to Write a Business Plan for a Small Business

A business plan is a comprehensive document that outlines what your business does, where it is headed, and the strategy for reaching that destination. It utilizes specialized terminology to define the financial goals of the business and the approach to achieving these goals in the current market landscape. It is also an indispensable tool for raising capital. This article will guide you step by step in creating your business plan with the instructions provided below.

Identify the type of business plan to be used. Although all types of business plans share the goal of defining objectives, business structure, market analysis, and cash flow projections, they are divided into different categories, with three main types.

• Mini Plan. This is a shorter plan (usually less than 10 pages) and is useful for gauging potential interest in your business activities, further exploring the core idea or starting point for a detailed plan. It’s a great starting point.
• Action Plan. This is essentially a more detailed version of the mini plan, and its primary purpose is to outline precisely how to structure and operate the business without emphasizing outward appearances. Business owners frequently refer to this plan as their business moves closer to its goals.
• Pitch Plan. This plan is designed for those who do not own or operate the business, such as banks or potential investors. Essentially, it’s an action plan that is carefully crafted and presented in an appealing manner, using appropriate business terminology and language. While the action plan is for the business owner, the pitch plan is intended for investors, banks, and the public.

Understand the basic structure of a business plan. Whether you decide to start with a mini plan or a comprehensive action plan, understanding the core elements that make up a business plan is crucial.

• The business idea is the first general element. Here, we need to focus on describing the business activities, the market, the products, and the organizational structure as well as how it is managed.
• Market analysis is the second major component. A business will operate in a specific market, and thus, understanding demographics, consumer preferences, needs, consumption behaviors, and competitors is essential.
• Financial analysis is the third component. If starting a new business, this analysis will include cash flow forecasts, operating capital, and balance sheets. It will also predict when the business will break even.

Get the right help. If you lack financial or business knowledge, seeking assistance from an accountant for the financial analysis section of the plan could be a great idea.

• Above are the general components of a business plan. They can be broken down into seven smaller sections, which are: company description, market analysis, organizational structure and management, products and services, marketing and sales, investment proposal, which will be discussed in the next part of this article.

Correctly format the document. Format section headings using Roman numerals. For example: I, II, III,…

• Basically, the first section is called "Management Summary" (providing an official overview of your business), and although it comes first, it is usually written last as it requires all the information from the business plan to complete it.

Start with a description of the business. To do this, describe the business operations and identify the market required for your product or service. Provide a brief description of your target customers and the strategy for your success.

• For instance, if it were a small café, the description might be: "An Trang is a small coffee shop located in the city center with the aim of serving high-quality coffee and freshly baked pastries in a relaxed, modern setting. Just one building away from the local university, An Trang aims to offer students, professors, and office workers a place to study, socialize, or simply relax during breaks between classes or meetings. An Trang will stand out due to its great atmosphere, convenient location, quality products, and excellent customer service".

Write a Market Analysis. The aim of this section is to explore and present the knowledge of the market in which your business will operate.

• This includes information about your target market. You should be able to answer questions like: What is your target market? What are their needs and preferences? What is their age and where do they live?
• Don't forget to analyze the competition. A competitive analysis provides research and information about your direct competitors. List your main competitors, their weaknesses, and the potential impact on your business. This part is crucial because it will summarize how your business can capture market share by exploiting competitors' weaknesses.

Describe the structure and management of the business. This section focuses on the key personnel within the company, including details about the business owner and the management team.

• Discuss the expertise of the management team and their decision-making process. If the owner and management team have extensive experience in the industry or have achieved notable successes, highlight these achievements.
• Include an organizational chart if available.

Describe the product or service. What will you sell? What makes your product or service unique? How will customers benefit from it? How does it outperform competitors' products or services?

• Answer questions about your product’s lifecycle. Do you already have a prototype or are you planning to develop one? Are you registering a patent? Document all planned activities.
• For instance, if you are writing a business plan for a coffee shop, include a detailed menu that outlines your offerings. Before presenting the menu, provide a brief summary that explains why this menu stands out. For example: "Our coffee shop offers five different beverage types, including coffee, tea, smoothies, soda, and hot chocolate. This variety gives us a competitive edge: we can offer a wider selection than our main competitors currently do."

Write a marketing and sales strategy. In this section, explain your approach to dominating the market, managing growth, communicating with customers, and distributing your product or service.

• Be clear in your sales strategy. Will you use sales representatives, signage, flyers, social media marketing, or a combination of these methods?

Propose capital investment. If you're using the business plan to seek funding, include a capital investment proposal. Explain the amount of money needed to start and maintain your small business. Use a summary table broken down by categories to show how the startup capital will be allocated. Set a timeline for the investment proposal.

• Gather financial reports to support the investment proposal. In some cases, you may need to hire an accountant, lawyer, or other expert to complete this step accurately.
• Financial reports typically include all forecasted or actual financial data (if this is an existing business), including income statements, balance sheets, profit and loss reports, and budget forecasts. Provide quarterly and monthly reports for the first year and annual reports for each subsequent year. These documents should be included in the appendices of the business plan.
• Include a cash flow forecast for at least 6 months or until you achieve sustainable growth rates, and if possible, provide valuation calculations based on discounted cash flows.

Write a business plan summary. This section serves as an introduction to your business plan, outlining your company's mission statement and giving the reader an initial understanding of the product or service you offer, the target market, and your company's goals. Be sure to position this section at the beginning of the document to set the tone.

• If the business is already operational, include information about the company's history. When did it first take shape? What are some of its key milestones?
• A new company will focus more on industry analysis and funding goals. Mention the company's structure, capital requirements, and whether ownership will be shared with investors.
• For both established and new businesses, highlight significant achievements, contracts, current or potential clients, and provide a brief outline of future plans.

Utilize the Appendix. This final section aims to provide additional information. Potential investors might want to review this before making their decision. The document here should support claims made in the rest of the plan.

• The appendix should include financial reports, credit reports, business licenses, legal documents, and contracts (to show that forecasted revenue is backed by solid business relationships), as well as the resumes of key personnel.
• Refine risk factors. Provide a clear outline of risks affecting the business and risk mitigation strategies. This demonstrates to readers that you have prepared strong contingency plans.

Editing and proofreading. Go through your business plan multiple times to check for spelling and grammar errors before finalizing it.

• Edit or rewrite content to ensure its effectiveness from the reader's perspective. This is especially important for the 'pitch plan'.
• Read the plan out loud. This allows you to catch any awkward phrasing and makes it easier to spot grammatical mistakes.
• Make an extra copy and ask a trusted friend or colleague to review it and offer feedback. You can also go online, print an NDA (Non-Disclosure Agreement), and have them sign it to protect your business idea.

Create a cover page. The cover page defines the document's presentation, giving it a professional and eye-catching look to make it stand out.

• The cover page should include: The phrase 'Business Plan' centered in bold, large font, along with the company's name, logo, and contact details. Simplicity is key here.

• In addition to this guide, you may refer to the U.S. Small Business Administration's 'How to Create a Business Plan' for more in-depth guidance.
• Helpful resources for Small Businesses are available through government agencies at the federal, state, and local levels. Check with your local Chamber of Commerce for more details.