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Business Plan Basics: A Simple Formula for Highly Successful Startups

business.com editorial staff
business.com editorial staff

A well-crafted business plan forms the cornerstone of your business.

A well-crafted business plan is far more than just a written document – it forms the cornerstone of your business. It can help you grow more effectively, with greater focus and reduced risk. It is also a useful marketing tool for raising capital or recruiting partners, advisors or key hires.

Most importantly, it is the "process" of developing your plan that provides great value. By applying a structured approach, you will know the market, your customers and the competition, and you will have real insight into the levers that drive profitability in your business.

Here is a basic outline to get you started.

Market opportunity

  • Establishes the case for "why the world needs your solution"
  • Provides market size, growth, trends, and customer information

Company and products

  • Explains what your product does and how it meets market needs
  • Details your business model today and in the future

Operations and development

  • Lays out launch, growth, and expansion strategies and tactics
  • Details what you will do and when given the limited resources (human and financial capital) of a startup

Existing relationships and future alliances and partnerships

  • Discusses who will help you succeed and why they will do so

Marketing, sales and distribution

  • Demonstrates how you will gain awareness, close deals, and get the product to market

Competition

  • Describes the competitive environment as well as your advantages and differentiation

Management and advisors

  • Background on who is running the show
  • Demonstrates credibility

Financial

  • Shows how you will make money, your funding needs and uses, and how much of a return you will generate for investors.

6 steps to writing a good business plan

Step 1: Get organized, get focused, get started.

The first step is to get your team (and yourself) committed to building a plan. It's recommended that you have a dedicated time set aside each week to work on the plan, with goals and deadlines to hit. Building a solid plan takes time and effort; know this upfront.

Pull together the research, documents and insights from various team members. You will brainstorm, analyze, discuss and debate. Importantly, you will also commit to putting things down on paper; for example, what is your initial market focus (at launch), and what are the secondary and tertiary markets you will pursue? How much will you charge and why?

In this manner, you will gain consensus, and the plan will begin to take shape. It should be treated as a living document, but it should also be used to narrow the scope and keep you focused on things that matter.

Step 2: Revise, refine, repeat.

The best plans are not done overnight, and they do not sit on a shelf. Rather, the best plans, the ones that ultimately help guide your business to success, are constantly massaged, enhanced, revised, and reworked. To borrow a cliche, "the journey is the destination."

Once you have a solid draft, let it sit for a week, then review it with fresh (and critical) eyes. In addition, hone your plan as new information becomes available, and as you test out your original assumptions in the market. To encourage more frequent revisions, you should use a system for document sharing and workflow management that is easy to use. Google's Apps are good, and many companies use a Wiki or a shared online drive. Another solid alternative is Zoho.

Step 3: Get help, gain perspective.

Many startup teams, and solo founders, in particular, suffer from "forest for the trees" syndrome, meaning they focus too much on the minutiae of their business, and have a hard time seeing how their business fits into the broader competitive and market landscape.

The remedy is to get external advice on your business plan and strategy from trusted third parties. Ideally, such parties know your market and business intimately, and have deep experience within the startup world (which is quite different from the experience at a Fortune 500 company). Advisors may include venture capitalists, business attorneys, industry analysts, and founders of companies who have "been there, done that." (Side note: For folks who will provide value over the long-term, you may consider structuring a formal advisory board).

In addition, 

  • Commit to building a business plan. The return you will gain – in focus, investor preparation and business insight – will be many times the effort invested.

  • Treat your plan as a living document. It will help keep you on track and serve as a means to continually hone your business model.

  • Get help, advice, and feedback. Input from professional advisors translates into a better business plan, and ultimately, a more successful business.

Step 4: Choose the legal structure.

According to Nerd Wallet, another major step you need to take to develop a business plan is deciding on the legal structure your business will take. This means you need to decide whether you will be the sole proprietor, partnership or corporation. Additionally, you must also decide who will take on the management roles and who will serve as key employees, etc.

Step 5: Outline the products and services.

Additionally, you need to decide on the products and services you will be selling. This means you will need to take the time to decide exactly what you will be selling, why you are selling it and how much the goods or services will cost.

Step 6: Spell out your financial projections.

Lastly, the whole goal of any business is to make money. Especially, if you are seeking financial investors, you need to show them what you expect your company to make both in the near future and over time. Therefore, to keep yourself striving towards this goal, you will need to solidify your financial projections.

Image Credit: Ivan-balvan / Getty Images
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