Business Planning: The Step-by-Step Guide for Beginners


51 min. read

Updated August 17, 2022

In its simplest form, a business plan is a guide. A roadmap for your business that outlines goals and details how you plan to achieve those goals. If you’ve ever thought about starting a business and written down a few ideas about your business strategy, you’ve started to write a business plan.

Now, to successfully start and run a business, you’ll need more than a sketch on a napkin. Thankfully, modern business planning is simpler, easier, and faster than ever before.

Introduction to business planning

In this 10-step guide, you’ll learn everything you need to know to successfully put together a complete business plan. One that will impress bankers and investors, and ensure that you build a successful business. You’ll even get tips on what to do with your plan once it’s created. As well as access to additional resources and free templates that will help you create your plan quickly and easily.

Each section includes brief introductions to specific concepts vital to writing a business plan. Depending on your experience and needs, you can just read through the guide or check out the additional resources linked within each section for more in-depth information.

Here’s a rundown of what to expect from this course:

1. Business planning basics — Before you write your plan

Before you get started on your business plan, get familiar with some background information about business planning. This section covers what a business plan is, why you need one, the types of business plans you can write, and how to assess what you need for your specific business. With a little preparation, writing your plan will be a quick, painless, and incredibly valuable process.

2. Writing your business plan

Every business plan for every business is unique. There are still specific sections, information, and best practices worth following to ensure you cover everything that you, investors, employees, mentors, or anyone else may need to know. This section will cover what to include in your plan, common mistakes to avoid, and how to turn your plan into an effective management tool.

3. Products and services

Part of starting a successful business is making sure that there is actually a need for what you plan to offer. For this section, we’ll explore how to showcase the value of your products and/or services. You’ll do this by defining the problem you’re solving, addressing who your competitors are and how you’ll differ from them, and establishing milestones for success.

4. Get to know your customers

A business idea is only viable if there are customers who are actually interested in what you offer. That’s what you look to do in this section by conducting a market analysis. You’ll learn how to explore your potential market, identify emerging trends, hone in on what is attainable, and ultimately find and define your ideal customer.

5. Describe your strategy

Defining what your business is and does is only the first step. To truly get your business off the ground, you need to be sure that you understand how it will operate and make money. This section of your business plan takes what you learned from your market analysis and converts it into Nextable steps. In this section, we’ll help you define your market position, draft up a marketing and sales plan, explore business model options and teach you how to establish milestones and metrics for success.

6. Outline how your company operates

Even if you’re a sole proprietor, it’s worth outlining what your business structure currently is and what it will become. In this section, you’ll define the legal structure of your business, what operational roles you have and need, as well as what your mission statement is. This is really where you explore the human element of your business including who is and will be involved and why you do what you do.

7. Create your financial plan

It’s important that even early on when you have no financial data, you set up a financial plan for your business. This will include developing financial forecasts, setting up personnel plans, accounting procedures, and other necessary financial documentation. For those seeking funding, this is the most vital and necessary piece of your business plan.

8. Writing your executive summary

The executive summary is a streamlined view of your entire plan. This means you need the rest of your plan to write it. Here you’ll learn what’s important to bring into this introduction to your plan and how to simplify broader elements like your financial plan, execution, and opportunity.

9. The business plan appendix

Sometimes you may have additional data, charts, or other information that just doesn’t fit into specific sections of your plan. That’s what your appendix is for, and we’ll cover some of the potential information you may want to include.

10. How to use your plan

With your plan in hand, it’s time to learn how to put it to work. Here we’ll cover best practices for reviewing and revising your strategy, using it as a management tool, and how to pitch your business.

Are you ready to turn your entrepreneurial dreams into a cohesive business strategy? Let’s jump in and write your business plan.

1. Before you write your business plan

Before you start your business you should plan on writing a business plan. Now, jumping right into writing your plan can lead to long hours spent on a document that gets you nowhere. That’s not to say that business plans aren’t important, they are and actually make you more likely to succeed. But, if you’re just writing a plan because you think it’s expected of you, and aren’t fully prepared to take on the task, it can be frustrating and fruitless.

So, before you sit down and put pen to paper, or more likely fingers to your computer keyboard, it’s worth going through the basics of business planning. This includes understanding what a business plan really is, why it’s important, what your options are, and assessing the potential needs of your business.

What is a business plan?

A business plan is a document that details a business’s future objectives and strategies to achieve them. It’s designed to describe a company’s core business activities and the specific processes that will help them achieve established goals. It can be an internal roadmap, a management tool, as well as a guide for employees and investors to understand the ins and outs of a given business.

>> See the full definition

Why write a business plan?

In the USA, over 540,000 new businesses are started every month. After the first two years , only seven out of 10 are still in business. In five years only half are still running. Having a business plan doubles the chances of your business succeeding. It forces you to think strategically and cover all of your bases. It also makes you 152% more likely to actually start your business in the first place. Often one of the most difficult hurdles for a fledgling entrepreneur.

For established businesses, having a business plan in place also makes it much easier to navigate uncertainty during a crisis. In our own research, we found that 58% of businesses that feel confident in their business health have or are working on a business plan. Now, business planning is not for everyone, but the data shows it’s more likely to help your business than hinder it.

>> Reasons to write a plan

Assess your business need

This step is useful for those starting a business as well as those that are currently operational. In short, it’s meant to help you determine if your business or idea is valid. It’s an assessment that should be done at the very start to help you determine if the business planning process is necessary or not.

In many ways, this is a light version of creating a business plan. You can leverage the lean planning process for this (we’ll get into that in the next section) which will save you time and effort. Aside from helping you validate your business, this should also help you determine what type of plan is necessary.

>> Start your assessment

Business plan options explained

A business plan can be as simple as a few randomized ideas and tasks on a post-it note. Or as complex and lengthy as a 50-page tome that leaves no stone unturned. There are one-page plans, internal documents, operation plans, expansion plans, and of course lean plans.

With all of these options, it can be difficult to determine which business plan format is right for you. The thing to do is review your options with your business idea in mind to determine how you’ll use your plan. Will you be looking into funding? Do any 3rd parties need to understand your business? Or will your plan just be used by you and your team?

For example, if you plan to only use your business plan for internal purposes and to outline your strategy, you likely don’t need a traditional business plan. On the other hand, if you intend to pitch to investors, a more in-depth plan may be necessary. You can even look into planning software like LivePlan, which provides step-by-step guidance through the planning process and introduces you to an ongoing live planning method.

>> See your planning options

Next steps

2. Writing your business plan

Now that you’ve done the prep work, it’s time to start writing your business plan. This process doesn’t have to be complicated. The more you know about what goes into a business plan, the easier it will be to write. Think of this stage as the outline, where you lay out the key components and fill in what you know before diving in a bit deeper.

To start, we’ll be working through the general outline of your business, highlighting some common mistakes to avoid, and walking through the two most common plan types. Don’t worry if you don’t get everything down in one go. This is meant to get you familiar with the plan outline so we can go a bit more in-depth on what to include in the next few sections of this guide.

Start with a lean business plan

Want to write your business plan in less than an hour? We recommend you start with a lean plan . This one-page business plan is built to be simple and easy to update and adapt. It still includes all of the essential components you saw in the business plan outline but is far more focused and brief than a traditional plan.

Think of it like you’re tweeting about your business. You have a limited amount of characters to work with and are intentionally trying to keep things short and easy to digest. This is the best format for those looking to validate their business idea. Those who need an internal strategy document, or who want a plan that can be adapted over time. You can even convert your lean plan into a traditional business plan when the time comes.

>> Create your lean plan

>> Download a Lean Plan Template

How to write a traditional business plan

As we said before, not everyone needs a traditional business plan. However, if you plan to seek out funding , are expecting to pitch your business to investors, or find yourself needing more detailed information on your business strategy, this is the plan to write. Like the lean plan, it will cover the same core outline and content, but allow you to make it as long as necessary.

Now writing a traditional business plan can be incredibly daunting. To keep things simple, have your outline handy, and check out the overview on how to write a full business plan. This will give you an idea of what to expect during this process as you work through the rest of this guide.

>> Write a full business plan

>> Download the ebook

What to include in your business plan

No matter what business plan format you choose, there are seven basic sections that you’ll need to cover. Here’s what you’ll need to include:

There’s no true established order for how these sections should be laid out, but this is the most common format. You can check out the full outline for brief definitions and subsections of what may be included, before reading on for more in-depth steps on how to write your plan.

>> Full business plan outline

Business planning mistakes to avoid

Like any long-standing business practice, there are some common issues that every entrepreneur and business owner can fall into. With business planning, it’s typically centered around being too vague in your plan, failing to pay attention to market conditions, and being too optimistic about your financial projections. And of course, the biggest issue is making the planning process overwhelming and stressful.

Be sure to review what issues other business owners have run into when developing their plans. Having these mistakes in mind will hopefully help you avoid making them yourself.

>> Avoid these 11 mistakes

Next steps

3. What is the value of your products and services?

One of the earliest benefits of writing a business plan is the ability to validate your business idea. Doing so during the planning stage can help you avoid investing in an idea with no runway, or just confirm that you have a solid idea and roadmap. The products and services section is what will allow you to work through this validation process.

It’s at this stage where you summarize what your business does, the problem it solves, and who your competitors are going to be. This should provide enough information for you to establish initial milestones for success. By the end, you should have a very clear picture of whether you can continue based on your original concept or if some initial changes should be made.

What problem are you solving?

Most successful businesses solve a problem for their customers. They make customers’ lives easier or fill an unmet need in the marketplace. The opportunity section of your business plan is all about the product or service that you are creating. The goal is to explain why your business is exciting and the problems that it solves for people.

This is also the section to get you, your team, and investors excited about your business. You’re telling a story of what the problem is, how it can be better and who will truly benefit.

>> How to make people care

Competitive analysis

Part of defining your opportunity is determining what your competitive advantage may be. To do this effectively you need to get to know your competitors just as well as your target customers. Every business will have competition, if you don’t then you’re either in a very young industry or there’s a good reason no one is pursuing this specific venture.

To succeed, you want to be sure you know who your competitors are, how they operate, necessary financial benchmarks, and how you’re business will be positioned. To kick this off, start by identifying who your competitors are or will be during your market research. Then. conduct a SWOT analysis to outline the basics of your business’s strengths, weaknesses, opportunities, and threats.

>> Conduct a SWOT analysis

>> Get to know your competition

Startup milestones

At this stage, it’s valuable to display any traction you’ve already made with your products and services. This can be anything from pre-sales to an email list that demonstrates the value of your idea. If you don’t have any initial startup milestones to mention, this is where you develop them.

Don’t worry about establishing detailed long-term milestones at this stage. Instead, focus on what it will take within the next year to successfully launch your business. This can be reaching your first sale, launching your website, acquiring a storefront, and anything else that will help you track success.

You’ll dig into more specific goals, strategic milestones, and the metrics that help you measure your progress later on in this process. For now, keep things simple, focus on the short-term, and what it will take to get your business off the ground.

>> Create a roadmap for your business

Next steps

4. Find your ideal customers with a market analysis

You need to get to know your potential customers. If you don’t know your customers, you won’t know their problems and you can’t possibly identify a business opportunity. Conducting a market analysis will help you make sense of the unknown, as well as greatly reduce your risk.

There are plenty of methods for successfully conducting this type of research. Interviewing your ideal customer base, looking at public data sources like the US Census, and even testing sales through pre-orders are all applicable methods. What type of research is necessary to get a full view of your business opportunity fully depends on your business idea , but you can still follow the same four-step process.

>> Do market research in 4 steps

>> Explore market research tools

Explore the industry

You need to know the ins and outs of the industry you’re entering. Who are the major players? What are the barriers to entry? Is it growing or shrinking? What are the potential external forces you’ll need to deal with?

These are just a few of the questions an industry analysis can provide you. The key to doing this successfully is to not get too caught up in collecting data. The reality is that markets change daily, and more than likely the information you pull together will become outdated in as little as a week.

Instead, take a broad approach with your background research. Decide if you’ll be looking at the entire market or a specific subset. Have the questions you want to be answered in mind about your competitors, market growth, industry standards, supply chains, etc. At this point, start exploring reports from the likes of IBISWorld, Statista, and even the US Census to start pulling together data.

Remember the end goal here is to gain a baseline understanding of your industry. You want information that provides the right answers to your questions and can help you hone in on your ideal customers.

>> Get to know your industry

Define your target market

You can’t and shouldn’t please everyone. Luckily, by conducting market research, you should have a clear picture of your ideal customer. Known as your target market, this is a very specific group of individuals who are experiencing the problem you’ve identified and could benefit the most from your solution.

Now, it’s not enough to just find your target market, you also need to be sure this customer base is sustainable. This can be done by narrowing down your focus from the total available market, to what’s serviceable, and finally what you and your business can handle.

It can also be helpful to actually put a name to your potential customer, creating a buyer persona that you craft and cater to. Remember, the more you can create a visceral story, the easier it will be to convince yourself, your employees, investors, and even your customers of the value of your business.

>> Find your serviceable market

>> Define your target market

>> Create your buyer persona

Next steps

5. Describe your strategy — how you’ll build your business

While the products and services section discussed what you’re doing, you now need to explain the specifics of how you’re going to do it. The marketing and sales section of your business plan dives into how you’re going to accomplish your goals. There’s a reason it comes after you’ve described the problem and narrowed down your customer base.

In this section, you’ll basically be answering questions you opened up when outlining the opportunity. Based on your audience, how will you position your product or service in the current market? What marketing channels, messaging and sales tactics will you implement? What’s your business model and how will your business operate day-to-day?

By the end of this section, you should have an outline of what growth looks like, what milestones you intend to hit, and how you’ll measure success. Basically, you’re backing up the opportunity you’ve identified with a solid plan .

What’s your market position?

You need to be sure that you have a firm understanding of your place in the market. This stems from your competitive research, what your attainable market is and who your customers are. At this stage, you’ll take all of that information to create a positioning statement for your business.

It defines how your business is different. What your business does better, faster, or cheaper for a specific customer base. Knowing your place and how you intend to compete early on will help focus your strategy and make it much easier to explain it to anyone within or outside your organization.

To work through this exercise, it may be helpful to work through a positioning diagram. This simple chart will help you visually layout where your competitors or substitutions are compared to your own. Having this diagram can also be useful to include in your finished business plan or pitch to help simplify your explanation of your market position.

>> Set your market position

Goals, milestones, and metrics

This section is all about defining the broad vision for your business, the tactics you’ll use to achieve those goals, and the metrics you’ll use to track success.

Your goals should answer specific questions, help define performance indicators, and must be achievable and relevant. You can help reinforce this criteria by sticking to the SMART format when setting your goals.

The milestones section is all about execution to achieve those goals. There are three types of business milestones that can help grow your business, including plan reviews, assumption validation, and implementation. Plan reviews are set times where you review your strategy, tactics, and financials.

Assumption validation is simply when you make a decision around some of your early guesses based on performance, customer interviews, and other data collection practices. Lastly, implementation is when you establish a timeline for how you’ll actually execute your strategy.

A good milestone clearly lays out the parameters of the task at hand and sets expectations for its execution. You’ll want to include a description of the task, a proposed due date, who is responsible, and eventually a budget that’s attached. You don’t need extensive project planning in this section, just key milestones that you want to hit and when you plan to hit them.

You should also discuss key metrics, which are the numbers you will track to determine your success. Some common data points worth tracking include conversion rates, customer acquisition costs, profit, etc.

It’s perfectly fine to start small and grow the number of metrics you are tracking. You also may find that some metrics simply aren’t relevant to your business and can narrow down your selection over time.

>> Set SMART business goals

>> Make your plan actionable

>> 17 key metrics to track

How to write your sales and marketing plan

Your marketing and sales plan lays out how you intend to go to market, the channels you intend to leverage, and the elements of your business that will be impacted by any marketing initiatives. Here’s everything you should cover in your marketing and sales plan.

Goals and objectives

Start broadly with your business milestones and establish key objectives for your marketing process to support them. You want these goals to be measurable and if you can, try to tie them to customer acquisition, lifetime value, or some other form of revenue generation for your business.

Additionally, your objectives must be clear and concise for your employees or hired consultants to easily understand and execute. If your objectives are too cumbersome, then it’s best to rework them to be as succinct as possible.

>> Outline your marketing plan

Value proposition

Your value proposition is the solidified statement of promised value that you’ll deliver to customers. This should stem from your competitive analysis, the needs of your target market, and your market position statement. You need to define the relevance of your solution, the specific benefits, as well as how it differs from competitors. Knowing why your business is valuable can help you establish and adjust language, pricing, and other key points that should be conveyed in your communications.

>> Set core marketing values

Promotional channels

One of the most important aspects of your marketing plan is knowing where you plan to advertise and promote your product or business. You can’t feasibly be everywhere, and you really don’t want to be. Instead, you need to focus on where your customers are and meet their expectations and needs.

Part of this is ensuring that whatever channels you choose can communicate and share the same core message. As much as you need to be where your customers expect, you can’t overextend your team and expect top-tier customer experience to remain intact. This is where having a voice and tone guide, which should be part of your branding mix, can come in handy.

>> Marketing channel options

Pricing and sales estimates

You’ll need to define your pricing structure and forecast initial sales to fully define how much of the market you think you can feasibly acquire. You want to fully incorporate the research you’ve conducted here to decide on pricing and how it will help you compete. You may need to charge more and position yourself as a premium option or undercut the competition by charging less.

We do recommend that you stick with words or rough numbers at this stage. You may want to start outlining specific sales and expense breakdowns, but it’s better to get your strategy in place and tackle that in the financial planning section.

>> Price products and services

Branding and copy

When deciding how to brand your product or service you’ll want to leverage the insights you found from your market research. Try to have answers to questions like —What is it? What does the customer want from it? How will the customer use it? What problem will it solve?

You can start by leveraging your market position statement and value proposition to kickstart your messaging. Use those statements to try to hone in on the purest form of your brand. The easiest way to do this is to treat it like you’re crafting a tweet and only have 280 characters to work with.

You’ll also need to consider how that verbal personality will translate to elements like colors, fonts, images, and even your logo. Eventually, you’ll need to develop brand guidelines that you and the rest of your team can reference for any marketing communications. It’s not required, but if you have examples of ad, web, or other copy that defines your brand voice, it may be worth including here or in your appendix.

For now, start by building the rough aspects of your brand and work to solidify specific elements as you test and prove their viability.

>> Check out the Bplans Branding Guide to start developing your brand

Operations and distribution

The operations section describes the necessary requirements for your business to operate. This includes elements such as inventory, supply chains, equipment and technology, distribution, and manufacturing. In short, this section is where you talk about how your business works and what day-to-day operations look like.

Operations do not cover your business model and organizational structure. Those elements will be addressed in the next section of your business plan. Instead, your operations and distribution are tied strictly to execution and help further fill out how you will achieve your goals and objectives. For businesses without a physical product, you can use this section to describe the technology you’ll leverage, what goes into your service, and any other factors that outline operations.

What’s your exit strategy?

Your exit strategy defines your goals as a business owner and establishes a clear roadmap for investors of what your future plans are.

It’s simply a method to future-proof your business, the investment you’ve made, and the investment of anyone else interested in funding your business. Your exit strategy doesn’t even have to be that detailed at first, and can simply mention how you intend to exit your business at some point in the future. It can be through an acquisition, an IPO, employee or investor buyout, family succession, or even liquidation.

You may not need to write this section out in your initial business plan. Just keep your exit strategy in mind and be ready to build it out as soon as you start seeking out funding.

>> Explore exit strategies

Next steps

6. Explain how your business operates

This is typically the shortest chapter of a business plan. However, it’s one of the most important sections to introduce you and your business. It’s an overview of the most important points about your company—your history, management team, location, mission statement, and legal structure.

It’s worth noting that if you intend to only use your business plan for internal use, this section may not be necessary. However, if you intend to seek out funding, submit a loan application or pitch your business, this section is a necessity. It also may be a valuable document for new employees to have access to since it covers the basics of your business.

You can think of the company overview as the written version of your elevator pitch. Keep this initial section brief and expand on specific information in the remaining sections of your Company Overview.

Outline your organizational structure

This section represents the legal and historical elements of your business. First, you’ll want to define what type of organization your business is registered as. Are you an LLC? A sole proprietor? A partnership? This affects how you will file your taxes, how liable you are for business debt, and the type of insurance you’ll need.

Part of the legal element is also outlining the ownership stake in your company. Basically, you just list out who owns what percentage of your business, even if it’s just you.

Lastly, you’ll want to include a rough timeline of your company history. The basics are mentioning when it was founded, who was involved and any major milestones up to this point. If you’re presenting this to a third party, you’ll want to be sure that you present a strong track record of success and good decision-making. If you’re a relatively young business, you likely won’t have much here, but you should at least include the when and the why.

This section is really most useful for your own legal records and when seeking out funding from banks or investors. You can split this section into a handful of smaller sections if needed, or simply combine your company history, legal structure, and ownership information.

>> Legal structures explained

Management team and known gaps

The management team section of your business plan allows you to showcase your team and their finest attributes. Again, for internal use, this may not be applicable. However, you could use it to highlight new employees being brought in or existing employees that are taking on some new leadership responsibilities. It can also help you identify potential gaps or needed personnel for further growth.

For example, if you’re looking to expand, there may be team members you know you’re lacking. Mention those roles here, what your plans are to fill those holes, and even tie them to specific milestones if possible. If you have specific people in mind for those roles, make sure to include them here even if they aren’t currently on staff.

Be sure to include details about yourself and your employees. Work experience, past successes, and degrees can be referenced for each person. You want to showcase everyone in their best light. Additionally, if you have any mentors or board members, who aren’t directly involved but you work with to define your visions and overall strategy, they’re also worth mentioning here.

>> Write about your team

What’s your company mission?

Your mission statement is a simple Next-oriented statement that explains what you do and why you do it. It summarizes what your company does for customers, employees, and owners, as well as a general description of your organization, its core function, and its goals. It differs from your positioning statement by tying in additional meaning or purpose behind your organization into what your business is and does.

If you’d like, your mission statement can be even broader to better encapsulate the vision you have for your company. Some organizations even split this off into a separate vision statement which acts as a more aspirational goal. They then treat the mission statement like milestones, serving as the Nextable steps you’re taking to accomplish your vision.

The key to writing a great mission statement is to leverage the story of your target customer, include how it benefits customers, employees, and owners, and of course, keep it short. You want this to be the ideal method for describing your business to the point that anyone who reads it understands what you’re about.

There’s no strict structure for a mission statement. In fact, it may change over time as your business grows and evolves. The important thing is that you write a mission statement that adds clarity to your business goals and helps clarify your purpose.

>> Mission statement examples

Next steps

7. Create your financial plan

There’s a lot riding on your financial plan. It makes you more prepared to pitch to investors, helps you know how to manage funding and expenses, and makes it far easier to plan for growth. This can, unfortunately, make creating a financial plan the most intimidating part of writing a business plan. The good news is that you don’t need to be an accounting expert to do it right.

If you’re a new business

As a new business, you have no historical financial data to include in your financial plan. Instead, you’re starting with educated guesses possibly based on industry benchmarks, maybe some pre-launch validation like pre-sales or email subscriptions, and your own expectations.

The beauty of working with financial forecasts is that there is no right answer. You don’t need to worry about getting it exactly right. We actually encourage you to revisit your projections throughout the planning process and after your plan is officially written. Even after you’re up and running, you should continue to revise your projections as you learn more about your business and what realistic sales goals and expense budgets might be.

This is really the section where you explore the validity of your business idea. You’ll begin to understand what’s feasible and what initial traction can look like. It’s going to change. But by starting with these forecasts you position yourself to be ready to handle those changes.

If you’re an existing business

If you’re an existing business, you do have the benefit of leveraging your historical financial statements. Your P&L, balance sheet, cash flow statement, and any other accounting data can be used to kickstart your financial forecasts. However, just like a new business, the important thing here is that you start looking ahead and build those forecasts to better manage your business strategy.

Everything we mentioned in the last section is still viable. You may need to look at external trends, compare your actual results against competitor performance, and even fine-tune your reporting. The more solidified your forecasting process becomes, the easier it will be to leverage that historical data when reviewing performance.

Aside from that, you may want to include historical accounting information here or in your appendix when seeking outside funding. Investors and banks will want to see how you’ve managed your business so far and what type of traction you’ve found. Those statements, along with your forecasts, can help prove that you have a sustainable business.

How to create a sales forecast

Your sales forecast is simply your projected sales total for a given period. It’s a core piece of your business plan that should be regularly revisited and fine-tuned based on actual performance. This forecast is especially crucial if you’re pitching to investors and can help strengthen your roadmap for growth by providing context for specific milestones.

To build out your initial sales forecast, start by listing your sales categories. These can be specific products, recurring revenue streams, additional services, or anything else that brings money into your business. Just keep in mind that the more products or services that you have, the more complex and difficult it is to manage your sales forecast will become.

So, rather than separating every single item that brings in revenue, it is better to group similar products or services together into streamlined categories and create a forecast just for that category. This method of strategic forecasting is much easier to manage and update, while still leaving you with the ability to dive deeper if necessary.

Once you have your categories established, start building out forecasted sales totals line-by-line, each month for the next 12 months. You’ll be creating these estimates based on price and volume assumptions that you’ll multiply together to get your sales totals. Keep in mind that if your business model leverages subscriptions or hourly billing, your estimates will likely focus on new users, churn rate , hours of operation, etc.

Knowing what to forecast for each month is a challenge for new businesses. Ideally, you’d start with historical data as a baseline for performance and then make adjustments based on the time of year, expected growth, marketing returns, and a number of other factors. For those starting fresh, it’s wise to look at industry benchmarks and your current available market to help determine what sales numbers are realistic for your business.

Once you have your sales numbers in place you’ll need to estimate the appropriate direct costs (COGS) for each sales category. Again, you may not have the exact number for every sales category outlined if you’re just starting out. Look to industry benchmarks for guidance and adjust the actual costs as you begin to experience them firsthand.

Remember, forecasting is not about seeing the future. You’re making educated guesses about your business to help drive your strategy. The important thing is to revisit them and make adjustments regularly to make sure you’re making the best decisions for your business.

>> Build your sales forecast

>> Download forecast template

Personnel plan

You already covered the people and roles established in your business in the Organizational Structure section of your plan. The personnel plan is now where you plan what it’s going to cost to hire the employees you need. Now the actual importance of this section fully depends on the number of people you employ and the size and type of business you operate.

The key here is to try and keep things simple. Similar to how you grouped revenue streams in your sales forecast, you’ll want to group employees by department or job function. This is especially vital if you have a larger team, or plan to grow specific departments. If you’re a smaller team or if you have singular roles that you need to track the value of, it may make more sense to list some individual employees.

With a full personnel plan, you can outline each payroll expense by individual or department. The important thing is that you can showcase the value of each person or department, verify that the expense is valuable to the success of your business, and have the ability to analyze performance in relation to your other financial statements.

Your goal really is to list out payroll expenses in a manner that is beneficial to you and your team. If you find your personnel plan becoming overly complex or need more detail on a month-to-month basis, you can always make adjustments.

>> Create your personnel plan

Profit and loss statement

Your profit and loss statement, also known as the income statement or P&L, explores the profitability of your business over a given period of time. At its most basic, this is where you list out all of your revenue streams and expenses, to find your net profit or loss. It’s the aggregation of the information you’ve outlined in your sales forecast and personnel plan, plus a list of your regular business expenses. Here’s what you can expect to include on your profit and loss statement:

To keep things simple, start with your revenue and expense line items including the cost of goods sold. Then add any taxes, interest, depreciation, or amortization expenses. Having these in place will help you find your Gross Margin (Revenue – COGS), your Operating Income (Gross Margin – Expenses), and your Net Income (Operating Income – ITDA). Once you’ve created the P&L Statement it should be a simple exercise of updating it each month or bringing in current accounting data.

>> P&L Statement analysis tips

>> Download a free P&L Template

How to create a cash flow forecast

It’s easy to lose sight of how much cash you have if you’re strictly looking at revenue numbers. Your business may be performing incredibly well on paper, appear profitable, and set for growth, until suddenly you realize that you’re out of cash. This is why your cash flow forecast is so important.

Without a solid understanding of how much cash you’re using, where it’s coming from, and how often it enters and leaves your business, you can’t possibly expect to know the health of your business. Having a clear cash flow forecast ensures that you know what your cash runway is (how much time until you hit $0) as well as the difference between profits and your actual cash position.

Your cash flow forecast helps you determine what your cash position will be in the next month, three months, year, and so on. To accomplish this you can either leverage the direct or indirect forecasting method for cash flow. Both options are viable, with direct being easier to implement and indirect playing a bit nicer with accounting software.

Whichever method you choose, the important thing is that you focus on cash from receivables, and how your outstanding accounts payable impacts cash flow and expenses. Your end goal will be to have a forecast where you can easily see your future cash position, providing a clearer picture of the actual health of your business.

>> Methods to forecast cash flow

>> Build a cash flow statement

>> Download a cash flow template

Balance sheet

Your balance sheet brings equity, assets, and liabilities together to create a cohesive picture of your financial position at a given time. Your balance sheet should always be balanced. This means that your total assets, which include accounts receivable, cash, inventory, etc. is equal to your combined liabilities and equity.

On the surface, your balance sheet may just seem like another reporting tool. However, the true value is determining the liquidity of your business and comparing it to industry standards. This is the one location where you’re able to document the value of your assets and outstanding debt obligations. Banks and investors will expect to see this statement of accounts making it a necessary addition to your financial plan.

>> Balance sheet analysis tips

>> Download a balance sheet template

Use of funds report

This section isn’t a necessity when you initially write your plan. In fact, the use of funds report is really only viable if you’re seeking out funding and need to showcase exactly where the investment will be used and how it will impact profitability, cash flow, and expenses.

The good news is that you’ll be able to include the forecasts that you already created as a starting point. Those early forecasts likely explore performance without the inclusion of funding which means that you’ll want to explore an additional scenario that shows how a loan or investment will impact your business. Having distinct scenarios that explore performance with and without funding can make it much easier to explain your needs and emphasize how it will benefit your business.

Next steps

8. Writing your executive summary

The executive summary is a brief introduction to your business that briefly covers your full business plan. Ideally, this section will be kept to two pages or less, but there is room to expand or reference other sections if necessary. The key is to make it convincing and easy to digest since this is the first thing investors, employees and anyone else will read. Often times it’s the only thing they’ll read.

While your executive summary will structurally be the first section of your business plan it should be written last. This may seem a bit backward, but there’s a good reason to write your plan this way. You have already written out all of the necessary information about your business and know it inside and out. Having the lengthier version will make it far easier to plug the necessary information into the abbreviated executive summary. After all, it’s far easier to cut unnecessary details rather than add them in.

Here’s everything you need to cover in your executive summary. Keep in mind that this section should be brief so try to keep any descriptions between one or two sentences, and anything that’s itemized as a bulleted list.

Business overview

A one-sentence overview of your business that explains what you do, why you do it, and how you do it. This could simply be your mission statement or a shorter iteration of it.


Summarize the problem you’re solving in the market and reference any data that solidifies that there is a need. You can pull details directly from your market research within the Opportunity section of your business plan.


Describe your product or service and how it addresses the problem you identified. You may want to outline your market position and value proposition from the Execution section of your business plan.

Target market

Who is your ideal customer? As we mentioned before when you honed in on your target market, you want to develop a persona that you, employees, and investors can visualize and understand. Describe who they are, how they’ll benefit, and why they’re an attainable customer base.


Who are your competitors? List out any primary competition as well as alternatives that your customers may consider. If there are any key details around their current offerings, promotions or business strategy try to include them here. Otherwise, just leave this as a bulleted list and include a deeper analysis in your Opportunity section.

Company overview

Provide an overview of your organizational structure and current team. List out brief explanations of who you and your team are, why you’re qualified, and what your function will be within the business. You can pull this information directly from your larger Company Overview section.

Financial summary

You can’t include your full financial plan within the Executive Summary. Instead, highlight key aspects that address sales, expenses, and profitability. Try to keep these in chart or graph form to ensure the information is easy to consume and resonates visually.

Funding requirements

This section is only necessary if you’re seeking out funding or pitching to investors. You want to be sure you throw out your financing number and reasoning upfront, rather than hiding it later on in your plan. It helps investors understand your position, what you’re asking for, and provides an explanation of how you’ll use it.

You likely won’t be able to address every element of your funding requirements here. Just include a short statement, the number you hope to raise, and point to the full use of funds report in your Financial Plan.

Milestones and traction

Here is where you lay down the proof that your business idea is validated. If you have initial sales, presales, newsletter sign-ups, or anything else that showcases an interest from your target market, add it here. You’ll also want to outline what steps you’ve already taken to launch your business, the milestones you’ve hit, and your goals and milestones for the next month, six months, year, etc.

Remember, the Executive Summary is where you put your best foot forward. You are showcasing your business in its simplest form and want to be sure that you highlight any success or traction that you are making. For investors, the more convincing and thorough your Executive Summary is with just one to two pages, the more likely they are to read the rest and potentially meet with you.

For your own use, this is the holistic snapshot of your business that you can reference when planning, managing, or revising your strategy. It’s also worth mentioning that if you started with a Lean Plan at the beginning, you may already have an outline of your Executive Summary already made. Now you can just go back and refine it.

>> Write your executive summary

Next steps

9. The business plan appendix

The last thing you may need to tackle when writing your business plan is the appendix. This section is basically a repository. It’s where you drop any necessary documents, financial statements, research, or other supplementary material that doesn’t fit into your business plan.

Maybe you have a patent, an illustration of your product, branding mockups, licenses, contracts, marketing materials, etc. Put it in the appendix. Just be sure that whatever you include is relevant information and isn’t required to make the rest of your business plan viable. The main document needs to stand on its own and these additional documents are just to help elaborate.

>> What goes in the appendix

Next steps

10. How to use your plan

Congratulations! You’ve officially written your business plan, or are at least well on your way to creating one. While you should pat yourself on the back for a job well done, there’s still more work to be done.

Yes, you now have a business plan that can help guide your strategy as you start your business. You even have a document that can help back up your pitch deck when seeking out funding from investors. However, the most important purpose of creating your plan is that you now have a management tool that you can review and revise to grow your business.

That’s why we had you start with the Lean Plan early on. The concise version of your business plan is perfect to leverage as a guide for you and your team to reference when setting goals, reviewing financials, and making any changes. Now, just like building your plan can seem a bit daunting at first, so can managing your business effectively.

The thing is, you now have a roadmap for success and know your business inside and out thanks to your business plan. So, let’s look at what you can do with it .

Start managing with your plan

After taking the time to write up your plan, the last thing you likely want to do is change it. Now, we’re not telling you to jump back in and change everything right away. Instead, we’re recommending you take the time to review your progress based on actual results. That may sound like a time-consuming process, but it’s a crucial element of successful business management. Thankfully you can also embed it into a monthly plan review meeting.

This is exactly what it sounds like. It’s a time for you, your team, and any stakeholders to review current progress against the milestones and goals you’ve set up. It should just be one or two hours where you dive into specific parts of your strategy and review financials. The end result should be action steps to make adjustments to your strategy based on the elements you’ve reviewed.

Having this meeting in place will commit your business to adapt, help you engage with individuals across your organization, and encourage engagement amidst different teams. The true benefit is that these positive results all come from just five key steps.

1. Review your financial statements

Start with top-line performance and review all relevant monthly financial statements. These will likely be everything you have in your financial plan and can help you quickly identify potential issues or opportunities. This is where a business dashboard, which allows you to look at your performance from different financial statements in one place and established business ratios can come in handy.

2. Review and revise your financial forecasts

Once you’ve reviewed your actual performance it’s time to see how it matches up against your forecast. Known as a plan vs actual analysis , this is where you determine if you performed better, worse, or just as expected. What you’re looking for here is any variance between your accounting data and your forecasts.

Starting with this broad comparison can immediately help you identify any red flags worth analyzing further. It forces you to look at your strategy, determine if you need to make any changes, or simply revisit your forecasting methods if you were simply wrong in your estimations.

Lastly, you’ll want to bring your forecasts up to date with your actual performance. This will ensure that your forecasts remain as accurate as possible. Doing so will provide a solid idea of what to expect in the coming weeks, months, year, and so on.

3. Reevaluate your milestones

Take a look at your major milestones through the lens of your financial performance. Are you still on track? Do some goals need to be removed or adjusted? Has something more important come up?

You want to keep your business agile and ahead of the curve. The more actively you review and adjust your timelines and prioritize strategies that strengthen your core performance, the better off you’ll be.

4. Review long-term goals and strategy

Now it’s time to go a bit broader and take a peek at your long-term goals. This likely won’t change month to month. However, it’s useful to review and adjust anything that may have been affected by changes to your milestones or financial performance.

5. Set aside time for additional discussion

During your meeting, be sure that you set time aside to discuss issues outside of your finances and strategy. You may find that there are potential opportunities or issues worth prioritizing within other departments that can end up strengthening your overall performance. By bringing other people and perspectives into the mix, you may unlock new ideas and insights that would otherwise be hidden.

6. Set guidelines

Lastly, be sure to set criteria for your plan review. Be sure you have a firm stop time, that information is sent out ahead of time, and that your agenda is clear and repeatable. All that being said, don’t be afraid to change things if elements of your plan review aren’t working. You want this to be an optimized and beneficial time to refine your strategy. Not just another meeting on the calendar.

>> Set up a plan review meeting

Pitch with your plan

We mentioned investors and funding throughout this course. With your business plan in place, you can successfully pitch your business. You just need to develop a pitch deck to help present your business idea effectively. Luckily, just like when you wrote your Executive Summary, you have all the necessary information to create a pitch quickly and easily. You can even just leverage your Lean Plan if you want to.

Your pitch will differ depending on your audience, your business, and the format you’re pitching in. The key here is that pitching still requires you to have a business plan to pack up your claims. You can have a very convincing speech and pitch deck, but without a full plan in place that’s probably where your investment journey will end.

>> Step-by-step pitch guide

>> Must have pitch deck slides

>> Revise your plan for investors

Manage funding

If you successfully pitched your business to a bank, angel investor, or another funding source — you now have funding to manage. This can be even more difficult than actually seeking out funding, especially if you aren’t prepared to manage it. Luckily, you have your business plan and a section that covers your use of funds. You have a starting point to successfully manage your funding.

However, just like anything involved with business management, you can’t just leave things as is. Now is the time to revisit your initial use of funds report and see if your initial plan still makes sense and build out how the money will impact your business more specifically in your financial statements. From there, it’s all about reviewing your progress, adjusting your forecasts, reviewing your cash position, and establishing milestones around your funding.

You can incorporate this process into your monthly plan review to ensure you’re consistently taking the time to review your funding in comparison to your plan. It also helps you keep an active report of how you actually use the funds, which will likely change from your initial vision.

>> Manage funds with your plan

Next steps