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How To Write a Business Plan
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Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .
Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.
Table of contents
- Write your executive summary
- Do your market research homework
- Set your business goals and objectives
- Plan your business strategy
- Describe your product or service
- Crunch the numbers
- Finalize your business plan
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Step 1: Write your executive summary
Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.
An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.
You’ll cover other things too, but answer these basic questions in your executive summary:
- Idea: What’s your business concept? What problem does your business solve? What are your business goals?
- Product: What’s your product/service and how is it different?
- Market: Who’s your audience? How will you reach customers?
- Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?
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Step 2: Do your market research homework
The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.
This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.
Step 3: Set your business goals and objectives
Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?
Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.
Step 4: Plan your business strategy
Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.
Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.
Step 5: Describe your product or service
In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.
Step 6: Crunch the numbers
Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .
These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.
You may want to work with a financial professional to ensure your financial projections are realistic and accurate.
Step 7: Finalize your business plan
Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.
You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.
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The takeaway
Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.
Key Takeaways
- A business plan is a document detailing a company's business activities and strategies for achieving its goals.
- Startup companies use business plans to launch their venture and to attract outside investors.
- For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
- There's no single required format for a business plan, but certain key elements are essential for most companies.
Investopedia / Ryan Oakley
Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.
Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.
A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.
While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.
A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.
Common elements in many business plans include:
- Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
- Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
- Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
- Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.
Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.
2 Types of Business Plans
Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
- Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.
Why Do Business Plans Fail?
A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.
How Often Should a Business Plan Be Updated?
How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.
A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.
As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.
University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.
Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
Harvard Business Review. " How to Write a Winning Business Plan ."
U.S. Small Business Administration. " Write Your Business Plan ."
SCORE. " When and Why Should You Review Your Business Plan? "
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Start » startup, writing a business plan here’s how to do it, step by step.
At the foundation of every strong business is a solid business plan. Looking to develop a business plan for your new venture? Here’s what to include in each step.
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At the foundation of every strong business is a solid business plan. A business plan outlines important information regarding a company’s operations and goals, and serves as a blueprint for how to achieve those goals. This document not only helps entrepreneurs think through and research their venture thoroughly, it also demonstrates to investors the viability of the business idea.
If you’re looking to develop a business plan for your new venture, it’s important to include all the necessary information. Here are the nine sections to include in a strong business plan, step by step.
1. Executive summary.
Your business plan should begin with an executive summary, which outlines what your company is about and why it will succeed. This section includes your mission statement, a brief description of the product or service you are offering, a summary of your plans and basic logistical details about your team.
2. Company description.
Your company description should further detail the logistics of your business, such as its registered name, address and key people involved. Here, you should also provide specific information about your product or service, including who your business serves and what problem you solve for that population.
3. Market analysis.
Conducting thorough market research can help you understand the nature of your industry, as well as how to stand out from competitors. Include a summary of your research findings in this section. Consider any trends or themes that emerge, what other successful businesses in the field are doing (or failing to do) and how your business can do better.
[Read: How to Conduct a Market Analysis ]
4. Organization and management.
This section should include your business’s legal structure — for example, whether you are incorporating as an S or C corporation, forming a partnership or operating as an LLC or sole proprietor. Provide pertinent information on your leadership team and other key employees, including each relevant individual’s percent of ownership and extent of involvement.
Describe how you will attract and retain your customer base, including what makes you stand out from competitors, and detail the actual sales process.
5. Products/services.
Your product or service is the crux of your business idea, so you’ll want to ensure you make a strong case for it being on the market. Use this section to elaborate on your product or service throughout its life cycle, including how it works, who it serves, what it costs and why it is better than the competition. If you have any pending or current intellectual property, include this information here. You can also detail any research and development for your product or service in this section.
6. Marketing and sales.
In this section, you should explain what your marketing and sales strategies are, and how you will execute them. (Note that these strategies will likely evolve over time, and you can always make adjustments as needed.) Describe how you will attract and retain your customer base, including what makes you stand out from competitors, and detail the actual sales process.
[Read: 5 KPIs to Measure Your Business’s Marketing Success ]
7. Funding request.
If you’re seeking funding, this section is critical for investors to understand the level of funding you need. Specify what type of funding you need (debt or equity) and how much, as well as how that capital will be used. You should also include information on any future financial plans, such as selling your business or paying off debts.
8. Financial projections.
The goal of your financial projections section is to show that your business is viable and worth the investment. Offer a financial forecast for the next five years, using information from current or projected income statements, balance sheets and cash flow statements to support it. Graphs and charts can be an especially helpful tool in visualizing your business’s finances.
9. Appendix.
Finally, use the appendix for any information that could not fit or did not apply to other sections of the document. Information such as employee resumes, permits, credit history and receipts are often included in this section. If you have a long appendix, consider adding a table of contents to make it easier for the reader.
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12 Things You Must Do Before Starting a Business
Here are 12 essential steps to prepare for opening a business, including what you shouldn’t do.
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Business ownership is on the rise, with budding entrepreneurs taking the leap every day. In 2023 alone, a record 5.5 million new business applications were filed, according to the U.S. Census Bureau . This surge in entrepreneurship is driven partly by the expanding opportunities available through online platforms and gig work, which make it easier to establish a business.
If you’re thinking about starting a new company, there are some essential steps you must take and a few critical mistakes to avoid.
12 things to do before starting a business
Starting a business is a big undertaking that requires ample preparation. Take these key steps before you begin your business venture.
1. Identify a creative idea.
Think of a business idea as the seed of your company. You need that before you can begin adding fertilizer, watering and growing complementary plants. What unique service can you provide? What gap in the marketplace can you fill? Consider these cheap business ideas for inspiration.
2. Write a business plan.
Creating a business plan displays a genuine level of commitment, and it requires you to answer essential — and sometimes challenging — questions at the start of the development process. A business plan is also the first thing any potential investor will request. It will give them a detailed overview of your proposed business venture, your level of industry expertise, and your understanding of the opportunity, financial requirements and potential upside. [Read related article: How to Find and Attract Business Investors ]
3. Choose a legal structure.
It’s important to select the proper legal structure for your business at the outset because it’s not easy to change it later. Each type of legal entity comes with specific requirements and restrictions, and only certain types of corporations may meet your particular business needs. If you need help, a corporate attorney or experienced business accountant can offer timely and accurate advice for creating the proper legal structure for your proposed company.
4. Get your business registration, licenses and tax identification.
Once your business structure is in place, you need to register your business and obtain the correct licenses, taxpayer identification number and employer identification number (EIN). There are various resources to assist with establishing business names, filing incorporation paperwork, obtaining necessary licenses and registrations with your local municipality, and getting your federal tax information squared away.
Aside from the IRS for federal tax matters, regional corporation commissions (typically at the county level) can assist new business owners with meeting the regulatory requirements for each locale. If you’re planning on hiring staff, you’ll also need to apply for a federal tax ID or an EIN. Having an EIN will protect you and your identity, allow you to file business taxes separately from your personal taxes and help establish credit for your business.
5. Know your competition and the marketplace.
There’s nothing wrong with a little competition; it allows business owners to innovate and evolve their products and services continuously. Knowing your business’s market, what your competition is doing and how your company fits into this landscape are important parts of establishing and running your business.
Including this information in your business plan will showcase your thorough knowledge of the industry for your proposed company. Without this information, no serious investor will rise to the occasion, and it will be hard to stand out in the marketplace. Know your industry, understand your competition and determine how your business will become a differentiator in the market.
6. Finance your business.
Unless you’re an accountant, have a degree in finance or are a sophisticated investor, you’ll need some help nailing down this part of your prelaunch planning. Investors will want to know how much money your company will have to begin with and how much it will need in the future.
Regardless of where your revenue will come from, list it in your business plan. Will you use your credit cards and home equity to start? Will you need a loan to get started? Are you willing to give up a percentage of your ownership in exchange for cash? Will you have sales the day you open? These are important questions to address.
There are many investors out there, and they’ve seen it all. Investors typically want to know three things:
- For how long?
- What is the exit strategy?
If you answer these three questions to an investor’s satisfaction, you’ll likely strike a deal. [Read related article: How to Know an Investor Is Offering You a Good Deal ]
Identify and secure a location.
Whether it’s a home office or an entire building, you need to know where your business will be located before you launch it. Prior to your first day of operations, you’ll want to have the following in place:
- Phone and internet service
- Business directory listings
- A lease or purchase agreement for your workspace
If you haven’t identified or secured a location for your business before meeting with investors, don’t fret. Investors, bankers and legal counsel generally don’t see the lack of a specific location early on as a dealbreaker or red flag.
8. Get proper insurance.
Selecting the right business insurance for your company is not a decision to make lightly. There are several types of insurance to consider, including health, auto, directors and officers, liability, performance bond, travel (including accidental death and dismemberment) and life.
In addition to understanding the differences among the available options, it’s important to identify any local regulations that might require your type of business to carry certain types of insurance. For example, if you’re starting a carpentry or plumbing company, you’ll need liability insurance, which typically isn’t necessary for businesses in other industries. Learn what else you need to keep in mind when choosing business insurance .
9. Obtain legal counsel.
Whether you want to have in-house counsel or hire an attorney as needed, your business needs to have access to legal advice. You may need legal representation specializing in corporate, tax, intellectual property, labor or international law. Wherever regulatory requirements demand compliance, asking a lawyer to review and sign off on this part of your business will save you time and money and protect you from potential legal ramifications.
10. Establish a web presence.
In addition to securing your business’s physical location, you’ll need to establish a virtual presence. First, register a domain name that matches your business’s name so you’re ready to build your website when the time comes.
Once you’re ready to develop your website, research the options to ensure you’re selecting the best website builder that will meet your immediate needs and be able to support your desired functionality in the future, such as online ordering capabilities. Enlist the help of a search engine optimization expert to ensure your website’s design and content are fully optimized. You also may want to consider the cost of starting an online business when deciding which kind of company to start.
11. Use local and national business resources.
There are plenty of local, county and national resources to make sure your business name is available, to verify the legal structure you’ve chosen is correct and in compliance with location-specific ordinances, and to advise on the different business loan options and other funds available to entrepreneurs. You can also refer to resources provided by your local corporation commission, the Small Business Administration and the IRS throughout the planning process.
12. Create a marketing plan.
Writing a marketing plan that complements your overall business plan will help ensure your new business’s success. A fully optimized website should be at the center of your marketing plan, even if you’re planning a brick-and-mortar business.
5 things to avoid when opening a business
Understanding common entrepreneurial pitfalls can increase your chances of success at launch and beyond. Here are five mistakes to avoid when you’re starting a business.
Doing everything by yourself
Attempting to run a business without any help is futile. Instead, leverage your community and connect with other business-minded professionals who can offer advice, insights and feedback to keep you on track. Consider outsourcing time-consuming or technical tasks, such as accounting or IT support, to allow time to focus on growing your business.
Hiring employees too soon
While every business needs someone to operate it, bringing on employees too soon can lead to failure. Take your time when hiring, and ensure you find the right people who fit your business culture. Look for employees who can supplement your skill gaps and add new perspectives to your business.
Spending irresponsibly
Startups must be smart with their finances to ensure they have enough money to keep the engine running. Curb unnecessary spending, keep track of your financials and create a long-term budget to prioritize the most important purchases. Otherwise, you may run out of funding sooner than you expected, leaving no money to cover operating costs, salaries or other expenses.
Rushing to launch
Being the first to market is not the key to success if you haven’t fully developed your product or service, so don’t rush when launching your business. Take advantage of your competitors’ progress by learning from their mistakes to improve your offerings. If they’ve already piqued the market’s interest, use this attention to promote your newer and superior product or service.
Miscalculating the demands
Many entrepreneurs underestimate the challenges of owning a business, leading them to become overwhelmed by its responsibilities and demands. This, in turn, can hurt the quality of the products and services you deliver to customers.
To avoid overpromising, set realistic expectations and be upfront about your availability. Telling clients when you are at capacity shows that you are trusted and in demand and that you recognize your limits to ensure high-quality work.
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How to write a business plan in 12 steps (2024 edition)
26 June 2024
This guide breaks down how to write a business plan, step-by-step, detailing what your document needs to include and what you need to think about to make your business plan as persuasive as possible.
What is a business plan?
A business plan is an essential document that can provide immense value for new and existing companies of all sizes. It is an overview that includes an outline of your business, its key objectives and plan for achieving important goals.
This information can be used to communicate strategic actions to internal teams and also attract interest from potential partners and investors . However, writing a business plan can be a lengthy and involved process. For many, using a business plan template can be a good way to get started.
For best results, you’ll need to do a lot of thinking and planning before you start writing your business plan. This way you have all the information and resources you need at your fingertips and won’t be under time pressure to come up with something at the last minute. After all, a well-thought-out business plan can help you avoid generic information and set your company up for success.
Download your free business plan template .
Why write a business plan?
Writing your business plan helps to get your strategy nailed down and onto the page. A plan that stays in your head is probably going to be full of unrealistic assumptions and biases, whereas a strategically thought-out and organised approach forces you to notice your blind spots and find a way forward.
If you’re looking for financing, a bank or investor needs to be persuaded by your business proposal and the opportunity to work with you. Therefore, a well-written business plan can help provide potential financial partners with the confidence that your business can become profitable. Your business plan gives them a comprehensive view of all aspects of your business and details your strategy for achieving your goals.
What are the main sections of a business plan?
Whatever your line of work, your business plan will generally need to provide the following:
An executive summary
A business overview
The market opportunity
Your products/services
How to write a business plan
Make sure you cover each of the following steps when preparing your document:
1. Write an executive summary
This section of your business plan should be 1–2 pages in length and enables potential financiers or partners to get an overview of what your business does and – most importantly — what the opportunity is for them. If they’re interested in the opportunity, they’ll conduct their own due diligence - and this will start with going through your business plan and financials.
It’s a good idea to write your executive summary last, when you’ve clarified your thinking around every section of the document. As an overview section, you don’t want to add any new content that isn’t in your business plan. Aim to keep this summary succinct and engaging by using simple, plain language, as this is much more persuasive than complicated or academic wording.
Use sub-headings and bullet points to help your most important information stand out, especially as busy executives may simply scan your executive summary and use this to decide whether they want to find out more.
What to include in an executive summary?
Make sure you include details on:
What your business does
What the opportunity is
What your unique selling points / differentiators are
How much funding you’re looking for
What the funding will be used for
How you'll succeed
Remember, you’re providing the big picture overview of your business - the detail is in the rest of the document and in the appendices.
2. Write your business overview
This section of your business plan needs to be more than just a list of what your business does. Its purpose is to excite those you’re hoping will work with you or help to fund your business.
Information to address includes:
What's the purpose of your business?
What problem does your business’ product or service solve?
What niche could it fill?
What’s different about your offering?
How are you better than anyone else at what you do?
Consider what your customer value proposition is by deciding what you want to achieve and what your number 1 benefit is for your customer.
3. Identify your USP
Think about what your unique selling points (USP) or differentiators are, and what proof-points you can provide to back them up.
For example, you can use terms like “market-leading” but if you don’t provide any evidence to back up your claims, your reader will take them with a big pinch of salt!
You should certainly reference any awards or endorsements that position you as the best person to provide your product or service, as well as any client testimonials. Make sure you include any education or experience that makes you an expert in your field as well.
4. Describe the market opportunity
Show you understand your industry, market and where you fit in it. While no-one can predict the future, offer up where you think the opportunity is for your business and make sales projections based on that.
For example, imagine your business is selling personalised cookies - there's little competition in your area and you see your market opportunity to create designs for all calendar and holiday events. You expect to increase sales by 30% in one year and 50% in three years, driven primarily by word-of-mouth referrals.
Make sure you also consider macro trends that may create opportunities for you, such as social, environmental, or technological changes that may affect buying behaviour.
5. Include a SWOT analysis
Whatever your business strengths or opportunities, they’ll always be known and unknown weaknesses and threats; there’s no such thing as certainty in business or in life!
However, you can demonstrate that you’ve examined your business through different lenses and have a thorough understanding of it by doing a SWOT (strengths, weaknesses, opportunities, threats) analysis.
Don’t worry about drawing attention to your business’ shortcomings - every opportunity has them and it’ll give investors and partners confidence in you that you won't bury your head in the sand. Naturally, it's important that you specify what you’re going to do to address these weaknesses and counter these threats.
Here are some areas you can think about to get started: reputation, technology, location, experience, staff, overheads, competition, suppliers and price.
6. Present a competitor analysis
Let’s face it, no matter what industry you’re in, or what you’re selling, there’s going to be other businesses offering the same thing. But instead of worrying about the competition, use this as a positive opportunity to up your game and work out the unique advantages you have that will keep you competitive.
Identify your top 3 competitors and analyse what they're doing well and where they’re coming up short. Try to be as objective as possible and identify how to differentiate yourself from them.
You should also look into who the industry leaders are and what the benchmarks are for your industry so that you can set yourself targets for continuous improvement.
7. Create a customer persona
A customer persona is a fictional person who represents your company's ideal customer. Naturally, the persona can be based on a real person - the more you get to know your ideal customer, the more targeted and successful your marketing efforts will be.
To create a customer persona, you need to conduct research into your ideal customer’s age, sex, income, employment, daily activities, interests and hobbies. If you’re feeling unsure about your customer persona, you may need to give your ideal customer further thought and download the customer persona template to get started.
8. Write your marketing strategy
When you’ve created your customer persona, you need to work out how you’re going to reach them. Do they hang out on social media apps, like Facebook, Instagram, Pinterest, Twitter or LinkedIn? Or are they more used to local, traditional marketing like free local papers or high foot traffic areas?
Once you’ve figured where your audience is likely to hang out, you can outline your strategies for promoting and advertising your products or services in the next 12 months.
Make a list of the marketing channels you’ll use to achieve your advertising strategy and be sure to include your budget. How much can you set aside for advertising? And where are you most likely to see a return on your efforts? Paid ads on Facebook? Half or full paid spreads in an industry magazine? Or even a direct mail out?
For more structured help around this, check out free course: Business 101 | Get social with your business on Facebook .
9. Design your customer retention strategy
Business success relies heavily on the relationship you’re able to build with your customers. What techniques will you use to keep them coming back? Consider the following:
What can your business do to increase the number of repeat customers?
Does your business have a referral or loyalty program?
Do you have a post-purchase follow up in place?
Will you use surveys to track customer satisfaction?
What ways can you continue delivering outstanding service?
Is there a way to continue educating and adding value to your customers?
10. Present your financials
Most people who are looking at investing their time and/or money in your business will want to see your financial statements - your performance to date and your projections over the short and medium term. They'll also want to know how much you’ve received in funding to date and what these other sources of funding are - including your own investment.
Current finances
You need to show how your business has performed financially over the last year, highlighting metrics such as positive cashflow , net profit and assets.
Financial forecasts
You should also provide a balance forecast projecting total assets, total liabilities and net assets over 1, 2 and 3 years, and a profit and loss forecast for the same periods detailing gross profit /net sales, total expenses and net profit/loss. Finally, you should also provide a cash flow forecast month by month over the next year.
It’s also a good idea to speak to an expert like an accountant or bookkeeper about your finances and get advice on how best to present them in this all-important section of your business plan.
11. Detail how much funding is needed
Naturally, you also need to be very clear about how much money you’re looking for and what you plan to do with it. If you’re looking for a loan , you need to detail what it’s for, over what period it’ll be repaid, and what collateral you have to secure it.
12. Propose an exit strategy
Any financial stakeholder in your business will want a return on investment. If you’re pursuing this type of funding, you should include some detail on your proposed exit strategy . For example, do you want to sell the company at some point or go public?
Similarly, you should outline your succession plan so the business can continue to operate if you decide to step away from it. Likewise, you need a plan for what happens if the business loses money and can’t sustain itself. Documenting this means that everyone is on the same page and potential investors have this information upfront.
Frequently asked questions about writing a business plan:
When to write a business plan.
Typically, entrepreneurs write their business plans within the first year of operations. A business plan is a tool that helps business owners refine their strategy, attract partners and financiers, and grow their business.
If a business plan is written too soon, it may lack the substance that comes with time in the market. However, it’s important to note that a business plan isn't a static document - it can and should change as the business evolves.
How long should your business plan be?
There are no hard and fast rules around how long your business plan should be - it just needs to include all the relevant information. Aim for clear, concise sections and build a business plan that is as easy to read and navigate as possible.
Using a business plan template can help you make sure you have everything covered off, while also having a document that looks as professional as possible. Make sure you run a spelling and grammar check too - any sloppy errors can undermine your credibility.
What’s a business plan on a page?
It’s important to write your business plan as it helps to embed your strategy - as well as communicate what you’re about to potential partners or investors. When you have a comprehensive business plan you can easily adapt it to suit different audiences. For example, a full business plan is essential for raising capital but a business plan on a page may be enough for potential partners or employees.
What do venture capitalists look for in a business plan?
Venture capitalists invest money into businesses with the goal of achieving a return on their investment within the short to medium term. As a result, they’re looking for an attractive market opportunity, a clear point of differentiation, a strong management team, a proven track record, solid financials and, importantly, an exit opportunity.
Where to go for help or more information?
There are many great resources out there to help you fine-tune your business strategy and write your business plan. The Australian Government has a comprehensive website dedicated to supporting businesses at all stages of their journey.
You can also get help from Business Enterprise Centres , business advisors, accountants and fellow business owners. MYOB also has a list of business advisors who can give you feedback on your business plan, so your venture has the very best chance of success.
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The Essential Guide to Writing a Business Plan Here's the no-nonsense guide on how to write a business plan that will help you map success for your startup.
By Carolyn Sun
Opinions expressed by Entrepreneur contributors are their own.
President Dwight D. Eisenhower once said, "In preparing for battle I have always found that plans are useless, but planning is indispensable." If you're starting a business, you should have a business plan regardless of whether you're bootstrapping it or looking for outside funding.
The best sorts of business plans tell a clear story of what the company plans to do and how it will do it. Given the high failure rate of startups in their first year, a business plan is also an ideal opportunity to safely test out the feasibility of a business and spot flaws, set aside unrealistic projections and identify and analyze the competition.
A business plan doesn't need to be complicated, but for it to serve its purpose and set you up for success, it must be clear to whomever is reading your plan that you have a realistic handle on the why and how your business will be a success.
To get you moving in the right direction, here's a guide on how to write a business plan.
Overall tips
There's a lot of advice in the infosphere about how to write a business plan, but there's no single correct way. Your approach depends on your industry, who is reading your plan and what the plan is intended for. Are you trying to get funding? Sara Sutton Fell, founder of FlexJobs , a job site for flexible telecommuting jobs, says her business plan was an initiator for more in-depth conversation with potential investors. "A plan does help to see if investors and entrepreneurs are on the same page with general expectations for the business," she says.
A business plan serves many purposes, but there is universal consensus on the following when it comes to your business plan:
Have several versions tailored for specific audiences: "One of the mistakes that inexperienced business owners make is not understanding who they're writing the plan for," says David Ciccarelli, a small business owner who got consultation from his local Small Business Association (SBA) when he was starting his company Voices.com , which connects employers with voiceover talent.
Your plan is a living document: Tim Berry, the founder of a business planning software company Palo Alto Software , took his company from zero to $5 million in sales in its first three years. To do so requires frequent review and close tracking, says Berry, who met with his management team every month to review the plan versus what actually happened -- and then to revise. "There is no virtue to sticking to a plan if it's not useful and responsive to what actually happens," he cautions.
Be realistic about financial estimates and projections: "When you present a plan to bankers and financiers, or even to your employees, people will get way more excited about what's real rather than some huge thing that's never going to happen," says Ciccarelli. So present an achievable sales forecasts based on bottom-upwards information (i.e. how many units per month get sold in how many stores) and stop over projecting profits.
Writing your business plan is about the process and having a blueprint: Your business plan "reflects your ideas, intuitions, instincts and insights about your business and its future," according to Write Your Business Plan (Entrepreneur, 2015). The plan serves as a safe way to test these out before you commit to a course of action. And once you get your business going, the plan also serves as a reference point. "I still print the document," says Ciccarelli. "You're capturing it in time. If you're changing it all the time, you kind of don't remember where you were last year."
Back up any claims: Follow up your projections and assertions with statistics, facts or quotes from a knowledgeable source to lend your plan credibility.
Presentation counts: Reading any long, text-heavy document is hard on the eyes, so format with this in mind. Consider formatting your text pages into two-columns and break up long passages with charts or graphs. Arial, Verdana or Times New Roman are standard industry fonts.
Writing your business plan isn't busy work or a luxury; it's a vital part of the process of starting a business and arms you with information you need to know. So, let's get into what information goes into your business plan.
Related: Bu siness Plans: A Step-by-Step Guide
What goes into a business plan?
A typical business plan is 15 to 25 pages. Its length depends on a variety of factors, such as whether your business is introducing a new product or belongs to a new industry (which requires explanation to the reader), or if you're pitching to bankers, who generally expect to see a traditional written business plan and financials.
"Most equity investors prefer either an executive summary or pitch deck for first contact, but will often request a more detailed plan later in the due diligence process. Potential customers don't need all the details of your internal operation. Your management team needs access to everything," says Akira Hirai, managing director of business plan consulting service Cayenne Consulting .
Most business plans include these seven sections:
1. Executive summary : The executive summary follows the title page and explains the fundamentals of your business. It should provide a short and clear synopsis of your business plan that describes your business concept, financial features and requirements (i.e. cash flow and sales projections plus capital needed), your company's current business position (i.e. its legal form of operation, when the company was formed, principals and key personnel) and any major achievements in the company that are relevant to its success, including patents, prototypes or results from test marketing.
2. Business description : This section typically begins with a brief description of your industry and its outlook. Get into the various markets within the industry, including any new products that will benefit or hurt your business. For those seeking funding, reinforce your data with reliable sources and footnote when possible. Also provide a description of your business operation's structure (i.e. wholesale, retail or service-oriented), who you will sell to, how you will distribute your products/services, the products/services itself (what gives you the competitive edge), your business's legal structure, your principals and what they bring to the organization.
Here are some worksheets from Write Your Business Plan that will help determine your unique selling proposition and analyze your industry.
Click to Enlarge+
![what comes before a business plan worksheets](https://assets.entrepreneur.com/static/20151104045403-unique-selling-proposition-and-industry-analysis-worksheet-short.jpg)
3. Market strategies: Here is where you define your target market and how you plan to reach them. Market analysis requires research and familiarity with the market so that the target market can be defined and the company can be positioned (i.e. are you a premium product or a price-competitive product?) in order to garner its market share. Analyze your market in terms of size, structure, growth prospects, trends and sales/growth potential. This section also talks about distribution plans and promotion strategy and tactics that will allow you to fulfill your plans.
Here is a worksheet from Write Your Business Plan that will guide you toward identifying your target market.
![what comes before a business plan Worksheet](https://assets.entrepreneur.com/static/20151104040501-market-research-questions-worksheet-short.jpg)
4. Competitive analysis: The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle. Show why your business will be a success over others.
5. Design and development plan: You will only need this section if you have a product in development, such as an app. The purpose of this section is to provide investors with a description of the product's design, chart its development within the context of production and marketing and show a development budget that will enable the company to reach its goals.
6. Operations and management plan: This section describes how the business functions on a daily basis, its location, equipment, people, processes and surrounding environment. If you have a product that needs to be manufactured, explain the how and where; also, describe your work facility, the personnel, the legal environment (such as licensing, permits, special regulations, etc.), key suppliers and inventory. This section will also highlight the logistics of the organization such as the various responsibilities of the management team and the tasks assigned to each division within the company.
7. Financial factors: Financial data is always at the back of a business plan -- yet it's extremely important. The financial data can include your personal financial statement, startup expenses and capital, your projected cash flow statement and 12-month profit-and-loss statement. PaloAlto's Berry stresses that if you're going after investors, you'll need to show a cash flow statement and a break-even analysis -- or the breakdown to see where your business breaks even.
The best way to prepare for running a business is to have all the components of the plan ready. So if you are are showing a prospective lender your business plan on 10 PowerPoint slides and get asked about something that isn't in the presentation, you can speak knowledgeably and follow up with a more fleshed out plan -- and quickly.
Some business owners hire business plan writing services. Cayenne Consulting's Hirai says that his clients generally fall into one of two categories: those intimidated by the process and those who could write the plan themselves but would prefer to spend their time on other priorities.
If you find yourself intimidated or stuck, you can always write the parts of plan yourself that you understand and hire a consultant or researcher to help with parts that you find confusing.
Or if you're a startup watching every dollar, then tap the free services of the federal Small Business Association (SBA). Every state has a district office . Through the SBA, you can get business plan assistance through its various resource partners, which includes Women's Business Centers , Small Business Development Centers and Service Corps of Retired Executives .
Allow this business plan template for Business Plan for a Startup Business to guide you:
Different types of business plans
Generally, business plans can be divided into four categories :
Working plan: This plan is what you will use to operate your business and is not meant to be admired. This version of your plan is an internal document and will be long on detail, short on presentation. Here, you can omit descriptions that you need not explain to yourself or your team.
Mini plan: The reader may request a mini plan, or a condensed version of your business plan (1-10 pages), which includes most of the same components as in a longer traditional plan -- minus the details and explanation. This includes the business concept, financing needs, marketing plan, financial statements (especially cash flow), income project and balance sheet. This shorter plan is not meant to be a substitute for a full-length plan, but serves as an option to present to potential partners or investors.
Presentation plan: Whether you're using a pitch deck or a written business plan, the information in your presentation plan will be, more or less, the same as in your working plan but worded differently and styled for the eyes of an outsider. The reader of your presentation plan will be someone who is unfamiliar with your business, such as investor or venture capitalist, so lose any jargon or shorthand from your working plan, which only makes sense to you. Also, keep in mind that investors will want to see due diligence on your competition threats and risks as well as financial projections. In addition, looks count, so use the color printer, a nice cover and bindings and the fancy paper stock. Or else, if you're presenting your business plan as a PowerPoint presentation, you can use this business plan presentation template .
What-if plan: This is a contingency plan -- in case your worst case scenario happens, such as market share loss, heavy price competition or defection of a key member of your team. You want to think about what to do in the face of an of these, and if you're trying to get outside funds, having a contingency plan shows that you've considered what to do if things don't go according to plan. You don't necessarily need this, but if you are getting outside funding, then it can strengthen your credibility showing that you have thought about these what-if possibilities. Even if you're not going to get outside funding, shouldn't you be thinking of the what ifs?
If four plans seem like a mountain of work, don't panic. Select two to start off -- a working plan and a mini plan, which will be an abbreviated version of your working plan.
Take several months to write your business plan. Consider it a journey, not a sprint.
Related: The Ultimate Guide to Writing a Business Plan
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Do This One Thing Before You Write Your Business Plan
![what comes before a business plan Male and female entrepreneurs sitting at a table outside of a coffee shop with laptops opening. Trying to figure out what to do before writing their business plan.](https://web-cdn.bplans.com/bplans/content/uploads/2019/12/15145034/99.jpg)
Noah Parsons
6 min. read
Updated May 10, 2024
![what comes before a business plan Download Now: Free Business Plan Template →](https://no-cache.hubspot.com/cta/default/467363/interactive-174330637568.png)
So, you’ve been asked to write a business plan. It’s likely that your mind is filled with images of long documents, bad memories of writing term papers, and worries about doing market research and creating financial forecasts.
Take a deep breath.
It doesn’t have to be that way. Today, I’m going to walk you through an easier way to get your business plan started, and show you how to develop a winning strategy.
Start with why you’re writing a business plan
But first, let’s talk about why you’re writing a business plan .
There are a lot of reasons why writing a business plan is important . Most businesses start the planning process because they are applying for a loan or seeking funding from investors .
But, beyond needing to develop a plan that will impress the bank or your investors, you want to build a solid company. You want to develop a sound strategy that will help your business grow and be successful.
Unfortunately, while traditional business plans will help you develop strategy, they have several drawbacks.
Traditional business plans take too long to write, they’re rarely updated, and they are time-consuming to read.
Now, there may be a point in your business career that you will need to deliver a formal business plan to a bank, investors, or other business partners. But, until that point, I recommend that you start your planning with a simpler process— a one-page plan —that will help you develop your business strategy.
Building a one-page plan takes less than 20 minutes . You can even build several of them in an afternoon to try out different business ideas.
A Lean Plan forces you to distill your ideas for your business into the core of your strategy. As planning expert Tim Berry says, “a good strategy is about what you’re not doing.”
And, once you have nailed down your business strategy, you can expand on it with a longer business plan document that fleshes out the details of your plan.
What to include:
Your one-page plan is a very high-level overview of your business. Each section should only be a few bullet points, so you should be able to complete an initial draft of your plan in 20 minutes or less.
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- 1. Your identity
What sets your business apart from others? What’s your focus? For example, a bike shop’s identity might be, “High-quality biking gear for families and regular people, not just for gearheads.” With this identity, this bike shop has focus. It describes who they are and what they are trying to do. Ideally, you should be able to describe your identity in one or two short sentences.
- 2. The problem you are solving
How are you helping your customers? What problem will they go to you to solve? Don’t think that your business doesn’t solve a problem; for example, a new restaurant would fill a need for a particular type of cuisine or a certain atmosphere that is not currently available in a certain neighborhood.
- 3. Your solution to the problem
How does your business solve a customer’s problem? What is your product or service? Make sure your product or service is addressing your customer’s needs.
- 4. Your customer
Who is your ideal customer? A great exercise is to create a buyer persona, but you can just jot down some notes at this stage about who your customer is. Focus on a specific type of customer or certain groups. Focusing on “everyone” is not a sound business strategy.
- 5. The competition
Who is your competition , and what sets you apart? How are you better or different than other options available to your customers?
- 6. Sales channels
How will you reach your target customers ? Do you have a single storefront? Are you selling online? Do you rely on distributors to get your products onto store shelves?
- 7. Marketing activities
How will you let your customers know about your product or service? Do you need to go to trade shows? Will you buy online advertising?
- 8. Your team
Probably the single key to a successful business is a great group of people to turn an idea into reality. Do you have the right people? If you need additional key team members to help you build the business, identify them here.
- 9. Your business model
“ Business model ” sounds like a confusing term, but really it’s just a fancy way of talking about how you will make money. In the early stages of fleshing out your business idea, you can just write down a few bullet points about how you will make money and what your key expenses will be.
As you refine your business idea, you will want to turn these initial notes into a sales forecast and an expense budget . But for your initial 20-minute plan, just write down a short list of the things you will charge for and the important expenses that you will have as you run the business.
- 10. Milestones
Ideas are nothing without execution—you need to turn your idea into a real business. Use the “ Milestones ” section of your one-page plan to list the critical things that need to be accomplished to start your business. Do you need to find a location? Maybe you need to get FDA approval for a new medical device. List the key milestones you need to accomplish here. Ideally, add approximate dates and list who will accomplish each task.
- 11. Partners and resources
If you need to work with other companies or business partners to get your idea off the ground, list those partners and resources here. Do you need a manufacturer or supplier for your products? Do you need a distributor to get your product on store shelves?
That’s it! A first pass at creating a one-page plan should only take 20 minutes or so. Set a timer and jump right in. Just getting everything down on paper is a great first step. The beauty of the one-page format is that you can come back and revise as you go.
- How to use your one-page plan
Now that you have the first draft of your Lean Plan, or maybe even several different mini-plans, you need to put it to use.
First, you’ll want to use your plan to identify the key assumptions about your business. Typically, those assumptions are around what famous entrepreneur and investor Marc Andreessen calls “product/market fit.” What that really means is that you’ve found a group of potential customers who have the problem you say they have, and who are willing to spend money on your solution.
Your Lean Plan includes assumptions about who your customer is, what problem they have, and what kind of solution they want.
As a next step, you’ll want to go out and talk to potential customers and verify that they do indeed have the problem you’ve assumed they have and that they’re willing to spend money on your solution.
As you gather feedback from potential customers, you’ll refine your plan . This is where you’ll be glad that you started with a one-page plan instead of a detailed business plan. It’s easy to update and revise as you go. You can quickly update it with new information as needed.
Now, if you don’t need to present a plan to outsiders, this may be all the business plan that you need. But, if you do need to create that formal business plan document, you can use your one-page plan as the key outline for that document. The business plan may also document more details about your marketing plan, product plan, or hiring plans, but ultimately, your business plan will just expand on and provide additional detail for each section of your one-page plan.
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Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.
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12 Key Elements of a Business Plan (Top Components Explained)
Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .
You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.
When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.
Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.
This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.
Let’s get started.
Why Are Business Plans Important?
Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .
1. Proves Your Business Viability
A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.
2. Guides You Throughout the Business Cycle
A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .
During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.
After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.
Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.
3. Helps You Make Better Business Decisions
As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.
A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.
4. Eliminates Big Mistakes
Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.
Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.
5. Secures Financing and Attracts Top Talents
Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.
A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).
You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.
Key Elements of Business Plan
Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.
A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.
With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.
Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.
Here are some of the components of an effective business plan.
1. Executive Summary
One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.
In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.
A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.
The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.
A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.
![what comes before a business plan Executive Summary of the Business Plan](https://www.founderjar.com/wp-content/uploads/2022/10/Executive-Summary-of-the-Business-Plan.jpeg)
An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.
Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.
Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.
Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.
Components of an Executive Summary
Here are some of the information that makes up an executive summary:
- The name and location of your company
- Products and services offered by your company
- Mission and vision statements
- Success factors of your business plan
2. Business Description
Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.
What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.
A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.
Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.
Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.
In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.
Components of a Business Description
Your business description needs to contain these categories of information.
- Business location
- The legal structure of your business
- Summary of your business’s short and long-term goals
3. Market Analysis
The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.
Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.
All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.
In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.
The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.
![what comes before a business plan Components of Market Analysis](https://www.founderjar.com/wp-content/uploads/2022/10/Components-of-Market-Analysis.jpeg)
Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.
Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.
Market Analysis Factors
Here are some of the factors to be included in your market analysis.
- The geographical location of your target market
- Needs of your target market and how your products and services can meet those needs
- Demographics of your target audience
Components of the Market Analysis Section
Here is some of the information to be included in your market analysis.
- Industry description and statistics
- Demographics and profile of target customers
- Marketing data for your products and services
- Detailed evaluation of your competitors
4. Marketing Plan
A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.
Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.
Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.
The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.
![what comes before a business plan Marketing Strategy vs Marketing Plan](https://www.founderjar.com/wp-content/uploads/2022/10/Marketing-Strategy-vs-Marketing-Plan.jpeg)
5. Sales Strategy
Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.
Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.
Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.
Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.
![what comes before a business plan Sales Strategy](https://www.founderjar.com/wp-content/uploads/2022/10/Sales-Strategy.jpeg)
6. Competitive Analysis
Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.
Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.
![what comes before a business plan Competitive Analysis Framework](https://www.founderjar.com/wp-content/uploads/2022/10/Competitive-Analysis-Framework.jpeg)
The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.
This section should define the following:
- Your competitors' identified advantages in the market
- How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
- The standout qualities that distinguish you from other companies
- Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks
In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.
7. Management and Organization
Management and organization are key components of a business plan. They define its structure and how it is positioned to run.
Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.
Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.
The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.
Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.
Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.
This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.
8. Products and Services
This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.
Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.
At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.
The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.
Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.
You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.
Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.
This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.
9. Operating Plan
An operations plan describes how you plan to carry out your business operations and processes.
The operating plan for your business should include:
- Information about how your company plans to carry out its operations.
- The base location from which your company intends to operate.
- The number of employees to be utilized and other information about your company's operations.
- Key business processes.
This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.
The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.
What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.
10. Financial Projections and Assumptions
Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.
The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.
All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.
The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.
Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.
Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:
- Projected income statements
- Cash flow statements
- Balance sheets
- Income statements
Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.
11. Request For Funding
The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.
When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.
If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.
When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.
Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.
12. Exhibits and Appendices
Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.
Some of the documents that comprise the exhibits and appendices section includes:
- Legal documents
- Licenses and permits
- Credit histories
- Customer lists
The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.
Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.
There are key points to include in the appendix and exhibits section of your business plan.
- The management team and other stakeholders resume
- Marketing research
- Permits and relevant legal documents
- Financial documents
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Martin luenendonk.
Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.
This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.
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Source: Babson Entrepreneur Experience Lab
A colleague of mine, Brad George , and I are working on an academic paper related to entrepreneurship education. Here’s the premise. Those that need entrepreneurship education are nascent entrepreneurs—those thinking about starting a business and going through some of the early motions. However, standard entrepreneurship courses target new business owners—typically not the students sitting in the seats. Nascent entrepreneurs can, of course, progress into new business owners, but we are not paying enough attention to these prospective entrepreneurs. If anything, traditional entrepreneurship education is scaring them away as opposed to unleashing their potential.
Why? Blame the business plan.
According to the Global Entrepreneurship Monitor , 12.3% of the adult U.S. population aged 18-64 years old is involved in some type of entrepreneurial activity. This accounts for over 22 million individuals of which approximately 60% are nascent entrepreneurs. Many of these individuals see opportunities, stay awake at night thinking about their ideas, share their idea with anyone who will listen, sketch possible company logos on napkins, order cheap business cards, and many other small steps that make the entrepreneur feel a bit more legitimate. Yet the plunge from nascent entrepreneur to new business owner seems more like traversing Niagara Falls on a tight rope rather than taking another small step towards legitimacy.
The old adage that the business plan is outdated as soon as it comes off the printer strikes a nerve with me. If we know this then why do we continue to write business plans? More specifically, why do we continue to encourage nascent entrepreneurs to sit down and write a business plan as the quintessential first step on the path to becoming an entrepreneur? Think about it. If an entrepreneur has a really novel business opportunity, does the data required for a “sound” business plan really exist? Do you really know the market size? Do you really understand your core customer? Can you really project five years of cash flows? I’ve read hundreds of business plans and I’m never surprised when I see hockey stick growth projections on the P&L. I’m actually shocked when I don’t!
Eric Ries , author of The Lean Startup argues that one reason startups fail is due to “the allure of a good plan, a solid strategy, and thorough market research.” Ries hints that corporate strategic planning led us to the conundrum that if planning works for the greatest corporations in the world, then it must be good for startups too! Ries eloquently notes, “Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment. Startups have neither.”
Michael Schneider , President of McPherson College , recently cofounded iCollegeCrowd . iCollegeCrowd is an online experiential learning platform for college students. Schneider and his team identify companies with pressing challenges and match students to these challenges. There is no existing data to help solve these challenges; the students have to take action in the real world, collect relevant data, and use that data to design and develop solutions for the company challenges. In many ways, this is the antithesis of business plan writing. The process here is do then learn – the business plan teaches us to learn then do. The only way to learn when we don’t know what to do is simply to act. Even Michael Schneider, a college president and entrepreneur, did not write a business plan for iCollegeCrowd. He saw the lack of experiential learning opportunities in higher education as a significant problem, talked to lots of people and then developed a beta platform that will launch with a few schools, including Babson College , in September. He says, “We need to think about planning differently. We still need to be thoughtful and able to articulate our idea. But rather than writing about it, you need to go out and do something. We need to be more curious and experimental.”
And this is exactly why the business plan discourages nascent entrepreneurs. If the business plan is the first big step taken along the entrepreneurial path, the prospective entrepreneur is faced with a mountain of questions that cannot be answered just yet. What happens when we can’t answer all the questions? We get frustrated. We give up. We procrastinate on writing the plan in a world that has historically educated us to write a plan before we take action. So what should come before the business plan? Perhaps not everything but it’s important to get traction (note that action is part of traction!) around an idea before the logic of business plan writing makes sense. Getting traction requires testing ideas, getting market feedback, shaping ideas, enrolling customers in your design—it’s a continuous cycle of intentional iteration and learning. The goal is to start and do something—to see if the opportunity can or should really be turned into a business. Of course, the byproduct of starting and acting is that you will collect “real” data that can later be used if you need to eventually write that formal business plan.
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Thinking of starting a business?
Starting a business offers many benefits including being your own boss, offering a flexible work schedule, and boosting your income. In addition to these rewards, owning a business offers many personal benefits, like the opportunity to innovate or be creative, have a positive impact on your community, or make money doing something you love. It’s an exciting challenge!
How to get started
Step 1: Get your paperwork in order – Before opening for business, make sure you file the required legal, tax, and business licensing documents for your local area.
- Choose a business structure : It’s important to select the proper legal structure for your business (sole proprietorship, LLC, LLP, GP, corporation) in the beginning because it’s not easy to change it later. Each type of legal entity comes with specific requirements and restrictions.
- File your tax and employer identification documents : City, county, or state governments may require business tax filings.
- Get appropriate licensing : A city, county, or state license or professional certification may be required to operate.
Step 2: Create a business plan – Your plan creates the foundation for your business on how to structure, run, and grow it. Business plans can also help you get funding or bring on new business partners.
Step 3: Business funding – One of the greatest challenges small businesses and entrepreneurs face is accessing capital. Many small businesses are funded by loans from friends, partners, or family members. However, according to the 2020 Census, more than 68 percent of small businesses rely on banks for credit. Accessing traditional sources of capital often relies on connections or a track record of sustainable business growth. Below are some funding alternatives for small businesses:
- Government-backed loans: Microloans are good options for when a lender is not able to make a direct loan. They may also offer better lending terms and payment flexibility. The California Office of the Small Business Advocate also offers grants and financing.
- Investors and private equity: Consider capital raising through equity financing when a bank may not be an option.
- Business incubators and accelerators: Access seed grants and other resources like networking, mentorship, fundraising, and legal assistance. Be careful about signing shared equity agreements, mandatory participation contracts, or sharing proprietary information about your business, products, or services. APEX accelerators benefit underserved communities with regional offices across the state.
- Franchise opportunities : A franchise agreement grants the right to offer, sell, or distribute goods or services under a prescribed marketing plan or system. Franchising can be a relatively affordable way to start a business that provides educational resources, marketing support, and access to learn from an already established company. Most (but not all) franchises doing business in California are required to be registered with the DFPI.
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How to Start a Business in 7 Steps
![what comes before a business plan Connor Campbell](https://cdn.knowyourmoney.co.uk/uploads/sites/4/2023/03/connor-campbell-e1678327404999-40x40.jpg)
Starting a business: your 7-point checklist
Step 1: develop your business idea, step 2: conduct market research, step 3: write a business plan, step 4: finance your business, business loans, step 5: register your business, step 6: set up your business, step 7: promote your business, what happens next.
Through good times and bad, the UK’s entrepreneurial spirit is unwavering. That drive has led small and medium-sized enterprises (SMEs) to become the nation’s business backbone – so much so that they account for 99.9% of the country’s total business population, and make up over 60% of the country’s employment.
These figures are bolstered by the 801,006 new businesses that were registered in the financial year across 2022/23, despite rising inflation, surging energy prices and the cost of living crisis . Starting a business in the UK remains popular.
For many, though, the thought of joining the ranks of the nation’s entrepreneurs can feel as daunting as it is exciting. That’s why we have put together a guide on how to start your own business – from assessing your strengths and weaknesses to getting your brand out there.
By following these seven steps, you can find out how to start a business in the UK, and hopefully secure a long-term future in your chosen industry.
- Develop your business idea.
- Conduct market research.
- Write a business plan.
- Finance your business.
- Register your business.
- Set up your business.
- Promote your business.
This is maybe the most important step of starting a successful business: actually coming up with a business idea. And not just any idea – a great business idea, one that has legs and stands the best chance of succeeding.
Of course, there is a very good chance you have an idea already. However, there are a few ways you can approach generating a business idea if you are looking for inspiration.
Solve a problem
Can you solve a problem for customers or businesses?
This could be an issue you encounter in your everyday life, such as a badly designed household appliance; an annoyance you’ve come across in your career such as a frustrating piece of software; or a bigger, global problem such as the climate crisis.
Predict the future
Is there a problem people might not know they have yet?
Is there a product you think will only become more vital in the future, or a service that can take a slice of a niche-but-growing market? Spot a situation like this and you have the makings of a successful venture.
Do you think you have a way to provide a product or service that is cheaper than the current market rate, without sacrificing quality? An easy way to attract attention is by offering something people already want and use, but for less money.
Do it better
Being cheaper isn’t the only way you can improve on a pre-existing product or service. Someone else might have had a good idea, but executed it poorly. If you think you can do it better, you might be on to something.
Innovate and disrupt
Do you think you can shock an industry that has long been set in its ways? The rise of so-called online-only challenger banks shows that, with a bit of innovation, even the oldest of professions can be forced to change.
Turn a hobby into a business
Do you have a hobby, interest or other source of expertise that can help you to build a successful business? You might be better able to create something in an area where you are knowledgeable and passionate.
A great business idea isn’t worth the paper it is written on without thorough, extensive market research. But how do you do market research for a startup or new business idea? The objective of market research is to find out more about your potential customer base and competitors, a process which will leave you better prepared to set up your business.
You can manage this research in several ways, including conducting online research, talking to industry customers and competitors, or going to rival stores and locations to check out the competition.
The two most important questions to keep in mind about your business idea are:
- Is there demand for my product or service?
- Who is my target market?
Competitor landscape
You need to gain a greater understanding of the market your business will be operating in, including:
- who your biggest competitors are and how they are positioned
- what differentiates each competitor and what traits they share
- what’s your unique selling point (USP) – how you can differentiate yourself from your competitors
- any issues your chosen industry or market is facing
Target market
When it comes to your audience or target market specifically, you need to ask yourself:
- Who will buy your product or service?
- What are people looking for from that product or service?
- What pain points have they experienced in the past?
- How much are they willing to pay for your product or service?
- How will you communicate with your target market?
Once you are confident that your business idea has legs, it is time to write your business plan. It will give you clarity, help you to spot potential issues that need to be addressed, and can give you hard goals with which to measure your progress.
While you can assess your finances first, creating a business plan beforehand will help give you a better idea of exactly how much money you need. It will normally also be required if you apply for a start up loan or business loan.
Your business plan will likely need to include:
- an executive summary
- a company description
- details on management and organisation
- market analysis
- marketing and sales strategies
- details on your service or product line
- funding requirements
- financial projections
For a detailed guide read our article on how to write a business plan .
Writing a detailed business plan will help you figure out the amount of money you need to start your business. While you might be able to start some businesses with no money or as little as £1,000, it is highly likely that your business plan will indicate that you need more money to get started.
But how can you fund a new business?
You may need to combine the various funding options below to get your start up off the ground.
» MORE: Start up funding
Your savings
Using personal savings to start your business will allow you to retain full ownership. If you are using your own savings, it is wise to make sure you are not putting yourself in a financially precarious situation when it comes to your personal finances.
Friends and family
At the beginning of your business journey, you may want to turn to your friends and family for financial, as well as practical and emotional, support.
Borrowing money from friends and family can be tricky, though. So it is best to draw up a written agreement, as you would with any other lender, with specific repayment terms, in order to avoid any disagreements in the future.
» MORE: Lending money to friends and family
Small business grants
There are a range of non-repayable and partially repayable start up business grants across the UK, as well as for businesses in England specifically.
Similarly, there are dedicated grants if your business is based in Scotland , Wales and Northern Ireland .
You may also be able to find options for specific groups, such as business grants for women .
Business grants can be competitive, so make sure you take your time with your application, and check the eligibility criteria beforehand to avoid wasting your efforts on schemes you do not qualify for.
You can find a list of the full range of government business loans and grants using the Department for Business, Energy and Industrial Strategy’s search tool .
Start up loans
A start up loan is a form of funding designed specifically for new businesses. As with other forms of business finance, you will borrow a lump sum and pay it back in monthly instalments, with interest on top.
You should make sure you understand the different types of start up loans before applying.
With the government-backed Start Up Loan, you can borrow up to £25,000 over a term of one to five years, at a fixed interest rate of 6% per year. You should be aware, however, that the Start Up Loan is structured as a personal loan, meaning that you, rather than your business, is liable for repaying the loan.
Other start up loans will be structured as traditional business loans and come with different interest rates and maximum borrowing amounts.
Government business loans
Alongside the Start Up Loan scheme, there are other government business loans that may be available to your organisation.
This includes loans from various investment funds around the country.
If you are ineligible for the government-backed Start Up Loan, you could look into applying for a traditional small business loan .
These can be more difficult to secure as a start up, as lenders use your business credit score and trading history to assess whether or not to approve the loan. However, it is not impossible.
You may need to offer a personal guarantee in order to successfully apply for a business loan. Alternatively, you could provide an asset as collateral and apply for a secured business loan.
When taking out any form of loan, you should only borrow what you can afford to pay back.
» MORE: How do business loans work?
Angel investors
Angel investors tend to be wealthy individuals looking to invest in new businesses in order to make a decent return down the line. Normally, this will involve them offering you funding in exchange for equity or convertible debt. They may also offer mentorship and support as you develop your business.
There are a number of platforms, such as the UK Business Angels Association and the UK Angel Investment Network , you can use to find potential angel investors.
» MORE: What is an angel investor?
Crowdfunding
Another option for raising money for your start up is crowdfunding. This involves securing funding from more than one source.
There are three main types of crowdfunding:
- Debt-based crowdfunding: This is where you are matched with investors on a crowdfunding platform. You then repay the amount you have raised in monthly instalments, with interest.
- Equity-based crowdfunding: This is where you offer a stake in your company to investors in exchange for funding.
- Rewards-based crowdfunding: This is where you offer tangible rewards, such as early access to a product or service, in exchange for funding.
» MORE: Crowdfunding for business
One of the first official steps you will take when starting up is choosing a business structure and then registering your business. You should take your time and research which business structure will best suit your needs.
» MORE: Should I register as a sole trader or limited company?
Sole trader
If you are a sole trader , you are the exclusive owner of your business, and can keep all of your business’s post-tax profits. It also means there is no separation between you and your business – making you personally responsible for any losses your business makes.
How to register as a sole trader
As a sole trader, you are not legally required to register your business at Companies House. However, you must register as a company director with HM Revenue & Customs (HMRC) in order to pay tax each year by completing your self-assessment tax return.
You can register for Self Assessment at Gov.uk .
Partnership
A partnership is when two or more people, labelled as partners, share the responsibilities of running – or owning – a business. This includes sharing the risks associated with the business, any profits or losses, and the bills associated with running the organisation.
There are three main types of partnerships:
- Business partnerships: Sometimes known as general or ordinary partnerships, this type of partnership works in a similar way to sole traders. Partners are not legally distinct from the business. Therefore, if one partner resigns, dies or goes bankrupt, the partnership must dissolve. This does not mean, however, that the business has to stop.
- Limited partnerships: A limited partnership must have at least one ‘general’ partner and one ‘limited’ partner. General partners manage the business of the partnership, while limited partners do not participate in day-to-day operations and have less liability.
- Limited liability partnerships (LLPs): When incorporating as a limited liability partnership, you must have at least two ‘designated members’ at all times, as well as any number of ordinary members. Designated members are responsible for registering the business, keeping accounting records and submitting them to Companies House, as well as reporting any changes to the business.
How to register as a business partnership
In order to register as a business partnership, you will need to:
- Choose a business name, following the government guidelines.
- Choose a ‘nominated partner’ – they will be responsible for managing your business’s tax returns and keeping your business records up to date.
- Register the partnership with HMRC in order to pay tax through Self Assessment.
- Register for VAT if you think your VAT taxable turnover will be greater than £90,000.
You do not need to register with Companies House.
You can register as a business partnership at Gov.uk .
How to register as a limited partnership
In order to register as a limited partnership, you will need to take the following steps:
- Register the address of your principal place of business.
- Appoint your general and limited partners.
- Register with Companies House.
- Register with HMRC for Self Assessment.
- Register for VAT if you expect sales to be more than £90,000 a year.
You can register as a limited partnership at Gov.uk .
How to register as a limited liability partnership
In order to register as a limited liability partnership, you will need to:
- Register your business address, which will be publicly available.
- Choose at least two designated members.
- Create an LLP agreement detailing how the partnership will be run.
- Register the business for Self Assessment with HMRC.
- If you expect your business sales to be over £85,000, register for VAT.
You can register as a limited liability partnership at Gov.uk .
Limited company
If you choose to incorporate as a limited company, you as an individual will be legally and financially distinct from your business. As a limited company, you will have shares and shareholders and can keep any post-tax profits.
How to register as a limited company
In order to register as a limited company, you will need to:
- Choose your directors and a company secretary.
- Decide who your shareholders or guarantors will be.
- Identify the people with significant control (PSC) over your company.
- Prepare a document detailing how your company will be run.
- Research which company and accounting records you will need to keep.
- Register your office address.
- Figure out your standard industrial classification of economy activities (SIC).
- Register with HMRC in order to pay Corporation Tax.
You can register as a limited company at Gov.uk .
» MORE: How to register a company name
Once you have chosen your structure and registered your business, it is time to go about setting up your business for its day-to-day operations.
Rules and regulations
Depending on your business and industry, there could be a number of specific rules and regulations you will need to adhere to, as well as licences and permits you may need to apply for.
You can run a business from home, or from separate premises. You can provide physical products, or offer services to customers. Depending on these factors, you might have to obtain different licenses or permits.
These regulations will also be informed by how you have set up your business, and whether you are a sole trader, or the type of partnership or limited company you’ve set up.
You can find more government guidance on business regulations at Gov.uk .
Keeping on top of your accounts
Making sure you are on top of your business records and accounts is a must if you want to avoid getting into trouble with HMRC and even having to pay a fine. Especially when it comes to paying your taxes , from Corporation Tax to VAT.
One option you may consider is hiring an accountant . They can help to ensure you are filing everything correctly. Similarly, you could purchase accounting software in order to take control of your records yourself.
A good first port of call is opening a business bank account . While you can use your personal account if you are a sole trader, assuming your bank allows it, the moment you incorporate as a limited company or partnership, you must open a business bank account.
If you are a sole trader, opening a business bank account still has its benefits, as it will help keep your personal and professional finances separate. You can even find specific business bank accounts for start ups .
» MORE: Benefits of a business bank account
Build a business website
Building a website can help many different types of small businesses.
Could your business sell products or services online? Is your business a restaurant or cafe that could showcase its menu and offer table or event bookings through a website? Is your business offering something people search for on the web? Could an online presence improve your customer service?
If so, a website could be a key addition.
However, this doesn’t necessarily mean developing one from scratch, as there are many online services that will allow you to quickly build a website, using templates and plug-ins that can be customised to suit your needs.
Find business premises
If you are not running your business from home, you will need to find the perfect business location . Factors to consider include, but are not limited to:
- size of building
- cost of commercial rent (if leasing) or commercial mortgage (if buying)
- how much footfall an area gets
- whether the location is suitable for your target market
- building accessibility
- local competition
- specific permit requirements in the area
- cost of business energy bills
- cost of business rates
Build your team
While you can start a business on your own, certain ideas will require you to build a team.
The cost of hiring someone in the UK isn’t cheap, so it is important to get the process right. Understanding what to put in a job description will help you narrow down the field, as will learning how to interview someone properly.
When hiring, you will also need to be aware of your responsibilities as an employer, from paying the right level of National Insurance to taking out employers’ liability insurance.
» MORE: 70 questions to ask in an interview
Protect your business
Protecting your business can mean many things. For example, you may need to consider business insurance . This could include public liability insurance if you regularly come in contact with third parties, or professional indemnity insurance if your business involves you providing advice.
You might also need to look into trademarks, to make sure your business’s intellectual property is protected, or create a set of terms and conditions so your customers know exactly what they can expect from your products or services.
It could even be as simple as installing CCTV and burglar alarms at your premises to keep it safe.
Now that you have set up your business, it is time to promote it.
» MORE: How to promote your business
Ways to promote your business
Here are just some of the ways you could promote your new business:
What kind of marketing you choose will depend, among other things, on your budget and your business. Types of marketing to consider include:
- digital marketing – website articles, online stores, reviews, pay-per-click and display advertising
- offline marketing – posters, billboards, TV advertisements
- email marketing – sharing content, deals, promotions via email
- social media marketing – utilise platforms like Facebook, Twitter, Instagram and TikTok
- affiliate marketing – working with partners who will advertise your products or services
Also bear in mind your audience – business-to-business (B2B) marketing and business-to-consumer (B2C) marketing tactics will likely differ.
Social media
You can utilise your own personal social media accounts, as well as those of friends and family, to help your business reach a wider audience.
Remember to consider your target audience. If you are selling to other businesses you might rely on LinkedIn as your primary social media platform, whereas a brand targeting consumers might depend more on Instagram and TikTok.
Local listings
Ensuring that your business is featured in the local listings of your area is a great way to get the right sets of eyes on your services.
Similarly, there may be industry-specific listings that you can contact for additional exposure.
Ask for reviews
A good way to build up buzz, trust and awareness for your business is by asking your customers to post online reviews. Important sites include Trustpilot, Feefo, Google Maps and Facebook.
Media relations
Another route you can take to promote your business is by building your media presence. While you might not be able to appear in the big broadsheets and tabloids immediately, you could start by approaching local news outlets in order to drum up interest in your business.
Search engine optimisation (SEO)
When you create a business website, it is important to consider search engine optimisation (SEO). This is to ensure your website is findable on search engines, such as Google or Bing. After all, the higher you rank on a search engine, the more likely your business is to be seen, and the more customers you may be able to secure.
Your site’s technical configuration, the content on its pages and how often it is linked to all play a part in a good SEO strategy.
Now comes the hard part: maintaining day-to-day operations, while trying to ensure your business grows and expands.
Starting a business requires patience – you may not see immediate results, and will need to strike a balance between sticking to your original plan, and accommodating changes in the market, and your own personal situation, when needed.
If at any time you are feeling overwhelmed by the pressure of running your own business, there are avenues of support you can reach out to.
In England, there is the Business Support Helpline , as well as The Local Enterprise Partnerships Growth Hub .
In Wales, you can contact the Business Wales Helpline , in Scotland there is Business Support Scotland , and in Northern Ireland there is the Invest Northern Ireland Helpline .
» MORE: How to grow your business
Image source: Getty Images
About the Authors
![what comes before a business plan Connor Campbell photo](https://cdn.knowyourmoney.co.uk/uploads/sites/4/2023/03/connor-campbell-e1678327404999-100x100.jpg)
Connor is a lead 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…
![what comes before a business plan Duncan Ferris photo](https://cdn.knowyourmoney.co.uk/uploads/sites/4/2024/01/Duncan-writer-image-e1704133526500-150x150.jpeg)
Duncan Ferris is a business writer with expertise in pensions, investing and personal finance. Though he began his career as a pensions industry professional, he transitioned to journalism in 2017.…
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Business Plan Template: Use our Free Downloadable Tool to Produce a Plan for Your New Business
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Watch CBS News
Here's why Southwest is assigning seats — and what it means for customers
By Megan Cerullo
Edited By Aimee Picchi
Updated on: July 25, 2024 / 5:04 PM EDT / CBS News
Southwest will start selling assigned seats , marking a major shakeup of a signature policy that has set the low-cost carrier apart from airlines for half a century. The new policy, announced Thursday, will make flying Southwest look and feel remarkably different for customers.
The shift will affect how customers of the discount carrier select seats and board planes. Southwest passengers, including longtime fans of the open seating policy, will also be able to choose different types of seats for a price, including those offering more legroom. These changes could affect ticket costs across the board, according to experts, although Southwest has not addressed pricing or indicated that regular seat costs will change.
Some experts are cheering the move, saying it amounts to an improvement for both passengers and the airline.
" Southwest's decision to start assigning seats and plan to add extra-legroom seats prove an old dog can learn new tricks," Henry Harteveldt, president of Atmosphere Research Group, told CBS News. "It will make their flights more orderly and comfortable. And it should also improve the airline's bottom line as well."
Southwest will begin selling tickets with assigned seats beginning in 2025. The airline will reveal additional details around changes to the flight boarding process in September. Here are three ways flying Southwest could change.
Assigned seats
Southwest is ending its open seating policy, in which customers find a cabin seat on a first-come, first-serve basis. When the changes go into effect next year, customers will purchase tickets with assigned seating, eliminating some of the stress associated with the current boarding process.
"It's a pretty big change for Southwest, which always had an open seating system, and you had to run into the cabin and try to find the seat you want," Clint Henderson, managing editor of The Points Guy, told CBS MoneyWatch.
Henderson said this turned off some business travelers like himself from choosing to fly Southwest, and he predicted the change could attract a new crop of customers to the airline.
"Many business travelers don't want to fight for a seat and deal with the drama that sometimes entails," Henderson said.
Tensions can run high on airplanes too, with testy passengers quibbling over limited and sometimes shared real estate.
"Since the pandemic, airline passengers may be less cordial and less amicable," said airline customer experience analyst Marbue Brown. "There are certainly benefits to environments where there is no ambiguity about who owns a seat."
Some seats will have more leg room
In addition to assigned seats, Southwest will introduce premium seating, offering passengers extended legroom on one-third of a cabin's seats.
Southwest already lets customers pay to be first in line to board aircraft, "but this is a much bigger change now, with premium seats available for purchase," Going.com's Keyes said.
The airline is likely responding to travelers' penchant for more premium travel experiences following the pandemic, according to Keyes. "The demand is for premium economy, business class and better seats, which Southwest doesn't have to offer," he said.
Southwest's seats already offer more legroom than traditional carriers', which has been a selling point for the airline. They come with 32 inches of space, versus the industry standard of 30-31 inches. It's possible Southwest's new cabin configuration could shrink its current standard of 32 inches of space, some experts said.
"They haven't announced the new cabin design, but the most likely outcome is we're going to see that 32 inches of legroom to start to shrink for main cabin, and for it to be more like 31 or 30," Scott Keyes, founder of Going.com, told CBS MoneyWatch. "That's normal for people who are used to flying American or United, but cramped for people who fly Southwest."
Price changes
The new cabin configurations could drive up ticket prices across the board because Southwest's aircraft might contain fewer number of total seats, industry analysts said. On the other hand, the dramatic policy changes could be price-neutral, depending on how Southwest redesigns its plane cabins.
"Some folks will pay more for extra legroom, and, based on how you reconfigure planes, you might not have to raise prices on other seats," Brown said.
What remains to be seen is whether Southwest will introduce a bare-bones, basic economy-type offering.
Currently, all tickets come with free checked bags and free changes. "But might they start to offer an economy package that includes more restrictions on baggage? That's something we'll have to wait and see," Keyes said.
Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.
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- How to budget your money
1. Examine your income
- 2. Choose your budgeting strategy
- 3. Reduce spending
4. Automate savings and investments
- 5. Track your progress
- How to budget on a low income
Why is budgeting important?
How to budget: tips, tools, and techniques.
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- A budget can help you stay on top of expenses, pay off debts, and achieve your financial goals.
- There are several strategies for budgeting. Each has its own unique pros and cons.
- Checking in on your budget, adjusting it, and analyzing your spending habits regularly is critical.
A budget is, at its simplest, a plan for how you'll spend your earnings. It ensures you have the funds to cover your essentials — like housing, groceries, utilities, and your monthly debt payments — while also working toward other financial and savings goals .
In short: Budgets allow you to get the most out of your paycheck. Without one, there's a chance you could run out of money before your next pay date.
How to budget your money
Budgeting is critical if you want to stay on top of bills, pay off debts , or save for the future, and there are several ways to go about it.
"Building a budget doesn't have to be overly complicated or time-consuming," says Brittany Castro, former in-house CFP for Mint. "It's actually the first step in putting yourself in control of your finances because it means you know where your money goes each month."
How to plan a budget
Budgeting as a beginner can be daunting. Use these steps when making a personal finance budget for the first time:
- Examine your income and expenses so that you can understand how much you're making, how much you're using, and if you're spending more than you're making
- Choose your approach to budgeting, such as the 50/30/20 rule or the envelope system, when determining how much to save each month
- Figure out where you can cut back on spending — and make strategies to help you stick to those cutbacks
- Automate your savings and investments so you can continue to make money off of your extra income without too much effort
- Find ways of tracking your budgeting process that work for you, such as using budgeting apps and/or creating a budgeting spreadsheet
To start budgeting, you first need a good pulse on your monthly income — more specifically, how much you take home each after taxes. If you're unsure what your net income (your income after taxes) looks like off the top of your head, you can typically use pay stubs or bank statements to get these numbers.
Once you have your income estimated, you'll also need to estimate your monthly expenses — things like your rent or mortgage, utility costs, groceries, insurance, and gas. If you have debts (like credit cards or personal loans ), add these in as well. Then compare the two numbers.
"If your expected expenses are greater than your expected income, you will need to earn additional income, cut out some purchases, go into debt, or do a combination of these three," says Todd Christensen, an accredited financial counselor and education manager at Money Fit.
If your income outweighs your expenses, though, that means you have extra cash to put in savings, add to an emergency fund , or put toward other financial goals.
2. Choose your budgeting strategy
The next step is to create your budget — a specific plan for how you'll use your earnings each month and eventually achieve your financial goals.
There are several strategies for doing this, each with its own pros and cons. Here are a few of the options you might consider:
50/30/20 rule
According to Christensen, the 50/30/20 rule has become increasingly popular in the last 20 years. "It suggests you live on 50% of your income — housing, transportation, cell phone, utilities — enjoy 30% with dining out, recreation, or travel, and save and invest 20%."
The benefit here is that it's a simple, easy-to-learn approach, and it doesn't force you to account for every single purchase or expenditure. On the downside, it doesn't take into account your circumstances and may not work in every scenario. (If you live in a high-cost housing market, for example, adhering to that 50% rule may be unrealistic.)
70/20/10 rule
The 70/20/10 rule is similar to the 50/30/20 rule in that it has a loose budgeting structure. The categories for this budgeting strategy are: 70% goes to wants and needs, 20% goes toward savings and investments, and 10% goes toward debt payments or donations.
Zero-balance or traditional budget
With a zero-balance budget, you're trying to get your income minus your expenses to equal zero. That means you use all your income each month — first, toward your essentials, and then, toward your wants and financial goals. Under this strategy, if you were to find yourself with an unspent $300 at the end of the month, you'd put that money in savings, make an extra loan payment, or make some other use of it.
The advantage of a zero-balance budget is that it accounts for every dollar, ensuring you make the absolute most of your earnings. The main drawback is that it's time-consuming. Tracking each expenditure and every dollar you earn can be tiresome. It's also difficult to use on unpredictable incomes (you never know how much you can allot for each expense).
Pay yourself first budget
The pay yourself first strategy starts with your financial goals and works backward. So, say you know you want to put $500 toward your mortgage and $500 into savings each month. You'd start by subtracting that $1,000 from your monthly take-home pay (for example, $4,000 - $1,000), and then use that number ($3,000) for your monthly bills and expenses.
This strategy's big perk is that it prioritizes your goals and allows flexibility in spending. On the downside, it may create stress if you leave yourself with too little to cover your monthly costs.
The envelope budget
The envelope system is a monthly budgeting method created by financial author Dave Ramsey. It requires putting cash into individual envelopes for each expense or category of expenses (e.g., housing, utilities, food, and entertainment). You then pull cash out of the envelopes as costs arise during the month.
If you run out of money in an envelope, it's a sign you overspent or need to allot more to that category. If you have lots left over, you can adjust the budget for the next month and put those funds elsewhere.
The benefit of this method is that it's visual and tangible, making it easy to understand your budget and how you can improve it. Unfortunately, it's also time-consuming, and cash isn't always accepted — especially in today's digital economy.
3. Reduce spending
While you go about creating a budget, it's important to fully analyze your expenses. You should ask yourself: Are those expenses necessary? If so, are there ways to reduce them or make them more affordable? This might mean renegotiating your pricing, switching service providers, or looking for coupons or special deals.
Here are some budgeting tips to cut down what you spend:
- Increase friction: Friction is when something like spending money becomes a little more difficult. An example of adding friction when spending would be removing your saved credit card information from your favorite site so that you have to manually re-add it in every time. This is a great way to make it harder for you to spend easily.
- Wait before buying something: Set a 48-hour waiting rule for your purchases. If there's something you'd like to buy, sleep on it. If it still seems like a good idea in two days, then make the purchase. This helps you steer clear of unnecessary impulse buys.
- Audit your monthly subscription services: There are so many subscription services these days, and it's easy to lose track of just how much you're spending. Take a hard look at your subscriptions and consider cutting any you're not actively using. Look at streaming services, apps, subscription boxes, and even Subscribe and Save subscriptions on Amazon.
- Refinance any loans to get lower rates: You'll be surprised how much interest adds up on any loans you have. Refinancing your mortgage , car loan, and sometimes even your student loans could reduce your interest rate, monthly payment, or both, freeing up cash flow that you can put toward your budget for other, more important, expenses. Make sure to shop around with several lenders if you're considering this route.
- Meal plan: Planning your meals ahead of time helps you stay on track at the grocery store and avoid eating out in a pinch. You'll want a plan for every day of the week, including breakfasts, lunches, dinners, and snacks.
Cutting back even slightly could free up more cash for paying down debts, achieving your financial goals, or just reducing overall financial stress.
No matter which budgeting method you choose, it's important to make saving a part of your plan. Typically, the best option is an automated deposit into your savings account, as this reduces hassle and keeps your goals on track. To maximize your savings, you might consider a high-yield savings account , which earns money at a higher rate than other options.
Once you've automated your savings, you can also think about investing any income you might have left over. If this is something you're interested in, consider talking to a certified financial planner before diving in. They can help you choose the best investments for your goals.
5. Track your progress
Budgets are ever-evolving tools, and you'll need to track your progress, adjust, and recalibrate often — especially in the beginning. You'll also need to adjust your spending habits as you go.
"The key is to identify your spending trends and ensure they match up with your spending priorities," Christensen says. "If you're spending $50 a week on soft drinks, but you would rather prioritize the purchase of a new gaming console, then it's time to change your soft-drink purchasing behavior."
Though you can certainly manually check in on your budget, Christensen recommends using a budgeting app that connects to your bank account, as these can streamline the process. For example, Rocket Money is an app that helps you create a budget, negotiate your bills, and reduce your spending — and it has a free plan.
Some budgeting apps offer credit monitoring services , as well. Consider tracking your credit score and credit card use when you're tracking your budget to better understand all of your financial needs.
You can also create an expense tracking spreadsheet in Excel, ask for receipts for every purchase, and total them up at the end of each week or month.
How to budget on a low income
If you're struggling financially, budgeting is particularly important. As Lisa Fischer, chief growth and lending officer at Mission Lane , explains, "Keeping a close eye on spending is crucial for all consumers, but especially those who may be living paycheck to paycheck."
Not only can budgeting help you monitor your spending habits and stay on track with bills and expenses, but it can also ensure you prioritize saving, which should improve your financial outlook down the line.
In addition to budgeting, you can consider applying for rental or housing payment assistance, food pantries, and health care sharing plans to reduce your costs. Financial, debt, or credit counseling might be helpful as well. If this is something you're interested in, the nonprofit National Foundation for Credit Counseling is a good place to start.
If you want to make the most of your income while also achieving your long-term financial goals, having a budget is crucial. As Castro explains, "You need a solid budget and financial plan in order to set yourself up for long-term financial wellness, avoid running into problems such as racking up credit card debt, and build your net worth over time."
There are many ways to go about budgeting, and you may need to try a few before you find the right fit. You can also speak to a financial advisor for help choosing the best budgeting route for your household.
How to budget: FAQs
The best way to start a budget is to figure out how much you're making and compare it to what you're spending. Then you can figure out what budgeting method you want to use.
Cash stuffing is a budgeting technique that involves assigning monthly spending and saving categories to different envelopes. Then you put the amount of money you want to spend on those categories into the envelopes.
The 50/30/20 rule is a budgeting technique in which you assign 50% of your income to living expenses (such as rent and utilities), 30% of your income to non-necessary expenses (such as concerts or travel), and 20% to savings and investments.
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