How to Write an Effective Business Plan

Why do you need to write a business plan? Well, for starters, an effective business plan can help you acquire funding from investors and banks because it demonstrates that you have done some research and thought about marketing, operations and finances. It’s a great starting point to build off of.

Some successful entrepreneurs with experience in launching startups, a rolodex of powerful connections and a proven track record may get away with not having a plan, but if you’re opening your first business, a business plan is almost always a prerequisite.

Another thing to remember is that an effective business plan is never written in stone. It is an educated guess at why the business can be successful and an outline for you business model. Historically speaking, every single business plan has had to be changed at least once since the business started, simply because the real world is much different than the world detailed by the plan. Sales cycles could be longer, the market could be different, or the price of your good or service has to be changed.

A well-written plan, however, will help keep you focused on your business objectives and the marketing and sales endeavors that will lead you to success. To write an effective business plan, you’ll need to have the following elements, all of which will need to be well-researched and detailed.

Executive Summary

Although positioned first in your business plan, this section will usually be written last. The executive summary outlines your business in a few concisely written statements to offer readers a snapshot of your business. Include your business name and location, the products or services you plan to offer, your mission statement, your business goals and the reason you are submitting the plan (e.g. to request a loan). Describe the type of business you want to open or are currently running, and detail why you and any partners are qualified to run the business.

This section is probably the most important part of your plan because it’s the only section most will read before deciding to meet with you or actually making an offer. If it’s not written well, your plan will be dead on arrival, as a poorly conveyed business plan is ineffective and leads to nothing.

Business Description

In this section, you will paint a full picture of your business. Include information about the current state and outlook of your industry, and describe your average customer. Next, go into detail about your products or services and how your offerings will improve customers’ lives or solve the problems they deal with on a regular basis.

Also, highlight any business-related achievements you have reached or milestones you have crossed, such as patenting a product or trademarking your name.

Market Analysis

Provide an overview of the location or community and demographics of your customers, explaining how you can meet specific needs for people in that area and why you will be successful there. Be sure to back up any statements with hard data and statistical evidence. In order to get this data, be sure to do a lot of primary research, which will require going out and actually talking to people, whether they are experts, customers, competitors, manufacturers or anything else. The more research you do on your potential market, the more credible your numbers will be in the financial section.

Competitive Analysis

In this section, your goal is to set yourself apart from the competition. List your top competitors, and explain how you differ from them and why customers will choose your offering over another. Go into detail about competitor weaknesses that you can exploit with better pricing, higher quality or stronger service. In addition, be honest about the areas where competitors beat you, and provide ideas for how you plan to overcome these deficits and still attract customers.

Thoroughly describe your plans for marketing your business, including your plans for traditional and online advertising, social media advertising and so on.

Operations Plan

In this section, you will lay out a plan for running your business. Start by listing basics like your hours of operation and details about your location and workspace. Then provide a list of equipment and supplies you will need to purchase or lease upfront, along with a list of materials you expect to purchase on an ongoing basis and the estimated cost of those supplies.

Along with that information, include a list of vendors or suppliers you have vetted and will likely use. If you already have relationships with businesses that will cut you a deal or help you to generate money, explain that in this section.

Finally, describe your staffing needs, and outline your leadership structure, providing an organizational chart if possible. Include job descriptions for each person you want to hire and the money required to cover his or her salary, benefits and training.

Financial Projections

Besides the executive summary, this is an extremely important section for an effective business plan. In this section, you will focus on your sales potential and show any potential investors how your business will make money for both yourself and your partners.For the next three to five years, provide a:

  • Profit-and-loss statement. This statement is a monthly or annually generated report that details your business’ earnings by stating your profits or losses during an allotted timeframe.
  • Cash-flow statement. This is a statement that details the cash you have coming in (e.g. sales, investments, selling of assets, loan proceeds, etc.) and out (e.g. operating expenses, debt payments, asset purchases, etc.) during a specific timeframe.
  • Breakeven analysis. Your breakeven point tells you when and at what point you will recoup the cost of operating your business and turn a profit. To calculate your breakeven point, use this equation:
  • Balance sheet. A statement of your businesses assets, liabilities and capital that details the balance of assets versus expenses at a specific point in time. In a sense, it provides a picture of your business’ financial position. 
  • Possible Risk. This shows that you are aware of the challenges you will face, allowing investors and banks to see that you are realistic. In addition, detail a plan for dealing with those risks.

Request for Funds

If you are seeking funding, use this section to clearly state how much money you are asking for and when you need the money. Then briefly summarize how you will use the money to meet your financial objectives and overall goals for the business.

Writing an effective business plan can be the single best thing you do for your business, regardless of whether you haven’t yet opened up shop or have been operating for a while.


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