How to Write a Business Plan

To write a business plan, first pick a format, then work through its sections one at a time: what you sell, who buys it, how you’ll reach them, what it costs and how you’ll make money. The U.S. Small Business Administration (SBA) describes two common formats. A traditional plan is detailed, can run dozens of pages and is what lenders and investors commonly request. A lean startup plan sums up the key points, is typically one page and can take as little as an hour to make (SBA). The SBA also says there’s no right or wrong way to write one, as long as the plan meets your needs (same source).

Pick a format

Format	Length and effort	Good fit if you…
Traditional	Detailed and comprehensive; can be dozens of pages	are detail-oriented, want a thorough plan, or plan to ask for financing from traditional sources
Lean startup	Key elements only; typically one page	want to start or explain the business quickly, run a relatively simple business, or expect to change the plan often

Source: SBA.

For most side hustles and very small businesses, a lean plan is a sensible place to start. You can expand it into a traditional plan later if you apply for a loan or bring in investors. The SBA notes that some lenders and investors ask for more information when given a lean plan (same source).

What goes in a traditional plan

The SBA doesn’t require you to follow the outline exactly; it says to use the sections that make the most sense for your business. These are the common sections it lists (SBA):

1. Executive summary. What your company is and why it will succeed: your mission statement, product or service, and basic information about your leadership, employees and location. Add financial information and high-level growth plans if you’ll ask for financing.
2. Company description. The problems your business solves, the customers or businesses it will serve, and the competitive advantages that will make it work.
3. Market analysis. Your industry outlook and target market, plus what competitors do well. The SBA suggests asking what successful competitors do, why it works and whether you can do it better.
4. Organization and management. Your legal structure (sole proprietorship, LLC, partnership, C or S corporation) and who runs what, often shown in an organizational chart.
5. Service or product line. What you sell, how it benefits customers, the product lifecycle and any plans for copyrights or patents.
6. Marketing and sales. How you’ll attract and keep customers and how a sale will actually happen.
7. Funding request. If you’re asking for money: how much you’ll need over the next five years, what you’ll use it for, whether you want debt or equity, and on what terms.
8. Financial projections. For an established business, income statements, balance sheets and cash flow statements for the last three to five years. For every plan, a five-year forecast, with quarterly or even monthly projections for the first year that match your funding request.

Write the executive summary last, even though it comes first. It’s easier to summarize a plan once the rest is done.

If you haven’t settled on a legal structure yet, our guide to LLCs vs. sole proprietorships covers the trade-offs.

What goes in a lean plan

A lean plan is a chart with a handful of boxes. The SBA lists nine components (SBA):

• Key partnerships: suppliers, manufacturers, subcontractors and other businesses you’ll work with.
• Key activities: the ways your business will gain a competitive advantage.
• Key resources: your most important assets, such as staff, capital or intellectual property.
• Value proposition: a clear statement of the unique value you bring to the market.
• Customer relationships: how customers will interact with the business, from start to finish.
• Customer segments: a specific description of who you’ll serve. The SBA’s point is that your business won’t be for everybody.
• Channels: the main ways you’ll talk to customers.
• Cost structure: whether you’ll focus on reducing cost or maximizing value, and your most significant costs.
• Revenue streams: how the company will actually make money, listing every stream if there’s more than one.

The SBA also offers fictional sample plans to download, in both formats, from its business plan page (same source).

Tips for the hard parts

Do the market research first

The market analysis and customer sections rest on research, so do it before you write them. The SBA suggests answering six questions: whether people want your product or service, how many would be interested, the income range and employment rate in your area, where your customers live, how many similar options already exist, and what customers pay for those alternatives (SBA). Our guide to finding and testing a business idea walks through the free federal data that can answer them.

Count your costs in two groups

The SBA suggests splitting startup costs into one-time expenses, such as major equipment, a logo designer, permits and licenses, and monthly expenses, such as salaries, rent and utilities. It recommends counting at least one year of monthly expenses and says five years is ideal (SBA). Its startup cost list includes items that are easy to forget, like insurance, a lawyer and accountant, and a website.

Find your break-even point

The break-even point is where total costs equal total revenue. The SBA calls it an important part of any plan you show to an investor and gives this formula for a single product or service (SBA):

Break-even point in units = fixed costs ÷ (price per unit − variable cost per unit)

For example, if your fixed costs are $600 a month and each unit sells for $25 and costs $10 to make, you’d need to sell 40 units a month to break even ($600 ÷ $15). The SBA also suggests adding a little extra, such as 10%, to cover expenses you can’t predict (same source). For more on the numbers behind profit, see gross vs. net profit.

Make the numbers agree

The marketing plan, the projections and the funding request should tell the same story. The SBA says you’ll refer back to your marketing and sales section when you make financial projections, and that your projections should match your funding request (SBA). If you’re asking for $20,000 for equipment, the cost table and cash flow forecast should both show it.

Treat it as a working document

The SBA calls a business plan a roadmap for how to structure, run and grow your business (same source). Date each version and revisit it when something big changes, like your prices, your costs or a new competitor.

Get free help

The SBA works with resource partners that offer counseling (SBA):

• SCORE is a nonprofit network of volunteer business mentors. The SBA says SCORE mentors give advice at no cost on subjects including financing and business planning, by email, phone and video, and that SCORE also offers training, webinars and workshops.
• Small Business Development Centers (SBDCs) provide counseling and training to existing small businesses and to people who haven’t started one yet. According to the SBA, their help covers business planning, access to capital, financial management and marketing, among other areas.

The SBA’s local assistance tool finds these partners near you by ZIP code (same source). Taking a draft to a counselor gets you a second reader before a lender or investor sees it.