How To Start A Business In 11 Steps (2023 Guide)
Updated: Nov 1, 2023, 11:57pm
Table of Contents
Before you begin: get in the right mindset, 1. determine your business concept, 2. research your competitors and market, 3. create your business plan, 4. choose your business structure, 5. register your business and get licenses, 6. get your finances in order, 7. fund your business, 8. apply for business insurance, 9. get the right business tools, 10. market your business, 11. scale your business, what are the best states to start a business, bottom line, frequently asked questions (faqs).
Starting a business is one of the most exciting and rewarding experiences you can have. But where do you begin? There are several ways to approach creating a business, with many important considerations. To help take the guesswork out of the process and improve your chances of success, follow our comprehensive guide on how to start a business. We’ll walk you through each step of the process, from defining your business idea to registering, launching and growing your business.
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The public often hears about overnight successes because they make for a great headline. However, it’s rarely that simple—they don’t see the years of dreaming, building and positioning before a big public launch. For this reason, remember to focus on your business journey and don’t measure your success against someone else’s.
Consistency Is Key
New business owners tend to feed off their motivation initially but get frustrated when that motivation wanes. This is why it’s essential to create habits and follow routines that power you through when motivation goes away.
Take the Next Step
Some business owners dive in headfirst without looking and make things up as they go along. Then, there are business owners who stay stuck in analysis paralysis and never start. Perhaps you’re a mixture of the two—and that’s right where you need to be. The best way to accomplish any business or personal goal is to write out every possible step it takes to achieve the goal. Then, order those steps by what needs to happen first. Some steps may take minutes while others take a long time. The point is to always take the next step.
Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Maybe you love making soap and want to open a soap shop in your small town that already has three close by—it won’t be easy to corner the market when you’re creating the same product as other nearby stores.
If you don’t have a firm idea of what your business will entail, ask yourself the following questions:
- What do you love to do?
- What do you hate to do?
- Can you think of something that would make those things easier?
- What are you good at?
- What do others come to you for advice about?
- If you were given ten minutes to give a five-minute speech on any topic, what would it be?
- What’s something you’ve always wanted to do, but lacked resources for?
These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.
Your business idea also doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it. You can also sell a digital product so there’s little overhead.
What Kind of Business Should You Start?
Before you choose the type of business to start, there are some key things to consider:
- What type of funding do you have?
- How much time do you have to invest in your business?
- Do you prefer to work from home or at an office or workshop?
- What interests and passions do you have?
- Can you sell information (such as a course), rather than a product?
- What skills or expertise do you have?
- How fast do you need to scale your business?
- What kind of support do you have to start your business?
- Are you partnering with someone else?
- Does the franchise model make more sense to you?
Consider Popular Business Ideas
Not sure what business to start? Consider one of these popular business ideas:
- Start a Franchise
- Start a Blog
- Start an Online Store
- Start a Dropshipping Business
- Start a Cleaning Business
- Start a Bookkeeping Business
- Start a Clothing Business
- Start a Landscaping Business
- Start a Consulting Business
- Start a Photography Business
- Start a Vending Machine Business
Most entrepreneurs spend more time on their products than they do getting to know the competition. If you ever apply for outside funding, the potential lender or partner wants to know: what sets you (or your business idea) apart? If market analysis indicates your product or service is saturated in your area, see if you can think of a different approach. Take housekeeping, for example—rather than general cleaning services, you might specialize in homes with pets or focus on garage cleanups.
The first stage of any competition study is primary research, which entails obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to learn what consumers want. Surveying friends and family isn’t recommended unless they’re your target market. People who say they’d buy something and people who do are very different. The last thing you want is to take so much stock in what they say, create the product and flop when you try to sell it because all of the people who said they’d buy it don’t because the product isn’t something they’d actually buy.
Utilize existing sources of information, such as census data, to gather information when you do secondary research. The current data may be studied, compiled and analyzed in various ways that are appropriate for your needs but it may not be as detailed as primary research.
Conduct a SWOT Analysis
SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to look at the facts about how your product or idea might perform if taken to market, and it can also help you make decisions about the direction of your idea. Your business idea might have some weaknesses that you hadn’t considered or there may be some opportunities to improve on a competitor’s product.
Asking pertinent questions during a SWOT analysis can help you identify and address weaknesses before they tank your new business.
A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. When writing a well-rounded business plan, include the following sections:
- Executive summary: The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
- Company description: The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
- Market analysis: This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
- Organization and structure: Write about the type of business organization you expect, what risk management strategies you propose and who will staff the management team. What are their qualifications? Will your business be a single-member limited liability company (LLC) or a corporation ?
- Mission and goals: This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
- Products or services: This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your products cost, who will be responsible for creating the products, how you’ll source materials and how much they cost to make.
- Background summary: This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
- Marketing plan: The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
- Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.
Learn more: Download our free simple business plan template .
Come Up With an Exit Strategy
An exit strategy is important for any business that is seeking funding because it outlines how you’ll sell the company or transfer ownership if you decide to retire or move on to other projects. An exit strategy also allows you to get the most value out of your business when it’s time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.
The most common exit strategies are:
- Selling the business to another party
- Passing the business down to family members
- Liquidating the business assets
- Closing the doors and walking away
Develop a Scalable Business Model
As your small business grows, it’s important to have a scalable business model so that you can accommodate additional customers without incurring additional costs. A scalable business model is one that can be replicated easily to serve more customers without a significant increase in expenses.
Some common scalable business models are:
- Subscription-based businesses
- Businesses that sell digital products
- Franchise businesses
- Network marketing businesses
Start Planning for Taxes
One of the most important things to do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be liable for, including income tax, self-employment tax, sales tax and property tax. Depending on the type of business you’re operating, you may also be required to pay other taxes, such as payroll tax or unemployment tax.
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When structuring your business, it’s essential to consider how each structure impacts the amount of taxes you owe, daily operations and whether your personal assets are at risk.
An LLC limits your personal liability for business debts. LLCs can be owned by one or more people or companies and must include a registered agent . These owners are referred to as members.
- LLCs offer liability protection for the owners
- They’re one of the easiest business entities to set up
- You can have a single-member LLC
- You may be required to file additional paperwork with your state on a regular basis
- LLCs can’t issue stock
- You’ll need to pay annual filing fees to your state
Limited Liability Partnership (LLP)
An LLP is similar to an LLC but is typically used for licensed business professionals such as an attorney or accountant. These arrangements require a partnership agreement.
- Partners have limited liability for the debts and actions of the LLP
- LLPs are easy to form and don’t require much paperwork
- There’s no limit to the number of partners in an LLP
- Partners are required to actively take part in the business
- LLPs can’t issue stock
- All partners are personally liable for any malpractice claims against the business
If you start a solo business, you might consider a sole proprietorship . The company and the owner, for legal and tax purposes, are considered the same. The business owner assumes liability for the business. So, if the business fails, the owner is personally and financially responsible for all business debts.
- Sole proprietorships are easy to form
- There’s no need to file additional paperwork with your state
- You’re in complete control of the business
- You’re personally liable for all business debts
- It can be difficult to raise money for a sole proprietorship
- The business may have a limited lifespan
A corporation limits your personal liability for business debts just as an LLC does. A corporation can be taxed as a C corporation (C-corp) or an S corporation (S-corp). S-corp status offers pass-through taxation to small corporations that meet certain IRS requirements. Larger companies and startups hoping to attract venture capital are usually taxed as C-corps.
- Corporations offer liability protection for the owners
- The life span of a corporation is not limited
- A corporation can have an unlimited number of shareholders
- Corporations are subject to double taxation
- They’re more expensive and complicated to set up than other business structures
- The shareholders may have limited liability
Before you decide on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each business type has different tax treatments that could affect your bottom line.
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There are several legal issues to address when starting a business after choosing the business structure. The following is a good checklist of items to consider when establishing your business:
Choose Your Business Name
Make it memorable but not too difficult. Choose the same domain name, if available, to establish your internet presence. A business name cannot be the same as another registered company in your state, nor can it infringe on another trademark or service mark that is already registered with the United States Patent and Trademark Office (USPTO).
Business Name vs. DBA
There are business names, and then there are fictitious business names known as “Doing Business As” or DBA. You may need to file a DBA if you’re operating under a name that’s different from the legal name of your business. For example, “Mike’s Bike Shop” is doing business as “Mike’s Bikes.” The legal name of the business is “Mike’s Bike Shop,” and “Mike’s Bikes” is the DBA.
You may need to file a DBA with your state, county or city government offices. The benefits of a DBA include:
- It can help you open a business bank account under your business name
- A DBA can be used as a “trade name” to brand your products or services
- A DBA can be used to get a business license
Register Your Business and Obtain an EIN
You’ll officially create a corporation, LLC or other business entity by filing forms with your state’s business agency―usually the Secretary of State. As part of this process, you’ll need to choose a registered agent to accept legal documents on behalf of your business. You’ll also pay a filing fee. The state will send you a certificate that you can use to apply for licenses, a tax identification number (TIN) and business bank accounts.
Next, apply for an employer identification number (EIN) . All businesses, other than sole proprietorships with no employees, must have a federal employer identification number. Submit your application to the IRS and you’ll typically receive your number in minutes.
Get Appropriate Licenses and Permits
Legal requirements are determined by your industry and jurisdiction. Most businesses need a mixture of local, state and federal licenses to operate. Check with your local government office (and even an attorney) for licensing information tailored to your area.
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Open a Business Bank Account
Keep your business and personal finances separate. Here’s how to choose a business checking account —and why separate business accounts are essential. When you open a business bank account, you’ll need to provide your business name and your business tax identification number (EIN). This business bank account can be used for your business transactions, such as paying suppliers or invoicing customers. Most times, a bank will require a separate business bank account to issue a business loan or line of credit.
Hire a Bookkeeper or Get Accounting Software
If you sell a product, you need an inventory function in your accounting software to manage and track inventory. The software should have ledger and journal entries and the ability to generate financial statements.
Some software programs double as bookkeeping tools. These often include features such as check writing and managing receivables and payables. You can also use this software to track your income and expenses, generate invoices, run reports and calculate taxes.
There are many bookkeeping services available that can do all of this for you, and more. These services can be accessed online from any computer or mobile device and often include features such as bank reconciliation and invoicing. Check out the best accounting software for small business, or see if you want to handle the bookkeeping yourself.
Determine Your Break-Even Point
Before you fund your business, you must get an idea of your startup costs. To determine these, make a list of all the physical supplies you need, estimate the cost of any professional services you will require, determine the price of any licenses or permits required to operate and calculate the cost of office space or other real estate. Add in the costs of payroll and benefits, if applicable.
Businesses can take years to turn a profit, so it’s better to overestimate the startup costs and have too much money than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.
When you know how much you need to get started with your business, you need to know the point at which your business makes money. This figure is your break-even point.
In contrast, the contribution margin = total sales revenue – cost to make product
For example, let’s say you’re starting a small business that sells miniature birdhouses for fairy gardens. You have determined that it will cost you $500 in startup costs. Your variable costs are $0.40 per birdhouse produced, and you sell them for $1.50 each.
Let’s write these out so it’s easy to follow:
This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in your first month, you will make a profit.
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There are many different ways to fund your business—some require considerable effort, while others are easier to obtain. Two categories of funding exist: internal and external.
Internal funding includes:
- Personal savings
- Credit cards
- Funds from friends and family
If you finance the business with your own funds or with credit cards, you have to pay the debt on the credit cards and you’ve lost a chunk of your wealth if the business fails. By allowing your family members or friends to invest in your business, you are risking hard feelings and strained relationships if the company goes under. Business owners who want to minimize these risks may consider external funding.
External funding includes:
- Small business loans
- Small business grants
- Angel investors
- Venture capital
Small businesses may have to use a combination of several sources of capital. Consider how much money is needed, how long it will take before the company can repay it and how risk-tolerant you are. No matter which source you use, plan for profit. It’s far better to take home six figures than make seven figures and only keep $80,000 of it.
Funding ideas include:
- Invoice factoring: With invoice factoring , you can sell your unpaid invoices to a third party at a discount.
- Business lines of credit: Apply for a business line of credit , which is similar to a personal line of credit. The credit limit and interest rate will be based on your business’s revenue, credit score and financial history.
- Equipment financing: If you need to purchase expensive equipment for your business, you can finance it with a loan or lease.
- Small Business Administration (SBA) microloans: Microloans are up to $50,000 loans that can be used for working capital, inventory or supplies and machinery or equipment.
- Grants: The federal government offers grants for businesses that promote innovation, export growth or are located in historically disadvantaged areas. You can also find grants through local and regional organizations.
- Crowdfunding: With crowdfunding , you can raise money from a large group of people by soliciting donations or selling equity in your company.
Choose the right funding source for your business by considering the amount of money you need, the time frame for repayment and your tolerance for risk.
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You need to have insurance for your business , even if it’s a home-based business or you don’t have any employees. The type of insurance you need depends on your business model and what risks you face. You might need more than one type of policy, and you might need additional coverage as your business grows. In most states, workers’ compensation insurance is required by law if you have employees.
Work With an Agent To Get Insured
An insurance agent can help determine what coverages are appropriate for your business and find policies from insurers that offer the best rates. An independent insurance agent represents several different insurers, so they can shop around for the best rates and coverage options.
Basic Types of Business Insurance Coverage
- Liability insurance protects your business against third-party claims of bodily injury, property damage and personal injury such as defamation or false advertising.
- Property insurance covers the physical assets of your business, including your office space, equipment and inventory.
- Business interruption insurance pays for the loss of income if your business is forced to close temporarily due to a covered event such as a natural disaster.
- Product liability insurance protects against claims that your products caused bodily injury or property damage.
- Employee practices liability insurance covers claims from employees alleging discrimination, sexual harassment or other wrongful termination.
- Workers’ compensation insurance covers medical expenses and income replacement for employees who are injured on the job.
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Business tools can help make your life easier and make your business run more smoothly. The right tools can help you save time, automate tasks and make better decisions.
Consider the following tools in your arsenal:
- Accounting software : Track your business income and expenses, prepare financial statements and file taxes. Examples include QuickBooks and FreshBooks.
- Customer relationship management (CRM) software : This will help you manage your customer relationships, track sales and marketing data and automate tasks like customer service and follow-ups. Examples include Zoho CRM and monday.com.
- Project management software : Plan, execute and track projects. It can also be used to manage employee tasks and allocate resources. Examples include Airtable and ClickUp.
- Credit card processor : This will allow you to accept credit card payments from customers. Examples include Stripe and PayPal.
- Point of sale (POS) : A system that allows you to process customer payments. Some accounting software and CRM software have POS features built-in. Examples include Clover and Lightspeed.
- Virtual private network (VPN) : Provides a secure, private connection between your computer and the internet. This is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
- Merchant services : When customers make a purchase, the money is deposited into your business account. You can also use merchant services to set up recurring billing or subscription payments. Examples include Square and Stripe.
- Email hosting : This allows you to create a professional email address with your own domain name. Examples include G Suite and Microsoft Office 365.
Many business owners spend so much money creating their products that there isn’t a marketing budget by the time they’ve launched. Alternatively, they’ve spent so much time developing the product that marketing is an afterthought.
Create a Website
Even if you’re a brick-and-mortar business, a web presence is essential. Creating a website doesn’t take long, either—you can have one done in as little as a weekend. You can make a standard informational website or an e-commerce site where you sell products online. If you sell products or services offline, include a page on your site where customers can find your locations and hours. Other pages to add include an “About Us” page, product or service pages, frequently asked questions (FAQs), a blog and contact information.
Optimize Your Site for SEO
After getting a website or e-commerce store, focus on optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords for your products, the search engine can point them to your site. SEO is a long-term strategy, so don’t expect a ton of traffic from search engines initially—even if you’re using all the right keywords.
Create Relevant Content
Provide quality digital content on your site that makes it easy for customers to find the correct answers to their questions. Content marketing ideas include videos, customer testimonials, blog posts and demos. Consider content marketing one of the most critical tasks on your daily to-do list. This is used in conjunction with posting on social media.
Get Listed in Online Directories
Customers use online directories like Yelp, Google My Business and Facebook to find local businesses. Some city halls and chambers of commerce have business directories too. Include your business in as many relevant directories as possible. You can also create listings for your business on specific directories that focus on your industry.
Develop a Social Media Strategy
Your potential customers are using social media every day—you need to be there too. Post content that’s interesting and relevant to your audience. Use social media to drive traffic back to your website where customers can learn more about what you do and buy your products or services.
You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram because they offer e-commerce features that allow you to sell directly from your social media accounts. Both of these platforms have free ad training to help you market your business.
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To scale your business, you need to grow your customer base and revenue. This can be done by expanding your marketing efforts, improving your product or service, collaborating with other creators or adding new products or services that complement what you already offer.
Think about ways you can automate or outsource certain tasks so you can focus on scaling the business. For example, if social media marketing is taking up too much of your time, consider using a platform such as Hootsuite to help you manage your accounts more efficiently. You can also consider outsourcing the time-consumer completely.
You can also use technology to automate certain business processes, including accounting, email marketing and lead generation. Doing this will give you more time to focus on other aspects of your business.
When scaling your business, it’s important to keep an eye on your finances and make sure you’re still profitable. If you’re not making enough money to cover your costs, you need to either reduce your expenses or find ways to increase your revenue.
Build a Team
As your business grows, you’ll need to delegate tasks and put together a team of people who can help you run the day-to-day operations. This might include hiring additional staff, contractors or freelancers.
Resources for building a team include:
- Hiring platforms: To find the right candidates, hiring platforms, such as Indeed and Glassdoor, can help you post job descriptions, screen résumés and conduct video interviews.
- Job boards: Job boards such as Craigslist and Indeed allow you to post open positions for free.
- Social media: You can also use social media platforms such as LinkedIn and Facebook to find potential employees.
- Freelance platforms: Using Upwork, Freelancer and Fiverr can help you find talented freelancers for one-time or short-term projects. You can also outsource certain tasks, such as customer service, social media marketing or bookkeeping.
You might also consider partnering with other businesses in your industry. For example, if you’re a wedding planner, you could partner with a florist, photographer, catering company or venue. This way, you can offer your customers a one-stop shop for all their wedding needs. Another example is an e-commerce store that partners with a fulfillment center. This type of partnership can help you save money on shipping and storage costs, and it can also help you get your products to your customers faster.
To find potential partnerships, search for businesses in your industry that complement what you do. For example, if you’re a web designer, you could partner with a digital marketing agency.
You can also search for businesses that serve the same target market as you but offer different products or services. For example, if you sell women’s clothing, you could partner with a jewelry store or a hair salon.
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To rank the best states to start a business in 2023, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state. Check out the full report .
Starting a small business takes time, effort and perseverance. But if you’re willing to put in the work, it can be a great way to achieve your dreams and goals. Be sure to do your research, create a solid business plan and pivot along the way. Once you’re operational, don’t forget to stay focused and organized so you can continue to grow your business.
How do I start a small business with no money?
There are several funding sources for brand-new businesses and most require a business plan to secure it. These include the SBA , private grants, angel investors, crowdfunding and venture capital.
What is the best business structure?
The best business structure for your business will depend entirely on what kind of company you form, your industry and what you want to accomplish. But any successful business structure will be one that will help your company set realistic goals and follow through on set tasks.
Do I need a business credit card?
You don’t need one, but a business credit card can be helpful for new small businesses. It allows you to start building business credit, which can help you down the road when you need to take out a loan or line of credit. Additionally, business credit cards often come with rewards and perks that can save you money on business expenses.
Do I need a special license or permit to start a small business?
The answer to this question will depend on the type of business you want to start and where you’re located. Some businesses, such as restaurants, will require a special permit or license to operate. Others, such as home daycare providers, may need to register with the state.
How much does it cost to create a business?
The cost of starting a business will vary depending on the size and type of company you want to create. For example, a home-based business will be less expensive to start than a brick-and-mortar store. Additionally, the cost of starting a business will increase if you need to rent or buy commercial space, hire employees or purchase inventory. You could potentially get started for free by dropshipping or selling digital goods.
How do I get a loan for a new business?
The best way to get a loan for a new business is to approach banks or other financial institutions and provide them with a business plan and your financial history. You can also look into government-backed loans, such as those offered by the SBA. Startups may also be able to get loans from alternative lenders, including online platforms such as Kiva.
Do I need a business degree to start a business?
No, you don’t need a business degree to start a business. However, acquiring a degree in business or a related field can provide you with the understanding and ability to run an effective company. Additionally, you may want to consider taking some business courses if you don’t have a degree to learn more about starting and running a business. You can find these online and at your local Small Business Administration office.
What are some easy businesses to start?
One of the easiest businesses to start also has the lowest overhead: selling digital goods. This can include items such as e-books, online courses, audio files or software. If you have expertise in a particular area or niche, this is a great option for you. Dropshipping is also a great option because you don’t have to keep inventory. You could also buy wholesale products or create your own. Once you create your product, you can sell it through your own website or third-party platforms such as Amazon or Etsy.
What is the most profitable type of business?
There is no one answer to this question because the most profitable type of business will vary depending on a number of factors, such as your industry, location, target market and business model. However, some businesses tend to be more profitable than others, such as luxury goods, high-end services, business-to-business companies and subscription-based businesses. If you’re not sure what type of business to start, consider your strengths and interests, as well as the needs of your target market, to help you choose a profitable business idea.
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Katherine Haan, MBA is a former financial advisor-turned-writer and business coach. For over a decade, she’s helped small business owners make money online. When she’s not trying out the latest tech or travel blogging with her family, you can find her curling up with a good novel.
Step-by-Step Guide to Writing a Simple Business Plan
By Joe Weller | October 11, 2021
A business plan is the cornerstone of any successful company, regardless of size or industry. This step-by-step guide provides information on writing a business plan for organizations at any stage, complete with free templates and expert advice.
Included on this page, you’ll find a step-by-step guide to writing a business plan and a chart to identify which type of business plan you should write . Plus, find information on how a business plan can help grow a business and expert tips on writing one .
What Is a Business Plan?
A business plan is a document that communicates a company’s goals and ambitions, along with the timeline, finances, and methods needed to achieve them. Additionally, it may include a mission statement and details about the specific products or services offered.
A business plan can highlight varying time periods, depending on the stage of your company and its goals. That said, a typical business plan will include the following benchmarks:
- Product goals and deadlines for each month
- Monthly financials for the first two years
- Profit and loss statements for the first three to five years
- Balance sheet projections for the first three to five years
Startups, entrepreneurs, and small businesses all create business plans to use as a guide as their new company progresses. Larger organizations may also create (and update) a business plan to keep high-level goals, financials, and timelines in check.
While you certainly need to have a formalized outline of your business’s goals and finances, creating a business plan can also help you determine a company’s viability, its profitability (including when it will first turn a profit), and how much money you will need from investors. In turn, a business plan has functional value as well: Not only does outlining goals help keep you accountable on a timeline, it can also attract investors in and of itself and, therefore, act as an effective strategy for growth.
For more information, visit our comprehensive guide to writing a strategic plan or download free strategic plan templates . This page focuses on for-profit business plans, but you can read our article with nonprofit business plan templates .
Business Plan Steps
The specific information in your business plan will vary, depending on the needs and goals of your venture, but a typical plan includes the following ordered elements:
- Executive summary
- Description of business
- Market analysis
- Competitive analysis
- Description of organizational management
- Description of product or services
- Marketing plan
- Sales strategy
- Funding details (or request for funding)
- Financial projections
If your plan is particularly long or complicated, consider adding a table of contents or an appendix for reference. For an in-depth description of each step listed above, read “ How to Write a Business Plan Step by Step ” below.
Broadly speaking, your audience includes anyone with a vested interest in your organization. They can include potential and existing investors, as well as customers, internal team members, suppliers, and vendors.
Do I Need a Simple or Detailed Plan?
Your business’s stage and intended audience dictates the level of detail your plan needs. Corporations require a thorough business plan — up to 100 pages. Small businesses or startups should have a concise plan focusing on financials and strategy.
How to Choose the Right Plan for Your Business
In order to identify which type of business plan you need to create, ask: “What do we want the plan to do?” Identify function first, and form will follow.
Use the chart below as a guide for what type of business plan to create:
Is the Order of Your Business Plan Important?
There is no set order for a business plan, with the exception of the executive summary, which should always come first. Beyond that, simply ensure that you organize the plan in a way that makes sense and flows naturally.
The Difference Between Traditional and Lean Business Plans
A traditional business plan follows the standard structure — because these plans encourage detail, they tend to require more work upfront and can run dozens of pages. A Lean business plan is less common and focuses on summarizing critical points for each section. These plans take much less work and typically run one page in length.
In general, you should use a traditional model for a legacy company, a large company, or any business that does not adhere to Lean (or another Agile method ). Use Lean if you expect the company to pivot quickly or if you already employ a Lean strategy with other business operations. Additionally, a Lean business plan can suffice if the document is for internal use only. Stick to a traditional version for investors, as they may be more sensitive to sudden changes or a high degree of built-in flexibility in the plan.
How to Write a Business Plan Step by Step
Writing a strong business plan requires research and attention to detail for each section. Below, you’ll find a 10-step guide to researching and defining each element in the plan.
Step 1: Executive Summary
The executive summary will always be the first section of your business plan. The goal is to answer the following questions:
- What is the vision and mission of the company?
- What are the company’s short- and long-term goals?
See our roundup of executive summary examples and templates for samples. Read our executive summary guide to learn more about writing one.
Step 2: Description of Business
The goal of this section is to define the realm, scope, and intent of your venture. To do so, answer the following questions as clearly and concisely as possible:
- What business are we in?
- What does our business do?
Step 3: Market Analysis
In this section, provide evidence that you have surveyed and understand the current marketplace, and that your product or service satisfies a niche in the market. To do so, answer these questions:
- Who is our customer?
- What does that customer value?
Step 4: Competitive Analysis
In many cases, a business plan proposes not a brand-new (or even market-disrupting) venture, but a more competitive version — whether via features, pricing, integrations, etc. — than what is currently available. In this section, answer the following questions to show that your product or service stands to outpace competitors:
- Who is the competition?
- What do they do best?
- What is our unique value proposition?
Step 5: Description of Organizational Management
In this section, write an overview of the team members and other key personnel who are integral to success. List roles and responsibilities, and if possible, note the hierarchy or team structure.
Step 6: Description of Products or Services
In this section, clearly define your product or service, as well as all the effort and resources that go into producing it. The strength of your product largely defines the success of your business, so it’s imperative that you take time to test and refine the product before launching into marketing, sales, or funding details.
Questions to answer in this section are as follows:
- What is the product or service?
- How do we produce it, and what resources are necessary for production?
Step 7: Marketing Plan
In this section, define the marketing strategy for your product or service. This doesn’t need to be as fleshed out as a full marketing plan , but it should answer basic questions, such as the following:
- Who is the target market (if different from existing customer base)?
- What channels will you use to reach your target market?
- What resources does your marketing strategy require, and do you have access to them?
- If possible, do you have a rough estimate of timeline and budget?
- How will you measure success?
Step 8: Sales Plan
Write an overview of the sales strategy, including the priorities of each cycle, steps to achieve these goals, and metrics for success. For the purposes of a business plan, this section does not need to be a comprehensive, in-depth sales plan , but can simply outline the high-level objectives and strategies of your sales efforts.
Start by answering the following questions:
- What is the sales strategy?
- What are the tools and tactics you will use to achieve your goals?
- What are the potential obstacles, and how will you overcome them?
- What is the timeline for sales and turning a profit?
- What are the metrics of success?
Step 9: Funding Details (or Request for Funding)
This section is one of the most critical parts of your business plan, particularly if you are sharing it with investors. You do not need to provide a full financial plan, but you should be able to answer the following questions:
- How much capital do you currently have? How much capital do you need?
- How will you grow the team (onboarding, team structure, training and development)?
- What are your physical needs and constraints (space, equipment, etc.)?
Step 10: Financial Projections
Apart from the fundraising analysis, investors like to see thought-out financial projections for the future. As discussed earlier, depending on the scope and stage of your business, this could be anywhere from one to five years.
While these projections won’t be exact — and will need to be somewhat flexible — you should be able to gauge the following:
- How and when will the company first generate a profit?
- How will the company maintain profit thereafter?
Business Plan Template
Download Business Plan Template
Microsoft Excel | Smartsheet
This basic business plan template has space for all the traditional elements: an executive summary, product or service details, target audience, marketing and sales strategies, etc. In the finances sections, input your baseline numbers, and the template will automatically calculate projections for sales forecasting, financial statements, and more.
For templates tailored to more specific needs, visit this business plan template roundup or download a fill-in-the-blank business plan template to make things easy.
If you are looking for a particular template by file type, visit our pages dedicated exclusively to Microsoft Excel , Microsoft Word , and Adobe PDF business plan templates.
How to Write a Simple Business Plan
A simple business plan is a streamlined, lightweight version of the large, traditional model. As opposed to a one-page business plan , which communicates high-level information for quick overviews (such as a stakeholder presentation), a simple business plan can exceed one page.
Below are the steps for creating a generic simple business plan, which are reflected in the template below .
- Write the Executive Summary This section is the same as in the traditional business plan — simply offer an overview of what’s in the business plan, the prospect or core offering, and the short- and long-term goals of the company.
- Add a Company Overview Document the larger company mission and vision.
- Provide the Problem and Solution In straightforward terms, define the problem you are attempting to solve with your product or service and how your company will attempt to do it. Think of this section as the gap in the market you are attempting to close.
- Identify the Target Market Who is your company (and its products or services) attempting to reach? If possible, briefly define your buyer personas .
- Write About the Competition In this section, demonstrate your knowledge of the market by listing the current competitors and outlining your competitive advantage.
- Describe Your Product or Service Offerings Get down to brass tacks and define your product or service. What exactly are you selling?
- Outline Your Marketing Tactics Without getting into too much detail, describe your planned marketing initiatives.
- Add a Timeline and the Metrics You Will Use to Measure Success Offer a rough timeline, including milestones and key performance indicators (KPIs) that you will use to measure your progress.
- Include Your Financial Forecasts Write an overview of your financial plan that demonstrates you have done your research and adequate modeling. You can also list key assumptions that go into this forecasting.
- Identify Your Financing Needs This section is where you will make your funding request. Based on everything in the business plan, list your proposed sources of funding, as well as how you will use it.
Simple Business Plan Template
Download Simple Business Plan Template
Microsoft Excel | Microsoft Word | Adobe PDF | Smartsheet
Use this simple business plan template to outline each aspect of your organization, including information about financing and opportunities to seek out further funding. This template is completely customizable to fit the needs of any business, whether it’s a startup or large company.
Read our article offering free simple business plan templates or free 30-60-90-day business plan templates to find more tailored options. You can also explore our collection of one page business templates .
How to Write a Business Plan for a Lean Startup
A Lean startup business plan is a more Agile approach to a traditional version. The plan focuses more on activities, processes, and relationships (and maintains flexibility in all aspects), rather than on concrete deliverables and timelines.
While there is some overlap between a traditional and a Lean business plan, you can write a Lean plan by following the steps below:
- Add Your Value Proposition Take a streamlined approach to describing your product or service. What is the unique value your startup aims to deliver to customers? Make sure the team is aligned on the core offering and that you can state it in clear, simple language.
- List Your Key Partners List any other businesses you will work with to realize your vision, including external vendors, suppliers, and partners. This section demonstrates that you have thoughtfully considered the resources you can provide internally, identified areas for external assistance, and conducted research to find alternatives.
- Note the Key Activities Describe the key activities of your business, including sourcing, production, marketing, distribution channels, and customer relationships.
- Include Your Key Resources List the critical resources — including personnel, equipment, space, and intellectual property — that will enable you to deliver your unique value.
- Identify Your Customer Relationships and Channels In this section, document how you will reach and build relationships with customers. Provide a high-level map of the customer experience from start to finish, including the spaces in which you will interact with the customer (online, retail, etc.).
- Detail Your Marketing Channels Describe the marketing methods and communication platforms you will use to identify and nurture your relationships with customers. These could be email, advertising, social media, etc.
- Explain the Cost Structure This section is especially necessary in the early stages of a business. Will you prioritize maximizing value or keeping costs low? List the foundational startup costs and how you will move toward profit over time.
- Share Your Revenue Streams Over time, how will the company make money? Include both the direct product or service purchase, as well as secondary sources of revenue, such as subscriptions, selling advertising space, fundraising, etc.
Lean Business Plan Template for Startups
Download Lean Business Plan Template for Startups
Microsoft Word | Adobe PDF
Startup leaders can use this Lean business plan template to relay the most critical information from a traditional plan. You’ll find all the sections listed above, including spaces for industry and product overviews, cost structure and sources of revenue, and key metrics, and a timeline. The template is completely customizable, so you can edit it to suit the objectives of your Lean startups.
See our wide variety of startup business plan templates for more options.
How to Write a Business Plan for a Loan
A business plan for a loan, often called a loan proposal , includes many of the same aspects of a traditional business plan, as well as additional financial documents, such as a credit history, a loan request, and a loan repayment plan.
In addition, you may be asked to include personal and business financial statements, a form of collateral, and equity investment information.
Download free financial templates to support your business plan.
Tips for Writing a Business Plan
Outside of including all the key details in your business plan, you have several options to elevate the document for the highest chance of winning funding and other resources. Follow these tips from experts:.
- Keep It Simple: Avner Brodsky , the Co-Founder and CEO of Lezgo Limited, an online marketing company, uses the acronym KISS (keep it short and simple) as a variation on this idea. “The business plan is not a college thesis,” he says. “Just focus on providing the essential information.”
- Do Adequate Research: Michael Dean, the Co-Founder of Pool Research , encourages business leaders to “invest time in research, both internal and external (market, finance, legal etc.). Avoid being overly ambitious or presumptive. Instead, keep everything objective, balanced, and accurate.” Your plan needs to stand on its own, and you must have the data to back up any claims or forecasting you make. As Brodsky explains, “Your business needs to be grounded on the realities of the market in your chosen location. Get the most recent data from authoritative sources so that the figures are vetted by experts and are reliable.”
- Set Clear Goals: Make sure your plan includes clear, time-based goals. “Short-term goals are key to momentum growth and are especially important to identify for new businesses,” advises Dean.
- Know (and Address) Your Weaknesses: “This awareness sets you up to overcome your weak points much quicker than waiting for them to arise,” shares Dean. Brodsky recommends performing a full SWOT analysis to identify your weaknesses, too. “Your business will fare better with self-knowledge, which will help you better define the mission of your business, as well as the strategies you will choose to achieve your objectives,” he adds.
- Seek Peer or Mentor Review: “Ask for feedback on your drafts and for areas to improve,” advises Brodsky. “When your mind is filled with dreams for your business, sometimes it is an outsider who can tell you what you’re missing and will save your business from being a product of whimsy.”
Outside of these more practical tips, the language you use is also important and may make or break your business plan.
Shaun Heng, VP of Operations at Coin Market Cap , gives the following advice on the writing, “Your business plan is your sales pitch to an investor. And as with any sales pitch, you need to strike the right tone and hit a few emotional chords. This is a little tricky in a business plan, because you also need to be formal and matter-of-fact. But you can still impress by weaving in descriptive language and saying things in a more elegant way.
“A great way to do this is by expanding your vocabulary, avoiding word repetition, and using business language. Instead of saying that something ‘will bring in as many customers as possible,’ try saying ‘will garner the largest possible market segment.’ Elevate your writing with precise descriptive words and you'll impress even the busiest investor.”
Additionally, Dean recommends that you “stay consistent and concise by keeping your tone and style steady throughout, and your language clear and precise. Include only what is 100 percent necessary.”
Resources for Writing a Business Plan
While a template provides a great outline of what to include in a business plan, a live document or more robust program can provide additional functionality, visibility, and real-time updates. The U.S. Small Business Association also curates resources for writing a business plan.
Additionally, you can use business plan software to house data, attach documentation, and share information with stakeholders. Popular options include LivePlan, Enloop, BizPlanner, PlanGuru, and iPlanner.
How a Business Plan Helps to Grow Your Business
A business plan — both the exercise of creating one and the document — can grow your business by helping you to refine your product, target audience, sales plan, identify opportunities, secure funding, and build new partnerships.
Outside of these immediate returns, writing a business plan is a useful exercise in that it forces you to research the market, which prompts you to forge your unique value proposition and identify ways to beat the competition. Doing so will also help you build (and keep you accountable to) attainable financial and product milestones. And down the line, it will serve as a welcome guide as hurdles inevitably arise.
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How to write a business plan in seven simple steps
When written effectively, a business plan can help raise capital, inform decisions, and draw new talent.
Companies of all sizes have one thing in common: They all began as small businesses. Starting small is the corner for those just getting off the ground. Learn about how to make that first hire, deal with all things administrative, and set yourself up for success.
Writing a business plan is often the first step in transforming your business from an idea into something tangible . As you write, your thoughts begin to solidify into strategy, and a path forward starts to emerge. But a business plan is not only the realm of startups; established companies can also benefit from revisiting and rewriting theirs. In any case, the formal documentation can provide the clarity needed to motivate staff , woo investors, or inform future decisions.
No matter your industry or the size of your team, the task of writing a business plan—a document filled with so much detail and documentation—can feel daunting. Don’t let that stop you, however; there are easy steps to getting started.
What is a business plan and why does it matter?
A business plan is a formal document outlining the goals, direction, finances, team, and future planning of your business. It can be geared toward investors, in a bid to raise capital, or used as an internal document to align teams and provide direction. It typically includes extensive market research, competitor analysis, financial documentation, and an overview of your business and marketing strategy. When written effectively, a business plan can help prescribe action and keep business owners on track to meeting business goals.
Who needs a business plan?
A business plan can be particularly helpful during a company’s initial growth and serve as a guiding force amid the uncertainty, distractions, and at-times rapid developments involved in starting a business . For enterprise companies, a business plan should be a living, breathing document that guides decision-making and facilitates intentional growth.
“You should have a game plan for every major commitment you’ll have, from early-stage founder agreements to onboarding legal professionals,” says Colin Keogh, CEO of the Rapid Foundation—a company that brings technology and training to communities in need—and a WeWork Labs mentor in the UK . “You can’t go out on funding rounds or take part in accelerators without any planning.”
How to make a business plan and seven components every plan needs
While there is no set format for writing a business plan, there are several elements that are typically included. Here’s what’s important to consider when writing your business plan.
1. Executive summary
No longer than half a page, the executive summary should briefly introduce your business and describe the purpose of the business plan. Are you writing the plan to attract capital? If so, specify how much money you hope to raise, and how you’re going to repay the loan. If you’re writing the plan to align your team and provide direction, explain at a high level what you hope to achieve with this alignment, as well as the size and state of your existing team.
The executive summary should explain what your business does, and provide an introductory overview of your financial health and major achievements to date.
2. Company description
To properly introduce your company, it’s important to also describe the wider industry. What is the financial worth of your market? Are there market trends that will affect the success of your company? What is the state of the industry and its future potential? Use data to support your claims and be sure to include the full gamut of information—both positive and negative—to provide investors and your employees a complete and accurate portrayal of your company’s milieu.
Go on to describe your company and what it provides your customers. Are you a sole proprietor , LLC, partnership, or corporation? Are you an established company or a budding startup? What does your leadership team look like and how many employees do you have? This section should provide both historical and future context around your business, including its founding story, mission statement , and vision for the future.
It’s essential to showcase your point of difference in your company description, as well as any advantages you may have in terms of expert talent or leading technology. This is typically one of the first pieces of the plan to be written.
3. Market analysis and opportunity
Research is key in completing a business plan and, ideally, more time should be spent on research and analysis than writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent to the wider market is essential for the success of your business, and these considerations should be described here.
In addition to this, it’s important to include research into the target demographic of your product or service. This might be in the form of fictional customer personas, or a broader overview of the income, location, age, gender, and buying habits of your existing and potential customers.
Though the research should be objective, the analysis in this section is a good place to reiterate your point of difference and the ways you plan to capture the market and surpass your competition.
4. Competitive analysis
Beyond explaining the elements that differentiate you from your competition, it’s important to provide an in-depth analysis of your competitors themselves.
This research should delve into the operations, financials, history, leadership, and distribution channels of your direct and indirect competitors. It should explore the value propositions of these competitors, and explain the ways you can compete with, or exploit, their strengths and weaknesses.
5. Execution plan: operations, development, management
This segment provides details around how you’re going to do the work necessary to fulfill this plan. It should include information about your organizational structure and the everyday operations of your team, contractors, and physical and digital assets.
Consider including your company’s organizational chart, as well as more in-depth information on the leadership team: Who are they? What are their backgrounds? What do they bring to the table? Potentially include the résumés of key people on your team.
For startups, your execution plan should include how long it will take to begin operations, and then how much longer to reach profitability. For established companies, it’s a good idea to outline how long it will take to execute your plan, and the ways in which you will change existing operations.
If applicable, it’s also beneficial to include your strategy for hiring new team members and scaling into different markets.
6. Marketing plan
It’s essential to have a comprehensive marketing plan in place as you scale operations or kick off a new strategy—and this should be shared with your stakeholders and employees. This segment of your business plan should show how you’re going to promote your business, attract customers, and retain existing clients.
Include brand messaging, marketing assets, and the timeline and budget for engaging consumers across different channels. Potentially include a marketing SWOT analysis into your strengths, weaknesses, opportunities, and threats. Evaluate the way your competitors market themselves, and how your target audience responds—or doesn’t respond—to these messages.
7. Financial history and projections
It’s essential to disclose all finances involved in running your company within your business plan. This is so your shareholders properly understand how you’re projected to perform going forward, and the progress you’ve made so far.
You should include your income statement, which outlines annual net profits or losses; a cash flow statement, which shows how much money you need to launch or scale operations; and a balance sheet that shows financial liabilities and assets.
“An income statement is the measure of your financial results for a certain period and the most accurate report of business activities during that time, [whereas a balance sheet] presents your assets, liabilities, and equity,” Amit Perry, a corporate finance expert, explained at a WeWork Labs educational session in Israel.
It’s crucial to understand the terms correctly so you know how to present your finances when you’re speaking to investors. Amit Perry, CEO and founder of Perryllion Ltd.
In addition, if you’re asking for funding, you will need to outline exactly how much money you need as well as where this money will go and how you plan to pay it back.
12 quick tips for writing a business plan
Now that you know what components are traditionally included in a business plan, it’s time to consider how you’ll actually construct the document.
Here are 12 key factors to keep in mind when writing a business plan. These overarching principles will help you write a business plan that serves its purpose (whatever that may be) and becomes an easy reference in the years ahead.
1. Don’t be long-winded
Use clear, concise language and avoid jargon. When business plans are too long-winded, they’re less likely to be used as intended and more likely to be forgotten or glazed over by stakeholders.
2. Show why you care
Let your passion for your business shine through; show employees and investors why you care (and why they should too).
3. Provide supporting documents
Don’t be afraid to have an extensive list of appendices, including the CVs of team members, built-out customer personas, product demonstrations, and examples of internal or external messaging.
4. Reference data
All information regarding the market, your competitors, and your customers should reference authoritative and relevant data points.
5. Research, research, research
The research that goes into your business plan should take you longer than the writing itself. Consider tracking your research as supporting documentation.
6. Clearly demonstrate your points of difference
At every opportunity, it’s important to drive home the way your product or service differentiates you from your competition and helps solve a problem for your target audience. Don’t shy away from reiterating these differentiating factors throughout the plan.
7. Be objective in your research
As important as it is to showcase your company and the benefits you provide your customers, it’s also important to be objective in the data and research you reference. Showcase the good and the bad when it comes to market research and your financials; you want your shareholders to know you’ve thought through every possible contingency.
8. Know the purpose of your plan
It’s important you understand the purpose of your plan before you begin researching and writing. Be clear about whether you’re writing this plan to attract investment, align teams, or provide direction.
9. Identify your audience
The same way your business plan must have a clearly defined purpose, you must have a clearly defined audience. To whom are you writing? New investors? Current employees? Potential collaborators? Existing shareholders?
10. Avoid jargon
Avoid using industry-specific jargon, unless completely unavoidable, and try making your business plan as easy to understand as possible—for all potential stakeholders.
11. Don’t be afraid to change it
Your business plan should evolve with your company’s growth, which means your business plan document should evolve as well. Revisit and rework your business plan as needed, and remember the most important factor: having a plan in place, even if it changes.
A business plan shouldn’t just be a line on your to-do list; it should be referenced and used as intended going forward. Keep your business plan close, and use it to inform decisions and guide your team in the years ahead.
Creating a business plan is an important step in growing your company
Whether you’re just starting out or running an existing operation, writing an effective business plan can be a key predictor of future success. It can be a foundational document from which you grow and thrive . It can serve as a constant reminder to employees and clients about what you stand for, and the direction in which you’re moving. Or, it can prove to investors that your business, team, and vision are worth their investment.
No matter the size or stage of your business, WeWork can help you fulfill the objectives outlined in your business plan—and WeWork’s coworking spaces can be a hotbed for finding talent and investors, too. The benefits of coworking spaces include intentionally designed lounges, conference rooms, and private offices that foster connection and bolster creativity, while a global network of professionals allows you to expand your reach and meet new collaborators.
Using these steps to write a business plan will put you in good stead to not only create a document that fulfills a purpose but one that also helps to more clearly understand your market, competition, point of difference, and plan for the future.
For more tips on growing teams and building a business, check out all our articles on Ideas by WeWork.
Caitlin Bishop is a writer for WeWork’s Ideas by WeWork , based in New York City. Previously, she was a journalist and editor at Mamamia in Sydney, Australia, and a contributing reporter at Gotham Gazette .
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How to Start a Business: A Comprehensive Guide and Essential Steps
Building an effective business launch plan
Starting a business in the United States involves a number of different steps, spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also entails decisions around a business’s location, structure, name, taxation, and registration.
This article covers the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.
- Entrepreneurs seeking to develop their own business should start by conducting market research to understand their industry space and competition, and to target customers.
- The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy. Potential funders and partners may want to review the business plan in advance of signing any agreements.
- Securing funding is crucial in launching a business. Funding can come in the form of grants, loans, venture capital, or crowdfunded money; entrepreneurs may also opt to self-fund instead of or in combination with any of these avenues.
- Choosing a location and business structure can have many implications for legal aspects of business ownership, such as taxation, registration, and permitting, so it’s important to fully understand the regulations and requirements for the jurisdiction in which the business will operate.
- Another key aspect of launching a new business is having a strategic marketing plan that addresses the specifics of the business, industry, and target market.
Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends.
The U.S. Small Business Administration (SBA) recommends researching demographic data around potential customers to understand a given consumer base and reduce business risk. It also breaks down common market considerations as follows:
- Demand : Do people want or need this product or service?
- Market size : How many people might be interested?
- Economic indicators : These include income, employment rate, and spending habits of potential customers.
- Location : Where are the target market and the business located?
- Market saturation : How competitive is the business space, and how many similar offerings exist?
- Pricing : What might a customer be willing to pay?
Market research should also include an analysis of the competition (including their strengths and weaknesses compared to those of the proposed business), market opportunities and barriers to entry, industry trends, and competitors’ market share .
There are various methods for conducting market research, and the usefulness of different sources and methodologies will depend on the nature of the industry and potential business. Data can come from a variety of sources: statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, or questionnaires.
A comprehensive business plan is like a blueprint for a business. It will help lay the foundation for business development and can assist in decision making, day-to-day operations, and growth.
Potential investors or business partners may want to review and assess a business plan in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital.
Business plans will differ according to the needs and nature of the company and only need to include what makes sense for the business in question. As such, they can vary in length and structure depending on their intended purpose.
Business plans can generally be divided into two formats: traditional business plans and lean startup business plans. The latter is typically more useful for businesses that will need to adjust their planning quickly and frequently, as they are shorter and provide a higher-level overview of the company.
The process of funding a business can be as unique as the business itself—that is, it will depend on the needs and vision of the business and the current financial situation of the business owner.
The first step in seeking funding is to calculate how much it will cost to start the business. Estimate startup costs by identifying a list of expenses and putting a number to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses.
From there, an entrepreneur will need to determine how to secure the required funding. Common funding methods include:
- Self-funding , also known as bootstrapping
- Seeking funding from investors, also known as venture capital
- Raising money by crowdfunding
- Securing a business loan
- Winning a business grant
Each method will hold advantages and disadvantages depending on the situation of the business. It’s important to consider the obligations associated with any avenue of funding. For example, investors generally provide funding in exchange for a degree of ownership or control in the company, whereas self-funding may allow business owners to maintain complete control (albeit while taking on all of the risk).
The availability of funding sources is another potential consideration. Unlike loans, grants do not have to be paid back—however, as a result, they are a highly competitive form of business funding. The federal government also does not provide grants for the purposes of starting or growing a business, although private organizations may. On the other hand, the SBA guarantees several categories of loans to support small business owners in accessing capital that may not be available through traditional lenders.
Whichever funding method (or methods) an entrepreneur decides to pursue, it’s essential to evaluate in detail how the funding will be used and lay out a future financial plan for the business, including sales projections and loan repayments , as applicable.
Legally, businesses operating in the U.S. are subject to regulations and requirements under many jurisdictions, across local, county, state, and federal levels. Legal business requirements are often tied to the location and structure of the business, which then determine obligations around taxation, business IDs, registration, and permits.
Choosing a Business Location
The location—that is, the neighborhood, city, and state—in which a business operates will have an impact on many different aspects of running the business, such as the applicable taxes, zoning laws (for brick-and-mortar, or physical locations), and regulations.
A business needs to be registered in a certain location; this location then determines the taxes, licenses, and permits required. Other factors to consider when choosing a location might include:
- Human factors : Such as the target audience for your business, and preferences of business owners and partners around convenience, knowledge of the area, and commuting distance
- Regulations and restrictions : Concerning applicable jurisdictions or government agencies, including zoning laws
- Regionally specific expenses : Such as average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing
- The tax and financial environment : Including income tax, sales tax, corporate tax, and property tax, or the availability of tax credits, incentives, or loan programs
Picking a Business Structure
The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications, it’s important to fully understand and choose a business structure carefully and, if necessary, consult a business counselor, lawyer, and/or accountant.
Common business structures include:
- Sole proprietorship : An unincorporated business that has just one owner, who pays personal income tax on profits
- Partnership : Options include a limited partnership (LP) or a limited liability partnership (LLP)
- Limited liability company (LLC) : A business structure that protects its owners from personal responsibility for its debts or liabilities
- Corporation : Options include a C corp , S corp , B corp , closed corporation , or nonprofit
Getting a Tax ID Number
A tax ID number is like a Social Security number for a business. Whether or not a state and/or federal tax ID number is required for any given business will depend on the nature of the business, as well as the location in which the business is registered.
If a business is required to pay state taxes (such as income taxes and employment taxes), then a state tax ID will be necessary. The process and requirements around state tax IDs vary by state and can be found on individual states’ official websites. In some situations, state tax IDs can also be used for other purposes, such as protecting sole proprietors against identity theft.
A federal tax ID, also known as an employer identification number (EIN) , is required if a business:
- Operates as a corporation or partnership
- Pays federal taxes
- Wants to open a business bank account
- Applies for federal business licenses and permits
- Files employment, excise, alcohol, tobacco, or firearms tax returns
There are further situations in which a business might need a federal tax ID number, specific to income taxation, certain types of pension plans, and working with certain types of organizations. Business owners can check with the Internal Revenue Service (IRS) about whether they need an EIN.
Registering a Business
Registration of a business will depend on its location and business structure, and can look quite different depending on the nature and size of the business.
For example, small businesses may not require any steps beyond registering their business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all. However, registration can include personal liability protection as well as legal and tax benefits, so it can be beneficial even if it’s not strictly required.
Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will require a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:
- Whether the business has a physical presence in the state
- If the business often conducts in-person client meetings in the state
- If a large portion of business revenue comes from the state
- Whether the business has employees working in the state
If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state), and file for foreign qualification in any additional states.
Some businesses may decide to register with the federal government if they are seeking tax-exempt status or trademark protection, but federal registration is not required for many businesses.
Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.
Filing for the applicable government licenses and permits will depend on the industry and nature of the business, and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.
Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling.
Marketing plans will vary according to the specifics of the industry , target market, and business, but they should aim to include descriptions of and strategies around the following:
- A target customer : Including market size, demographics, traits, and relevant trends
- Unique value propositions or business differentiators : Essentially, an overview of the company’s competitive advantage with regard to employees, certifications, or offerings
- A sales and marketing plan : Including methods, channels, and a customer’s journey through interacting with the business
- Goals : Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, or sales targets
- An execution plan : Should detail tactics and break down higher-level goals into specific actions
- A budget : Detailing how much different marketing projects and activities will cost
The startup costs for any given business will vary greatly depending on the industry, business activity, and product or service offering. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.
Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.
Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for the purposes of starting a business, although private sources do.
Business plans are comprehensive documents that lay out the most important information about a business. They are important references for the growth, development, and decision-making processes of a business, and financial institutions as well as potential investors and partners generally request to review them in advance of agreeing to provide funding or work together.
Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of the target market, competition, industry, business goals, business structure, funding requirements, tax and operating regulations, and marketing strategy, and conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.
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U.S. Small Business Administration. “ Write Your Business Plan .”
U.S. Small Business Administration. “ Loans .”
U.S. Small Business Administration. “ Fund Your Business .”
U.S. Small Business Administration. “ Pick Your Business Location .”
U.S. Small Business Administration. “ Choose a Business Structure .”
U.S. Small Business Administration. “ Get Federal and State Tax ID Numbers .”
Internal Revenue Service. “ Do You Need an EIN? ”
U.S. Small Business Administration. “ Register Your Business .”
U.S. Small Business Administration. “ Apply for Licenses and Permits .”
U.S. Small Business Administration. “ Marketing and Sales .”
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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.
In our Startup2021 series, we're helping aspiring entrepreneurs navigate the new business climate of the COVID-19 era. Each week, we'll share an in-depth look at one step you can to take toward launching your business in 2021.
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.
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.
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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The Business Planning Process: 6 Steps To Creating a New Plan
In this article, we will define and explain the basic business planning process to help your business move in the right direction.
What is Business Planning?
Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.
The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.
The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.
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The Better Business Planning Process
The business plan process includes 6 steps as follows:
- Do Your Research
- Calculate Your Financial Forecast
- Draft Your Plan
- Revise & Proofread
- Nail the Business Plan Presentation
We’ve provided more detail for each of these key business plan steps below.
1. Do Your Research
Conduct detailed research into the industry, target market, existing customer base, competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:
- What are your business goals?
- What is the current state of your business?
- What are the current industry trends?
- What is your competition doing?
There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.
You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.
Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.
This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.
3. Calculate Your Financial Forecast
All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.
Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.
A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.
This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.
4. Draft Your Plan
With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.
If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.
5. Revise & Proofread
Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.
Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.
6. Nail the Business Plan Presentation
The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.
Business Planning Process Conclusion
Every entrepreneur dreams of the day their business becomes wildly successful.
But what does that really mean? How do you know whether your idea is worth pursuing?
And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way.
Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.
Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.
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How to Start a Business
Ready to start your business don’t know where to start with this guide, you’ll go from a simple idea to a growing business in 12 easy steps..
1. What to do before starting a business
Why are you starting a business? What does it take to be successful? Could you start with a side hustle? Let’s help you answer these and other vital questions before setting up your business.
In this section
2. Find the right business idea
Once you know why you want to start a business, it’s time to find and develop your idea. Learn what it takes to develop a good idea and explore our curated lists of potential business ideas that may be a good fit.
3. Validate your business idea
How do you know if your business idea will work? By testing it out and verifying that you’re solving a real problem for real people. Here’s what you should do after coming up with your business idea.
4. Conduct market research
Who are your customers? Who are your competitors? What does the industry look like? Will you be able to successfully enter this market? These are necessary questions to answer with a bit of research.
5. Select your business model
How will you make money? This is answered with your business model, which covers how your costs, revenue streams, and customer expectations work together. And you don’t have to start from scratch—check out these common types of business models.
6. Price your products and services
What are your customers willing to pay? It’s difficult to know when starting out, but don’t let that stop you. Learn how to set initial prices and compare common pricing models that may work for your business.
7. Write your business plan
You need a business plan before starting a business. This isn’t about checking a box but improving your understanding of what it takes to run a successful business. Check out our Business Planning Guide for everything you need to write a great business plan.
8. Make your business legal
Before setting up shop, you must check all the necessary legal boxes. Don’t worry about spending hours researching—we’ve compiled the most common legal requirements.
9. Set up your finances
You need a firm grasp of your startup costs and funding needs. Which requires you to forecast your sales, expenses, and cash flow. That may sound daunting, but we’ve broken it down into steps to follow and even cover setting up accounting and payroll systems.
10. Choose a business location
Will you be selling online? Running a traditional brick-and-mortar location? Maybe a bit of both? You need to consider where and how you’ll sell your products. Let’s explore what to look for in a physical retail location and how to make a splash online.
11. Put your team together
Learn to identify the right time to hire, what makes a good employee, and how to successfully grow your team.
12. Market your business
Learn the basics of creating a small business marketing plan, including what to prepare beforehand and how to track the impact of your marketing efforts.
How to start a nonprofit
Nonprofits are designed to pursue a mission, not generate profits. That doesn’t mean you can skip traditional startup steps—in fact, it may be even more crucial to your survival.
How to start a home-based business
Home-based businesses can provide a quicker startup path, greater flexibility, and lower costs. Learn how to take advantage of these benefits and establish a successful business.
How to start a franchise
Franchising is a great way to launch a business without having to start from scratch. Get to know the nuances of this business type and find out if it’s a better fit for you.
Tips to start your business
Looking for additional guidance to help get your business off the ground? We’ve rounded up our favorite tips and resources from entrepreneurial experts to do just that.
Industry startup guides
Interested in learning more about starting a specific type of business? Check out our growing list of industry startup guides for more detailed insights.
Resources and templates for starting a business
Business startup checklist
Try this simple checklist for an easy way to track your progress when starting a business.
Business idea validation checklist
Want to find out if your business idea is a winner? Work through this checklist to test it.
Business plan template
Make writing a business plan easy and improve your chances of success with this fill-in-the-blank template.
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Quickly consider every aspect of your business, build your business plan, and create accurate financial reports that help you start and grow.
Starting a business FAQ
What are the basic steps to start a business?
To start a business, you’ll need to—identify and validate your business idea, conduct market research, select a business model and pricing strategy, write a business plan and financial plan, select your business structure, register your business and obtain licenses and permits, select an online or physical location, start building your team if necessary, and promote your business through marketing and advertising.
How much money do you usually need to start a business?
The amount of money needed to start a business varies greatly depending on the type and scale of the business. It could range from a few hundred dollars for a home-based service business to several thousand or even millions for a manufacturing or tech startup. You must carefully consider and forecast your startup costs and cash flow to fully understand how much money you need to start.
What should I do first when starting a business?
The first step in starting a business is identifying a viable business idea and conducting market research to understand the demand, competition, and potential challenges. Additionally, it’s worth self-reflection to determine if you want to jump into entrepreneurship.
What do I need to start my first business?
At a minimum, you’ll need a business idea, a business plan, capital, a legal structure, a registered business name, necessary licenses and permits, a business bank account, and an accounting system.
How can I start a business with no money?
Starting a business with no money can be challenging but not impossible. You can consider service-based businesses that require minimal upfront costs. You can also minimize your upfront investment by starting your business as a side hustle while retaining a full or part-time job.
What 3 things make a business successful?
A clear and compelling value proposition, a strong understanding of the market and customers, and effective management and operations are three key elements that contribute to business success.
How can I start a simple business?
Starting a simple business often involves offering a service based on your skills or interests. This could be anything from pet sitting to graphic design. The key steps include identifying your service, understanding your market, setting prices, and promoting your business.
How do I start a beginner business?
As a beginner, start with a business idea that aligns with your skills and passions. Conduct market research, write a one-page business plan, and test if your idea resonates with your target customers. Start small, learn from the experience, and gradually grow your business.
How to start a business with only $100?
With only $100, consider a service-based or online business that requires minimal startup costs. This could be a consulting service, online tutoring, freelance writing, or selling handmade products. Use social media and free online tools for marketing and management to keep costs low.
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How to Develop a Business Strategy: 6 Steps
- 25 Oct 2022
Business strategy can seem daunting, and for good reason: It can make or break an organization. Yet, developing a strong strategy doesn’t need to be overwhelming.
In the online course Business Strategy , Harvard Business School Professor Felix Oberholzer-Gee posits that strategy is simple. His secret? Focus on your organization’s value creation.
“Strategy often sounds like a lofty concept that only the most senior executives can develop,” Oberholzer-Gee says. “But actually, anyone can think and act strategically. It doesn’t need to be difficult; all you need is a proven framework.”
Here’s a breakdown of why business strategy is important, the basics of value-based strategy, and six steps for developing your own.
Why Do You Need a Business Strategy?
Business strategy is the development, alignment, and integration of an organization’s strategic initiatives to give it a competitive edge in the market. Devising a business strategy can ensure you have a clear plan for reaching organizational goals and continue to survive and thrive.
According to a study by Bridges Business Consultancy , 48 percent of organizations fail to meet half of their strategic targets and 85 percent fail to meet two-thirds, highlighting why dedication to the business strategy process is crucial.
One type of business strategy is called value-based strategy, which simplifies the process by leveraging the value stick framework to focus on the advantage your business creates.
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What Is Value-Based Strategy?
Value-based strategy , also called value-based pricing, is a pricing method in which an organization relies on the perceived value of its goods and services to determine its pricing structure and resource allocation.
The value stick framework can be used to visualize how various factors impact each other and determine which initiatives to pursue to increase value for all parties.
The value stick has four factors:
- Willingness to pay (WTP) : The highest price a customer is willing to pay for your product or service
- Price : The amount customers have to pay for goods or services
- Cost : The amount a company spends on producing goods or services
- Willingness to sell (WTS) : The lowest amount suppliers are willing to accept for the materials required to produce goods or services
To determine how to best create value, you can toggle each factor on the value stick to see how the others are affected. For instance, lowering price increases customer delight.
"As strategists, we really ask three questions,” Oberholzer-Gee says in Business Strategy. “How can my business best create value for customers? How can my business create value for employees? And how can my business create value by collaborating with suppliers? Think of a company's strategy as an answer to these three questions."
Related: 4 Business Strategy Skills Every Business Leader Needs
6 Steps to Develop a Value-Based Business Strategy
1. define your purpose.
When approaching business strategy, defining your organization’s purpose can be a useful starting point.
This is vital in creating customer and employee value, especially if your organization’s purpose is linked to a cause such as environmental protection or alleviating specific social issues.
A recent survey conducted by clean energy company Swytch found that nearly 75 percent of millennials would take a decrease in salary if it meant working for an environmentally responsible company. Nearly 40 percent selected one job over another because of an organization’s sustainability practices.
Additionally, research in the Harvard Business Review shows that consumers’ motivation to buy from sustainable brands is on the rise. Sales of products marked as sustainable grew more than five times faster than those that weren’t.
By starting with purpose, your organization can create more value down the line.
2. Assess Market Opportunity
Next, understand your market’s competitive landscape. Which companies own shares of the market? What differentiates your competitors’ products from yours? Are there any unmet needs your organization could take advantage of?
Conducting this research before planning a strategy is critical in identifying how your organization provides unique customer value and opportunities to create even more.
3. Create Value for Customers
With an understanding of the market and your company’s purpose, you can determine how your organization provides unique or greater value and strategize ways to improve.
On the value stick, the value captured by customers is called “customer delight.” It can be increased by raising their willingness to pay and decreasing the product’s price. If lowering the price isn’t an option, brainstorm how you could make the product more valuable to customers, thus increasing their willingness to pay.
Some ways to create customer value include:
- Lowering the product’s price
- Increasing the product’s physical quality and longevity
- Providing quick, high-quality customer service and a smooth shopping experience
- Leveraging network effects , if applicable, to create a community of users
- Incorporating an environmental or social cause into processes, packaging, and branding
4. Create Value for Suppliers
In addition to creating value for customers, you also need to provide value for suppliers. Suppliers can include any company that provides raw materials, labor, and transportation to help your organization produce goods or deliver services.
Supplier surplus, also called supplier delight, is created when the cost of materials increases or their willingness to sell decreases. The relationship between a firm and its suppliers can be contentious, given that both want to increase their margins. Yet, there are ways to create value for both parties.
Some ways to create value for suppliers include:
- Agreeing to pay more for higher quality materials : While this increases the supplier surplus, it may also increase customer delight by raising willingness to pay, or increase the firm’s margin by allowing you to raise prices.
- Working with the supplier to increase efficiency : This strategy can increase supplier surplus by lowering the overall cost of the supplier’s labor and their willingness to sell.
5. Create Value for Employees
Creating value for employees is a critical part of an effective business strategy and can be assessed using the value stick. Think of your employees as the “supplier” of labor and the supplier margin as employee satisfaction.
Employee satisfaction can be increased by raising wages or lowering the minimum salary they’re willing to receive by delivering value in other ways. Satisfied employees may provide a better customer experience, resulting in increased customer delight.
The value you provide employees ensures they’re motivated to do their best work, develop their skills, and stay with your company long-term.
Some examples of ways to create value for your employees include:
- Offering competitive salaries and bonuses
- Offering benefits like ample paid vacation and sick days, generous parental leave, and wellness budgets
- Providing flexibility of work location, whether your team is fully remote or hybrid
- Aiding in professional development
- Creating a workplace rich with a diversity of experiences, identities, and ideas
- Fostering a supportive organizational culture
One example from Business Strategy is that of a call center for a diagnostics company. The employees were being paid minimum wage and expressed that the analytical nature of their phone calls with customers warranted higher pay. They also expressed pain points about cumbersome tasks and work conditions.
When a pay increase was implemented for all employees, along with operational changes to make processes smoother, employee productivity increased to the point that it balanced out the higher cost of salaries.
Because the employees’ satisfaction increased, they also began providing better experiences on the phone with customers. This increased the customers’ willingness to pay, directly impacting customer delight.
6. Map Strategy to Actionable Tasks and KPIs
Amidst creating value for each of the three groups, don’t forget the fourth party that needs value: your company. By creating value for employees, suppliers, and customers, you’re creating value for your firm, too.
To ensure you’re tracking to goals, determine your key performance indicators, what metrics constitute success, and how you’ll report results over time. Then, break each of the above value-creation goals into action items. For instance, what steps can you take to increase your employees’ compensation? Who will be responsible for each task?
Having actionable assignments and clear metrics for success will allow for a smooth transition from strategy formulation to execution.
Building Your Strategic Skill Set
By leveraging the value stick, you can create a business strategy that provides value to employees, customers, suppliers, and your firm.
To develop your strategies further and dig deeper into how to navigate value creation, consider taking an online course like Business Strategy . Professor Oberholzer-Gee walks through real-world examples of business challenges, prompts you to consider how you’d create value, and then reveals what those business leaders did and how you can apply the lessons to your organization.
Want to learn more about how to craft a successful strategy for your organization? Explore Business Strategy , one of our online strategy courses , to learn how to create organizational value. Not sure which course is the right fit? Download our free flowchart .
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- What is strategic planning? 5 steps and ...
What is strategic planning? 5 steps and processes
A strategic plan helps you define and share the direction your company will take in the next three to five years. It includes your company’s vision and mission statements, goals, and the actions you’ll take to achieve those goals. In this article we describe how a strategic plan compares to other project and business tools, plus four steps to create a successful strategic plan for your company.
Strategic planning is when business leaders map out their vision for the organization’s growth and how they’re going to get there. Strategic plans inform your organization’s decisions, growth, and goals. So if you work for a small company or startup, you could likely benefit from creating a strategic plan. When you have a clear sense of where your organization is going, you’re able to ensure your teams are working on projects that make the most impact.
The strategic planning process doesn’t just help you identify where you need to go—during the process, you’ll also create a document you can share with employees and stakeholders so they stay informed. In this article, we’ll walk you through how to get started developing a strategic plan.
What is a strategic plan?
A strategic plan is a tool to define your organization’s goals and what actions you will take to achieve them. Typically, a strategic plan will include your company’s vision and mission statements, your long-term goals (as well as short-term, yearly objectives), and an action plan of the steps you’re going to take to move in the right direction.
Your strategic plan document should include:
Your company’s mission statement
Your company’s goals
A plan of action to achieve those goals
Your approach to achieving your goals
The tactics you’ll use to meet your goals
An effective strategic plan can give your organization clarity and focus. This level of clarity isn’t always a given—according to our research, only 16% of knowledge workers say their company is effective at setting and communicating company goals. By investing time into strategy formulation, you can build out a three- to five-year vision for the future of your company. This strategy will then inform your yearly and quarterly company goals.
Do I need a strategic plan?
A strategic plan is one of many tools you can use to plan and hit your goals. It helps map out strategic objectives and growth metrics. Here’s how a strategic plan compares to other project management and business tools.
Strategic plan vs. business plan
A business plan can help you document your strategy as you’re getting started so every team member is on the same page about your core business priorities and goals. This tool can help you document and share your strategy with key investors or stakeholders as you get your business up and running.
You should create a business plan when you’re:
Just starting your business
Significantly restructuring your business
If your business is already established, consider creating a strategic plan instead of a business plan. Even if you’re working at a relatively young company, your strategic plan can build on your business plan to help you move in the right direction. During the strategic planning process, you’ll draw from a lot of the fundamental business elements you built early on to establish your strategy for the next three to five years.
Key takeaway: A business plan works for new businesses or large organizational overhauls. Strategic plans are better for established businesses.
Strategic plan vs. mission and vision statements
Your strategic plan, mission statement, and vision statements are all closely connected. In fact, during the strategic planning process, you will take inspiration from your mission and vision statements in order to build out your strategic plan.
As a result, you should already have your mission and vision statements drafted before you create a strategic plan. Ideally, this is something you created during the business planning phase or shortly after your company started. If you don’t have a mission or vision statement, take some time to create those now. A mission statement states your company’s purpose and it addresses what problem your organization is trying to solve. A vision statement states, in very broad strokes, how you’re going to get there.
A mission statement summarizes your company’s purpose
A vision statement broadly explains how you’ll reach your company’s purpose
A strategic plan should include your mission and vision statements, but it should also be more specific than that. Your mission and vision statements could, theoretically, remain the same throughout your company’s entire lifespan. A strategic plan pulls in inspiration from your mission and vision statements and outlines what actions you’re going to take to move in the right direction.
For example, if your company produces pet safety equipment, here’s how your mission statement, vision statement, and strategic plan might shake out:
Mission statement: “To ensure the safety of the world’s animals.”
Vision statement: “To create pet safety and tracking products that are effortless to use.”
Your strategic plan would outline the steps you’re going to take in the next few years to bring your company closer to your mission and vision. For example, you develop a new pet tracking smart collar or improve the microchipping experience for pet owners.
Key takeaway: A strategic plan draws inspiration from your mission and vision statements.
Strategic plan vs. company objectives
Company objectives are broad goals. You should set these on a yearly or quarterly basis (if your organization moves quickly). These objectives give your team a clear sense of what you intend to accomplish for a set period of time.
Your strategic plan is more forward-thinking than your company goals, and it should cover more than one year of work. Think of it this way: your company objectives will move the needle towards your overall strategy—but your strategic plan should be bigger than company objectives because it spans multiple years.
Key takeaway: Company objectives are broad, evergreen goals, while a strategic plan is a specific plan of action.
Strategic plan vs. business case
A business case is a document to help you pitch a significant investment or initiative for your company. When you create a business case, you’re outlining why this investment is a good idea, and how this large-scale project will positively impact the business.
You might end up building business cases for things on your strategic plan’s roadmap—but your strategic plan should be bigger than that. This tool should encompass multiple years of your roadmap, across your entire company—not just one initiative.
Key takeaway: A business case tackles one initiative or investment, while a strategic plan maps out years of overall growth for your company.
Strategic plan vs. project plan
A strategic plan is a company-wide, multi-year plan of what you want to accomplish in the next three to five years and how you plan to accomplish that. A project plan, on the other hand, outlines how you’re going to accomplish a specific project. This project could be one of many initiatives that contribute to a specific company objective which, in turn, is one of many objectives that contribute to your strategic plan.
A project plan has seven parts:
Stakeholders and roles
Scope and budget
Milestones and deliverables
Timeline and schedule
Key takeaway: You may build project plans to map out parts of your strategic plan.
When should I create a strategic plan?
You should aim to create a strategic plan every three to five years, depending on your organization’s growth speed. That being said, if your organization moves quickly, consider creating one every two to three years instead. Small businesses may need to create strategic plans more often, as their needs change.
Since the point of a strategic plan is to map out your long-term goals and how you’ll get there, you should create a strategic plan when you’ve met most or all of them. You should also create a strategic plan any time you’re going to make a large pivot in your organization’s mission or enter new markets.
What are the 5 steps in strategic planning?
The strategic planning process should be run by a small team of key stakeholders who will be in charge of building your strategic plan.
Your group of strategic planners, sometimes called the management committee, should be a small team of five to 10 key stakeholders and decision-makers for the company. They won’t be the only people involved—but they will be the people driving the work.
Once you’ve established your management committee, you can get to work on the strategic planning process.
Step 1: Determine where you are
Before you can get started with strategy development and define where you’re going, you first need to define where you are. To do this, your management committee should collect a variety of information from additional stakeholders—like employees and customers. In particular, plan to gather:
Relevant industry and market data to inform any market opportunities, as well as any potential upcoming threats in the near future
Customer insights to understand what your customers want from your company—like product improvements or additional services
Employee feedback that needs to be addressed—whether in the product, business practices, or company culture
A SWOT analysis to help you assess both current and future potential for the business (you’ll return to this analysis periodically during the strategic planning process).
To fill out each letter in the SWOT acronym, your management committee will answer a series of questions:
What does your organization currently do well?
What separates you from your competitors?
What are your most valuable internal resources?
What tangible assets do you have?
What is your biggest strength?
What does your organization do poorly?
What do you currently lack (whether that’s a product, resource, or process)?
What do your competitors do better than you?
What, if any, limitations are holding your organization back?
What processes or products need improvement?
What opportunities does your organization have?
How can you leverage your unique company strengths?
Are there any trends that you can take advantage of?
How can you capitalize on marketing or press opportunities?
Is there an emerging need for your product or service?
What emerging competitors should you keep an eye on?
Are there any weaknesses that expose your organization to risk?
Have you or could you experience negative press that could reduce market share?
Is there a chance of changing customer attitudes towards your company?
Step 2: Identify your goals and objectives
This is where the magic happens. To develop your strategy, take into account your current position, which is where you are now. Then, draw inspiration from your original business documents—these are your final destination.
To develop your strategy, you’re essentially pulling out your compass and asking, “Where are we going next?” This can help you figure out exactly which path you need to take.
During this phase of the planning process, take inspiration from important company documents to ensure your strategic plan is moving your company in the right direction like:
Your mission statement, to understand how you can continue moving towards your organization’s core purpose
Your vision statement, to clarify how your strategic plan fits into your long-term vision
Your company values, to guide you towards what matters most towards your company
Your competitive advantages, to understand what unique benefit you offer to the market
Your long-term goals, to track where you want to be in five or 10 years
Your financial forecast and projection, to understand where you expect your financials to be in the next three years, what your expected cash flow is, and what new opportunities you will likely be able to invest in
Step 3: Develop your plan
Now that you understand where you are and where you want to go, it’s time to put pen to paper. Your plan will take your position and strategy into account to define your organization-wide plan for the next three to five years. Keep in mind that even though you’re creating a long-term plan, parts of your strategic plan should be created as the quarters and years go on.
As you build your strategic plan, you should define:
Your company priorities for the next three to five years, based on your SWOT analysis and strategy.
Yearly objectives for the first year. You don’t need to define your objectives for every year of the strategic plan. As the years go on, create new yearly objectives that connect back to your overall strategic goals .
Related key results and KPIs for that first year. Some of these should be set by the management committee, and some should be set by specific teams that are closer to the work. Make sure your key results and KPIs are measurable and actionable.
Budget for the next year or few years. This should be based on your financial forecast as well as your direction. Do you need to spend aggressively to develop your product? Build your team? Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for those.
A high-level project roadmap . A project roadmap is a tool in project management that helps you visualize the timeline of a complex initiative, but you can also create a very high-level project roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or years to make the plan more actionable and understandable.
Step 4: Execute your plan
After all that buildup, it’s time to put your plan into action. New strategy execution involves clear communication across your entire organization to make sure everyone knows their responsibilities and how to measure the plan’s success.
Map your processes with key performance indicators, which will gauge the success of your plan. KPIs will establish which parts of your plan you want achieved in what time frame.
A few tips to make sure your plan will be executed without a hitch:
Align tasks with job descriptions to make sure people are equipped to get their jobs done
Communicate clearly to your entire organization throughout the implementation process
Fully commit to your plan
Step 5: Revise and restructure as needed
At this point, you should have created and implemented your new strategic framework. The final step of the planning process is to monitor and manage your plan.
Share your strategic plan —this isn’t a document to hide away. Make sure your team (especially senior leadership) has access to it so they can understand how their work contributes to company priorities and your overall strategic plan. We recommend sharing your plan in the same tool you use to manage and track work, so you can more easily connect high-level objectives to daily work. If you don’t already, consider using a work management tool .
Update your plan regularly (quarterly and annually). Make sure you’re using your strategic plan to inform your shorter-term goals. Your strategic plan also isn’t set in stone. You’ll likely need to update the plan if your company decides to change directions or make new investments. As new market opportunities and threats come up, you’ll likely want to tweak your strategic plan to ensure you’re building your organization in the best direction possible for the next few years.
Keep in mind that your plan won’t last forever—even if you do update it frequently. A successful strategic plan evolves with your company’s long-term goals. When you’ve achieved most of your strategic goals, or if your strategy has evolved significantly since you first made your plan, it might be time to create a new one.
The benefits of strategic planning
Strategic planning can help with goal-setting by allowing you to explain how your company will move towards your mission and vision statements in the next three to five years. If you think of your company trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from point A (where you are now) to point B (where you want to be in a few years).
When you create and share a clear strategic plan with your team, you can:
Align everyone around a shared purpose
Proactively set objectives to help you get where you want to go
Define long-term goals, and then set shorter-term goals to support them
Assess your current situation and any opportunities—or threats
Help your business be more durable because you’re thinking long-term
Increase motivation and engagement
Sticking to the strategic plan
To turn your company strategy into a plan—and ultimately, impact—make sure you’re proactively connecting company objectives to daily work. When you can clarify this connection, you’re giving your team members the context they need to get their best work done.
With clear priorities, team members can focus on the initiatives that are making the biggest impact for the company—and they’ll likely be more engaged while doing so.
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How to Create a Business Budget for Your Small Business
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A business budget estimates future revenue and expenses in detail, so that you can see whether you’re on track to meet financial expectations for the month, quarter or year. Think of your budget as a point of comparison — you run your actual numbers against it to determine if you’re over or under budget.
From there, you can make informed business decisions and pivot accordingly. For example, maybe you find that your expenses are over budget for the quarter, so you may hold off on a large equipment purchase.
Here’s a step-by-step guide for creating a business budget, along with why budgets are crucial to running a successful business.
» MORE: What is accounting? Definition and basics, explained
How does a business budget work?
Budgeting uses past months’ numbers to help you make financially conservative projections for the future and wiser business decisions for the present. If you’ve had a few bad months and predict another slow one, you can prepare to minimize expenses where possible. If business has been booming and you’re bringing in new customers, maybe you invest in buying more inventory to satisfy increased demand.
Creating a business budget from scratch can feel tedious, but you might already have access to tools that can help simplify the process. Your small-business accounting software is a good place to start, since it houses your business’s financial data and may offer basic budgeting reports.
To create a budget in QuickBooks Online , for example, you break down your estimated income and expenses across each area of your business. Then, the software calculates figures like gross profit, net operating income and net income for you.
You can then compare actual versus projected figures side by side by running a Budget vs. Actuals report. Businesses that need more in-depth features, like cash flow forecasting or the ability to use different projection methods, might subscribe to business budgeting software in addition to accounting software.
If your small business doesn’t have access to these features or has simple financials, you can download free small-business budget templates to manually create and track your budget. Regardless of which option you choose, your business will likely benefit from hiring an accountant to help manage your budget, course-correct when the business gets off track, and make sure taxes are being paid correctly.
Why is a business budget important?
A business budget encourages you to look beyond next week and next month to next year, or even the next five years.
Creating a budget can help your business do the following:
Establish a financial plan that helps your business reach its goals.
Point out leftover funds that you can reinvest.
Predict slow months and keep you out of debt.
Estimate what it will take to become profitable.
Provide a window into the future so you can prepare accordingly.
Creating a business budget will make operating your business easier and more efficient. A business budget can also help ensure you’re spending money in the right places and at the right time to stay out of debt.
How to create a business budget in 6 steps
The longer you’ve been in business, the more data you’ll have to inform your forward-looking budget. If you run a startup, however, you’ll want to do extensive research into typical costs for businesses in your industry, so that you have working estimates for revenue and expenses.
From there, here’s how to put together your business budget:
1. Examine your revenue
One of the first steps in any budgeting exercise is to look at your existing business and find all of your revenue sources. Add all those income sources together to determine how much money comes into your business monthly. It’s important to do this for multiple months and preferably for at least the previous 12 months, provided you have that much data available.
Notice how your business’s monthly income changes over time and try to look for seasonal patterns. Your business might experience a slump after the holidays, for example, or during the summer months. Understanding these seasonal changes will help you prepare for the leaner months and give you time to build a financial cushion.
Then, you can use those historic numbers and trends to make revenue projections for future months. Make sure to calculate for revenue, not profit. Your revenue is the money generated by sales before expenses are deducted. Profit is what remains after expenses are deducted.
2. Subtract fixed costs
The second step for creating a business budget involves adding up all of your historic fixed costs and using them to reliably predict future ones. Fixed costs are those that stay the same no matter how much income your business is generating. They might occur daily, weekly, monthly or yearly, so make sure to get as much data as you can.
Examples of fixed costs within your business might include:
Depreciation of assets.
Once you’ve identified your business’s fixed costs, you’ll subtract those from your income and move to the next step.
3. Subtract variable expenses
As you compile your fixed costs, you might notice other expenses that aren’t as consistent. Unlike fixed costs, variable expenses change alongside your business’s output or production. Look at how they’ve fluctuated over time in your business, and use that information to estimate future variable costs. These expenses get subtracted from your income, too.
Some examples of variable expenses are:
Hourly employee wages.
Owner’s salary (if it fluctuates with profit).
Utility costs that change depending on business activity.
During lean months, you’ll probably want to lower your business’s variable expenses. During profitable months when there’s extra income, however, you may increase your spending on variable expenses for the long-term benefit of your business.
4. Set aside a contingency fund for unexpected costs
When you’re creating a business budget, make sure you put aside extra cash and plan for contingencies.
Although you might be tempted to spend surplus income on variable expenses, it’s smart to establish an emergency fund instead, if possible. That way, you’ll be ready when equipment breaks down and needs replacing, or if you have to quickly replace inventory that's damaged unexpectedly.
5. Determine your profit
Add up all of your projected revenue and expenses for each month. Then, subtract expenses from revenue. You may also see the resulting number referred to as net income . If you end up with a positive number, you can expect to make a profit. If not, that’s a loss — and that can be OK, too. Small businesses aren’t necessarily profitable every month, let alone every year. This is especially true when your business is just starting out. Compare your projected profits to past profits to confirm whether they’re realistic.
6. Finalize your business budget
Are the resulting profits enough to work with, or is your business overspending? This is your opportunity to set spending and earning goals for each month, quarter and year. These goals should be realistic and achievable. If they don’t line up with your projections, make sure to establish a strategy for making up the difference.
As time goes on, regularly compare your actual numbers to your budget to determine whether your business is meeting those goals, and course correct if necessary.
» MORE: Ways your small business can spend smarter
A business budget projects future revenue and expenses so you can create a smart, realistic spending plan. As the year progresses, comparing your actual numbers against your budget can help you hold your business accountable and make sure it reaches its financial goals.
A business budget includes projected revenue, fixed costs, variable costs and the resulting profits. You can also factor in contingency funds for unforeseen circumstances like equipment failure.
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Business Planning Process: Create a Business Plan That Works
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If you are planning to start or grow your business, you might have heard about the importance of the business planning process countless times. And yes, it is necessary to have a plan. After all, it’ll be your roadmap to success.
But how would you go about it? Where will you start? And most importantly is there a tried and tested process that can make your job easier? What if we told you there is such a process?
And through this article, we’ll walk you through everything from what is business planning to the steps of the business planning process .
What is Business Planning?
Business planning is the process of giving structure to your business idea. It acts as a roadmap to your business journey, helps you get through obstacles, and maximizes opportunities.
It also helps you set realistic goals and pursue the same with a structured action plan.
Moreover, through a business plan, you can analyze your company’s strengths and weaknesses, and understand how that would impact your company while dealing with market competition and how your strengths would help you achieve your goal.
Above all, doing business with a well-written business plan increases your chances of success.
Steps of the Business Planning Process
Although there’s no sole right way to go about the process of planning your business, here’s a compilation of steps that’ll make your planning process faster and easier.
1. Carry out your research
The first step to creating a business plan is to do thorough research about the business and industry you are trying to get into. Tap into all the information you can get about your target audience, potential customer base, competitors, market and industry trends, cost of business, etc.
You can give a form to your research by asking yourself the following questions:
- What are your goals?
- Where does your business stand currently?
- What are the prevailing market trends?
- What strategies is your competitor following?
You can find your answers by conducting market surveys , talking to customers and industry experts, designing good questionnaires, reading articles, blogs, and news updates about your industry and related ones, and so on.
Also, it is a good practice to conduct a SWOT analysis for your company to understand how your company’s strengths and weaknesses would help you stand apart from your competitors based on the current market statistics.
2. Make a Framework
Once you’re done with your research the next step is to make a framework or a set of strategies for your business based on your research and business goals. You can either design strategies from scratch or reframe previously tried and tested successful strategies to fit your business goals.
But remember that you’ll have to tweak strategies to fit your unique competitive advantages and goals. Hence, strategies that are already being used can act as a good foundation, but it is essential to remember that you’ll have to expand upon them or improvise them for your business.
This step can be completed by taking a deep dive into your customer’s buying motivations and challenges that your product can help solve. Based on that, make a marketing plan, operations plan, and cost structure for your business at least for the first few years of your business.
3. Formulate your Financial Forecasts
No matter how tedious finances might seem, they are an integral part of any business. When you map out your finances it is essential to note down all the costs you’ll incur as you grow and run your business for the next five years and what would be your potential revenue , and if or not it would leave room for profit.
You can get your financial forecast by adding your financial assumptions to a financial system which will give you your cash flow statements and give you an idea of what amount of funds you’ll need to start and run your business for the first year.
This step is especially helpful if you want to acquire funding for your business. Nonetheless, it helps you prepare to deal with the financial aspects of your business.
A financial statement essentially provides details of a company’s expenses and profits. It also provides an overview of the company’s current financial stance, including its assets and liabilities.
Through this section try to write down and explain how you plan to use your investments and how would the same give a return.
4. Draft a Plan
As you’re done with creating business strategies and planning your finances, it is time to draft your business plan and compile everything into a single document. As you are done with all the technical aspects, this step should feel relatively easy.
But if you need help drafting a business plan and making it look presentable, you can subscribe to business plan software that comes with predesigned templates and tools to make your work easier .
5. Recheck and Improvise
Now as you’re done with writing your plan, it is a good idea to give it enough time to edit it. Check for any unclear sentences, irrelevant phrases, or confusing terms.
Take suggestions from your team members who are familiar with the functioning of your business. Finally, proofread for any grammar or punctuation errors. One of the most popular and useful pieces of editing advice is to put your work aside for a while and then look at it with fresh eyes to edit it better.
6. Create an Impressive Business Plan Presentation
Now, as you’re done with writing your business plan it is time to create a presentation that leaves an excellent impression on your audience. Highlight all the important and relevant points.
Also, add references for your investors like your financial reports, resumes of your key team members, snippets of your marketing plan, and past sales reports to have a well-rounded presentation.
It is true that starting a business is intimidating. It includes a bunch of emotions, chaotic ideas, and a will to take risks. ( Risks are a part and parcel of starting a business, no matter how much you plan, but yes planning helps you prepare for it.) But in the end, all of us know that all of it is worth it if you have a profitable business in the end.
And business planning is something that takes you one step closer to your idea of success. Moreover, a plan keeps you going in the face of challenges and adversities, and helps you push yourself a little harder to achieve your dreams when things get tougher.
Above all, a business plan helps you take action and turn ideas into a real and functioning business. So, what are you waiting for? Go ahead and start planning !
And while you’re at it do check out Upmetrics’s business planning software to make business planning easier and faster.
Build your Business Plan Faster
with step-by-step Guidance & AI Assistance.
About the Author
Radhika is an economics graduate and likes to read about every subject and idea she comes across. Apart from that she can discuss her favorite books to lengths( to the point you\'ll start feeling a little annoyed) and spends most of her free time on Google word coach.
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A 6-Step Plan to Prepare for Any Career Setback
- Octavia Goredema
You can’t control what might happen to you — but you can control how you respond.
Revenue spirals, industry shifts, and legislative changes can have unexpected ripple effects on your career advancement. Developing a predetermined fallback plan allows you to proceed with a clear head if you’re faced with a career setback. Importantly, fallback plans are not a marker of failure. Considering your options is an essential part of career exploration, adaptation to sudden transitions, and commitment to growth. The author, a career coach, presents six steps for creating a fallback plan so you’ll be ready in case you’re faced with a career setback.
“What might happen if…” is a common discussion prompt in the meetings I lead as a career coach. Coaching provides a safe space to talk honestly about the opportunities and challenges that intertwine when you’re pursuing the next step in your career. As we’ve seen in the past few years, those challenges abound.
- Octavia Goredema is a career coach at Twenty Ten Agency and the author of Prep, Push, Pivot: Essential Career Strategies for Underrepresented Women . She is the host of the Audible Original series How to Change Careers with Octavia Goredema . You can learn more about her work here .
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Tackle Year End Like A Boss: 8 Steps to Close your Books and Plan for 2024
By Diane Amato
PUBLISHED November 21, 2023 • 11 min read
No matter how many years you’ve been in business, taking certain steps at year-end can help you tie up any loose ends and set yourself up for a great year ahead. Here are 8 essential steps to take as we close out 2023.
1. Sum up your business financials
The end of the year is a great time to do a financial roundup, which ultimately starts with gathering your financial statements. Look at your income statement, cash flow statement and balance sheet to understand your current financial standing clearly and to forecast the year ahead. This is also a good time to leverage some fundamental financial tools and ratios, which can help you evaluate the performance of your business and identify potential pitfalls.
Here are some ratios to consider using to benchmark your business:
Also called Working Capital Ratio, this calculation indicates whether your business has enough cash flow to meet your short-term obligations, act on opportunities and look good in the eyes of potential lenders. It can also help you avoid cash flow problems before they surface.
Divide your current assets by your current liabilities. Ideally, your Current Ratio should fall between 1.5 and 2 — a ratio of 1 means you may not have enough money to last the year, while a ratio of more than 2 could mean you’re not investing enough into your business for the future.
Your Debt Ratio shows the percentage of your business’ assets financed by creditors. It’s a ratio a lender will look at before lending money to your business, so it’s wise to know this number before planning the year ahead.
Divide your total debt by your total assets. A good Debt Ratio largely depends on your industry, but anything below 0.3 is considered fair. With anything above 0.6, it may be difficult to obtain additional loans.
This calculation shows you what percentage of your income is profit after paying for the cost of doing business. These costs include labour, materials and other production costs. While it can help you assess your company’s financial health, it’s best used to track your company’s performance over time or benchmark your business against companies in the same industry.
Subtract your expenses/ cost of goods sold from your net sales (gross revenues minus returns, allowances and discounts). Then, divide that number by your net revenues and multiply by 100% to calculate the gross profit margin ratio.
The Debt Service Coverage Ratio (DSCR) is a key measure of a company’s ability to repay its loans, take on new financing and make dividend payments. Different debt providers may have different numbers they like to see; however, the greater the value over 1.25 (125% coverage), the better. The key value in calculating DSCR is identifying your company’s net income. If your business has a growth plan requiring investor/lender assistance, it is important to maintain a strong DSCR.
To calculate DSCR, divide net operating income by debt service, which is the sum of all current debts, including principal and interest.
Tip: Gather your bank and loan statements early so that you can identify any gaps that need filling and have your documents on hand for when you’re ready to do your review. Should you require bank confirmation of account balances, it’s best to initiate your request as soon as possible, especially if your year-end is Dec 31 st .
2. Find ways to save money in the year ahead
2023 was a tough year for many Canadian businesses. Rising interest rates increased the cost of borrowing, and inflation boosted the cost of goods, materials and supplies. Doing business in 2024 likely won’t be cheap, so it will take some creativity, negotiation and resourcefulness to find opportunities to save. Here are a few ideas to stretch your dollar:
Tips for finding savings:
- Reduce your variable costs . From inventory management to utility costs and subscriptions to marketing, evaluate expenses and consider how you can become more efficient with your spending in 2024.
- Assess your credit cards and loans . There are easy ways to maximize your business credit card’s potential while saving on borrowing costs, such as rewards points, leveraging the grace period and paying off the balance on time. There may be ways to reduce your repayment costs if you have loans.
- Utilize tax credits . Tax credits can help reduce the amount you pay on your taxable income and can make a difference to your bottom line come tax time.
- Get creative with hiring and retaining talent . Employees today value the opportunity to learn new skills and grow professionally. If you have a new role to fill, consider upskilling the talent you have in-house to save on the higher cost of new labour. Or, find young talent that matches the skills you’re looking for. Magnet helps you hire students and cost-effectively integrate learning opportunities.
- Evaluate your supplier terms . Year-end is a good time to assess your accounts receivable and accounts payable terms to see if there are any opportunities to affect your cash flow and save some money. Are there any early payment discounts available? Could you extend payment terms with your long-term vendors to ease cash flow pressures?
More money-saving tips : 5 Tips to Help Find Hidden Savings and Offset Rising Business Costs
3. Tap into funding opportunities
Business owners can tap into several new and unique opportunities that make it easier to access capital and grow their businesses.
Programs to consider:
- The Canada Digital Adoption Program (CDAP) . This $4 billion investment is designed to help small and medium-sized businesses get online with new digital tools. Learn more about CDAP here >
- Other grants relevant to your business . Non-repayable government grants can help you expand, create jobs, advance innovation, launch environmental initiatives and more. GrantMatch can help you find and secure government funding >
- The Canada Small Business Financing (CSBF) program . While not technically a funding program, the CSBF can ake it easier for businesses to access financing. Through the program, the government is providing a partial guarantee to lenders on behalf of eligible businesses, enabling businesses to start or expand their operations while taking on less personal risk than typical lending scenarios. Learn more about the CSBF program >
- RBC Black Entrepreneurship Program . RBC offers resources, funding and support to help create opportunity, growth and equity for Black entrepreneurs, including loans up to $250,000 to help start, manage or grow a business. Learn more about this program >
- Programs for young business owners . Futurpreneur offers access to business resources, financing and mentoring to help owners aged 18 – 39 build and grow a business. See how Futurpreneur can help >
4. Do some scenario planning
The last few years have thrown an array of curveballs at business owners, making scenario planning an essential part of running a business. Often defined as “what if” planning, business scenario planning involves making assumptions on what the future will bring – and determining how these situations, or scenarios, will affect your business.
- What if interest rates rose by over 3% in a year?
- What if you lost half your clients?
- What if you cost of raw materials doubled?
- What if your biggest supplier didn’t pay you on time?
Scenario planning lets you see alternative versions of your future business, giving you the opportunity to detect potential pitfalls or cash gaps before they happen. It can also stress test your plans against a variety of situations.
Tips for stress testing your business: RBC Small Business Talks: Incorporating Scenario Planning into your Business Plan
5. Get ready for tax season
While you’re not required to file your taxes for several months yet, there are some steps you can take now to prepare yourself for tax season. For example, are any activities you can take on now that will relieve your 2023 tax burden? Can you maximize tax credits, such as research and development or marketing incentives? If it makes sense for your business, are there any major purchases you can make and claim for this year?
Tip: It’s a good idea to chat with your accountant about possible things you can do in 2022 to minimize your taxes come spring and to estimate how much income to take out your business in 2023. It’s also smart to start organizing your business expenses and receipts now!
6. Do an operations check-in
When you’re caught up in the day-to-day running of your business, it can be easy for some of the maintenance activities to slip through the cracks. The end of the year is a great time to check that some key elements of your business are functioning as they should. Ask yourself: Are there areas of your operations you can streamline for greater efficiency? Are there new tools and platforms you can use to help make your business run better? Consider these Beyond Banking Services offered at special rates to RBC clients:
- The RBC Go Digital program can help you adapt to changes in the digital world, access new technologies and differentiate yourself in a disruptive market..
- Sherweb can help you access digital tools to enhance productivity, communication, collaboration, data analytics and your business operations.
- Offers on mobility, internet, security, and business connect plans can help your thriving business.
- Check that all your software is up-to-date and that your cyber security measures continue to align with your business needs. Learn how to become cyber ready >
- Check your marketing channels to ensure your website, social media, and Google listing are all up to date.
- Clean up your customer, vendor and supplier databases — add, remove and update as needed!
- Review your insurance policies to ensure they line up with the size and scope of your business today.
7. Take stock of your wins — and share them!
By the time December rolls around, it can be tough to remember everything that happened earlier in the year. Take some time to review your wins and accomplishments for 2023, beginning last January 1 st . By itemizing all the great work you and your team did this year, you can see how your business grew, adapted and evolved — and it gives you a great opportunity to share a positive recap with employees, vendors and clients.
Tip: Email valued clients, suppliers, and vendors, thanking them for their contribution to helping you make it through 2023, along with highlighting your business successes and any new plans for 2024.
8. Prepare your 2024 Business Plan
When was the last time you looked at your Business Plan? Whether it was a decade ago or last year, now is the right time to review your plan and make necessary adjustments to align with your current goals and circumstances, as well as the state of the current economy. Many business owners also take this opportunity to review compensation packages at year-end to remain competitive — more than ever, attracting and retaining employees has become a top priority. Be diligent about employee evaluations; properly managed evaluations can play a crucial role in employee performance and boost job satisfaction.
Evaluating and refreshing your 2024 Diversity, Equity and Inclusion goals — and embedding them into your Business Plan — is also a good exercise at this time of year.
Tip: Set some 2024 financial goals. An important part of your business plan is your numbers, so refreshing your financial goals is one way to keep it current and your business moving forward. Some goals could include better cash flow management, reducing debt, investing more in your business and reducing expenses. Try the free RBC Business Plan Builder Tool to help you get started on your 2024 plan. Read our article How to Build the Best Business Plan Ever: Step-by-Step Guide for further inspiration.
Taking a close look at how you ended 2023 can help you strengthen your business in the face of challenging economic conditions, enabling you to take on the new year with optimism and confidence. And thinking outside the box when it comes to funding, hiring and operations can open up new ways of doing business that can lead to greater efficiency, productivity and resilience.
- Let’s Talk about Debt – 5 Considerations for Business Owners Today
- 5 Steps to Strengthen Your Business During a Downward Economic Cycle
Things our lawyers want you to know
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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