How to Write the Perfect Business Plan in 8 Steps
What is a Business Plan?
A business plan outlines a company's goals, strategies, and plans for achieving its objectives. The best business plans are concise, clear, factually correct, and capture the reader's attention.
Why is a Business Plan Important?
Internal Reasons
- Focus your team: A business plan can be an internal guide to keep your team focused on and working towards short and long-term objectives.
- Risk management: A business plan can help identify potential risks and challenges the company may face and develop strategies to mitigate these risks. This can minimize the likelihood of unexpected setbacks and increase the chances of success.
- Evaluate new opportunities: A business plan includes financial projections and market research that can help you assess new opportunities' viability and potential profitability.
External Reasons
- It's a requirement to raise money: Business plans are often required when seeking funding from investors, lenders, or other stakeholders. For example, you need a business plan to apply for a bank loan.
- Recruit new hires: A well-written business plan can help you attract top talent, as it communicates the vision and growth potential for the business.
- Win money at competitions: There are several business plan competitions, which you can enter for a chance to win money, mentorship, and other rewards. For example, you can win $15,000 at this New York-based business plan competition.
- Identify and close helpful partners: A good business plan can help you identify and close useful partners to take your business to the next level. This may include supplier partnerships, distribution partnerships, marketing partnerships, and more.
Your business plan can be a fluid, living document that you can update over time as you progress, get more information, and decide how to build your business.
Business Plan Formats
There is no one way to write a business plan. What matters most is that the business plan meets your needs.
The most common ways business plans are formatted include:
- Traditional: This is the most popular business plan format. This detailed multi-page plan provides a comprehensive overview of all aspects of your business. In the following section, we will discuss the essential components of a business plan and provide detailed explanations for each section. Traditional lenders, like banks, will ask for your business plan in this format.
- Lean: This is the second most popular business plan format. This shorter version of the traditional business plan follows the same format but only includes the most critical information. Investors, like angel investors, may ask for your business plan in this format.
- Nonprofit: This business plan for nonprofit entities follows the same format as a traditional business plan but includes a section describing the social change and impact the company will make.
How to Write a Traditional Business Plan
Now is the time to start writing your business plan. Don't overthink this. Remember that your business plan can be a fluid, living document that you can update over time.
The italicized words in each section serve as an example.
1. Executive Summary
This section should answer one fundamental question:
Why will this company be successful?
To do this, follow this format:
- What is the problem your business is solving? (recommended length: 1-2 sentences)
According to the CDC, 108,000 people in the United States died of drug overdoses and poisonings in the 12 months ending in December 2049. A staggering 70 percent of those deaths involved synthetic opioids like fentanyl.
- What is your solution, and why is it the best solution on the market? (recommended length: 1-2 sentences)
In a randomized controlled trial involving 500 patients with opioid dependence, my company developed a new opioid addiction treatment called "OpiCare" that was deemed highly effective. After 12 weeks of treatment, 90% of patients receiving OpiCare achieved abstinence from opioids, compared to 55% of patients receiving the current standard of care treatment.
- What are the results, and how big can this business become? (recommended length: 2-4 sentences)
With the strong clinical trial results demonstrating the effectiveness of OpiCare, we anticipate significant growth in the opioid addiction treatment market. Based on the estimated number of opioid-dependent patients in the United States alone, the company projects a total addressable market of $5 billion annually. The company expects to capture a significant share of this market, with a goal of reaching $500 million in annual revenue within the next five years. We have assembled a world-class management team with 125 years of combined experience in the pharmaceutical industry to capture this opportunity.
- What should they take away from your executive summary? (recommended length: 2-4 sentences)
We seek a total investment of $5 million to achieve these goals at a pre-money valuation of $25M. This investment will be used to hire additional sales and marketing staff, invest in targeted advertising campaigns, and expand production capacity to meet growing demand. At the heart of our mission is a deep commitment to the health and well-being of our patients, as well as a dedication to improving public health outcomes and reducing the devastating impact of the opioid crisis. We are proud to be a part of the solution and look forward to continuing to impact the lives of those we serve positively.
Important notes:
- The executive summary is the most critical part of your plan because it's the first thing people will read – but it's also the last section you should write since it distills the most important information from the following sections of your business plan.
- Like a resume, your executive summary should be 1-page
- Focus on the strengths of your plan
2. Business Description
This section should answer one fundamental question:
What does your business do?
To do this, follow this format:
- What does your business do? (recommended length: 1 sentence)
Our company is a pharmaceutical company that develops evidence-based treatments for opioid addiction and related mental health conditions.
- What products and services do you offer? (recommended length: 2-3 sentences)
Our flagship product is OpiCare, a highly effective prescription medicine for opioid addiction that significantly reduces opioid use and improves physical and mental health outcomes. We sell OpiCare through healthcare providers, such as addiction treatment clinics or primary care physicians, for $199 per case.
Important notes:
- You need to be able to explain your business in 1 sentence.
3. Market Analysis
This section should answer one fundamental question:
What's your unique insight?
To do this, follow this format:
- How large is the market, and is it growing? (recommended length: 1 sentence)
The total addressable market for opioid addiction treatment is $5 billion annually in the U.S. and is expected to grow at a CAGR of 7.3% from 2049 to 2055.
- What drives growth in your market? (recommended length: 1-2 sentences)
Increased opioid addiction cases and the growing demand for evidence-based treatments drive this growth. Furthermore, the COVID-19 pandemic has exacerbated the opioid crisis, with a rise in overdose deaths, further driving the need for treatment options.
- Who are your potential customers? (recommended length: 1 sentence)
The potential customers for our pharmaceutical company are U.S. healthcare providers, including addiction treatment clinics, primary care physicians, and hospitals that treat patients with opioid addiction and related mental health conditions.
- What do you know about your customers' habits? (recommended length: 2-3 sentences)
Healthcare providers in the addiction treatment space may have different prescribing habits based on the patient's condition, the severity of the addiction, and personal preferences. For example, some providers may prefer to prescribe medications for opioid addiction, while others may prefer behavioral therapies. Similarly, patients with opioid addiction may also have different preferences based on the severity of their addiction and other health conditions.
- Who are your main competitors? (recommended length: 2-3 sentences)
Our company faces competition from pharmaceutical companies developing opioid addiction treatments, such as Suboxone, Vivitrol, and Methadone. These medications are established in the market and have a proven track record of reducing opioid use and improving health outcomes. There are also non-pharmaceutical treatment options, such as behavioral therapies, support groups, and detox programs, that may also compete with our product.
- What do you know that others don't? (recommended length: 2-5 sentences)
Our flagship product, OpiCare, is a unique prescription medication that combines buprenorphine and naloxone in a dissolvable film that you place under the tongue. This combination is highly effective in reducing opioid use and improving physical and mental health outcomes. OpiCare has a lower risk of abuse and dependence than other opioids, making it a safer treatment option for patients with opioid addiction. Our company has also invested in developing a patient support program that provides education, counseling, and assistance to patients during their treatment journey, which can differentiate us from our competitors.
Important notes:
- Every business has competitors, even if you are building a new product in a new market
- Explain why your unique insight will help you win
4. Management and Organization
This section should answer one fundamental question:
Why are you the best team to solve this problem?
To do this, follow this format:
- Who is your team? (recommended length: 1-5 team members)
CEO: John Smith has over 20 years of experience in the pharmaceutical industry and has previously served as the CEO of two public pharmaceutical companies, Oceania Pharma and Vanguard Pharma.
Chief Medical Officer: Dr. Jane Doe is a board-certified addiction psychiatrist with over 15 years of clinical experience at Stanford Medical Hospital in addiction treatment.
Chief Financial Officer: Mark Johnson has over 10 years of experience in finance and accounting and has previously worked as Head of Finance at Serene Therapeutics, a public pharmaceutical company with a market cap of $100 billion.
.
Chief Marketing Officer: Sarah Lee has over 12 years of experience in marketing and has previously worked as CMO at ApexRx, a leading pharmaceutical company.
Chief Operating Officer: Tom Wilson has over 15 years of experience in operations and has previously worked as VP of Operations at Oceania Pharma.
- How is your team structured? (recommended length: 2-3 sentences)
We've intentionally structured our organization to have one key owner for each business unit (marketing, sales, etc.) and one for each product line (OpiCare, etc.). These owners are responsible for setting metrics and driving key outcomes for their departments and business. Here is an overview of our org chart (link to your org chart).
- What makes your team unique? (recommended length: 2-4 sentences)
Our management team has the skills and experience to tackle the opioid crisis. Our team's collective experience in public pharmaceutical companies is particularly noteworthy. This experience has given us a deep understanding of the industry and the ability to navigate the complex regulatory and legal landscapes. It has also given us the skills to manage large teams of employees, raise capital from investors, and drive growth and profitability.
- What is the entity's legal structure? (recommended length: 1 sentence)
OpiCare is structured as a Delaware c-corp, making it easy to take outside investment capital and provide liability protection to the founders and investors.
Important notes:
- You may have to include resumes for stakeholders listed in this section, so ensure you have those on file.
- You can include external advisors in this section if they are noteworthy and make a meaningful impact on the chances of success for your business.
5. Marketing and Sales
This section should answer one fundamental question:
How will you attract and retain customers?
To do this, follow this format:
- How will you attract customers? (recommended length: 2-4 sentences)
We attract customers through 3 main channels: educational events in the community, pharmaceutical conferences, and referrals from our team's industry connections. These channels are performing above the industry average, with the only bottleneck being team bandwidth. In addition, we're confident these channels are highly repeatable because they rely on established practices widely used in the pharmaceutical industry to promote and sell new products. Our team members have executed this playbook at previous pharmaceutical companies.
- How will you retain customers? (recommended length: 2-4 sentences)
We retain customers by providing excellent customer service, free educational materials, and partnering with providers on local outreach efforts. These efforts have improved our NPS with customers from 70 (great) to 85 (excellent), generated 50+ new referrals, and increased the number of repeat orders for OpiCare by 20%.
Important notes:
- Show the reader that you are building a repeatable and scalable way to attract and retain customers.
6. Funding Request
This section should answer one fundamental question:
How much money are you asking for, and how will the money be used?
To do this, follow this format:
- How much money are you asking for, and on what terms? (recommended length: 1 sentence)
We seek a total investment of $5 million on a SAFE agreement at a $25M pre-money valuation.
- How will the money be used? (recommended length: 1-2 sentences)
The investment will be used to fund: our continued research and development efforts ($2M), scale up production of our flagship product ($1M), OpiCare, and expand our marketing and sales efforts ($2M).
- What key milestones will this money enable you to hit? (recommended length: 1-2 sentences)
This money will help us complete Phase III clinical trials for OpiCare and submit a new drug application to the FDA, scale up production and distribution from 100 providers to 250 providers, and hire 10 marketing and sales people to reach new healthcare providers and increase market share.
Important notes:
- Your funding request in your business plan is not a contract, and it is not legally binding.
- Disclose upfront any key clauses that you plan to include in the agreement.
- Disclose upfront if you plan to use investment capital to pay down debt.
7. Financials
This section should answer one fundamental question:
How much financial success will this business have?
To do this, follow this format:
- Income statement (link or attachment).
- Balance sheet (link or attachment).
- Cash flow statement (link or attachment).
Important notes:
- If you made projections, clearly state how you arrived at those projections.
- Indicate whether your financials have been reviewed or audited, and disclose the name of the CPA Firm.
- Please ensure they are in GAAP (Generally Accepted Accounting Principles) format.
- It's okay to have aggressive projections but make sure they are realistic.
8. Appendix
List any supporting documents in the Appendix section. Common documents include:
- Team member resumes
- Letters of reference
- Licenses and permits
- Legal documents
- Patents
- Contracts
Tips for Writing a Business Plan
- Define your goals: Before you draft your business plan, you need to define your goals. Ask yourself, what do you want your business plan to achieve?
- Know your audience: Edit and customize your business plan based on the audience.
- Invest the time: Your business plan is the foundation of your business and a key asset to help you accomplish your goals. Spend the time to create a well-crafted, effective business plan.
- Don't use jargon: Write clearly with simple language.
- Check for grammar and spelling mistakes: Ask friends and family to proofread your business plan, read it aloud, and run it through Grammarly.
Mistakes to Avoid When Writing a Business Plan
- Lack of clarity: A poorly written or unorganized business plan can be challenging to understand and may not effectively communicate the company's vision or strategy.
- Not updating the plan: A business plan is a living document that should be reviewed and updated as the company evolves. Failing to do so can lead to outdated information and inaccurate projections.
- Lack of research: A business plan without adequate research can be a significant issue, as it may not accurately reflect the market, the competition, or the financial projections of the company. It's easy to tell if you stuff generic information into your business plan or copy and paste something from the Internet.
- Too long: A business plan should be clear and concise. Proofread your business plan and follow each section's recommended number of sentences.
- Not disclosing risks to the business: Every business, even the best ones, has threats to its success. It's best to be upfront about these risks to show readers you are aware of these threats and have a plan to mitigate them.
What Resources are Available to Help Me Write a Business Plan?
- LivePlan: the best overall value for samples and templates
- Bizplan: the best for startups looking for investment
- GoSmallBiz: a budget-friendly option with industry-specific templates
- SBA: a free option for small businesses
Write your business plan today
While writing a business plan can be time-consuming and challenging, it is essential to building a business. By following these tips and best practices, entrepreneurs can create a business plan that effectively communicates their vision, strategy, and goals to potential investors and stakeholders. Then, with a strong business plan in place, entrepreneurs can confidently move forward and work towards building a successful and thriving business.
