Small businesses—independent businesses with fewer than 500 employees—play a crucial role in the U.S. economy. According to a report from the Small Business Administration’s Office of Advocacy, there are more than 32 million small businesses in the United States. These businesses account for 99.9% of all firms in the country and generate about two-thirds of net new jobs.
In addition to completing a series of legal requirements, starting a small business involves significant planning, research, and strategy. What will your business’s name be? What type of business structure will you choose? Where will your business be located? Have you registered your business and acquired your tax IDs? Where will you bank?
While having a written business plan is not a prerequisite to starting a business, multiple studies have shown that companies with a business plan grow larger and faster than companies without one.
What is a business plan and why is it so important?
Your business plan is the foundation of your business. It’s a living, ever-evolving document that establishes who you are, what you do, what your goals are, how you operate, how you make money, and more. Laying out your business plan helps you identify any gaps and get a better understanding of how much time and money you’ll need to start—or expand—your business.
While a lot of small businesses use business earnings as their primary source of funding, many others rely on a solid business plan to secure a loan from lenders and investors.
How to write a business plan
The good news is that there’s no right or wrong way to write a business plan. Business plans are unique to each business and can take many forms depending on the business type and objectives. Business plans vary in length and complexity. Traditional business plans are the most common; these standard plans are very comprehensive and include detailed sections and subsections in paragraph form. Lean business plans sum up the business plan at a glance—and are typically just one or two pages. Whether you’re planning to develop a traditional business plan or a lean plan, both plans cover the same key elements.
The 5 key parts of a business plan
- Company description - The company description provides information about the identity of the company, such as the products and services, mission statement, leadership, company history, differentiator, and more.
- Organization and management - This section details the legal structure of your business—whether it’s a sole proprietorship, C corp, S corp, or limited partnership. It should also include a description of who runs the company and how the company is organized, including roles and responsibilities. Consider including an organizational chart and biographies of your company’s leadership team.
- Products and services - This section of the business plan should answer the questions “What are your products and services?” and “What do your products and services do?” The products and services section includes a full list of all products and services, as well as detailed information about offerings, benefits, advantages, pricing information, R&D, shipping and fulfillment, sourcing information, etc.
- Marketing and sales - When it comes to marketing and sales, strategy matters. The marketing section provides market research information, growth strategies, communication plans, and promotions. In addition, it’s helpful to include a SWOT analysis that looks at your strengths, weaknesses, opportunities, and threats to identify your unique competitive advantage.
- Financial information - No matter how great your idea is, a business still needs to make money. The financial information in your business plan will look different if you’re a startup versus an established business. For example, if you’re a new business, you may need to use market research to guide your projections. If you’re an established business, you can include recent financial history—income statements, cash flow, and balance sheets—and your projections for the next five years.
Learn all the components of a business plan and how to write a business plan step by step at the Stellar Bank Financial Education Center.
Whether you already have a business plan or you’re just getting started, you can always get in touch with a Stellar Business Banker to discuss your plan and future goals. As a community bank, we have a variety of solutions designed to provide the capital that local businesses need to succeed.