how to sell a business plan

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1. Identify Your Reasons for a Sale

• 2. Decide on Timing

3. Get a Business Valuation

4. hire a broker.

• 5. Prepare the Documents

6. Find a Buyer

7. handle the profits, the bottom line.

• Small Business

7 Steps To Selling Your Small Business

Selling a small business is a complex venture that involves several considerations. It can require that you enlist a broker, accountant, and/or an attorney as you proceed.

Whether you profit on the venture will depend on the reason for the sale, the timing of the sale, the strength of the business' operation, and its structure.

A business sale will also require much of your time and, once the business is sold, the need to determine some smart ways to handle the profit. The seven considerations below can help you build a solid plan and negotiate a successful transaction.

Key Takeaways

• Once you've decided to sell your business, identify why you want to sell and make sure that it's ready to be sold.
• Take the time needed to determine the value of your business and consider hiring a business appraiser.
• Decide whether you want to hire a business broker or negotiate the deal yourself.
• Once you find a good buyer, there are a series of financial screenings and other steps that need to be taken to keep the process moving.
• Work with a financial professional to determine how you want to invest or otherwise use the money you make from the sale of your business.

You've decided to sell your business. Why? That's one of the first questions a potential buyer will ask.

Owners commonly sell their businesses for any of the following reasons:

• Partnership disputes
• Illness or death
• Becoming overworked

Some owners consider selling the business when it is not profitable , but this can make it harder to attract buyers. You must consider whether your business can attract buyers, its state of readiness, and your timing.

What Makes Your Business an Attractive Opportunity?

There are various attributes that can make your business attractive to buyers, including:

• Increasing profits
• Consistent income figures
• Appealing profit margins
• A strong customer base
• A major contract that spans several years

2. Decide on the Timing of the Sale

Timing is everything. And that includes the time it takes to get everything ready to sell your business.

Once you've made the decision to sell, prepare for the sale as early as possible, preferably a year or two ahead of time. The preparation will help you to improve your financial records, business structure, and customer base to make the business more profitable and a transaction more attractive.

These improvements will also ease the transition for the buyer and keep the business running smoothly. 

Selling a business involves a lot of legwork, discussions, and negotiations. If it's not possible for all of this to occur in person, use services like Zoom or Skype to hold digital business meetings with potential buyers.

Determine the value of your business to make sure you don't price it too high or too low. You can do this by hiring a business appraiser to provide you with a valuation .

Once you hire an appraiser, they will draw up a detailed explanation of the business' worth. The appraisal document will give credibility to the asking price and can serve as a gauge for your listing price .

You can also determine the overall value of your business using some key metrics. Consider evaluating your company by determining the market capitalization , earnings multipliers, book value, or other metrics.

Selling the business yourself allows you to save money and avoid paying a broker's commission . It's also the common sense route when the sale is to a trusted family member or current employee.

In other circumstances, a broker can help free up time for you to keep the business running, or keep the sale quiet and get the highest price. That's because the broker will want to maximize their commission. Discuss expectations and marketing approaches with the broker and maintain constant communication about their progress (or lack thereof).  

Even if you decide to sell your business to a close family member or employee, don't rush the sales process. However, if you need a relatively quick turnaround, hire a business broker to speed up the proceedings and keep things on track.

5. Prepare the Necessary Documents

Gather your financial statements detailing assets, liabilities, and income as well as tax returns dating back three to four years. Review them with an accountant. Dig up any other relevant paperwork such as your current lease. In addition, develop a list of equipment that's being sold with the business. Create a list of contacts related to sales transactions and supplies.

Make copies of these documents to distribute to financially qualified potential buyers.

Operational

Your information packet should also provide a summary describing how the business is conducted, an up-to-date operating manual, and information about roles and employees.

In addition to gathering needed documentation, you'll also want to make sure the business is presentable. Any areas of the business or equipment that are broken or run down should be fixed or replaced before meeting solid prospects or prior to the sale. 

A business sale may take anywhere from a few months to years. This includes the time you take to prepare for the sale all the way to the closing, according to SCORE, a nonprofit association for entrepreneurs and partners of the Small Business Administration (SBA) .

Finding the right buyer can be a challenge. Allow for solid, ongoing advertising to attract more potential buyers. Once you have some parties interested in your business, here's how to keep the process moving along:

• Have two to three potential buyers in the pipeline just in case the initial deal falters.
• Stay in contact with potential buyers.
• Find out whether the potential buyer pre-qualifies for financing before giving out information about your business.
• If you plan to finance the sale, work out the details with an accountant or lawyer so you can reach an agreement with the buyer.
• Allow some room to negotiate, but stand firm on a price that is reasonable and reflects the company's future worth.
• Put any and all agreements in writing. Potential buyers should sign a nondisclosure/ confidentiality agreement to protect your information.
• Try to get the signed purchase agreement into escrow .

You may encounter the following documents after the sale:

• The bill of sale , which transfers the business assets to the buyer
• An assignment of a lease
• A security agreement , which has a seller retain a lien on the business

A business broker often charges an average of 10% for businesses under $1 million. While that may seem steep, bear in mind that the broker may be able to negotiate a better deal than you can arrange on your own.

Now that you've sold your business, it's time to figure out what to do with the profit that you've made. The first instinct may be to go on a spending spree, but that probably isn't the best decision.

Here are a few things you may want to consider:

• Take some time—at least a few months—before spending the profits from the sale.
• Create a plan outlining your financial goals; focus on long-term benefits, such as getting out of debt and saving for retirement .
• Consult with a tax professional to learn about the tax consequences associated with the sale and sudden wealth.
• Speak with a financial professional to determine how you should invest the money so that you can meet your short- and long-term goals.

How Do You Sell a Franchise Business?

You'll need to work in conjunction with your franchiser, as they will need to determine if the new buyer is appropriate. Plus, that new buyer will need to sign a franchise agreement with the franchiser.

There are a variety of fees and rules associated with owning or selling a franchise. These can be found in the FTC's compliance guide .  

How Do You Sell a Business Idea?

It's possible to approach a company with a business idea, but first, do your research, prepare a presentation, and find potential targets. While some business plans are best protected with a patent, others can be secured by getting a potential company you want to work with to agree to a non-disclosure agreement.

Can I Sell a Small Business Without a Broker?

Many people would like to avoid the average 10% commission that a business broker may charge. But the expense may be negligible compared to the risks of selling on your own. If you decide to go it alone, prioritize selling to a buyer you know, make use of the advice of experienced, retired owners and executives, and use all the internet resources available, such as those offered by the Small Business Administration, or the National Federation of Independent Business (NFIB) .

How Would I Sell Just My Share of a Business?

Selling your share of a business to your partner(s) is a common ownership transfer method, particularly for small businesses. Have an agreement in place with your partners ahead of the sale to help smooth the transition. This can increase the likelihood that both the remaining and exiting partners benefit.

What Does Selling a Business Cost?

If you go through a business broker and your business is under $1 million, the broker's commission is likely 10% to 12%. Other fees that can crop up include attorney fees, marketing fees, and the costs of making any cosmetic or more substantial upgrades to your business so as to make it more sellable. There are also fees that may come up if you are transferring a lease to the new owner of your business.

Selling a business is time-consuming burden and, for many people, an emotional venture. A solid reason for selling or the existence of a hot market can ease the burden. So can the help of professionals, such as business brokers.

It may also be possible to obtain free counseling from organizations such as SCORE. Your local chamber of commerce may offer relevant seminars and workshops, as well.

When all is said and done, the large sum of money in your bank account and your newfound free time can make the potentially grueling process of selling your business worthwhile.

Small Business Chronicle. " How to Calculate the Selling Price For a Business ."

Berkshire Business Sales & Acquisitions. " What To Look For When Choosing a Business Broker ."

Inc. " What You Should Know About Working With Business Brokers ."

Score. " Selling Your Business ."

Federal Trade Commission. " Franchise Rule Compliance Guide ," Pages i, 24-119.

International Franchise Association. " Royalty Fee Requirement Definitions ," Page 1.

Small Business Chronicle. " How to Sell Ownership in a Partnership ."

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How to Sell a Business: The Ultimate Guide (2024)

Are you considering selling a business, but need help figuring out the process? This definitive guide to selling a business will demystify the process. Keep reading to get the most value for your business.

Every business owner will eventually decide it is time to develop an exit strategy.

Whether you are selling a business to start a new one, retiring, or just passing it on to your kids, our guide will give you the steps to prepare for a sale including:

• Define the exit strategy
• Prepare financial statements
• Get an independent business valuation
• Increase the business value of your small business
• Market to potential buyers
• Negotiate terms and sell your business
• Transition period

There will be a ton of information in this guide, so make sure to download our Selling a Business Checklist to help you in the process. Keep reading for information on how to sell your business.

Step 1: Define the Exit Strategy

The first step in selling your business is defining your exit strategy. There are a variety of exit strategies that a business owner can use to sell a small business.

Which strategy is right for you will depend on a variety of factors. The most important considerations are:

• Type of business
• Business structure
• Working with a broker vs. without a broker
• Who will take control of the business after I sell my business?

After reading this section, you should know what is the best way to sell your small business.

Type of Business

Selling your small business is going to vary based on the industry the business is in. For instance, many locations have specific requirements for certain industries that may limit the prospective buyers available.

I’m sure you already know the regulations for your area, but if you need to refresh yourself on any limiting restrictions for your location and industry, the Small Business Administration is a good place to start.

This information will help when you start to market to prospective buyers.

Franchises may have special requirements that owners must go through to sell their franchise. Talk to your franchisor for more information on making a deal to sell a franchise.

Business Structure

• Sole Proprietorship
• Partnership
• Corporation
• Comparison of business structures (need to remake chart)

Depending on how the business is structured, selling it will follow a different process. An LLC and Corporation are the easiest to transfer ownership as they are intended to be separate entities from the business owners, while a sole proprietorship is the hardest to transfer ownership as it is meant to have a single owner and the income and liabilities are tied to the person.

When you think about how to sell a small business that is a sole proprietorship remember you will be selling the assets, but the new business owner will have to reorganize the business under their name.

Alternatively, you can change it to an LLC before the sale to make the transfer easier. To set up an LLC check out this Small Business Trends article .

Other than those variances, the only real differences are the tax and legal documents, which you can find information on at the IRS website .

Broker Sales or Private Sales

There are two main ways to sell your business, brokers or private sales. Let’s explore each to establish whether your small business will benefit from a broker selling it or whether you should learn how to sell a business privately.

Selling Your Small Business with a Broker

They have been through the process multiple times and are able to help guide you in getting the proper financial statements and due diligence, determining an asking price, finding potential buyers,  finding the right buyer to sell your business to, and closing the deal.

If you want to sell your business with a broker, you’ll need to reach out to one. You can search for “business brokers near me” in Google to find a business broker in your location.

Brokers will normally charge a percentage with a minimum commission that varies based on the revenue of the company being sold.

MidStreet Mergers & Acquisitions has an easy-to-understand blog of how brokers normally charge if you want to understand “how much does it cost to sell a business?”

Given the minimum commission is typically $10-12k, if your business makes less than $100k revenue per year, you will probably want to understand how to sell a business without a broker.

How Do I Sell My Business Without a Broker?

A small business for sale by an owner may result in keeping more of the business valuation once the business is sold, but unless you already have someone in mind it may not be the best way when trying to figure out how to sell a business quickly.

You’ll be responsible for gathering all the company financial statements, determining the asking price, finding potential buyers, answering all their questions, getting the best deal, and finding someone to review the closing documents before selling.

Make sure to consider the time and financial costs that will be incurred when deciding how to sell your business.

If you are trying to improve cash flow, profit, or revenue while looking for prospective new owners, you may find that it is hard work if trying to sell quickly.

If you have time to do it right and make sure to do your due diligence, you can potentially get a higher sales price and keep more of the profit.

Who Will Take Control After Selling Your Business?

There are some specific instances where getting the best value may not require all these steps. Some scenarios that may simplify the process include:

• Employee Buyouts.
• Plan to sell to a related person upon retirement.
• A competitor approaches you about merging the businesses.

These scenarios could limit many of the questions that need to be considered in steps 3, 4, and 6.

In the case of merging two businesses, there are some additional considerations that are discussed in our blog Increasing Business Value through Mergers which will go into far greater detail about how to sell your business to a competitor.

Step 2: Prepare Company Financial Statements

Potential buyers are going to want to see the long-term value of the company as demonstrated through revenue, cash flow, and profit.

This information needs to be readily available because it will impact all the other steps going forward.

You should make sure to include the following documents

• Tax returns for last 7 years (or the start of business)
• Supplier agreements
• Business licenses and insurance documents
• Proof of intellectual property rights/ownership
• Documentation of all debts and liabilities
• Documentation of all assets
• Anything else you think the buyer might want to know

The long-term sales growth, net working capital , and other financial information will help brokers and agents answer buyer financial questions while selling the business for the most money.

Step 3: Get an Independent Business Valuation

Regardless of whether you get a suggested sale price from someone who evaluates businesses, there are several ways of establishing worth you should be familiar with.

Valuations Formulas to Know Before You Sell Your Business

There are multiple ways to value a business for sale which I discuss in the blog How to Buy a Business . The following is a recap of it adjusted for sellers.

When determining how to value a business to sell the following methods can be beneficial to evaluating the value:

• Asset Valuation

Price to Sales Ratio

• Discounted Cash Flow

Asset Valuation Model

An asset Valuation Model is used in businesses that are heavily based on assets. When selling a shopping center, this is a great model. It basically adds up all equipment, inventory, and property then subtracts liabilities and debts.

In the example above, the company would be valued at $1,516,020. This process doesn’t take into consideration revenue or market direction so it might not be the most fair way to value the true worth.

Another way of valuing a business is by the price to sales (P/S) ratio. This takes the revenue of a company and decides how much to value it based on industry standards. Check out NYU Stern’s site for an idea of what multiple to use.

Using this method the P/S ratio ranges from .21 for grocery stores to 14.85 for software companies, with a total market average of 2.64-2.66.

If you compare this process to the asset valuation model, you’ll find that the revenue would only have to be around $570, 000 to justify the same sale price.

Price to Earnings Ratio

To use the price to earnings (P/E) ratio, you use the net income and industry norms. NYU Stern has a similar table for P/E Ratios.

Let’s assume that your company is a retailer, based on the NYU Stern charts, the net income would only have to be between $58,000-67,000 to be worth the same as the previous models.

Discounted Cashflow Method

This one allows you to include a variety of factors that other methods might not. Investopedia wrote an article that will help you get a deeper understanding of this step. You can read it here.

Factors taken into consideration in this method include:

• Sales and growth
• Cost of capital (inflation assumption of 3% plus the interest rate on a loan)
• Income taxes
• Changes in inventory, accounts payable and accounts receivable
• Investment income
• Depreciation

Zions Bank offers a useful calculator for the discounted cash flow method.

It will help you test a variety of different market conditions and is a really good option to help you find how to value a small business.

Make sure to do your due diligence by documenting each scenario you test. This will help you negotiate when selling your business to potential buyers.

Check out our blog about How to Value a Business for more information on valuation methods.

Step 4: Increase Business Value Before Sale

Businesses are valued differently by different people based on what they consider important. There are several things you can do to increase the potential sale price  before approaching potential buyers, including:

• Documenting plan going forward like you aren’t selling
• Improve financial positions and profit margin.
• Pay attention to the market

Let’s dig deeper into why each of these is important.

In the normal process of the workday, it’s common for everyone to have more work than time. If you make the time to get the space where every person who walks in can tell what and where everything is it will take them less time to make a more favorable impression of the business.

It will get you prepared to give buyers the best idea of how to keep the store organized. It will be worth it because you’ll know where everything is and be more prepared to answer questions about any of the topics related to the operations.

Documenting Plan Going Forward Like You Aren’t Selling

This step shows that you have thought about the long-term success of the business and shows that even though you are considering selling, you want to help the buyers succeed.

Given you have the best knowledge about how well the business is doing, what opportunities you haven’t capitalized on, and what you just haven’t gotten around to, it will give both you and the potential buyer a map of what step should be focused on next.

A documented plan may increase the valuation from buyers if they believe it is a good plan. It will also help you with finding ways to improve the valuation to get the best offers from buyers.

Improve Financial Positions and Profit Margins

If you find that the financial position of the company can be viewed in vastly different ways, you may want to investigate how to make the different market valuations more in line with each other.

For instance, if the Price-Sales ratio shows the value is $1.5 million, but the Price-Earnings Ratio shows a valuation of $800,000, buyers are going to consider the best sale price $800,ooo leaving a lot of money on the table.

If you find a way to bring the PE ratio more in-line with the $1.5 million valuation, the sale could be worth an extra $700K.

This would require looking at aspects like unnecessary expenses, reducing (or increasing size of) orders based on what will save more money, paying down debt, having a sale on poor-selling inventory, or any other number of methodologies.

Check out our video on how to improve business efficiency to get ideas.

Pay Attention to the Market

Market conditions can dramatically impact whether buyers are willing to offer you the best deal.

During recessions, buyers will want to take advantage of the opportunity, while during expansionary times, businesses will often see premium valuations to increase the chance of making a deal.

Step 5: Market to Potential Buyers

• Business brokers
• Online business marketplaces, like UpFlip’s marketplace
• Sell to a top employee
• Sell to a competitor
• Newspaper / online ads
• Ask your social network
• Commercial realtors
• Trade associations
• You’re franchisor if you are a franchise.
• Add “Small business for sale near me” in the metadata of posts and images online to trigger results during searches.

The goal here is to make people aware that you are selling your business. The suggestions above basically fall into three categories:

• Sell to someone you know.
• Have a third party help you.
• Use digital platforms to sell the business

Sell to Someone you Know

This is typically the least complicated way as you already have a relationship and can discuss the terms without really having to do any marketing.

The major pitfall with this solution is you might agree to a lower price or even agree to let them pay you off over time. If this is not handled strictly professionally, it could create issues in the relationship.

Have a Third-Party Help You

Third parties will typically have more experience with selling businesses and may be able to create better results faster despite the additional costs that come with hiring a third party.

Business Brokers are ready to help and normally charge a percentage of revenue.  They have more resources to find business owners like existing relationships that may be interested.

Franchisors might also have a list of people looking to purchase franchises that will make finding the new owner easier. If you own a franchise make sure to reach out to them.

Use Digital Platforms

If you are already proficient in using digital platforms for ads, you may find that they can be highly beneficial.

If you haven’t used ads before, then they can be a steep costly learning curve, but most of them have amazing tutorials that will help you figure them out.

Step 6: Negotiate Terms and Sale of Business

To prepare for this stage, I would recommend checking out our blog about 41 questions to ask when buying a business . It will help you be prepared for questions buyers have.

During negotiations with the buyer make sure to discuss the following topics:

• Liabilities
• Period of Time You’ll Stay During transition

We’ve already discussed most of these in previous sections, but the employees and transition period should be discussed more.

The employees of the company can be both an asset and a liability. Depending on your plans for the current employees, you may need to negotiate an agreement on how to handle them.

If you plan on eliminating positions, you may want to have an agreement on how to handle layoffs or severance packages. The balance blog offers a good read on severance packages .

Period of Time to Stay on after Transition

Many business ownership transfers require a period of time where the current owner is still active in the business. This transitional period helps secure the success of the business once the new owner takes over.

Whether it is required by a lender or the purchaser certain aspects should be included:

• Period of time you’ll stay on
• Roles during transition
• Pay during transition

The Period of time you’ll stay on could be as little as a few weeks or multiple years depending on the complexity of the business. It should be specified in writing how long the transitional period will be.

During the transition, there should be a plan for the roles to gradually be performed by the new owner.

When my dad was hired as the CEO of a company, he explained to me that for the first 3 months he was just observing and learning how they do things. Then he gradually started implementing new processes.

I think that is a pretty good philosophy to take during a transition.

The American Institute of Architects gives some good advice on mistakes to avoid during transition planning. I’d take a read through it real quick to help minimize transition issues.

Pay during the transition should also be discussed and documented. This should be based on the time and amount of work done. It will typically be comparable to management or employee pay.

Make sure to negotiate the pay at a level where the new owner can still make a profit otherwise it could jeopardize the health of the business.

If the buyer is using financing to buy the business, they may want to include this in the purchase price so they can secure financing for it.

Once you and the buyer are in agreement on the terms, it’s time to contact a lawyer to draft the agreement before the sale is completed.

Once the contract is drafted and signed, the buyer is now the new owner and you have more money to pursue other passions.

There may be one more step that is required. Which we’ll discuss next.

Step 7: Transition Period

Some loans require this to help protect the investment. If it’s part of the terms required, make the best of the time. It might even be fun.

As discussed above, you’ll probably be working like normal for a period of around three months, then gradually reduce your responsibilities and time working. Typically this transition will be less than a year.

Now you know how to sell your company. We covered the following steps:

I personally find Shark Tank and The Profit really beneficial to better understand how investors evaluate businesses. If you don’t already watch them,

I’d recommend them to gain more business awareness.

I hope this article helps you sell your business for the most value. If you need some help, reach out to UpFlip and we’ll help you sell it.

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Thank you for this article! I've opened up a small online business last year to help with expenses. Unfortunately, I have to close it down as I underestimate the time and effort required to build one while keeping up with my day job. Anyway, hopefully, you can also make an article on how to negotiate to be a co-owner/investor when selling your business. Thanks again :)

Thank you for the comment. I'll add that to the list of ideas

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Seven Essentials When Preparing to Sell Your Business

Before you put your business up for sale, make sure these seven ducks are in a row to help with a smooth process and transition.

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Awareness and preparation are critical in understanding the complexities and nuances involved in selling a business. It's a significant decision that requires meticulous planning and strategic considerations.

Whether you're a seasoned entrepreneur or a first-time business owner, preparing to sell your business demands careful attention to detail. Here, I outline the seven essentials to consider when embarking on this transformative journey.

1. Ensure your financial readiness.

Before listing your business for sale, ensure your financial house is in order. Review your financial statements, including income statements, balance sheets and cash flow projections. Identify areas for improvement and implement strategies to maximize profitability .

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A potential buyer will scrutinize your financials, so transparency and accuracy are paramount.

2. Establish valuation and a pricing strategy.

Determining the value of your business is a critical step in the selling process. Seek professional valuation services to assess both tangible and intangible assets accurately. Avoid overpricing or undervaluing your business, as this can deter potential buyers or lead to missed opportunities.

A well-researched pricing strategy based on market trends and industry comparables can help attract qualified buyers and optimize sale proceeds.

3. Optimize your operations.

Streamline your business operations to enhance efficiency and maximize value. Identify areas for improvement, such as cost-reduction initiatives, process automation and scalability enhancements.

A well-oiled operation not only improves your business's attractiveness to buyers but also ensures a smoother transition post-sale.

4. Do a legal and compliance review.

Conduct a comprehensive review of your business's legal and regulatory compliance to mitigate risks and avoid potential liabilities. Address any outstanding legal issues, such as contracts, leases, permits and intellectual property rights.

Engage legal experts to draft necessary agreements, including sales contracts, nondisclosure agreements (NDAs) and noncompete agreements , to protect your interests throughout the transaction.

5. Determine market positioning and a marketing strategy.

Develop a compelling narrative that highlights your business' unique value proposition, competitive advantages and growth potential. Tailor your marketing materials, including prospectuses, pitch decks and online listings, to resonate with potential buyers.

Leverage various marketing channels, such as industry networks, online marketplaces and business brokers, to reach a diverse pool of qualified buyers and generate interest in your business.

6. Prepare for due diligence.

Anticipate the due diligence process by organizing all relevant documents and records in advance. Provide prospective buyers with access to financial statements, tax returns, customer contracts, employee agreements and other pertinent information in a secure and organized manner.

Proactively address any potential red flags or areas of concern to instill confidence and facilitate a smoother due diligence process.

7. Get professional guidance and negotiation expertise.

Seek guidance from experienced professionals, including financial advisers , attorneys and business brokers, to navigate the complexities of selling your business. Collaborate with trusted advisers to develop a negotiation strategy that maximizes your interests while fostering a mutually beneficial outcome for all parties involved.

Remain flexible and open-minded during negotiations, focusing on achieving your overarching goals and objectives.

In conclusion, selling a business requires careful planning, diligent preparation and strategic execution. By prioritizing these seven essentials — financial readiness, valuation, operational optimization, legal compliance, market positioning, due diligence preparation and professional guidance — you can enhance the likelihood of a successful and lucrative business sale.

Embrace the opportunity to embark on this transformative journey with confidence, knowing that you have the support and expertise needed to navigate the complexities of the selling process.

Remember, selling your business is not just a financial transaction — it's a milestone that marks the culmination of your hard work and dedication as an entrepreneur. With careful planning and strategic foresight, you can unlock the full potential of your business and embark on a new chapter of growth and prosperity.

Securities and advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®. CERTIFIED FINANCIAL PLANNER™ in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

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Dennis D. Coughlin, CFP, AIF, co-founded CG Capital with Christopher C. Giambrone in 1999. He has been in practice since 1996 and works with individuals nearing retirement and those whom have already retired. Proud of his humble upbringing, Dennis shares his advice with the same core principles that he was raised with. When not in the office, you will find him with his family enjoying the outdoors.

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How To Sell Your Business and Make a Successful Exit

Published: August 24, 2022

You’ve done it: You took an idea, built it into a thriving business, and now you’re ready to sell. Congratulations — few entrepreneurs make it to this point. But now it’s time to ensure you make the right deal for your most prized possession.

Entrepreneurs choose to sell their businesses for many reasons, ranging from retirement and health problems to co-founder conflict and just plain boredom. In 2021, 8,647 businesses were sold, a 14% jump from the year before. 

Regardless of why you’re moving on, there are actionable steps you can take so that your business is sold at the right time, for the right price, and to the right buyer. 

Steps to selling a business

1) Educate yourself — Spend some time researching how to sell (you’re doing that now!) and figure out if you need to make any changes to get your business ready for the process. Common actions include adding business processes to make the business scalable, adding features that would open up a new market, or filing patents to lock down intellectual property.

2) Get organized — Do your due diligence by organizing your bookkeeping and financials and getting ahead of anything that could slow down the sale (such as signoff from other shareholders or active lawsuits or legal proceedings). Write a business memorandum: the company’s history, overview, and successes (highlight wins such as high talent retention or pivoting amid the pandemic). 

Also consider your business’s employee contracts, intellectual property issues, and federal and state tax requirements. To ensure you have time to fix all potential red flags, hire a third-party accounting firm to audit your financial statements a year or two before the sale. 

3) Get a preliminary business valuation — Turn to experts (e.g., business brokers, merger and acquisition advisers) to understand how much your company is worth, then consider if you’re willing to accept that price. 

4) Identify who should be your buyer — Find the why when thinking of your ideal fit. For example: Does the buyer have the cash to buy, or do they need financing? Have they bought companies before? Who would need to approve the deal on the buyer’s end (internally: founders, board members, management; externally: investors, banks)? Will they keep your team employed after the sale? 

5) Assemble your team — Putting together a team early can prevent a lot of stumbling down the road. Professionals who could help with the process include: 

• Corporate finance attorney 
• Business broker 
• M&A adviser
• Personal tax accountant 
• Company auditor 
• Sell-side bankers 

6) Go to market — For small businesses, owners can list their companies anonymously on business broker sites. For larger ventures, owners should identify potential suitors by looking at direct rivals and companies in related industries.  

7) Follow the deal to close — Deals can fall through days before closing; stay on top of it along the way by responding to requests within 24 hours, scheduling weekly calls with advisers, and pushing legal counsel to move documents forward quickly. 

A tip: Time is your enemy. Resist any efforts made to push the closing date. 

8) Prepare for life after sale — Your business is your baby: You should be hands-on when planning your company’s transition (this includes how the new owner will interact with your employees and customers). But entrepreneurs also need to give thought to life after their exit, from retirement planning and managing sale proceeds to future personal and professional goals.

When to sell your business 

Knowing exactly when to let go of your venture can be intimidating, but experts agree you should decide whether selling is in your future at the very beginning. 

“The best time for entrepreneurs to consider selling their business is when they start their company,” says business broker Katie Milton Jordan . “Consider what you want your company to do for you. Are you creating a company that you want to sell or a company that will create an independent stream of income just for you?”

When weighing the pros and cons of an exit, also think about the financial health of your company. “You want to be selling when your company is performing well, you’re cashed up, and you’re growing,” says David Raffa , a corporate finance expert. “The worst possible thing you can have is to sell in the slope part of your year.”

Along with financial considerations, the right time to exit your business is a deeply personal decision that only you can make. For Cindy Summers, founder of Sugar Fixé Pâtisserie, moving on felt right once her business no longer challenged her or fit her lifestyle.

“My passion is building businesses and creating great customer experiences. Once my business was established, I became more of an operator. This didn’t give me the mental gymnastics I needed to stay inspired,” she says.

Additionally, the nature of her business made it difficult for Summers to find work-life balance. “I was married but kid-free when I started the business. Three kids later, and there was an emotional conflict between my family, employees, and customers. Busiest times in a bakery are weekends and holidays. This meant missing out on a lot at home,” she says. 

Some other common life experiences that lead to exits include:

• Illness 
• Co-founder misalignment or conflict 
• Boredom 
• Retirement 
• Shifting life priorities 

Jordan advises owners to sell their companies before the “five D’s”: death, divorce, disease, disengagement, and downturn. Making an exit prior to those events can ensure you get a fair price for your creation.

“Most entrepreneurs tend to get out too late, when they have no gas left in the tank, and the growth rate of the business is a big piece of the value you get in the end,” says Raleigh Williams, who sold his escape-room business for $26m. “Ending on a high note is something that pro exit entrepreneurs do versus amateurs.”

How much to sell your business for 

Della Kirkman , a CPA and business investor, uses a simple calculation to get entrepreneurs started: “A quick and easy formula is to determine the five-year weighted average of EBITDA and multiply it by the range of multiples that are appropriate for your type of business.” Kirkman says she most often uses a multiple between three and five. 

Meeting with experts to get a professional valuation of your business is the most accurate way to find the right number. Therefore, get started with assembling a team of advisers early in the selling process, and find professionals who work closely with your industry whenever possible. The more niche their experience, the more they’ll be able to guide your sale appropriately. 

Third-party experts can also ensure the business is ready to be sold. “A lot of business owners don’t realize their company can’t be transacted and isn’t packaged properly to go to market,” Jordan says. “That’s why it’s important to ask questions and get educated as soon as possible.” 

A common roadblock Jordan sees is solopreneur businesses. For those who wear every hat at their firm, buyers feel they are essentially buying a job rather than a company. Another reason for a difficult transaction could be if a business is tied up in any sort of legal proceedings. 

To make a business more appealing to buyers, Jordan suggests depersonalizing your operations.

“Business owners create a business and a system in a way that’s easy for them to run, built around their strengths and personality, because they work so hard around the clock,” says Jordan. “When it comes time to sell, their quirks are not the quirks of the new owner.”

She suggests that owners create manuals, standard operating procedures (SOPs), and automations where possible. 

“Just like when someone buys a new car and you hand them the set of keys and the owner’s manual,” she says. “If you have a company you can hand off with an owner’s manual, you have something that can be transacted.”

Once you have the right deal, stay active in the process until the very end. 

“As a founder, so much of your net worth is tied up in this transaction,” Williams says. “Outsourcing that process and not being involved, or expecting a lawyer or broker to be as involved in the details to the same extent you need to be, is unwise.”

Where to sell your business 

If you’re wondering where to sell your business, the right place depends on its size. For small solopreneur-owned ventures, owners can list their companies anonymously on business broker sites such as BizBuySell ).

There are many different business sites. Some target specific cities or states, as buyers often want to acquire local businesses. Experts recommend researching the best site to list using a simple Google search that includes your location. 

For larger companies, Raffa says that entrepreneurs can spearhead the selling process directly through a sell-side banker rather than list on a business broker website. 

“In that situation, you should do rounds of approaches,” he explains. “Make a list of 100 potential buyers, and start with the first 10-30 ideal ones, and work down that list.”

Raffa advises assembling your list by including companies 5-10x your size in your business space (often competitors), companies in a closely related space, companies in a similar industry who are struggling and need a new edge, and companies that want to enter your geographic market.

He notes that when reaching out to potential buyers, likely only half will engage with you, and they should sign NDAs before you disclose further financial information and insider business details. 

Alternatively, you can start with companies lower down the list to dip your toe in, understand the typical questions asked, and circle back to your ideal buyers when you feel more prepared.

When Williams began the process of finding a buyer, he approached direct competitors first, a tactic he says is helpful across industries. 

“People in the same industry or adjacent to the industry are the easiest people to do deals with because they understand what they’re looking at,” he says.

It’s also common for business owners to get inquiries from companies or investors interested in acquiring. Even if a sale isn’t in your immediate plans, don’t ignore the opportunities, which may lay the groundwork for a deal down the road. 

Life after exiting 

Selling doesn’t have to mark the end of your career — aspirations for the future can actually be baked into the terms of the sale. 

“The options are endless,” says Kirkman. “Whatever they can dream up and negotiate into the deal, they can have.”

Kirkman says this includes options such as:

• Annuity in perpetuity: a profit share for the life of the business
• Retaining ownership of a brick-and-mortar building to create a future rent stream
• Taking a revenue share for any new clients brought into the company 
• Selling your business on a partial installment basis to spread out the payments (which can help with tax deductions) 
• Staying on as an employee (often called an acqua-hire) 
• Stay with the business as a consultant 

Whatever you choose, be sure to put time into the decision-making process. If a clean break feels like the right move, it likely is. If you’re not quite ready to say goodbye, that’s OK, too. 

Plus, your exit might just be the first of many, and you can use the experience to inform your future ventures.

“Most entrepreneurs after they’ve exited something realize that the ends won’t justify the means nearly as much as they thought they would,” Williams says of running a business that’s purely profit-driven. 

“They tend to actually move into the thing that they wanted to do all along, but were scared there wasn’t enough money in,” says Williams. “And they tend to make way more money in the thing they actually enjoy doing than their first exit.” 

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Selling a Business: A Step By Step Guide

Reviewed by

February 23, 2021

This article is Tax Professional approved

When considering selling a business, it’s time to get the compensation you deserve for all of the blood, sweat, and tears.

By understanding all the moving parts behind a business sale, you can worry less about the process and focus more on the outcome: getting a fair price for all your hard work.

I am the text that will be copied.

How to sell a business, step by step

While every entrepreneur’s journey is different, these are the steps you can typically expect to take when selling a business.

Step 1: Determine your commitments

While preparing to sell a business, it shouldn’t suffer. Selling a business takes time and energy. Getting too caught up in the process can get in the way of servicing your customer base.

Chart out an exit strategy to prepare for the sales process well in advance. For example, have a plan in place for any outstanding invoices and get the financial records up to date for prospective buyers.

You don’t need to know the exact amount of time needed to take care of every task, but it will help you come up with a timeframe for a successful sale. It will also help you plan what kind of professionals you need to hire.

Step 2: Hire professionals

Knowing how to sell a business is important, but equally important is knowing where to bring in help.

To jump to our overview of professionals to hire, click here . But as a quick rule of thumb, start with an accountant and attorney. Outside of that, it’s up to you to determine how much help you need from appraisers, brokers, or consultants.

Once you’ve found and contacted them, any of these professionals should be willing to sit down with you for a free consultation. Here are some useful questions to ask an appraiser , a broker , and a consultant .

Step 3: Make improvements to the business

Before selling a business, invest in improving its profitability and the efficiency of its day to day operations. This will help you get the biggest sale price possible by boosting the value of your business. The changes you make will depend on the type of business, but here are some ideas to get you started.

Put on a fresh coat of paint

If you have a brick and mortar location, simple updates—new fixtures and furniture, or even a (literal) fresh coat of paint—can help the business look more desirable to potential buyers.

Smooth out the operations

The business operating system (BOS) is the rulebook for how the company runs and how employees work together to achieve goals. A BOS that’s disorganized or poorly implemented doesn’t look good, and hurts the profitability of the business. Replace it with a new system, or revise the current one to make it more efficient.

Sell, sell, sell

Focusing on boosting sales before selling a business will make it look more attractive to buyers. This is especially the case with individual buyers—as opposed to organizations—who may be looking to benefit from the immediate cash flow that comes with buying a high-revenue business.

Diversify the client list

If more than 20% of your business consists of a single client, you could be at risk of giving buyers cold feet. After all, if that client decides they don’t like the new owner and decides to churn, it will put a huge dent in the profitability of the business. Leading up to a sale, try to take on new clients and diversify your portfolio, so this is less of a risk.

Step 4: Organize your financials

When it comes to financials, prospective buyers want as much transparency as possible. You’ll need at least three years of clean financial statements (balance sheet, income statements) to present to prospective buyers. Make sure that all income is accounted for.

You should also make sure you have a bookkeeping solution in place, so you can guarantee the new owner ongoing, up-to-date financial info.

Finally, if you have any assets on your business books that you’d like to keep for private use—such as vehicles or equipment—be sure to transfer them off the books. These assets need to be legally transferred into your possession, so they’re not falsely recorded as belonging to the business you’re selling.

Step 5: Set the sale price

Does your business rely on proprietary information or specialized knowledge? If so, you’ll get the most realistic business valuation from an appraiser or broker.

If you’re determining your own asking price, you should generally plan to set it at one to four times the seller’s discretionary earnings (SDE).

The SDE consists of:

• Your business’ annual net income before taxes
• Money your business makes from investments
• Depreciation and amortization of business assets
• Your personal compensation and benefits
• Non-recurring expenses.

The number by which you multiply the SDE—one to four—is determined by the current state of the market, your business’s competitiveness, and other factors. These are hard to pin down, but a qualified business consultant can help you figure out the SDE multiplier when selling a business.

Step 6: Get your paperwork in order

Besides financial records, you need certain legal documents to be prepared before you make a sale. The most important is the asset purchase agreement —a legal contract for selling your business’s physical and intellectual property.

This document typically runs 25–50 pages in length, and draws on your financial records. Often, the asset purchase agreement will also list your obligations as former owner. Most commonly this means staying on with the business for a set period, to consult with the new owner.

A non-compete may also be required. This would state that you do not intend to start a new business that would be competition to the old one you just sold.

Preparing one of these documents is a time-consuming task, which is why it’s important to hire an attorney who can handle it for you.

Step 7: Prepare a selling memo

The selling memo is an integral document when selling a business.

You provide the selling memo to prospective buyers, giving them all the information they need about the business so they can consider making a serious offer.

Your selling memo will include:

• An overall description of the business
• Information on the location
• The business’s strengths
• An overview of the competitors
• A description of the products/services
• Information on the day-to-day operations
• The marketing plan
• Key employees and managers
• Growth projections
• Potential buyer concerns
• Financial information
• The asking price and terms of sale

Check out ExitAdviser for a comprehensive rundown of the selling memo , and online tools to help you put one together.

If you hire a broker, they will prepare the selling memo for you.

Step 8: Put the business on the market

One major challenge you face when advertising a business for sale is maintaining confidentiality. If clients or employees find out you’re planning to sell, they may get skittish. And competitors could interpret the decision as a sign of weakness, and take advantage of it.

That’s why it’s usually wise to hire a broker. Not only will they have a large network to draw on, they’ll know how to discreetly approach potential qualified buyers.

However, in the event you do decide to sell a business without help from a broker, online services have made doing so easier than it once was.

BizBuySell.com tags itself as the biggest business for sale marketplace in the world, and will even help you find a broker if you change your mind about going it on your own.

Step 9: Negotiate the sale

When the right buyer is ready to purchase the business, they’ll submit a letter of intent to purchase . This document is non-binding; either you or the buyer can back out at any time.

It’s rare for a buyer to back out, though. By this point, they’ve already invested significant time in researching the business and putting together an offer.

Now, you may either accept the offer, or enter into negotiations with the potential buyer. Negotiating the sale of the business is its own special art form, and you may want to draw on advice from a business consultant during the process.

Step 10: Finalize the sale

Once you accept a letter of intent, you should expect to wait while the buyer performs due diligence. They’ll take a set period of time, from two to four months, to do this.

For the sake of due diligence, they’ll examine your business’ assets and liabilities, financial history, inventory, staff structure—just about anything that affects the day-to-day running of your business.

Due diligence is your buyer’s chance to get an in-depth look at your business, and make any necessary last minute moves—borrowing extra cash, or looking for additional staff—before officially taking over.

The sale of your business is completed when you and the buyer sign the asset purchase agreement prepared by your attorney, and any other supporting documentation that may be required depending on the specifics of your business.

The professionals you need to hire

A guide on how to sell a business can give you the steps you need to take, but professionals can ensure you’re getting the maximum value and cover you legally. That’s why it’s best to get a little help from your friends—“your friends,” in this case, being paid professionals.

At minimum, you’ll need to work with an attorney and an accountant.

An attorney can help you prepare the legal documentation for the transfer of assets, and make sure nothing you’re doing is likely to get you sued.

An accountant prepares the financial records you need to prove to prospective buyers your business is worth investing in.

Then, you should consider hiring an appraiser . For a fee— typically $3,000 to $7,500 for small businesses—an appraiser will tell you how much your business is worth so you’re getting the maximum value.

An appraiser will survey:

• How much money your business owes
• How much others owe your business
• Your business’s inventory, and other assets
• Past tax returns
• Your receivables and sales

Then, they’ll take into account the condition of the market, and your business’s place in it, to determine an asking price that will be attractive to buyers while also getting you the best price.

However, you won’t need to hire an appraiser if you hire a business broker . A broker will both appraise your business, and put it on the market for interested buyers. Typically, they’ll charge 5–10% of the commission price. Brokers find business buyers for you by preparing a prospectus for it, listing it on marketplaces, and tapping into a large professional network.

Finally, before putting up the “For Sale” sign, consider hiring a business consultant . Someone with experience in your industry can tell you ways to improve your business before making a sale so it will look more attractive to potential buyers.

Who to sell a business to

Equally important as how to sell a business is who you’re going to sell it to.

You can sell a business to a variety of individuals or entities. There are pros and cons to dealing with each.

Selling a business to an individual on the market

This is like selling your house on the market. You put it out there, and see which individual shows the most interest in becoming a small business owner (for the highest price).

Pros: Since the business is up for sale on the open market, you have the highest chance of finding someone willing to meet the conditions of the sale—for instance, an all-cash closing.

Cons: To sell on the open market, you will likely need to hire a broker who charges commission.

Selling a business to a family member

Roughly one-third of business sales are between family members. This can take the form of handing off the business to the next generation of owners.

Pros: As the business gradually changes hands and your family member takes over, you’ll still have some say in how the business is run. Also, a change of hands between family members means a smoother transition for staff and clients.

Cons: It’s unlikely you’ll be able to get the highest possible asking price for the business when selling to a family member.

Selling a business to partners

If the business operates as a partnership, you have the option of selling your shares to your partner. Most likely, when you formed a partnership, you signed a buy-sell agreement. This document outlines the price and procedure you need to follow to make the sale.

Pros: Following a predefined path for making the sale requires minimum effort on your part, and has a low impact on staff and clients.

Cons: Even as the buy-sell agreement makes for a quick change of hands, you may find yourself stuck with a price that seemed attractive when you signed the contract, but has become less appealing as the business has increased in value.

Selling a business to an employee

A trusted employee who’s great at their job and knows the business inside and out could make the perfect business owner—and the ideal buyer.

Pros: You can plan the sale well in advance. The first step is setting up a legally-binding partnership with an employee. Then, you’ve got plenty of time to arrange the hand-off, and extract yourself from daily operations, before the employee takes over completely.

Cons: As with selling to a family member, selling to an employee is unlikely to get you top dollar for the business.

Selling a business to multiple employees

You may be able to sell the business to qualified employees, if you have an Employee Stock Ownership Agreement (ESOP) in place.

Pros: Taking advantage of existing relationships with employees means you don’t need to put the business on the market. Existing employees are also more likely to run it successfully than a buyer you’ve never met before.

Cons: The ESOP needs to be put in place well before you make the sale. Setting it up demands extra paperwork and professional help .

Selling a business to another business

Large businesses and private equity groups buy companies as investments. In that case, they’re not looking to set it up with a new owner, but to use parts of the business—market share, competitiveness, profitability—to benefit a larger, similar business in their portfolio.

Pros: You’re more likely to secure a better selling price from another business than from individuals, and get an instant payout.

Cons: Depending on the sale terms, you may need to continue managing the business for a fixed period during the transition.

Further reading

• How to Find an Accountant
• Accounting Outsourcing: How to Hand off Your Financial Tasks (With Recommendations)
• How to Know If Your Small Business Is Financially Healthy
• How Long to Keep Business Tax Records and Receipts

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How to sell a business in six steps

Wondering how to sell your business so you can make the most of your labor of love? First off, congratulations! Selling the business that you worked so hard to create and build is a big choice, and one that comes with planning, goal setting, searching (for buyers, and maybe even some soul-searching, too), valuations, and a whole lot more. So before you start advertising your business in the local classifieds, start here: how to sell your business— the right way. To help guide you, we’ve made a list of six simple steps that you can follow all the way to the bank. 🏦 How to sell a business in six steps:

• Time your sale properly
• Organize and prepare your finances
• Determine the value of your business
• Decided whether or not to use a broker
• Find a buyer

Ready to move from for sale to sold? Well, getting there will take longer than reading a few bullet points, but you’ve got to start somewhere! Let’s begin.

Step 1: Deciding to sell your business

Deciding to sell your business isn’t always an easy choice to make. It’s typically not a quick one, either. When you’ve reached this point, it usually means you’re in the midst of change, and that’s totally okay. Here are just a few reasons why people make the decision to put the proverbial “for sale” sign on their business:

• A career or a life change. For example, a divorce, a death in the family, illness, or, in terms of your professional life, you’ve decided that you’re ready for your next move and a total career change. This could be anything making the switch from running a boutique graphic design agency to opening a bakery or moving from owning a catering company to becoming a full-time accountant. You do you—and sell your business to help you get there.
• Retirement. You’ve put in your time and have decided to call it quits and join the flock of snowbirds who travel south six months of the year. We wouldn’t blame you. ✈️
• Differences: Perhaps after five years in business together, you and your partner have decided that you want different things, and selling the business is the best way to achieve your respective goals. Don’t stress, this happens. And when it does, it’s best to have the agreements made up in advance of the sale.
• It’s just not working for you: You feel overworked, underpaid, or simply bored. When this happens, you’ve got a call to make: should you stay or sell?

Whatever the case, it’s important to know the reason behind your decision. Not only will it help you sleep better at night, but potential buyers will want to know. Knowing the owner’s motivation can be a big part in their own decision making, helping them understand the reasoning behind the sale and how that might play a part in the future success of the business. When selling, remember to be open and transparent. This creates trust and a smoother process from start to finish.

Step 2: Time your sale properly

Making the decision to sell your business usually doesn’t happen overnight. But even if you magically woke up with the idea and decided to move it from dream to reality, the plan to get you there can take months—sometimes even years. This is why planning well in advance is key to making the most out of your business decision. Allowing for ample space and time in the process gives you the opportunity to make improvements that will increase the business’s valuation. For instance, you might want to clean up your finances , look at ways for reducing operational costs, and create a few campaigns to build up your sales. Or, if applicable, focusing on customer retention by launching a loyalty program, or executing a few tactics that will strengthen your brand awareness. While these tips do take time to go from ideation to implementation, they can make your business much more attractive to buyers. 

Step 3: Organize and prepare your finances

We just mentioned cleaning up your finances, but before you can do that, you’ve got to bring them all together in one organized place. Start with financial statements like balance sheets, P&L statements , and your tax returns from the past three to four years. If you’ve got the time, take the extra step to review them all with an accountant or Wave Advisor to make sure everything is in good order. You’ll also want to go into list-making mode to put together the following information:

• Equipment: What’s being sold with the business? 
• Contacts: Who are your suppliers? What are their related transactions? Anything outstanding? 
• Lease: How long is your current lease? What utilities are included? Are there options to renew? ‍

All of this information can go into an information packet for your potential buyer. This packet will provide an overview of your business, how it’s managed, and the day-to-day operations. It’s helpful for the buyer to have, so they can take over operations as seamlessly as possible.

Step 4: Valuate your business

How much is your business worth? That’s the question you want to find out as you prep for sale so you have a realistic listing price in mind. Emphasis on realistic. Don’t price the business too high or too low. When you do that, you’ll be stuck with less money than you deserve, or you’ll find that buyers are passing on the opportunity because the cost is too much. To help you get the right answer, look at hiring an appraiser to complete the valuation. As a third party, they’re neutral to the situation and have nothing to gain from the sale. Plus, they can draw up the necessary documentation that you’ll need throughout the process. Now, let’s take a step back to step two: timing your sale properly. When valuing your business, you need to give yourself enough time to get all your ducks in a row, which includes the time to boost your valuation. This can be done through cost-cutting tactics and initiatives to increase revenue, brand awareness, and customer retention. You know, all the things that a buyer wants to see before they sign the dotted line. 🖊

Step 5: Consider using a broker

When you’re selling your business, there are two ways you can go: with a broker or without one. If you’re selling to a close friend or relative, a broker might not be needed. If you decide that’s the case, you can save yourself a few bucks. But speaking of dollars, you might want to explore hiring a broker if you want the biggest bang for your buck. Brokers work off commission, so they’ll do what they can to help maximize the sale and their take-home amount. To help with the sale, they can handle the logistics of selling your business, freeing up your time so you can keep the business in good order until it's sold. For example, they might be working quietly in the background with their network of buyers to get the highest price. But before you decide to hire your broker, be sure to set your expectations, including advertisements, communication, and commission. This makes for a successful and transparent relationship, and a smoother sale.

Step 6: Find a buyer

Last but not least, you’ve got to find yourself a buyer. And you guessed it: this (likely) doesn’t happen overnight. To get you to that ideal point of having two to three potential buyers, consider boosting your advertising. This is where brokers can come in handy. Not only do they have their networks, but they’ve also got a few marketing strategies up their sleeves to help promote the sale of your business to those who are looking. Once you’ve found the buyer(s), keep in touch with them. You’ll also want to make sure they’re pre-qualified for financing before you give out any specific info about your business. Next, you’ll want to bring in your lawyer. Lawyers are extra helpful if you plan to finance the sale and need to work out the details with the buyer. On that note, make sure any agreements are put into writing, and have potential buyers sign a nondisclosure or confidentiality agreement so your business remains yours—at least until it’s theirs. Now, when it comes to price, allow yourself some wiggle room. Set a firm price or price range that you find reasonable. This lets you allow for negotiation, but on your terms. ‍ Lastly, the signed agreement. Try to get this into escrow , which means that a portion of the purchase price would be held by a third party until agreed-upon obligations are filled. These could be the transfer of assets or a resolution for any outstanding assets, as an example. ‍ After all is sold and done, you might find yourself with a few more business encounters, like a bill of sale that transfers your business assets to the lucky buyer; an assignment of lease; or a security agreement which lets you keep a lien on the business. Another legality? Your buyer might present you with a non-compete. By signing this, you’re agreeing that you won’t start a competing business that could lure your loyal customers away.

Selling a business FAQs

How much does it cost to sell a business .

This depends on the route you take. If you go with a broker and you sell your business for less than $1 million, expect to pay a commission around 10% to 12%. You’ll also have to pay fees associated with marketing, lawyers, potential transfer fees, and any improvements you make to your business to boost its appeal. 

How do you sell your share of a business?

The common way to sell your share of a business starts with an agreement. Try to put this in place with your business partner(s) ahead of any sale. This will help remove emotions and keep things running smoothly.

How do you sell a small business without a broker?

You don’t always need a broker to help sell your business. This can be especially true if you’re selling to someone you know, like a family member or friend. That said, you should still consult with your small business network to get their expertise and advice; trusted sources on the internet ( 👋 ); and those who’ve have sold businesses before.

The bottom line on selling your business

Selling your business comes down to six simple steps: the timing of your sale, organizing your finances, valuation, the choice to use a broker or not, and then finding a buyer. And even once all that’s complete, sometimes you need some help. Be sure to talk to your network of business owners or reach out to Wave Advisors for help. This is a big move, so you want to make sure that it’s the right one for you, and done right. Which, in the case of selling businesses, doesn’t always mean quick. But trust us: seeing that deposit enter your bank account will make all the hard work worth it.

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The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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5 Crucial Steps to Sell Your Business

Selling your business? Follow these 5 steps to make the process seamless and profitable.

Table of Contents

Selling your business is a complex process with many challenges. A lot can go wrong before you close the deal, whether that’s failure to find a buyer, selling at too low a price, or running into a breach of confidentiality. But if you take the right steps to prepare for a successful sale and seamless transition, you can limit these risks.

While the sale of every business is unique, the fundamental process remains the same, and there are well-established steps you must take. This guide offers five main steps you should follow to get you through the sale of your business and to get the best price.

Steps to selling your business

If you’re ready to sell your business, take the following steps to help you land the deal you want and ensure transfer of ownership goes smoothly. 

1.    Maintain clean and well-documented financials.

The No. 1 reason companies don’t sell is poor or weak financials. This means you must pay your taxes and show a profit on your tax returns. Your company’s financial data is the foundation of your future sale, so getting it right is vital. Work with your accountant and tax professional on this step to form the basis of your company’s valuation and sale negotiation. 

Potential buyers will scrutinize your business’s financials, as that forms the basis of their valuation. Therefore, the more information, statements and other documentation you can gather, the better. 

While getting your finances in order, consider the following questions:

• Do I have intellectual property that will make my business more valuable?
• What is special about my business that makes it worth more?
• Do I have documented standard operating procedures I can give to the acquirer?
• What are the strengths and weaknesses of my business?

2. Get an estimate of your business’s worth.

You might think you know the value of your business; you may even think it’s priceless. However, there is a true fair market value for your company and you’ll need a professional to help determine what that is. Getting an expert to examine your business’s financial stability, historic sales and expenses, and anticipated performance over time can help you maximize your valuation without overpricing your business and scaring off potential buyers.

The valuation process includes an analysis of your company’s financials, products and services, business model, marketing strategies, and management team. Everything that is relevant to the current health and future potential for your business will be considered.

Following the evaluation, you’ll receive an estimate or range of what your business is worth and the amount you should expect to sell it for. This valuation is based on a multiple of your business’s profit, as determined by similar companies that have recently sold.

Below are some of the variables that may make your business worthwhile compared to your competitors:

• Growth rate (faster growth equals a higher price)
• Competitive advantages
• Competency of the management team
• Market share
• The size of your company (larger companies generally sell for a higher comparative price)
• Industry and business model (for example, software companies generally sell for more than lawn mowing companies)
• Capital insensitivity of the business (for example, do you require more equipment than other businesses to make a profit?)
• Sales and distribution (companies with a repeatable process to get new customers tend to sell for a higher valuation)

Every business is unique, so it’s important to get a professional valuation from a reliable third party. 

3. Hire a reliable broker. 

A broker will guide you through the complex business-selling process and do a lot of the heavy lifting for you. A good broker is worth more than the fee you pay them. 

So what should a good broker do? For starters, they should take the following actions:

• Perform a business valuation and advise on a valuation range.
• Maintain confidentiality.
• Create a competitive deal process to have multiple bidders make offers on your company. 
• Organize due diligence efforts to ensure a smooth sale process (many deals fall apart because of a lack of due diligence).
• Connect you with qualified, interested buyers and advertise your business.
• Facilitate buyers throughout the sales process.
• Aid with negotiations. 
• Introduce resources for funding and financing .
• Coordinate lawyers, accountants and other advisors.
• Create the best deal possible for both parties.

What does a broker cost?

A broker generally charges a commission that is a percentage of the sale, but the percentage can depend on the size of the business (in terms of revenue). Variables include the location, company type, company size, and complexity of the deal. Here’s a ballpark estimate of prices you might see from brokers:

• Businesses with $1 million in revenue can expect to pay a 12 percent to 15 percent brokerage fee.
• Companies with up to $5 million in revenue can expect fees between 8 and 10 percent. 
• Larger businesses with more than $25 million in revenue can expect to pay a 5 to 7 percent commission. 
• Companies with revenue $50 million and over can expect fees between 4 and 6 percent. 

Not all brokers are created equal, so do your research and ask previous clients about their experiences before choosing a broker to work with. The best brokers will make their process transparent and offer references that can give you more details about the level of service to expect.

4. Find a pre-qualified buyer.

As the seller, you should only entertain serious offers for your business. How do you determine what constitutes a serious offer? Buyers, however good their intentions might be, need to be able to follow through with a deal — otherwise, they’re wasting your time. Ask the important questions right away before you get your hopes up. 

Here are some questions to pose to buyers from the beginning of any discussion:

• Does the potential buyer have the funding they need, or are they pre-approved for that funding?
• Does the potential buyer have experience in the industry, and do they generally know what they are getting into? 
• What are the potential buyer’s intentions for the business after they take over? If you care about what happens to your business and former employees after you sell the business, this might be an important question for you.

What is the timeline the potential buyer is considering? If you want to sell soon, you might not want to deal with a buyer who wants to drag things out for over a year.

5. Finalize contracts and close the deal.

This is where most deals fall apart, and it’s the most complex part of the process. You need to finalize legal contracts, deal with potentially messy final negotiations, and avoid the deal falling through at the last minute. 

We recommend hiring a business sales lawyer for this stage of the process. You might want to find one independently, though your broker might have several in their network. Make sure they are thoroughly in your corner, as they will look over every detail in your contract. The slightest error can potentially sink the detail.

There are plenty of documents to prepare, gather and review, including the following:

• Purchase agreements
• Bill of sale
• Reps and warranties
• Indemnification clauses
• Asset list and transfer
• Noncompete clauses and agreements
• Intellectual property transfer
• Transition time and work agreements
• Employment agreements and employee continuity
• Escrow of the sale monies, transfer and closing

You can easily be dealing with a collection of documents that is 100 pages or more once everything is accounted for. Having a professional on hand is essential to getting this right. Once everyone is satisfied with the paperwork, all that’s left is to execute the deal and transfer ownership of the business.

FAQs about selling a business

These questions are commonly asked by entrepreneurs who are preparing to sell their businesses.

What is the average sales time frame? 

The average sales process takes between four and 10 months, depending on the size of the deal.

Can I compete in the same industry after I sell my business? 

Generally, there will be a non-compete agreement with a duration between three and five years. This period of time is usually defined by your industry and/or your region. 

Will my employees be laid off after I sell? 

What happens to your employees after you sell your business is at the discretion of the buyer. That is why it’s important to understand the buyer’s intentions before you close the deal. You can, however, contractually require the buyer to maintain employment after the sale.

Will I need audited financials to sell my business? 

In most transactions, buyers perform a quality of earnings analysis rather than a full audit. A quality of earning analysis provides the buyer with information like a company’s EBITDA , or earnings before interest, taxes, depreciation, and amortization.

What happens to my liabilities? 

Most business liabilities need to be cleared before the business sells. If a buyer acquires a business with any outstanding debt on the books, it can become the buyer’s liability; however, this item is always pre-negotiated before the purchase agreement is signed.

Selling a business is a complex process

While some business owners think selling their business may be a simple task, it is actually a long-term process that requires extensive preparation, documentation, and deliberate action on the part of both buyer and seller. However, if you follow the steps above, you will set your business up for a relatively seamless sale that gets you the money your company is worth and sets the buyer up for success.

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How to Sell Your Business

If you want to jump right into selling your business,  Business Exits  is a great place to start.

You’ve decided to sell your business—now what?

The process of selling a business can feel overwhelming, especially if you’ve never been through it before. Between the timing of the sale, the logistics, and a whole lot more, there are many factors to consider before you proceed.

First, you need to understand that it’s perfectly okay to sell your business. Many small business owners struggle with this concept, especially if it’s a company they’ve built from scratch.

Whether you’re ready for retirement, feeling overworked, or just ready to move on to the next chapter of your life, selling your business can be extremely rewarding.

If you take the right approach, the profits can fund your next venture or give you the financial freedom you’ve always dreamed about.

We know what it takes to sell your business the right way. We’ve taken a complicated process and simplified it to just five easy steps.

Step #1: Determine Your Business Valuation

Most entrepreneurs think they have an idea about what their business is worth. But in many cases, the number in their minds is way off from its actual value.

Before you list your sale price too high or too low, bring in a valuation expert.

A third-party valuation will provide you with a realistic estimate of the company’s worth. For a fixed amount (usually a few thousand dollars), a qualified appraiser can determine the business’s true value with a detailed report and documentation.

The report can add credibility to your asking price if prospective buyers question the amount. At the very least, the valuation will give you a rough estimate of what you can expect.

If you don’t want to hire an appraiser, you could always try to figure out the value on your own. Generally speaking, there are three main ways to value a business —cost approach, market approach, or the intrinsic value approach.

The third method, also known as the discounted cash flow approach, is the easiest to do. Most companies are usually worth anywhere from three to six times the current cash flow.

With that said, there are lots of other factors to take into consideration here. Industry trends, business debt, assets, and similar companies for sale are just a few examples to consider.

Whether you estimate the value on your own or bring in a third-party appraiser, the valuation may not end up being the final sale price.

At the end of the day, the business is only worth what someone is willing to pay for it. If you’re unhappy with the valuation, it might not be time to sell your business quite yet.

Think of it like selling a home. Your real estate agent could tell you what the house is worth, but the property could sit on the market for months at that list price. You might have to put some money into the house to get the maximum value. The same analogy can be applied to selling your business.

Step #2: Get Your Financials in Order

Once you’ve determined the company’s value, it’s time to organize your financials. For some of you, this will be much easier than for others.

Selling a business draws many sets of eyes to your financial records. Prospective buyers, lawyers, accountants, third-party valuation firms, brokers, specialists, and other people will be combing through your statements. To ensure everything goes smoothly, your bookkeeping must be immaculate.

In most cases, you’ll need to provide at least the last three years of tax returns, as well as accurate financial statements (balance sheet, income statement, cash flow statement).

Any mistakes or disorganization in these records could be a red flag for potential buyers. Inconsistencies in your books could raise other questions, even if it was just an honest mistake.

Am I being misled? Are these numbers trying to cover something up? Can I believe everything else I’ve been told about the business? These are the types of thoughts that will go through the mind of a buyer if errors are found in your financials.

The vast majority of small businesses don’t have an accountant or a bookkeeper .

If you fall into that category, westrongly recommend hiring an accounting expert to clean up your books before you list the business for sale. This will make your life much easier down the road.

Step #3: Hire a Business Broker

There are basically two options to consider when selling a business—sell it on your own or use a broker.

You could potentially sell the company on your own if you’re handing the business off to a family member or someone trustworthy in your life. This will help you save some money on brokerage fees.

But, for the vast majority of circumstances, using a broker will be your best bet.

Will there be some extra fees associated with this method? Absolutely. But a broker can help you get the best possible price and sell your business faster than you could do on your own.

Remember, brokers work on commission. So it’s in their best interest as well to sell the company for maximum value.

The broker will typically form their own valuation of the business. Compare this to estimate you got back in step #1. While the two numbers probably likely won’t match exactly, they should be relatively close.

If there’s a drastic difference between the broker’s estimate and the valuation given by the appraiser, you might want to get a third opinion to see which one is more accurate.

Your broker has lots of experience selling businesses, which is extremely valuable. Other common duties of a broker include:

• Finding the best buyers
• Marketing the sale
• Provide confidentiality
• Getting the deal financed
• Assist with negotiations
• Manage due diligence

Business Broker Options

Here are recommendations on the best business brokers to sell your business:

• Business Exits – best for maximizing business value and sale price
• Digitalexits.com – best for selling online properties and web stores
• Woodbridge International – best for generating lots of demand and bids

So how much will this cost you? Pricing for a business broker usually depends on how much money your business makes.

The general rule of thumb is this; the higher your revenue, the lower the broker’s commission fee.

A business with up to $1 million in revenue will typically pay between 10% and 12% on brokerage fees, whereas businesses with $25+ million typically pay in the 2.5-4.5% commission range. For companies in the middle, it’s common for brokers to use the Double Lehman commission model, as opposed to a flat percentage.

It’s important to understand the broker’s commission model from the beginning. So ask questions if you’re unsure. Some brokers might even charge you a retainer, but you can probably avoid that by offering a minimum commission amount.

Step #4: Find Pre-Qualified Buyers

There are two key words to this step; pre-qualified and buyers (plural).

You’ll definitely want to field multiple offers for several reasons. For starters, not every offer will be legitimate. Selling your business requires you to disclose sensitive information about your organization. This could be worth a fortune to your competitors.

It’s possible that a competitor, or someone acting on behalf of a competitor, could make an offer just to review your financials. So don’t hand over that information to just anyone.

Most business transactions are backed by a third-party loan from the SBA. In some cases, banks require sellers to provide some of the financing as well. So don’t get too excited over the first offer that comes in and assume the company will be sold.

On average, it takes six to eight months to sell a business.

In addition to the broker, you could always bring in a sales expert to help speed up this process and pre-qualify buyers.

Buyers can typically be segmented into three main categories:

• Individual buyers
• Strategic buyers
• Private equity groups

The type of buyer making an offer plays a role in how long it takes to process the transaction. For example, an individual buyer will likely need an SBA-backed loan, which can take up to 90 days for approval, whereas a private equity group could finance the purchase on its own.

Don’t rush to accept an offer right away, either. You can always use one offer to leverage another, which will give you the maximum value for your business.

Step #5: Finalize Legal Documents and Contracts

Once you’ve found a qualified buyer and accepted an offer, it’s time to finalize the deal.

This is where things can get a little bit messy and confusing. So you’ll definitely want to have your lawyer handle the vast majority of this stage.

Some of the standard legal documents and contracts associated with a business sale include:

• Purchase agreement
• Asset listings
• Noncompete agreements
• Guidelines for website use and domain name
• Bill of sale
• Security agreement

You could potentially draft a purchase agreement and contract on your own, but we would strongly advise against that. There’s a good chance that you’ll miss vital information, and you could be left vulnerable to unforeseen circumstances. These contracts can be upwards of 25-50+ pages long.

If your current lawyer is not an expert with contract law, they should be able to refer a colleague.

Once everything is in order, it’s just a matter of crossing the T’s, dotting the I’s, followed by lots of signatures and initials.

Tips and Best Practices For Selling Your Business

While the process of selling your business can be simplified to just the five steps listed above, there are certain things you need to do along the way.

Follow these tips and best practices to make sure the sale goes smoothly. This will also ensure you get the maximum value for your business.

Boost Your Sales

As we said before, selling your business takes time. You can’t expect to list it today and get an offer tomorrow.

We’ve seen so many business owners focus so much effort on selling their company, that they neglect the business itself while they’re still in charge. You must continue coming to work every day and put all of your efforts into increasing sales.

Strong sales will ultimately increase the valuation of your business and make it more appealing to buyers. On the flip side, a drop or plateau in sales could be a huge red flag for prospective owners.

That’s why it’s important for you to surround yourself with people who can help you through this process. Let your broker, lawyer, and accountant handle their respective responsibilities. This will give you more time to prioritize sales.

Develop an Exit Strategy

Every business owner needs to have an exit strategy. The best exit strategies are developed long before the decision to sell your business occurs.

So hopefully, this is something you’ve been planning for a while; a proper exit strategy takes time to develop. For those of you who don’t currently have an exit strategy, it’s not too late to create one. But with that said, this might not be the best time to sell your business.

The last thing you want is to be in a position where you feel forced to sell your company. In those circumstances, it’s unlikely that you’ll be able to sell for maximum value.

Things come up. So have a contingency plan in place for a wide range of possible exit strategies .

What will you do if a big box store opens nearby? How will you proceed if age or illness becomes a factor in your life? What if your children don’t want to take over the company? These are just a few examples of situations that could arise.

When the day comes that you decide to sell, you’ll already be prepared with an exit strategy.

Be Rational

Selling a business can be very emotional. This is especially true for family businesses, small businesses, or something that you’ve built on your own from scratch.

Most business owners have a great sense of pride for what they’ve accomplished. Blood, sweat, tears, and sleepless nights are all things that entrepreneurs have in common.

With that said, it’s crucial that you keep your emotions out of the deal. Getting emotional can cloud your thoughts and decisions.

Prospective buyers don’t care how many hours you’ve worked per week for the last decade. All they care about is the bottom line. If you think an offer is too low or unfair, you can always decline.

In some cases, a competitor might make a legitimate and fair offer, with the full intention of buying. Don’t let an old rivalry prevent the deal from going through.

Get Paid Up Front

Make sure the terms of your deal require an upfront payment. Some buyers might make you an enticing offer, but don’t have the funding to pay you now.

Getting paid overtime might not sound like a big deal, but this arrangement could pose some challenges for you down the road. You could end up in a situation where you’re not getting paid to the terms that you agreed. If that happens, any legal recourse would just be an added expense to your side.

Furthermore, the new owner could run out of money to keep the business alive. If that happens, there may not be any money left for you if the company goes under.

Let’s say you have two serious offers on the table. One is for a higher amount but involves a ten-year financing period. The second offer is less but pays you upfront. We strongly recommend the latter.

Ready to sell your business? Don’t overcomplicate things; the entire process can be broken down into just five simple steps.

With that said, selling a business takes time. Have realistic expectations in terms of the price and time frame.

In some cases, you might ultimately decide to postpone the sale until you can increase revenues and get your financials organized. If your company is doing well and generating high profits, it’s much more appealing to potential buyers.

Use this guide as a reference to walk you through the process. Make sure to follow the tips and best practices that we outlined above to get the maximum purchase value for your company.

How to Sell a Business: 9 Steps to Selling Your Business

If you’re a homeowner, then you understand how complex and time-consuming the sale of a home can be. You have to renovate everything in the home that’s substandard, fix anything that’s broken, gather together a seeming library of legal and financial documentation — the list goes on. Selling a small business is just as, if not more, complex with many moving parts involved, including staff, customers and clients, real estate leases, equipment leases, among many others. Just as in starting a business or buying a business , selling a business should not be taken lightly. Selling a small business requires careful planning, patience and flexibility. All three requirements will result in a better selling process and likely a higher price. Read on to find out exactly how to sell a business and get the most out of the sale of your business.

How to Sell a Business in 9 Steps

Selling your business requires assembling a team of experts, including your accountant, attorney and business broker. They bring their expertise to the sale, plus free up more of your time, which is huge because you’ll still be running your company during the entire sale process. Once your team has been assembled, it’s time to actually get into the selling process. Here are nine steps you should take when you want to sell your business:

1. Explain Why Your Business Is for Sale

You’ve decided to sell your business and need to find potential buyers. The first question they’ll likely ask is, “Why are you selling your business?” The last thing you want to do is not have an answer to this essential, preliminary question. You’ll want to have your reasons clearly and concisely prepared early on so you can answer this question and not raise issues. Similar to used cars, if your business is for sale for the wrong reason, buyers won’t be interested. A good way to go about this step is to determine your motivation for wanting to sell your business, as well as how urgent your need to sell is. Some motivations for wanting to sell a business can be flexible with timing, such as the current owner simply being bored with his business or work. There are plenty of other situations, however, where your need to sell is more urgent. Here are some of the most common reasons why business owners want to sell their businesses:

• Business owner is retiring
• Business owner is relocating
• Business owner is burnt out
• Business owner is dealing with health problems
• Business owner is pursuing other opportunities
• Company has reached a high point for the business owner
• Business owner is facing divorce, family or personal change
• Business owner has overwhelming financial problems
• Business owner is looking for a change
• Company isn’t making enough money for owner
• Business owner has a problem with partners or current investors
• Business needs a buyer with more capital to reach its maximum potential

Note which ones relate to your motivation and situation. If they do, then also note whether the urgency of your situation to sell is immediate or flexible. For example, if your motivation to sell is due to being fed up with your partners, figure out if this is of immediate urgency or if you can be flexible and put up with your partners for a bit longer. Flexibility is almost always better when selling a business.

2. Prepare the Timing of the Sale

You either put a lot of time into starting your business or buying it, so you need to put as much time as possible into preparing to sell it. Ideally, you should start your sale preparations a year or two ahead of your target sale date. You’ll want to give yourself as much time as possible because, as you prepare to sell your company, you’ll likely uncover areas of your business that need to be improved before you can close the deal. Before you get into any hard numbers, which will come with the business valuation step, you’ll need to assess the attractiveness of your business to a buyer. What makes your business a good sell? At this stage, you don’t need to calculate anything complicated. Ask yourself general questions about your company’s performance, such as:

• Has revenue consistently increased over the last two to three years?
• Have profits consistently increased?
• Have costs and operating expenses increased at a pace consistent with revenue?
• Does your business revenue consistently cover costs and operating expenses?
• Do your assets exceed your liabilities?

Your answers can be a simple yes and no, but more questions answered in the affirmative mean your company is more attractive to potential buyers. Other areas of self-assessment include how appealing the location of your business is, the quality and uniqueness of your product or services, the state of company equipment and facilities, the status of current leases and size and loyalty of your customer or client base. As you assess the attractiveness of your business, highlight the areas that you find need improvement. List all the areas in need of improvement and put an action plan together. Taking the time and putting in the resources to make improvements is worth it even though you’re ultimately selling the business. If you don’t, a qualified buyer will easily be able to identify areas of your business that are subpar and knock down the price or walk away.

3. Consider the Type of Buyer You Want

While you carry out your improvement plan, you should also start figuring out what type of business buyer to target. There are all different types of individuals and businesses who are shopping for a company to buy. Each type of buyer has a different approach and various advantages for you as a seller. The type of buyer you target depends on the condition of your business, how you want to exit and the goals you’re trying to achieve in selling your company.

Selling Your Business to Another Business

Businesses or private equity groups will often acquire companies more for strategic reasons than solely financial reasons. These types of potential buyers usually want to integrate the products or services your company provides in order for them to expand their capabilities, market reach, competitiveness and profitability. Typically, these businesses or private equity groups are bigger and more robust than the business being purchased. What’s great about a business-to-business sale is that it opens up the possibility of a high selling price and potential for a quick payoff. When selling your company to another business or private equity group, it is common for them to require your continued involvement for a period of time before you completely exit your business and relinquish responsibilities. Some small business owners want to sell their company and be done with it, so this route — like all others — depends on your circumstances and goals.

Selling Your Business to an Individual

Many individuals are entrepreneurial but want to avoid the risks of a startup . These individuals are the kinds of people who could be potential buyers of your business. This type of buyer wants to buy your company to gain the immediate benefits of sales and cash flow, plus the added advantage of acquiring established operating systems, customer-base and reputation. Trying to find funding to launch a startup is very difficult, whereas an individual can utilize seller financing to purchase a business more conveniently.

Selling Your Business to an Existing Partner

This approach to selling your business can be very convenient — if it’s possible. Most business partnerships are founded with legal documents that include a buy-sell agreement that outlines how one partner will sell to the other partner or partners. A buy-sell agreement makes the selling process smoother because it specifies the price and procedure for selling your part of company ownership. This is an area that, unlike working with other potential buyers, won’t lead to as much back-and-forth negotiations, which consume time, energy and money. By selling to an existing partner, your exit route is well laid out and there tends to be less disruption to your customers and staff.

Selling Your Business to an Employee

Identifying a top employee, be it a vice president, C-level or director-level person, to sell your company to can be a convenient way to exit your business. Selling your business in this manner usually doesn’t produce a high selling price. However, it does produce less disruption than selling your company to outside buyers. Having a key employee takeover ownership provides a good transitional period for your staff and customers, helping maintain continuity. This type of sale also can allow you some flexibility if you want continued involvement on some level with your former business.

4. Prepare Key Documents

Throughout the selling process, you should have at least an accountant and an attorney as part of your team. When preparing all the critical documents you’ll need for a sale, your accountant and attorney will come in handy. For this step, you need to gather your financial statements and tax returns dating back three to four years and have your accountant review them. Prepare the following forms:

• Income statement: This shows your gross revenue, costs, profits and losses each year of business.
• Cash flow statement: This shows how money was received and paid out of your company and its resulting impact on business assets.
• Balance sheet: This shows the value of all tangible assets owned by your business minus the liabilities your company owes.
• Seller’s discretionary earnings statement: This shows how much your business makes after adjusting for extraordinary, non-recurring and discretionary expenses. This means it presents more accurately how much money your business really generates for you as the owner, which is of major importance to potential buyers.

But there are many more documents beyond financials that are integral to the selling process. Your buyer is going to want documents like a list of equipment, staff, company procedures, contracts and more. Here are some of the key documents involved in a small business sale process:

Key Documents

Description

Corporate or Schedule C tax returns

Returns for the last 2-3 years, enabling the buyer to verify revenues shown in financial statements

Business financial statements

Statements for the current and past 2-3 years, including income statements, balance sheets and current cash flow statement

Seller’s discretionary earnings (SDE)

Your most recent annual income statement adjusted to reflect revenues and essential operating costs without extraordinary, one-time or discretionary expenditures

Current building lease

Including information on lease duration and whether it can be transferred

Copies of contracts and agreements

Such as with vendors, suppliers, distributors, independent contractors, government and more

Intellectual property documentation

Patent and trademark information

Management and operational documentation

Including procedural manuals, product and pricing lists, other reports and agreements.

Staffing records

Including a list of employees with hire dates, salaries, contracts and benefits

Business formation documents

Documents like articles of incorporation , organization or partnership agreement

Additional documents

Inventory, accounts receivable and accounts payable, suppliers and distributors, major equipment, fixtures and furnishings

It’s best to put all these key documents in a packet, including an executive summary describing how your business is conducted, along with its purpose and goals. While you’re doing all this housekeeping, make sure your company is presentable, especially if you have a physical property. Your business should be clean and any equipment that’s broken should be repaired well before you get too deep into the sale process.

5. Consider Hiring a Business Broker

A business broker is a professional who specializes in helping people buy and sell businesses. They’re also called transfer agents or intermediaries, and they can be a huge asset when you’re trying to sell your business. Business brokers can offer great insights on valuation, marketing, prospecting, negotiations and more. Business brokers deal with buying and selling companies all the time. This enables them to understand the financial, operational and legal aspects of your company that your accountant and attorney may see. Business brokers are also helpful because you’ll be busy running your company so they handle the sale process. You can also search online for business brokers near you.

6. Perform a Business Valuation

Just as you would do when buying a business, when you sell yours, you need to figure out how much your company is worth. With all your financial statements prepared in the previous step, you’re now set up to move into the business valuation step of the selling process.

Find a Business Appraiser

Having an accountant as part of your team is important for tracking all your finances and all the documents needed for a sale. However, an accountant’s skill is in accounting and not in buying or appraising businesses, unless that’s their specialty. Seeking a third-party valuation of your company can give you the best estimate of what it’s worth when you’re trying to sell your business. For help valuing your entire business, it’s a good idea to seek out a business appraiser with a professional certification from a recognized trade association. Here are some typical business valuation credentials:

• CBA/Certified Business Appraiser
• ASA Accredited Senior Appraiser
• CVA Certified Valuation Analyst
• CBV Chartered Business Valuator
• CPA/ABV Certified Public Accountant Accredited in Business Valuation

To find a business appraiser, you can turn to your accountant, attorney or business broker for referrals. You can also search online to find business appraisers in your area on the American Society of Appraisers website.

Calculating the Value of Your Business

Small businesses are often sold based on valuing them in terms of multiples of earnings. This involves multiplying a company’s profits or income by a certain number to end up with a value. When selling your business, you would use your seller’s discretionary earnings — annual income statement adjusted to reflect revenues and essential operating costs without extraordinary, one-time or discretionary expenditures — as the basis. The number you multiply it by is determined based on the performance and condition of your business. In general, most small businesses sell based on an earnings multiple of one to four.

7. Find Potential Buyers

Finding the right buyer can be a challenge. That’s part of the reason why business sales can take anywhere from six months to two years. And it’s also the main reason to consider hiring a business broker. It is their job to find the right buyer for your business. They will handle the marketing and advertising of your small business while at the same time maintain confidentiality, so staff or clients don’t get jolted. Business brokers can tap their network to find potential buyers and field offers.

Pre-Qualify Potential Buyers

Pre-qualifying the potential buyers who respond to your for-sale ads is a smart strategy. This is because usually nine out of ten respondents to your ads are not qualified to make the purchase. One good method of pre-qualifying potential buyers is to describe your business and response requirements in a manner that forces unqualified buyers to opt themselves out. For example, you should describe the size of your business and asking price, followed by asking interested parties to respond with a description of their purchase capabilities. When done this way, unqualified buyers will likely not put in the effort to respond, leaving you with qualified, serious potential buyers of your business. Once you’ve lined up some potential buyers, here’s what you can do to keep the selling process going:

• Find out if the potential buyer pre-qualifies for financing before divulging information about your business. If you plan to use seller financing, work with your accountant and attorney to reach an agreement with the buyer.
• Allow some room to negotiate while standing firm on a price that makes sense and incorporates your company’s future value.
• Put down any agreements in writing, including a nondisclosure/confidentiality agreement for the potential buyers to sign.

8. Conduct Due Diligence

Conducting due diligence is the research and investigation step that proceeds the actual purchase. When selling a small business, due diligence has two sides:

• The buyer will conduct research on you and your company.
• You, the seller, will investigate the buyer.

During due diligence, the buyer will want to fully understand the condition of your business by reviewing all financial statements and obligations. The main things the buyer looks for in this area are debts, pending or potential legal issues, ongoing leases, long-term customer agreements, employment contracts, supplier and distributor agreements and much more. Meanwhile, as the seller, you should conduct due diligence of your buyer’s ability to purchase and manage your business. The buyer will likely want to research and examine, in great detail, the financial condition of your company, business operations and legal issues. You’ll want to allow plenty of time to help with the buyer’s due diligence. Lean on the talents and services of your accountant and attorney to help you determine what information to disclose and what to protect if the buyer wants to bring in a third-party to review some of your financials or other important information.

9. Close the Deal

After the marathon of the selling process and all its intricacies, you’re finally at the home stretch of closing the deal. You will have reached this step when the buyer submits a letter of intent to purchase. The letter of intent to purchase puts your buyer’s proposal in writing. Though this is a non-binding, non-legal document, it sets up the final phase of the sale and how it will work out. The letter will present the price, purchase structure, as well as the terms and purchase conditions proposed by your potential buyer. This is another area in which having a business broker is a great move. In this case, your business broker will receive and discuss the buyer’s purchase intentions. Once you and the buyer have negotiated a final price, it’s time to put the deal in writing. Have your attorney prepare the asset purchase agreement for you and the buyer to both sign. The asset purchase agreement is a definitive agreement that finalizes all the terms and conditions of the purchase and sale of your company’s assets. The sale of your business is completed when you and the buyer both sign this document. A common request by the buyer is for you to sign a non-compete agreement, in which you would agree to not start a new, competing business that could draw away customers and thus hurt the buyer commercially.

The Bottom Line

Selling a business is a grueling process, which is why working with a team of professionals if so important. Your accountant and attorney are indispensable during this process. And though you may be able to handle the marketing, advertising and communication with the potential buyers yourself, hiring a business broker allows you to focus on running your business. The last thing you want to do is get distracted and hurt your company’s performance right when you’re trying to sell it. The steps to sell your business can feel ironic at times. For example, before you can sell your business, you may have to make large improvements, such as increasing how much revenue you generate and upgrading equipment. The irony being, if you improve your business in these ways, you might start to reconsider selling altogether. This is why it’s important you thoroughly figure out your motivations for selling, what your objectives and goals are so you can know that you’re fully committed to selling your business.

How to Write a Business Plan for a Small Business

Noah Parsons

24 min. read

Updated September 2, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of writing a business plan

If you’re reading this guide, then you already know why you need a business plan . 

You understand that writing a business plan helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your business plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After writing your business plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

When writing a business plan, the produces and services section is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

When writing a business plan, the operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

The last section of your business plan is your financial plan and forecasts. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI to write a business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of writing a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Writing a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of writing a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan

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More From Forbes

6 common mistakes families make when selling a business.

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Selling a family business can be a monumental financial event and a major emotional transition. Such a sale often results in a significant liquidity event, presenting the family with new wealth management challenges. While the influx of capital can open up numerous opportunities, it also introduces potential pitfalls. Here are six common mistakes that families make when selling their business and here’s how you can avoid them:

Hire a trusted wealth advisor who can help you reexamine your financial objectives and investment ... [+] goals.

1. Failing to Plan Ahead

In the swirl of getting a transaction done, it’s easy to be so laser-focused on getting the deal across the finish line that certain wealth planning steps are inadvertently missed or considered too late to be implemented. Before you sign a letter of intent to sell a business, there are a few key steps you should consider.

Solution: Transfer non-voting shares of a non-publicly traded company into an irrevocable trust. The irrevocable trust could be set up for the benefit of the wealth creator’s spouse, children, grandchildren, and future descendants. The shares would likely be transferred at a discounted value because the company is not marketable and not publicly traded. The value will likely be lower than it is when you actually have a concrete offer to sell the business. So then, at some future date, when you sell your business, the amount it sells for is now locked in because the trust owns the non-voting shares of the business. Additionally, that new value will be exempt from estate tax.

This leads to another point: If you live in a traditionally high-tax state like Connecticut, New York, New Jersey, or California, you should consider moving your tax domicile and residency to another state with no income tax such as Florida or Texas before selling your business. However, this process can take several months, so it’s important to map out a sufficient timeline to execute these steps successfully before the transaction closes.

2. Overlooking Tax Implications

The sale of a business can have significant tax implications, and without careful planning, families can find themselves facing substantial tax liabilities. For example, should you sell shares in the company or the business assets? Buyers and sellers can be at odds as sellers want to achieve capital gains, and buyers want to get a stepped-up basis for depreciation. They can be worked out by negotiating the sales price. Often, the excitement and relief of selling can overshadow the necessity of tax planning, which can lead to unfavorable financial outcomes.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024.

Solution: Prior to the sale, collaborate with tax professionals to understand the potential tax impact and explore strategies for tax minimization. This might include timing the sale to coincide with specific tax advantages or utilizing trusts and other vehicles to manage the new influx of wealth. At my firm, planning in advance leads to advantageous timing that enables us to ensure that a client’s charitable intentions can achieve maximum tax benefits by offsetting ordinary taxable income.

3. Neglecting Estate Planning Updates

If estate plans were structured around the business as an asset, they need to be revisited once the company is no longer part of the family’s portfolio. Failing to update estate plans can lead to inefficiencies and conflicts within the family, especially regarding the distribution of the new assets.

Solution : Update estate planning documents to reflect the current state of family wealth. This may involve setting up trusts, revising wills, and ensuring that the distribution of assets aligns with the family’s current wishes. Most importantly, share details of the estate plan with your heirs while you’re still alive. That way, your heirs understand your thinking, can ask questions, and be prepared when the time comes.

The example of legendary investor Warren Buffet, 93, is instructive. He recently shared some details of his estate planning with the Wall Street Journal . He said he plans to leave nearly all his wealth to a charitable trust overseen by his three children (a daughter and two sons). “I feel very, very good about the values of my three children, and I have 100% trust in how they will carry things out,” Buffett told the Journal .

4. Not Reassessing Financial Goals

A family’s financial landscape changes dramatically after selling a business. What worked financially for the family when the business was operating might not be suitable for managing post-sale wealth. It's crucial for families to sit down with financial advisors to redefine their financial objectives, taking into account their current and future lifestyle, legacy considerations, and investment goals.

Solution: Engage with trusted advisors to establish new financial goals and create a strategic plan that aligns with the family’s values and new financial status. A family may want to consider establishing a family office structure to help its members navigate and manage their wealth or perhaps join an existing multifamily office that already has the staff, systems, and processes in place.

5. Making Hasty Investment Decisions

With a large amount of capital suddenly available, there might be a rush to reinvest this wealth. However, hasty investment decisions can lead to poor allocation of resources. The lack of a business, which previously might have been a major investment focus, can lead families to diversify their investments without adequate research or strategy.

Solution: Take a measured approach to investing the proceeds from the sale. Develop a comprehensive investment strategy with a wealth management advisor that considers risk tolerance, time horizon, and the family’s overall financial goals.

6. Underestimating Emotional and Psychological Impacts

Selling a family business is not just a financial transition but also an emotional one. The company often represents not just financial security but also a sense of identity and purpose for family members. Underestimating the emotional and psychological impact of this change can lead to challenges in adjusting to the post-sale reality.

Solution: Seek support from professionals specializing in family dynamics and wealth transition. Engaging in family governance structures can also help manage the emotional aspects and aid in the smooth transition of roles and responsibilities within the family.

Avoiding these common mistakes when selling a family business involves careful planning, professional guidance, and an understanding of the financial and emotional complexities involved. By addressing these areas proactively, families can secure their financial future and navigate the transition with confidence and clarity.

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Small Business Trends

How to create a business plan: examples & free template.

This is the ultimate guide to creating a comprehensive and effective plan to start a business . In today’s dynamic business landscape, having a well-crafted business plan is an important first step to securing funding, attracting partners, and navigating the challenges of entrepreneurship.

This guide has been designed to help you create a winning plan that stands out in the ever-evolving marketplace. U sing real-world examples and a free downloadable template, it will walk you through each step of the process.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Embarking on the journey of creating a successful business requires a solid foundation, and a well-crafted business plan is the cornerstone. Here is the process of writing a comprehensive business plan and the main parts of a winning business plan . From setting objectives to conducting market research, this guide will have everything you need.

Executive Summary

The Executive Summary serves as the gateway to your business plan, offering a snapshot of your venture’s core aspects. This section should captivate and inform, succinctly summarizing the essence of your plan.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Think of it as an elevator pitch in written form: it should be compelling enough to engage potential investors or stakeholders and provide them with a clear understanding of what your business is about, its goals, and why it’s a promising investment.

Example: EcoTech is a technology company specializing in eco-friendly and sustainable products designed to reduce energy consumption and minimize waste. Our mission is to create innovative solutions that contribute to a cleaner, greener environment.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

In the Overview and Business Objectives section, outline your business’s core goals and the strategic approaches you plan to use to achieve them. This section should set forth clear, specific objectives that are attainable and time-bound, providing a roadmap for your business’s growth and success.

It’s important to detail how these objectives align with your company’s overall mission and vision. Discuss the milestones you aim to achieve and the timeframe you’ve set for these accomplishments.

This part of the plan demonstrates to investors and stakeholders your vision for growth and the practical steps you’ll take to get there.

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

• Introducing three new products within the first two years of operation.
• Achieving annual revenue growth of 30%.
• Expanding our customer base to over 10,000 clients by the end of the third year.

Company Description

The Company Description section is your opportunity to delve into the details of your business. Provide a comprehensive overview that includes your company’s history, its mission statement, and its vision for the future.

Highlight your unique selling proposition (USP) – what makes your business stand out in the market. Explain the problems your company solves and how it benefits your customers.

Include information about the company’s founders, their expertise, and why they are suited to lead the business to success. This section should paint a vivid picture of your business, its values, and its place in the industry.

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Defining Your Target Market is critical for tailoring your business strategy effectively. This section should describe your ideal customer base in detail, including demographic information (such as age, gender, income level, and location) and psychographic data (like interests, values, and lifestyle).

Elucidate on the specific needs or pain points of your target audience and how your product or service addresses these. This information will help you know your target market and develop targeted marketing strategies.

Example: Our target market comprises environmentally conscious consumers and businesses looking for innovative solutions to reduce their carbon footprint. Our ideal customers are those who prioritize sustainability and are willing to invest in eco-friendly products.

Market Analysis

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

This analysis will enable you to spot market opportunities and anticipate potential challenges. Include data and statistics to back up your claims, and use graphs or charts to illustrate market trends.

This section should demonstrate that you have a deep understanding of the market in which you operate and that your business is well-positioned to capitalize on its opportunities.

Example: The market for eco-friendly technology products has experienced significant growth in recent years, with an estimated annual growth rate of 10%. As consumers become increasingly aware of environmental issues, the demand for sustainable solutions continues to rise.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

A SWOT analysis in your business plan offers a comprehensive examination of your company’s internal and external factors. By assessing Strengths, you showcase what your business does best and where your capabilities lie.

Weaknesses involve an honest introspection of areas where your business may be lacking or could improve. Opportunities can be external factors that your business could capitalize on, such as market gaps or emerging trends.

Threats include external challenges your business may face, like competition or market changes. This analysis is crucial for strategic planning, as it helps in recognizing and leveraging your strengths, addressing weaknesses, seizing opportunities, and preparing for potential threats.

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

• Innovative and eco-friendly product offerings.
• Strong commitment to sustainability and environmental responsibility.
• Skilled and experienced team with expertise in technology and sustainability.

Weaknesses:

• Limited brand recognition compared to established competitors.
• Reliance on third-party manufacturers for product development.

Opportunities:

• Growing consumer interest in sustainable products.
• Partnerships with environmentally-focused organizations and influencers.
• Expansion into international markets.
• Intense competition from established technology companies.
• Regulatory changes could impact the sustainable technology market.

Competitive Analysis

In this section, you’ll analyze your competitors in-depth, examining their products, services, market positioning, and pricing strategies. Understanding your competition allows you to identify gaps in the market and tailor your offerings to outperform them.

By conducting a thorough competitive analysis, you can gain insights into your competitors’ strengths and weaknesses, enabling you to develop strategies to differentiate your business and gain a competitive advantage in the marketplace.

Example: Key competitors include:

GreenTech: A well-known brand offering eco-friendly technology products, but with a narrower focus on energy-saving devices.

EarthSolutions: A direct competitor specializing in sustainable technology, but with a limited product range and higher prices.

By offering a diverse product portfolio, competitive pricing, and continuous innovation, we believe we can capture a significant share of the growing sustainable technology market.

Organization and Management Team

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Showcasing your team’s background, skills, and accomplishments instills confidence in investors and other stakeholders, proving that your business has the leadership and talent necessary to achieve its objectives and manage growth effectively.

Example: EcoTech’s organizational structure comprises the following key roles: CEO, CTO, CFO, Sales Director, Marketing Director, and R&D Manager. Our management team has extensive experience in technology, sustainability, and business development, ensuring that we are well-equipped to execute our business plan successfully.

Products and Services Offered

Describe the products or services your business offers, focusing on their unique features and benefits. Explain how your offerings solve customer pain points and why they will choose your products or services over the competition.

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Example: EcoTech offers a range of eco-friendly technology products, including energy-efficient lighting solutions, solar chargers, and smart home devices that optimize energy usage. Our products are designed to help customers reduce energy consumption, minimize waste, and contribute to a cleaner environment.

Marketing and Sales Strategy

In this section, articulate your comprehensive strategy for reaching your target market and driving sales. Detail the specific marketing channels you plan to use, such as social media, email marketing, SEO, or traditional advertising.

Describe the nature of your advertising campaigns and promotional activities, explaining how they will capture the attention of your target audience and convey the value of your products or services. Outline your sales strategy, including your sales process, team structure, and sales targets.

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

This section is critical to convey to investors and stakeholders that you have a well-thought-out approach to market your business effectively and drive sales growth.

Example: Our marketing strategy includes digital advertising, content marketing, social media promotion, and influencer partnerships. We will also attend trade shows and conferences to showcase our products and connect with potential clients. Our sales strategy involves both direct sales and partnerships with retail stores, as well as online sales through our website and e-commerce platforms.

Logistics and Operations Plan

The Logistics and Operations Plan is a critical component that outlines the inner workings of your business. It encompasses the management of your supply chain, detailing how you acquire raw materials and manage vendor relationships.

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

Quality control measures are essential to maintain product standards and customer satisfaction. This plan assures investors and stakeholders of your operational competency and readiness to meet business demands.

Highlighting your commitment to operational efficiency and customer satisfaction underlines your business’s capability to maintain smooth, effective operations even as it scales.

Example: EcoTech partners with reliable third-party manufacturers to produce our eco-friendly technology products. Our operations involve maintaining strong relationships with suppliers, ensuring quality control, and managing inventory.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

In the Financial Projections Plan, lay out a clear and realistic financial future for your business. This should include detailed projections for revenue, costs, and profitability over the next three to five years.

Ground these projections in solid assumptions based on your market analysis, industry benchmarks, and realistic growth scenarios. Break down revenue streams and include an analysis of the cost of goods sold, operating expenses, and potential investments.

This section should also discuss your break-even analysis, cash flow projections, and any assumptions about external funding requirements.

By presenting a thorough and data-backed financial forecast, you instill confidence in potential investors and lenders, showcasing your business’s potential for profitability and financial stability.

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Example: Over the next three years, we expect to see significant growth in revenue, driven by new product launches and market expansion. Our financial projections include:

• Year 1: $1.5 million in revenue, with a net profit of $200,000.
• Year 2: $3 million in revenue, with a net profit of $500,000.
• Year 3: $4.5 million in revenue, with a net profit of $1 million.

These projections are based on realistic market analysis, growth rates, and product pricing.

Income Statement

The income statement , also known as the profit and loss statement, provides a summary of your company’s revenues and expenses over a specified period. It helps you track your business’s financial performance and identify trends, ensuring you stay on track to achieve your financial goals.

Regularly reviewing and analyzing your income statement allows you to monitor the health of your business, evaluate the effectiveness of your strategies, and make data-driven decisions to optimize profitability and growth.

Example: The income statement for EcoTech’s first year of operation is as follows:

• Revenue: $1,500,000
• Cost of Goods Sold: $800,000
• Gross Profit: $700,000
• Operating Expenses: $450,000
• Net Income: $250,000

This statement highlights our company’s profitability and overall financial health during the first year of operation.

Cash Flow Statement

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

By including a cash flow statement in your business plan, you demonstrate your ability to manage your company’s finances effectively.

Example:  The cash flow statement for EcoTech’s first year of operation is as follows:

Operating Activities:

• Depreciation: $10,000
• Changes in Working Capital: -$50,000
• Net Cash from Operating Activities: $210,000

Investing Activities:

•  Capital Expenditures: -$100,000
• Net Cash from Investing Activities: -$100,000

Financing Activities:

• Proceeds from Loans: $150,000
• Loan Repayments: -$50,000
• Net Cash from Financing Activities: $100,000
• Net Increase in Cash: $210,000

This statement demonstrates EcoTech’s ability to generate positive cash flow from operations, maintain sufficient liquidity, and invest in growth opportunities.

Tips on Writing a Business Plan

1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively.

2. Conduct thorough research: Before writing your business plan, gather as much information as possible about your industry, competitors, and target market. Use reliable sources and industry reports to inform your analysis and make data-driven decisions.

3. Set realistic goals: Your business plan should outline achievable objectives that are specific, measurable, attainable, relevant, and time-bound (SMART). Setting realistic goals demonstrates your understanding of the market and increases the likelihood of success.

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

5. Be flexible and adaptable: A business plan is a living document that should evolve as your business grows and changes. Be prepared to update and revise your plan as you gather new information and learn from your experiences.

6. Use visuals to enhance understanding: Include charts, graphs, and other visuals to help convey complex data and ideas. Visuals can make your business plan more engaging and easier to digest, especially for those who prefer visual learning.

7. Seek feedback from trusted sources: Share your business plan with mentors, industry experts, or colleagues and ask for their feedback. Their insights can help you identify areas for improvement and strengthen your plan before presenting it to potential investors or partners.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

The template is divided into the following sections:

• Mission statement
• Business Overview
• Key products or services
• Target market
• Financial highlights
• Company goals
• Strategies to achieve goals
• Measurable, time-bound objectives
• Company History
• Mission and vision
• Unique selling proposition
• Demographics
• Psychographics
• Pain points
• Industry trends
• Customer needs
• Competitor strengths and weaknesses
• Opportunities
• Competitor products and services
• Market positioning
• Pricing strategies
• Organizational structure
• Key roles and responsibilities
• Management team backgrounds
• Product or service features
• Competitive advantages
• Marketing channels
• Advertising campaigns
• Promotional activities
• Sales strategies
• Supply chain management
• Inventory control
• Production processes
• Quality control measures
• Projected revenue
• Assumptions
• Cash inflows
• Cash outflows
• Net cash flow

What is a Business Plan?

A business plan is a strategic document that outlines an organization’s goals, objectives, and the steps required to achieve them. It serves as a roadmap as you start a business , guiding the company’s direction and growth while identifying potential obstacles and opportunities.

Typically, a business plan covers areas such as market analysis, financial projections, marketing strategies, and organizational structure. It not only helps in securing funding from investors and lenders but also provides clarity and focus to the management team.

A well-crafted business plan is a very important part of your business startup checklist because it fosters informed decision-making and long-term success.

Why You Should Write a Business Plan

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

• Attract Investors and Secure Funding : A well-written business plan demonstrates your venture’s potential and profitability, making it easier to attract investors and secure the necessary funding for growth and development. It provides a detailed overview of your business model, target market, financial projections, and growth strategies, instilling confidence in potential investors and lenders that your company is a worthy investment.
• Clarify Business Objectives and Strategies : Crafting a business plan forces you to think critically about your goals and the strategies you’ll employ to achieve them, providing a clear roadmap for success. This process helps you refine your vision and prioritize the most critical objectives, ensuring that your efforts are focused on achieving the desired results.
• Identify Potential Risks and Opportunities : Analyzing the market, competition, and industry trends within your business plan helps identify potential risks and uncover untapped opportunities for growth and expansion. This insight enables you to develop proactive strategies to mitigate risks and capitalize on opportunities, positioning your business for long-term success.
• Improve Decision-Making : A business plan serves as a reference point so you can make informed decisions that align with your company’s overall objectives and long-term vision. By consistently referring to your plan and adjusting it as needed, you can ensure that your business remains on track and adapts to changes in the market, industry, or internal operations.
• Foster Team Alignment and Communication : A shared business plan helps ensure that all team members are on the same page, promoting clear communication, collaboration, and a unified approach to achieving the company’s goals. By involving your team in the planning process and regularly reviewing the plan together, you can foster a sense of ownership, commitment, and accountability that drives success.

What are the Different Types of Business Plans?

In today’s fast-paced business world, having a well-structured roadmap is more important than ever. A traditional business plan provides a comprehensive overview of your company’s goals and strategies, helping you make informed decisions and achieve long-term success. There are various types of business plans, each designed to suit different needs and purposes. Let’s explore the main types:

• Startup Business Plan: Tailored for new ventures, a startup business plan outlines the company’s mission, objectives, target market, competition, marketing strategies, and financial projections. It helps entrepreneurs clarify their vision, secure funding from investors, and create a roadmap for their business’s future. Additionally, this plan identifies potential challenges and opportunities, which are crucial for making informed decisions and adapting to changing market conditions.
• Internal Business Plan: This type of plan is intended for internal use, focusing on strategies, milestones, deadlines, and resource allocation. It serves as a management tool for guiding the company’s growth, evaluating its progress, and ensuring that all departments are aligned with the overall vision. The internal business plan also helps identify areas of improvement, fosters collaboration among team members, and provides a reference point for measuring performance.
• Strategic Business Plan: A strategic business plan outlines long-term goals and the steps to achieve them, providing a clear roadmap for the company’s direction. It typically includes a SWOT analysis, market research, and competitive analysis. This plan allows businesses to align their resources with their objectives, anticipate changes in the market, and develop contingency plans. By focusing on the big picture, a strategic business plan fosters long-term success and stability.
• Feasibility Business Plan: This plan is designed to assess the viability of a business idea, examining factors such as market demand, competition, and financial projections. It is often used to decide whether or not to pursue a particular venture. By conducting a thorough feasibility analysis, entrepreneurs can avoid investing time and resources into an unviable business concept. This plan also helps refine the business idea, identify potential obstacles, and determine the necessary resources for success.
• Growth Business Plan: Also known as an expansion plan, a growth business plan focuses on strategies for scaling up an existing business. It includes market analysis, new product or service offerings, and financial projections to support expansion plans. This type of plan is essential for businesses looking to enter new markets, increase their customer base, or launch new products or services. By outlining clear growth strategies, the plan helps ensure that expansion efforts are well-coordinated and sustainable.
• Operational Business Plan: This type of plan outlines the company’s day-to-day operations, detailing the processes, procedures, and organizational structure. It is an essential tool for managing resources, streamlining workflows, and ensuring smooth operations. The operational business plan also helps identify inefficiencies, implement best practices, and establish a strong foundation for future growth. By providing a clear understanding of daily operations, this plan enables businesses to optimize their resources and enhance productivity.
• Lean Business Plan: A lean business plan is a simplified, agile version of a traditional plan, focusing on key elements such as value proposition, customer segments, revenue streams, and cost structure. It is perfect for startups looking for a flexible, adaptable planning approach. The lean business plan allows for rapid iteration and continuous improvement, enabling businesses to pivot and adapt to changing market conditions. This streamlined approach is particularly beneficial for businesses in fast-paced or uncertain industries.
• One-Page Business Plan: As the name suggests, a one-page business plan is a concise summary of your company’s key objectives, strategies, and milestones. It serves as a quick reference guide and is ideal for pitching to potential investors or partners. This plan helps keep teams focused on essential goals and priorities, fosters clear communication, and provides a snapshot of the company’s progress. While not as comprehensive as other plans, a one-page business plan is an effective tool for maintaining clarity and direction.
• Nonprofit Business Plan: Specifically designed for nonprofit organizations, this plan outlines the mission, goals, target audience, fundraising strategies, and budget allocation. It helps secure grants and donations while ensuring the organization stays on track with its objectives. The nonprofit business plan also helps attract volunteers, board members, and community support. By demonstrating the organization’s impact and plans for the future, this plan is essential for maintaining transparency, accountability, and long-term sustainability within the nonprofit sector.
• Franchise Business Plan: For entrepreneurs seeking to open a franchise, this type of plan focuses on the franchisor’s requirements, as well as the franchisee’s goals, strategies, and financial projections. It is crucial for securing a franchise agreement and ensuring the business’s success within the franchise system. This plan outlines the franchisee’s commitment to brand standards, marketing efforts, and operational procedures, while also addressing local market conditions and opportunities. By creating a solid franchise business plan, entrepreneurs can demonstrate their ability to effectively manage and grow their franchise, increasing the likelihood of a successful partnership with the franchisor.

Using Business Plan Software

Creating a comprehensive business plan can be intimidating, but business plan software can streamline the process and help you produce a professional document. These tools offer a number of benefits, including guided step-by-step instructions, financial projections, and industry-specific templates. Here are the top 5 business plan software options available to help you craft a great business plan.

1. LivePlan

LivePlan is a popular choice for its user-friendly interface and comprehensive features. It offers over 500 sample plans, financial forecasting tools, and the ability to track your progress against key performance indicators. With LivePlan, you can create visually appealing, professional business plans that will impress investors and stakeholders.

2. Upmetrics

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Bizplan is designed to simplify the business planning process with a drag-and-drop builder and modular sections. It offers financial forecasting tools, progress tracking, and a visually appealing interface. With Bizplan, you can create a business plan that is both easy to understand and visually engaging.

Enloop is a robust business plan software that automatically generates a tailored plan based on your inputs. It provides industry-specific templates, financial forecasting, and a unique performance score that updates as you make changes to your plan. Enloop also offers a free version, making it accessible for businesses on a budget.

5. Tarkenton GoSmallBiz

Developed by NFL Hall of Famer Fran Tarkenton, GoSmallBiz is tailored for small businesses and startups. It features a guided business plan builder, customizable templates, and financial projection tools. GoSmallBiz also offers additional resources, such as CRM tools and legal document templates, to support your business beyond the planning stage.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are to guide the company’s strategy, attract investment, and evaluate performance against objectives. Here’s a closer look at each of these:

• It outlines the company’s purpose and core values to ensure that all activities align with its mission and vision.
• It provides an in-depth analysis of the market, including trends, customer needs, and competition, helping the company tailor its products and services to meet market demands.
• It defines the company’s marketing and sales strategies, guiding how the company will attract and retain customers.
• It describes the company’s organizational structure and management team, outlining roles and responsibilities to ensure effective operation and leadership.
• It sets measurable, time-bound objectives, allowing the company to plan its activities effectively and make strategic decisions to achieve these goals.
• It provides a comprehensive overview of the company and its business model, demonstrating its uniqueness and potential for success.
• It presents the company’s financial projections, showing its potential for profitability and return on investment.
• It demonstrates the company’s understanding of the market, including its target customers and competition, convincing investors that the company is capable of gaining a significant market share.
• It showcases the management team’s expertise and experience, instilling confidence in investors that the team is capable of executing the business plan successfully.
• It establishes clear, measurable objectives that serve as performance benchmarks.
• It provides a basis for regular performance reviews, allowing the company to monitor its progress and identify areas for improvement.
• It enables the company to assess the effectiveness of its strategies and make adjustments as needed to achieve its objectives.
• It helps the company identify potential risks and challenges, enabling it to develop contingency plans and manage risks effectively.
• It provides a mechanism for evaluating the company’s financial performance, including revenue, expenses, profitability, and cash flow.

Can I write a business plan by myself?

Yes, you can write a business plan by yourself, but it can be helpful to consult with mentors, colleagues, or industry experts to gather feedback and insights. There are also many creative business plan templates and business plan examples available online, including those above.

We also have examples for specific industries, including a using food truck business plan , salon business plan , farm business plan , daycare business plan , and restaurant business plan .

Is it possible to create a one-page business plan?

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

A typical business plan ranges from 20 to 50 pages, but the length may vary depending on the complexity and needs of the business.

What is a business plan outline?

A business plan outline is a structured framework that organizes the content of a business plan into sections, such as the executive summary, company description, market analysis, and financial projections.

What are the 5 most common business plan mistakes?

The five most common business plan mistakes include inadequate research, unrealistic financial projections, lack of focus on the unique selling proposition, poor organization and structure, and failure to update the plan as circumstances change.

What questions should be asked in a business plan?

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

A business plan focuses on the overall vision, goals, and tactics of a company, while a strategic plan outlines the specific strategies, action steps, and performance measures necessary to achieve the company’s objectives.

How is business planning for a nonprofit different?

Nonprofit business planning focuses on the organization’s mission, social impact, and resource management, rather than profit generation. The financial section typically includes funding sources, expenses, and projected budgets for programs and operations.

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

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Adani Group said to plan to sell $1.5 billion of dollar bonds

Bonds would be issued under adani green and adani energy units and through spv, bloomberg said. moneycontrol had reported in february that the group has planned roadshows to bolster investor confidence ahead of the bond issue..

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Suzlon Energy sells corporate office to OE Business Park; stock gains 3%

The uptick in suzlon energy share price came after the company announced that it has executed a conveyance deed to sell its pune-based corporate office to oe business park for rs 440 crore..

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First Published: Sep 05 2024 | 9:28 AM IST

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