How to Build an Effective Business Plan

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A business plan is a written document that guides entrepreneurs in starting and running their companies. It’s a roadmap to help you navigate obstacles and challenges you might encounter along the way. It includes the following format: 

  • The executive summary is found on the first page of the business plan. However, it’s the last one you’ll write after completing the other sections. 
  • A company description highlights the organization’s purpose, products and services, and distribution channels. 
  • Market research includes information about your target market’s demographics. 
  • Management involves identifying the skills needed for management positions and recruiting employees with those skills. 
  • The product or service line highlights what you hope to sell to customers. This includes pricing strategy and quality standards. 
  • Promotions are how you introduce your offers to your clients through advertising or public relations campaigns. 
  • Funding includes how much money you need to start and where it comes from. 
  • Financial projections show all the cash flows for the next three years. 

An effective business plan encourages investors to provide funding support to your organization. That way, you’ll have the money to buy equipment, pay salaries, and expand your company. 

So, if you’re running a startup company but don’t know where to start, this article provides everything you need. Here’s a twelve-step guideline for establishing a business plan: 

Find a Business Structure

Before starting with the plan, you’ll need a business structure. It’s your company’s category that determines your liabilities and tax obligations. 

Here are the most common types: 

Sole Proprietorship 

A Sole Proprietorship is when you own a company by yourself, and no parties are involved. This structure is ideal if you want to keep it simple and not share ownership with anyone else. The downside is that you don’t have any protection from personal liability and pay taxes on your personal income. 


The Corporation is the most complex business entity, subject to double taxation. It’s because shareholders receive a salary instead of dividends, which means they must pay tax twice – once on corporate income and again on their personal income tax returns. 

Limited Liability Company ( LLC)

A Limited Liability Company is a hybrid between a sole proprietorship and a corporation where you have limited liability protection but still have options on how much control you may have over the business. This type of structure is suitable for those who want to maintain control while protecting themselves from legal action against their personal assets.  

If you’re asking, ‘How long does it take for an LLC to be approved?’ know that it ranges from three to four weeks. 


Partnerships are when two or more people share ownership of a company with each other. These are often called joint ventures. 

Every business structure has pros and cons, so it’s best to research before registering your startup. 

Determine Your Mission Statement

Once you have a business structure, define your mission statement. It summarizes your company’s efforts to accomplish and why they exist.  

An effective mission statement highlights your business’s value to employees and consumers. It should also define why your workforce will want to work for you. You may also include whether your company believes in honesty, integrity, or sustainability. This way, everyone knows what your company stands for and what they can expect.

Identify Your Goals

After identifying a mission statement, you must know your goals. This can be increasing profits, encouraging customer loyalty, or executing an effective marketing strategy. 

Just ensure it is realistic and attainable within a specific timeline. For instance, your goal may be to generate USD$50,000 within a year. You may want to increase revenue by 20% over the next six months. Whatever it is, make sure that your goals are specific and quantifiable.

List Down Your Products or Services

A product or service list is essential as it gives you a clear idea of what you’re selling. This list includes the following: 

  • Description of how the products and services work
  • How they benefit your target customers
  • Your order fulfillment method
  • The pricing models

This helps you create a marketing strategy and develop a sales pitch for promoting them. 

Know Your Audience

Once you have a clear view of your offerings, conducting market research is necessary. This outlines the following questions: 

  • Who is your target market? 
  • Where do they live? 
  • How old are they? 
  • How much are they willing to pay for your offers? 
  • What are their common pain points? 
  • How big is your potential market? 
  • What channels will you use to reach them? 

By answering these questions, you can develop a buyer persona. You’ll use this to reach out to your target consumers by ensuring that your marketing messages resonate with them.

Research the Competition

As you study your target audience, you should also learn about your competing brands. This includes asking these questions: 

  • How much competition do you face? 
  • What are their strengths and weaknesses? 
  • If your competitors are doing well, how can you be better than them? 

You can run competitive analysis in a variety of ways. You can use search engines to get information about the top brands in your industry. You’ll then find their websites and social media accounts to see what makes them stand out. You can also use this research to know how your target customers respond to them online. That way, you can create better offers that best fit their needs, helping you achieve your business goals.

Find Your Management Team

Now that you know the competition, start searching for your management team. This includes the following: 

  • Human Resources or HR management is accountable for hiring, training, and supervising employees. They handle performance reviews and disciplinary actions that could affect your brand image. 
  • In-House Employees include your advertising, organization, accounting, and executives. These are the ones you’ll train to execute your vision. 
  • External Management Resources include outsourced professional services. These include attorneys, advisory boards, coaches, and investment advisors. These professionals help you with legal and financial matters. 

Your management team should be made up of experts in their fields. This ensures they can produce a credible output while ensuring they are in your company’s best interest. This is essential as it prevents conflicts of interest, which might lead to ethical issues.

Assess Your SWOT

Once you know your top three competing brands, compare the report with your company. This includes a SWOT analysis, which details the following: 

  • Strengths may include the best features of your products or services. You may even have an exclusive deal with a credible manufacturer of raw materials. 
  • Weaknesses can be costly shipping or low-quality products. Or you may need more human and financial resources for expansion. 
  • Opportunities include having little competition in the niche, making you the pioneer in the field. Or maybe there’s an emerging demand for your offers. 
  • Threats may be in the form of saturated competition or regulations for products in global markets. 

For a successful SWOT analysis, you can ask input from shareholders, suppliers, and employees. You can also look at consumers’ feedback online only if you already sell them your offers. In doing so, you gain a broader perspective on your company. With these insights, you can turn your weaknesses into strengths and threats into opportunities for growth.

Outline Your Marketing Strategies

Marketing is a vital section of your business plan. It helps you craft strategies to introduce your offers to your target customers and lead them to purchase decisions. 

The marketing section outlines the following: 

Social Media Content 

It can be in the form of blogs, photos, videos, and infographics. You can use it to inform audiences about new products, educate through tutorials, and engage with them. 

Influencer Marketing

It involves forming a partnership with influencers so they can promote your offers to their audiences. Its purpose is to establish trust in your brand through recommendations from credible sources. 

Search Engine Optimization ( SEO )

It is about optimizing your online presence to rank higher on search engine ranking pages (SERPs). SEO aims to reach more organic web traffic and generate more leads. 

In-Person Events 

These can be networking, conferences, industry seminars, and trade shows. This marketing strategy helps raise brand awareness, leading to sales and broader connections. 

E-mail Newsletters 

It allows you to keep in touch with customers. You can also email prospects to remind them of their abandoned online carts and proceed with checkout. 

Traditional Advertising

This includes promoting through television, radio, billboards, flyers, and newspapers. They’re helpful when targeting your local community to encourage them to visit your brick-and-mortar store.This marketing section should also factor in the costs of these campaigns, so you know how much you’ll need.

Make Financial Projections

Before you look for investors, you should have a view of your company’s finances. This includes how your business will generate sales for repaying the loans and how much investors might get. You can indicate your monthly or even three-year sales projection through forecasting. You do this by reviewing your previous sales history to know how much you can make for these timelines.  

This section is the most important as it shows the investors that they’ll get a good return on their investment (ROI). Likewise, this affects the decisions of banking institutions when lending you capital as it shows that you can repay it. So, make sure to seek the expert guidance of financial experts as you prepare this part of the business plan.

Find Funding Sources

As you write your business plan, it’s time to know how you’ll fund your company and strategies. This includes the following options: 

  • Personal Investment comes from your own money. 
  • Love Money is loaned from family and friends. 
  • Angel Investors are wealthy individuals who share not only their investment but also their management skills. 
  • Crowdfunding is a type of fundraising that asks strangers for small donations to generate a large sum. 
  • Small Business Loans are loans from banks or other financial institutions. They require collateral, financial statements, and credit references for a successful business loan approval

These options all have their advantages and disadvantages. So, read articles online or consult your financial advisor before applying for any fund.

Review Your Plan Periodically

Continuous reviews, updates, and improvements make a business plan effective. So, checking your company’s performance is a must. As you do it, compare the results to your initial plan. For instance, ask yourself whether your marketing campaigns are effective. Similarly, look at your sales and conduct surveys with your customers.  

From there, you’ll know whether they like your products. At the same time, you can figure out their common pain points and see how to improve. For example, consumers might want additional product features or responsive customer service. In that case, consider investing in product development and 24/7 chat support.  

That way, your clients see that you prioritize their preferences and needs. This, in turn, translates to higher sales and market share. In short, you’ll be able to repay your loans and expand the business. 

Reasons Why Business Plans Fail

After creating a business plan, knowing why it might fail can save you from it. Companies might lack a viable business model from the start. What’s more, most entrepreneurs don’t have an exit strategy. This means they don’t know how their business ideas will make money. In other words, you might not be able to execute your plan in the first place. This, in turn, causes investors to reject their funding requests.  

Furthermore, some business owners might need a balanced team. This affects the productivity of each team member and their ability to collaborate. The lack of collaboration also hinders your ability to reach certain milestones on time or at all. 

Finally, many startup entrepreneurs aren’t wary of spelling and grammatical errors. This leaves the impression that they aren’t taking the business seriously. Or they might not be detail-oriented enough to succeed as CEOs of their ventures.  

Best Practices for a Successful Business Plan

It’s best to follow these tips to ensure the success of your business plan:

  • Create an exit strategy that you can use in case your plan doesn’t work out. This includes identifying what could go wrong and addressing it from the beginning. For example, your product isn’t selling well. In that case, consider lowering its price or boosting your marketing campaigns. Then, you may write this exit strategy on your business plan. This shows investors that you have a backup plan ready, ensuring that their investments won’t be wasted.  
  • Do a lot of research about the industry that you’re entering. It would be best if you understand your competitors and target customers. That way, you can find a good market positioning while catering to your audience’s needs. 
  • Use a consistent style and tone for all sections. You may allow one person to write the plan. If that’s not an option, consider building a guideline before distributing it. This ensures that everyone involved in writing it follows the same format.  

With these practices, you save time from re-creating the business plan. Most importantly, you’re leaving a positive impression on investors. In other words, they will likely fund your venture, helping you execute your strategies.


The effectiveness of your business plan depends on your ability to modify it. This means the process doesn’t end once you develop it. It requires a continuous effort to update and improve your plan as you progress with your business. That way, you ensure that you’re moving towards achieving your goals and reaching growth.

Who Do You Know?

Most likely you know someone who could apply this information right now to grow their career or business. If you do, help them out. Share this article with them today on LinkedIn in a private message or public post.


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