Successful entrepreneur and technology investor, Anthony Pompliano, tweeted why entrepreneurs must learn how to write a business plan.

Here’s what he said:

Did he invest in the business? You bet!

The takeaway from Anthony’s tweet is clear. A standout business plan lets investors see your idea’s viability, which could open the floodgate of investment.

A solid business plan is crucial even if you’re bootstrapping your business. Ethan Mollick, Professor and author of The Unicorn’s Shadow, summarizes what you can expect by writing a business plan. In Ethan’s words, “A business plan increases your chance of success by 10-20%.”

Perhaps you’re aware of the benefits of a business plan. Yet, the mere thought of writing your business plan bores you to tears, and you’d rather watch paint dry!

That’s why you need a detailed guide that makes the business plan writing process stress-free. In this guide, I’ll walk you through a step-by-step process for writing a winning business plan.

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What Is A Business Plan?

It serves as a blueprint, guiding your actions through every stage of building your business.

I’ll delve into the details of how to write a business plan shortly. But first, let’s explore a few reasons for writing your business plan.

Why Is A Business Plan Crucial?

Over 50% of entrepreneurs start their businesses without a plan.

If you seek investment funding, this is a no-no. A business plan gives you a better chance of getting a ‘Yes’ from investors. Here are two reasons to have a business plan, even if you’re bootstrapping.

1. Business Planning Ensures Resource Optimization

A CB Insights report says, “Running out of cash is one of the top 12 reasons startups fail.” This means that a conservative use of funds is crucial to the survival of your business.

When you develop your business plan, you compel yourself to consider the various aspects of the business.

The result? You deploy resources efficiently and preempt mistakes that could cost you time, money, energy, and your business.

2. Business Planning Enables You To Plan For A Strong Startup Team

The quality of your startup team is vital to the success of your business.

Even if your idea is the best since sliced bread, you still need the best people working with you. Writing a business plan allows you to plan for an A+ team, which can boost your odds of success.

Bottom line: Building a business without a business plan is like navigating a ship without a map. You could go around in circles and spend your funds until the business grinds to a halt.

If you don’t want that, you need to know how to write your business plan to stay on track.

How To Write A Business Plan In 7 Simple Steps

Business plans ‌fall into two categories:

• A lean business plan:

Lean business plans are one-pagers or, at the most, two-page documents. These pages provide a high-level overview of your business focus, strategy, and goals.

• A traditional business plan:

Traditional business plans contain many pages, so they are usually more comprehensive. We’ll discuss how to write a traditional business plan in the seven steps below.

Step 1: Write An Interesting Executive Summary

The executive summary is the introduction and one of the most important sections of your business plan. Interested business parties, like investors and lenders, may read just your executive summary. That’s because they are time-strapped and have many schedules on their plate.

An executive summary is like the headline of a newspaper article. If it doesn’t grab the reader’s attention, they lose interest and toss it aside.

Your executive summary should provide a high-level overview of your business concept. Like an elevator pitch — but with more detail — it conveys what your business does, who it’s for, why it’s different, and why it’ll be successful.

The purpose of your executive summary is to sell your business idea and its profit potential. Done right, it intrigues readers enough to thumb through the remaining pages.

Your executive summary should be under 2 pages and answer the following questions:

Pro Tip: Don’t write your executive summary until you’ve completed the rest of your plan. Since the executive summary gives an overview of your business plan, it’ll be easier to write after you complete other sections of your plan.

Step 2: Describe Your Company

Your company description is the second component of your business plan. This section shows who you are, the problems your business solves, your goals, and why you are different.

I’ll illustrate using Yellow Leaf Hammocks.

• Who they are: makers of the “world’s most comfortable” hammocks
• Their goal: empower their weavers—craftswomen from Northern Thailand—to break the cycle of poverty
• Why they’re different: They achieve their goals through training and sustainable job creation.

Not only do they make some of the finest and highest-quality hammocks, but their entrepreneurial venture also has a social cause. Include this kind of detail in your company description.

Your company description should also include details about the management team. This is information investors want to see.

Patrick FitzGerald, Investor and Wharton Entrepreneurship lecturer, says he reviews up to 50 business plans monthly. Know the first page Patrick flips to? The team section. “I try to see who these people are. What are they made of?” he said in an Entrepreneurship Workshop session at The Wharton School. Specifically, he’s looking to see if founders have:

• An advisory board that makes up for any lack of experience you may have.
• Industry experience.

In summary, your company description should contain your:

• Business model.
• Business mission and vision.
• Business name, registered address, and contact information.
• Founding story — how you came about your idea and why you pursued it.
• Business structure — sole proprietorship, partnership, or limited liability company (LLC). Include the ownership stake of every party as well.
• Management team, including their professional background, unique skills, and expertise.
• Short-term goals (achievable within 12 months) and long-term goals (achievable within 5 years).

Step 3: Share Your Market Analysis

Is the size of your total addressable market big enough?

Use this section to discuss your target market, the results of your market research, and how you plan to grab a huge amount of market share.

Your market analysis should prove:

1. You’ve validated your idea.

It’s not enough to claim an understanding of your target customers and their needs. You must also provide Proof of Concept (POC), i.e., data-based evidence that your idea is workable. As American management consultant W. Edwards Deming said, “Without data, you’re just another person with an opinion.” And it’s dangerous to base your business on opinions alone.

Often, many entrepreneurs skip this crucial step, remain blinded by their enthusiasm, and assume there’s a market for their product. This is incorrect. 35% of businesses die in infancy because there’s no market need for their product.

Strong and growing sales numbers are the most effective way to prove there is demand for your business. However, if you’ve yet to launch your business, you can test the feasibility of your idea with the lean start-up methodology.

2. You’ve analyzed your competitors and identified your competitive edge.

Have you thought hard about how you compare to your competitors? Expert-level understanding of your business environment is crucial to your success. To achieve this, conduct a thorough competitive analysis, do a SWOT analysis, and share your results.

The outcome of your analysis equips you to:

• Define your competitive advantages.
• Clarify your unique selling proposition (USP).
• Develop strategies that outperform competitors.
• Choose the best marketing approaches for your products/services.

Patrick Fitzgerald recommends focusing on 4 to 5 competitors. Otherwise, it becomes overwhelming.

Pro Tip: As the first (and probably the most important) investor in your business, avoid being blinded by enthusiasm. Objectively analyze these aspects of your business as thoroughly as an investor would.

Step 4: Describe Your Products Or Services

While your products and services may appear in multiple sections of the plan, it’s great to have a section that describes how they work.

For instance, if you have four physical products, it makes sense to describe all of them so that readers understand how they work and what makes them unique. If you have many products, pick a few and describe them. For tech products, share information about your product’s front and back end.

Always keep your explanations simple. Don’t assume readers have industry experience. Don’t make them work hard to understand your products and services.

Note that if your product is a commodity item, elaborate descriptions are unnecessary. But if you’re creating a new product, share insights about how you plan to protect your intellectual property with patents, trademarks, etc.

Step 5: Present Your Sales & Marketing Strategies

How will you spread the word about your business?

“If you build it, they will come” is a dangerous myth. The reality is this: businesses never live up to their sales potential without effective marketing efforts. That’s why you should invest time in building your marketing plan.

Recognize that your business needs repeat business to thrive, not one-time sales. Your marketing plan should include strategies both for acquiring and retaining customers.

Key information for this section includes:

• Impact and results of past marketing efforts
• Clear, realistic, and measurable sales targets
• Goals for future marketing efforts
• Deadlines for meeting set goals.
• Budget for all marketing activities.
• Marketing channels (e.g., word of mouth, social media, advertising, direct-to-consumer, retail stores, e-commerce, etc.)

Step 6: Share Your Financial Projections

Your financial projection helps investors and lenders know if your business will make a profit. It compares your operating costs with your projected sales and profit to see if your business will be profitable.

Keep in mind that a financial projection isn’t merely a prediction. It implies a commitment to achieving the targeted results.

Essential information to include in this section:

• Projected sales over the next 18- 36 months, including high, medium, and low sales estimates
• Total costs of producing goods, including marketing, promotion, commissions, administration, salaries, etc.
• Profit and loss projections
• Break-even analysis
• Projected cash flow

These projections are guesses, but they should be data-driven. Make estimates based on previous sales, experiences, market analysis, etc. If you haven’t launched your business, base your projections on industry averages.

It’s better to make conservative estimates and exceed them than to make over-optimistic projections. Unrealistic hockey stick profit projections could repel potential investors, but exceeding sales targets would strengthen their faith in your brand.

Take Jeff Bezos, for instance. He projected medium and high sales of $74 million and $114 million, respectively, for the year 2000. But according to Brad Stone’s book, The Everything Store, net sales in 2000 hit $1.64 billion. No wonder investors kept backing him, even when Amazon remained unprofitable for many years.

Step 7: Outline Your Operations & Management Plan

The operations and management plan describes how your business will operate, and it’s the concluding section of the business plan. It provides a high-level overview of your workflows, production processes, supply processes, administration, and so forth.

Elements of your operations and management plan include:

• Organizational structure, i.e., who is in charge of each aspect of the business
• Expense and capital requirements to support the organizational structure
• Facility, equipment, and supply requirements
• Initial personnel requirements

Keep in mind that you don’t have to share the full details of your operational processes. That would take too many pages. Just provide enough detail to make your reader know you’ve thought through the day-to-day operations necessary to run your business efficiently. Plus, be ready to answer questions they might have.

If you’re seeking investment capital, your business plan should include your funding request. State what you want to achieve with the amount you raise.

Some business plans also contain an “Appendix” section. This section is necessary if you’re seeking investment funding. Use it to provide supporting information that didn’t fit within the earlier sections. Patents, resumes of key employees, legal agreements, and so on can be included in your appendix.

Ready To Write Your Business Plan?

In business, things won’t always go as planned. You’ll need to take several detours and adjust your plan to fit changing market conditions.

Investors know this, too. Still, they request a business plan. Why? It shows the thought you’ve put into the business and how you’ll handle the inevitable challenges that’ll arise.

So use this guide, roll up your sleeves, and write your business plan. It’ll improve your chances of success. Plus, it trumps trying to grow your business by relying on your guts.