How to Write a Business Plan for a Service Business
9 min. read
Updated November 13, 2023
Free Download: Sample Administrative Services Business Plan Templates
If you’re starting a business that sells a service, writing a business plan is one of the first steps you need to take. Whether you are starting a consulting business, a car repair shop, or a construction firm, a business plan will help you figure out your strategy, develop your marketing plan and figure out the all-important financial forecasts so that you can be successful.
Writing a business plan can seem complicated at first. There are multiple topics you have to cover and you want to impress your readers with a complete plan. Whether it’s a loan officer reading your business plan or a potential business partner, you need to make sure you get your plan right.
That’s why we put this guide together. Business planning doesn’t have to be intimidating and we’ll guide you through the process of pulling everything together for your new service business.
- What is a service business?
A service business typically focuses on selling services to customers instead of products. For example, a consultant or lawyer typically sells their time and expertise to customers. A repair business typically is selling the service of fixing broken equipment and appliances. Event planners are selling the service of planning and managing events such as weddings and corporate retreats.
Service businesses don’t just have to sell services. Many service businesses sell a mix of products and services. Take a car repair shop, for example. They’ll sell the service of repairing your car in addition to the parts required to get your car serviced. Even though the repair shop sells parts, it’s different from an auto parts store that only sells parts and doesn’t sell any repair services.
- Why you should write a business plan for a service business
It’s tempting to just dive right in and start building your business. A business plan can seem like a waste of time and it’s certainly more fun to start working on things like logos, business cards, and finding office space. But, it’s important to remember that a business plan is a vital step in the process that will prevent you from wasting precious time and money as you get your business up and running.
Taking a little time to plan now can save you from making critical mistakes and prevent you from wasting thousands of dollars. Even though it may not be as “fun”, it’s worth every minute. Here’s why you’ll want to plan:
1. Clearly define your offering
Although you may have a good idea in your head for the services you’ll be offering, it’s important to write down exactly what you plan to offer to your customers and what you plan to charge. Especially for service businesses where you may be selling your time, it can be tempting to take on any job. That can lead to distractions and lead you away from your core business. You also want to ensure that business partners are on the same page as you and that you agree on the services you are providing, what you’re going to charge, and how you are going to deliver those services.
2. Create a marketing plan
A clear marketing plan is crucial for getting your service business up and running. You’ll need to know not only how you plan on landing your first customers, but also your hundredth customer. Taking the time to describe your ideal customer and craft a marketing plan to reach them in a smart and cost-effective way is the key to a business that can grow efficiently over time.
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3. know your numbers.
Before you start any business, understanding what it’s going to take to make money is a crucial first step. As you create a sales forecast and expense budget, you’ll be able to see what it will take to become profitable. Understanding how much it’s going to cost to start your business is also a critical number to know. For some service businesses, startup costs can be high. Looking back at our car repair service business example, startup costs may be significant. This business will need to purchase a workspace, tools, and other equipment before it can offer any services. In contrast, a consulting business may not have many startup costs. You may be able to simply work from home and offer your services online , avoiding the need for any physical overhead costs. Regardless of whether your startup costs are low or high, understanding what level of sales you’ll need to make money is something a business plan will tell you.
4. Build your business strategy
A business plan helps you outline your business strategy . Knowing your strategy before you start helps you focus on building your business the right way from the beginning. Figuring out your strategy while you’re trying to build your business is somewhat like building an airplane while you’re headed down the runway. It’s potentially possible but very difficult to do.
Your business plan will force you to think through and answer the questions you need to answer to have a successful business.
- How is a business plan for a service business different from a product business plan?
Although business plans for service businesses are fairly similar to plans for product businesses, there are a few key differences.
Often, service businesses have fairly low cost of goods sold . This is how much it costs you in parts, products, or other tangible items to make a sale. Most service businesses have low costs to deliver the service and therefore have fairly high-profit margins. Software-as-a-service businesses are a perfect example of this because the incremental cost of a new customer is so low.
Service businesses often have little or no inventory as they are focused on selling their service, not a product. That said, this isn’t always the case. Any kind of repair service usually has to have replacement parts on hand. But, lawyers and accountants almost never have any kind of physical inventory.
For some service businesses, overhead expenses can also be very low. Many service businesses don’t need storefronts, warehouses, or other expensive real estate.
- What you should include in your business plan
A good business plan includes six key chapters. Following this business plan outline will ensure that you have a complete and effective business plan.
1. Executive Summary
Every business plan should have a short executive summary . Your executive summary is an overview of your entire business and a preview of the rest of your plan. Ideally, your executive summary can be used as a stand-alone document that you can use to introduce your business to investors who don’t have the time to read a complete business plan. Your executive summary should describe the services that you are offering, who your target market is, and provide a snapshot of your sales goals and profit projections for the coming year. If you’re raising money to launch your business, be sure to include how much money you need to get the business launched. Write your executive summary last, after you’ve written the rest of your plan. Because it’s just a brief summary – two or three pages at most – writing it last will ensure that you cover all the key points in the rest of your plan.
2. Problem and Solution
The first major chapter of your business plan will cover the problem that you solve for your clients and describe the services that you provide. If you’re starting a landscaping service, the problem you’re solving is your customers’ desire for a well maintained, beautiful lawn and garden when they don’t have the time to do it themselves. A headhunting firm helps businesses find and recruit new employees without having to have a large HR department. When you describe the services you provide, make sure to describe your pricing and how you stack up against the competition. What makes your services better than other businesses that provide similar services? What sets you apart?
3. Target Market
The target market chapter of your business plan focuses on the customers that you are selling to. A good business plan describes your business’s ideal customer very specifically. No business sells to “everyone”. Instead, good businesses know the type of customer that they are after and where to find them. For example, a financial planning service business might target millennials that work in technology companies who like to communicate mostly online. When you describe your target market, make sure to indicate how large the market is . You’ll want to make sure that there are enough potential customers for your services out there so that you can grow your business.
4. Marketing and Sales
Once you’ve defined the problem you are solving for people, how you solve that problem for them and described exactly who your customer is, you’ll have a great platform for creating a marketing and sales plan . With your target market information, you should know where and how to reach your ideal customer so that you can come up with a marketing plan to reach them. If your business is local, focusing on local advertising and social media groups might be a good idea. If your services are expensive, you’ll also want to describe your sales plan since customers most likely won’t just sign up for your services immediately after hearing about you. You’ll most likely need to deliver information about your services, create bids, and have a follow-up strategy for closing deals. Use this chapter of your business plan to create your marketing and sales roadmap so that you can start executing on your marketing plan when your business is up and running and have sales processes in place so you make sure that you maximize your marketing efforts.
5. Company & Team
Your idea is surprisingly not the most important part of your business. It’s actually the people that build the business and run it that are the most important. Even the best idea that’s poorly executed is likely to fail, so it’s critical that you assemble the right people to make your business a success. In this chapter of your business plan, describe who is behind the business and why this team is the right team to build it. Investors often focus more on the team than the idea because they assume that a smart and motivated team will adjust and refine an idea to make it successful, even if the first iteration isn’t perfect.
6. Financial Plan
Finally, your business plan needs a financial plan . This plan should include:
- Sales forecast
- Profit and Loss
- Cash Flow Forecast
- Balance Sheet
If you’re starting a subscription service, include a forecast for subscriptions, renewals, and cancellations — otherwise known as “churn”. Your Profit and Loss statement will show your sales and expenses so that you can calculate your predicted profits. The Cash Flow Forecast will predict how cash moves in and out of your business and will help you identify potential cash flow problems that may occur in the future. The Balance Sheet will detail the assets and liabilities that your business is predicted to have over time.
- Free business plan examples & templates
It might be helpful to explore how other service-based businesses have written their business plans. Check out our free library of sample plans and templates for service businesses . You can download any of these documents in Word form and get some structure for your own plan.
See why 1.2 million entrepreneurs have written their business plans with LivePlan
Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.
Table of Contents
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Free Wedding Venue Business Plan PDF [2023 Template + Sample Plan]
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How to Write the Business Plan Products and Services Section
Get tips on writing the products and services part of your business plan
- The Products and Services Section
- What to Include
- Tips on Writing the Section
The products and services section of your business plan is more than just a list of what your business is going to provide. This section of your business plan should include details about how you'll price products and services, how you'll fulfill orders, and other details that investors need to hear before you can get funding . Learn more below.
- Business plans include details about products and services you'll offer, including exactly how you plan to market, sell, and deliver on customer orders.
- The best business plans are clear and concise.
- The products and services section of your plan should show off why your product or service is needed.
- The products and services section should also convey the expertise and experience you have to succeed.
Why You Need a Products and Services Section in a Business Plan
The business plan products and services section is the centerpiece of your plan. While other sections of your business plan are important, the products and services section is the essence of your business and the point around which every other part of the business plan is built .
What to Include in a Products and Services Section
The products and services section of your business plan outlines your product or service, why it's needed by your market, and how it will compete with other businesses selling the same or similar products and services.
Your products and services section should include a description of the products or services you are offering or plan to offer (including future products or services). You should explain how your products and services will be priced and a comparison of the products or services your competitors offer in relation to yours.
You should also include the sales literature you plan to use. Detail your marketing materials, and clarify the role your website will play in your sales efforts.
The products and services section will include a paragraph or so on how orders from your customers will be processed or fulfilled, as well as any needs you have to create or deliver your products, such as up-to-date computer equipment. If your process depends on intellectual property or legal issues, such as trademarks , then those need to be addressed.
Tips on Writing the Products and Services Section
This section of your business plan should excite those you're hoping will fund your business or work with you. To that end, here are a few tips to create a products and services section that appeals to the reader.
Indicate Why Your Product or Service Is Needed
Especially if you're venturing into a new concept or invention, or a place where there is no current market, you need to explain the need for your product or service.
Highlight the Features of Your Product or Service
A crucial part of business success is the ability to set yourself apart from other businesses that sell the same or similar products and services. What features, such as price point or level of service, do you offer that are unique to you?
Focus on Benefits
Unique features are important, but even more vital is how those features provide value to consumers. Translate your features (i.e., faster or cheaper) into benefits (i.e., get it now or save money). The goal is to highlight how your product or service will fix a problem or improve a client or customer's life.
Be Clear and Concise
Don't let your business plan get bogged down in too much description and information. Use bullets or numbered lists to quickly and easily highlight important information.
Show Off Expertise, Experience, and Accolades
You not only want to describe your products and services but also share why you're the best person to provide them. Include anything in your education or experience that makes you an expert in this business. If you have testimonials, awards, or endorsements, share those. Finally, if you've applied for a patent, copyright, or trademark, include that as well.
Be the Expert, But Use Layman's Terms
You should know your product, service, and industry well, but don't expect your potential funders and partners to have the same level of knowledge. Assume the reader doesn't know as much as you when you explain what you're offering.
Avoid acronyms and jargon when outlining your products and services.
Indicate What's Special About Your Products or Services
Will you be offering a special guarantee or refund policy? Do you have a quicker or more unique way of delivering your product or service?
Speak to Your Customer
While you don't want to write an advertorial, you do want to be customer-oriented when you write your products and services section.
Examples of a Products and Services Section
The Small Business Administration offers business plan examples that you can draw from to help guide your writing. Here's an example of a products section for someone creating "Wooden Grain Toys."
Wooden Grain Toys will sell wooden toys made from solid hardwoods (maple, beech, birch, cherry, and oak) and steel rivets. The toys are handcrafted and designed for small children to easily use. Our line currently includes the following nine models:
- All-Purpose Pick-Up Truck w/movable doors and tailgate
- Dump Truck w/functioning dumping mechanism and box
- Biplane (two-seater) w/movable propeller
- Steam engine with coal tender - additional cars available separately: caboose, flat car w/logs, box car, tank car, coal car
- Flat-Bed Truck w/logs
Wooden Grain Toys will offer its products for the following prices:
- All-Purpose Pick-Up Truck w/movable doors and tailgate - $25
- Dump Truck w/functioning dumping mechanism and box - $30
- Biplane (two-seater) w/movable propeller - $20
- Additional train cars (single car) - $5
- Additional train cars (three cars) - $12
- City Bus - $12
- Tow Truck - $18
- Flat-Bed Truck w/logs - $35
- Sports Car - $20
- Sedan - $20
What Is Product and Service in a Business Plan?
A products and services section of a business plan clarifies exactly what your business will produce , how much it'll sell for, and other details along those lines.
What Are Examples of Products and Services?
A product or service can be anything a business creates to turn a profit. Some businesses have both products and services. For example, a restaurant's services include cooking for and serving customers. The restaurant's products are the dishes and drinks it creates.
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Service Business Plan: Everything You Need to Know
A service business plan guides you through the complete operations of your service business. 3 min read
A service business plan guides you through the complete operations of your service business. It includes everything from service description through setup, marketing, management, and financial plans for your business.
According to a recent survey, less than 25 percent of business owners created a business plan for their new business. The topmost reason surveyed business owners gave for not having a business plan was that they didn't know how to create it.
Creating a Business Plan: An Opportunity in Itself
In the United States, more than half-a-million new businesses are set up every year. These new businesses create an enormous opportunity to start a service company to create business plans for new business owners. You can market your services using one or more of the following methods:
- Networking through business associations and meetings.
- Obtaining a list of applicants who have applied for a new business license.
- Partnering with business training schools to reach out to their students.
Benefits of Having a Business Plan
A business plan offers the following benefits among others:
- It gives you an opportunity to think through the whole process of your business.
- You can discover if there are any weaknesses in your ideas, identify the opportunities you might have missed earlier, and make a better plan to deal with potential challenges.
- A good business plan can help you get funds for your business by convincing investors or lenders.
- A business plan gives you a pathway to profit. A path with clear goals and actions helps you run your business smoothly.
- Others can judge your success potential on the basis of your business plan.
- You can use your business plan as a communication tool to orient your sales team, vendors, and others to your business goals and operations.
- A business plan helps you become a skillful manager. It makes you think about your competition, promotion, and advantageous situations. Over a period, it increases your ability to make adjustments.
What Does a Business Plan Include?
Your business plan should not be longer than 30 or 40 pages. It usually includes the following sections:
- Executive summary
- Business or company description
- Description about your products or services
- Marketing plan
- Operational Plan
- Business management and organization
- Setup expenses and funding
- Financial plan
- Refining your plan: This section provides for ways to modify your plan for certain specific purposes (for instance, for applying for a bank loan) or for certain industries (e.g., for retail).
Questions to Ask Yourself
To develop an effective business plan, ask yourself the following questions:
- What is the nature of your business?
- What services do you provide?
- Where is your market?
- Who are the buyers of your services?
- Who are your competitors?
- What will be your sales strategy ?
- How will you merchandise?
- How much money will you need to operate your business?
- How will you manage your work?
- How will you control the operations?
- When should you revise your plan?
- Where can you get help?
You should answer these questions yourself as you sit down to develop your service business plan.
Writing an Effective Business Plan: Products and Services
The Products and Services section should clearly describe your products and services. Based on the type of business, this section of your business plan can be long or short.
If you are into a product-focused business, you may want to describe your product in more detail. If you sell a product that is readily available in the market, you may want to focus more on your core strength (for example, competitive pricing) rather than the product itself. However, if you are producing a new commodity, it may be more important to explain the product and its uses thoroughly.
Avoid getting too detailed or technical. Keep it simple and avoid using industry jargons. You can list out the trademarks, patents, and copyrights you have obtained or applied for.
You should answer the following questions while writing the products and services section:
- Are your products in the development stage or they are already available on the market?
- When will you bring the new products to the market?
- How are your products different?
- How will pricing affect your profit margin?
- How will you purchase or manufacture the products?
If you need help with your service business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
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The Business Planning Process: 6 Steps To Creating a New Plan
In this article, we will define and explain the basic business planning process to help your business move in the right direction.
What is Business Planning?
Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.
The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.
The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.
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The Better Business Planning Process
The business plan process includes 6 steps as follows:
- Do Your Research
- Calculate Your Financial Forecast
- Draft Your Plan
- Revise & Proofread
- Nail the Business Plan Presentation
We’ve provided more detail for each of these key business plan steps below.
1. Do Your Research
Conduct detailed research into the industry, target market, existing customer base, competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:
- What are your business goals?
- What is the current state of your business?
- What are the current industry trends?
- What is your competition doing?
There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.
You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.
Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.
This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.
3. Calculate Your Financial Forecast
All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.
Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.
A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.
This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.
4. Draft Your Plan
With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.
If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.
5. Revise & Proofread
Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.
Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.
6. Nail the Business Plan Presentation
The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.
Business Planning Process Conclusion
Every entrepreneur dreams of the day their business becomes wildly successful.
But what does that really mean? How do you know whether your idea is worth pursuing?
And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way.
Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.
Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.
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Other Helpful Business Plan Articles & Templates
Business Plan Section 4: Products and Services
To give others a clear understanding of the value your product or service provides, read about 11 important things to include in this section of your plan.
This is the part of your business plan where you will describe the specific products and services you’re going to offer. You’ll fully explain the concept for your business, along with all aspects of purchasing, manufacturing, packaging, and distribution. You’ll go over suppliers, costs, and how what you’re offering fits into the current market and stacks up against your competitors.
How do you write the Products and Services section of a business plan?
While your product may be technical, don’t get caught up in complicated industry jargon. Explain and describe what you’re offering in layman’s terms, so someone who isn’t familiar with your business will understand and be excited about it. It may be necessary to give some basic background if this is an area or industry people are unfamiliar with.
While you write up the Products and Services section of your business plan, keep your reader in mind. Things that you might take for granted or know inside-out might not be common knowledge to potential lenders or investors. As you write, avoid being too technical, assuming too much knowledge from your readers, and using buzzwords.
You don’t want to come off as condescending, but you do want to make sure everyone understands what you’re talking about. To see if you’ve succeeded, have some trusted people who aren’t in your industry proof-read this section for you, and ask them to explain your product or service in their own words, along with the benefits to using them.
Here are the points you want to write up in the Products and Services section of your business plan:
The Product or Service Description
What is your product and service, and how does it work? How does it benefit customers? How do you make it or how will you get it made?
What makes this product or service unique or better than what’s already available in the market? Why would someone choose to buy your product or do business with you over someone else?
Have you had the product tested or certified? Gotten approvals from industry experts? Did you trademark, copyright, or patent your product ? These can add substance and credibility, so be sure to mention them.
Where are you currently with this product or service? Is it in the idea stage or do you have a prototype? Have you produced some and are looking to expand? Have you started offering this service already or are you still in the planning stages ?
How much will you charge for the products or services you’re offering? Where does this fit in with what’s currently available?
Sales and Distribution Strategy
How will you sell it? Will you market it online or in retail stores? Have you lined up any vendors? How will you distribute it or deliver the service you’re providing?
How will you fill orders or deliver the service? Will you manufacture items yourself or outsource to someone else? Who will handle distribution, and how?
Will you need any special equipment or technology to provide your product or service?
Do you envision future products or services as an extension of the business once it’s successfully launched?
Photos or Brochures
It’s beneficial to include a visual representation of your offering. Photos or brochures would generally get put in the plan’s appendix, but you would refer to them in this section.
How Do You Stand Out?
Perhaps most importantly, emphasize how and why you are competitive. How do you stand out, and why does this business have such a terrific chance at succeeding? In talking about your product or service, always try to answer why a client would want it. How will your offering make your customers’ lives better or more profitable? What need are you fulfilling or what problem are you solving?
To sum up, the product and services section of your business plan gives the reader a clear understanding of why you’re in business, what you sell, how you compete with what’s already available, or how you fill a niche that no one else is meeting.
Next > Business Plan Section 5: Market Analysis
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BUS101: Introduction to Business
The Business Plan
Read this section to see why business plans are essential and what sections should be included.
Goods, Services, and the Production Process
To succeed in attracting investors and lenders, you must be able to describe your goods or services clearly (and enthusiastically). Here, you describe all the goods and services that you will provide the marketplace. This section explains why your proposed offerings are better than those of competitors and indicates what market needs will be met by your goods or services. In other words, it addresses a key question: What competitive advantage will the company's goods and services have over similar products on the market?
This section also indicates how you plan to obtain or make your products. Naturally, the write-up will vary, depending on whether you're proposing a service company, a retailer, or a manufacturer. If it's a service company, describe the process by which you'll deliver your services. If it's a retail company, tell the reader where you'll purchase products for resale.
If you're going to be a manufacturer, you must furnish information on product design, development, and production processes. You must address questions such as the following:
- How will products be designed?
- What technology will be needed to design and manufacture products?
- Will the company run its own production facilities, or will its products be manufactured by someone else?
- Where will production facilities be located?
- What type of equipment will be used?
- What are the design and layout of the facilities?
- How many workers will be employed in the production process?
- How many units will be produced?
- How will the company ensure that products are of high quality?
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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.
- A business plan is a document describing a company's business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
- There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.
Investopedia / Ryan Oakley
Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.
Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."
Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.
Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.
While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.
These are some of the most common elements in many business plans:
- Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
- Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
- Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.
The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.
2 Types of Business Plans
Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
- Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.
Why Do Business Plans Fail?
A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.
How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.
Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.
A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
U.S. Small Business Administration. " Write Your Business Plan ."
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Start-up business planning.
- Service Business: Example Business Plan
Are you starting a service based business? We’ve created an example business plan to help you get started.
Do you have an idea for a service based business, but aren’t sure where to start? Make your idea a reality by writing a business plan that outlines how your business will operate, who your ideal customers are and how you plan to make money. A business plan doesn’t have to be elaborate, it just needs to explain your plan for your business.
To help you get started we’ve created an example business plan for a service based business. Our example is for a tutoring company, but the principles apply to any service based business.
You can also find the same example in the Business Plan Writer , our free online tool that guides you through the process of starting your business. Just select “service” as your industry when you register.
Good luck and happy writing!
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