If you're wondering how to write a business plan, you’ve likely been considering launching your own design firm for quite a while. You have a ton of ideas—you’ve seen how others have done it, and you’re ready to take a crack at striking out on your own. But where to begin? When getting your new business off the ground, one of your initial steps should be learning how to write a business plan. It’s crucial to structure your ideas formally into a road map for your firm’s success. If you plan to seek funding for your company, you’ll need to draft a traditional business plan; if you’re self-funding, a simple outline will suffice. Scroll on to find AD PRO’s guide, filled with strategies and details on what to include.
What type of business plan is right for you?
Typically, business plans fall into one of three categories:
1. A one-page business plan
This document summarizes your business goals in a simplified format. It’s ideal for introducing your concept to potential investors, who may not have time to peruse a lengthy document. This easy-to-read format, viewable at a glance, is perfect for initial meetings, and it offers a substantial jumping-off point—though you may need a more detailed plan in the future.
2. A lean startup plan
Slightly longer than the one-page plan, this one includes a summary and a bulleted list that contains your firm’s financial information, business strategies, metrics, and forecasts. Since this type of business plan mainly functions as an internal tool, it’s not necessary to include all the sections and information of a formal traditional business plan (see below). This simple-to-navigate five- to 10-page document should contain your strategy, the tasks you need to complete to achieve your goals and their due dates, projected sales, spending, and cash flow. It’s advisable to update this plan regularly (at least twice a year), as it is intended to guide the growth of your company—and help keep all internal members of your team in the loop. As such, it should evolve organically as your business does.
3. An external business plan (a.k.a. a traditional standard plan)
You'll need to create a more formal business plan if you intend to share company information with key players: potential investors to fund your endeavor, banks to support loan applications, or even future employees. Since you’ll be using this document to explain your strategies for your business with those who may finance or join your company, you’ll want to clearly delineate your plan in detailed sections.
Where to begin?
Your business plan is a living document that will evolve with your business. It should plot out how your business will operate, state your goals, and precisely express your vision for your company. Regardless of the type of plan you opt to create, check out these solid tips before you begin drafting the document.
1. Keep it simple
No need to complicate the already stressful process of starting your own business by constructing a convoluted plan. Create a simple bulleted plan that cites goals and your strategies for achieving them, then update it as your company grows. If you choose to draft a traditional business plan, keep it to less than 40 pages. If you’re having trouble distilling the essence of your company down to 30-35 pages, consider hiring an expert to help you write it. Fit Small Business lists Wise Business Plans as its top-choice service, but keep in mind this argument about why it’s often better to do the writing yourself.
Even if you go with a traditional, external business plan, keep it concise. Cut to the chase as quickly and efficiently as possible—you don’t want to lose a potential investor out of boredom! And don’t spend too much time making your business plan pretty. As a designer, your instinct may be to focus on stunning graphics, and while they can indeed enhance the appearance of the document, the actual content is what’s most important. Use graphs, charts, and photos to break up the text and illustrate your message without obscuring it.
2. Know your audience
Tailor your business plan to suit your needs, and craft it so that the intended audience can clearly understand it. Avoid using lingo only an A&D professional would understand—especially if you intend to use the plan as a pitch to investors or for a loan application. Use straightforward rather than insider-y language to avoid alienating your target audience.
3. Know your competition
Never speak disparagingly about your competitors. Get familiar with who they are, know what they are doing well (and poorly), and make it evident in your business plan how you will distinguish your brand from the rest. What makes your company stand out against the competition? Perhaps your firm offers online design services, specializes in custom millwork, or provides clients with assistance from a personal account director. Highlight whatever sets you apart transparently in your business plan.
4. Keep it real
Keep your expectations in check and never inflate your financials. While we encourage you to think positively and believe that your business will succeed financially, do not overestimate your earning potential and revenue forecast. What services will you offer, and how much will you bill for them? What do comparable companies bill for similar services? Make your projections realistic, particularly if you are seeking funding. Explain your business model and how you plan to earn money, as well as the reasoning behind your figures. And be certain to root all financial information in solid facts.
5. Work backward
Figure out what you want to accomplish and by what date, and then backtrack from there. Consider: Where would you like your company to be financially one year from now? What revenue goals would you like to achieve by that time? Then determine what you must do in 12 months, six months, and three months to arrive at your objective in a timely fashion. Work these milestones into your business plan. You'll be pleased as you see results accumulate throughout the year—even more so when you realize your objective by your firm’s one-year anniversary.
6. Just get it started
Don’t let the task of drafting your business plan paralyze you. If you sit down to write and come up empty, start jotting down your ideas—remembering what inspired you to launch your company in the first place—and worry about shaping your formal business plan later.
If it helps you to get started, begin with a simple one-page plan; you can always use that document as an outline and go back and fill in more details later. Remember: No one knows your business better than you do. Let your passion for starting your new company motivate you as you begin writing and don’t be afraid to let that emotion to come through in the final document. It will better convey your vision and help your readers understand what your small business is all about.
The essential components of a business plan
Now that you have an idea of what type of business plan will be right for your company and understand how to approach the task, the question remains: What do you need to include in your business plan? Entrepreneurs have varying ideas on what’s essential and what you can skip. But when starting your first-ever business, consider following the advice of the U.S. Small Business Administration, and make sure that your business plan contains these nine recommended sections.
1. Executive summary
As the single most important part of your business plan, the executive summary should pique the curiosity of your audience. It should be a brief synopsis of your company’s mission, your immediate as well as long-term goals, and your strategies for attaining these goals. Make it evident what exactly your business is: What’s the product or service? Why will your company be successful? What sets it apart from the competition? What do you plan to do differently? Get this information out there immediately. Also, include basic facts about your employees, leadership team, location, and financial statistics.
Sometimes investors will ask to see only your executive summary as they consider whether or not to grant you funding. If they are intrigued by what they read, they will ask for your entire business plan. So be sure to hit the highlights in the executive summary. And while this summary appears first in the document, it’s actually smart to write it last, since it encompasses all components of your plan, whittled down to a brief synopsis. Think of it as the whole document in a nutshell. Don’t let it exceed a page or two.
2. Company overview
Here’s where you go into detail about the concept behind your business, what you do, and what you plan to accomplish. What problem does your firm address? And what are your solutions? What target audience will your small business serve? Name specific businesses, design firms, organizations, and/or clients. Explain what you have to offer and what you’re selling. Be sure to use concrete examples and eliminate superfluous language. Outline what makes your company distinct from the competition. You’ve touched on this point in the executive summary, but go into specific detail in this section. It’s the place where you can toot your own horn—tastefully and succinctly, of course—so take advantage of the opportunity, play up your strengths, and sell your company.
3. Market research
Demonstrate that you understand your industry by doing comprehensive market analysis. Look for emerging trends and themes in the marketplace. Have a crystal-clear picture of who your customer is. Research your potential competitors, see what their strengths and weaknesses are, and determine how you can create more effective solutions. It’s critical that you stay on top of what the competition is offering.
When attempting to discern who your target audience is and who your ideal consumers are, a strong small business plan will identify market segments, the size of each, and additional segments that could be interested in your business. The typical way to distinguish market segments is to use a method called the TAM, SAM, and SOM approach, defined as:
• TAM: Your Total Available or Addressable Market. This group includes everyone you wish to reach with your product/service.
• SAM: Your Segmented Addressable Market or Served Available Market. This is the portion of the total available market you will target.
• SOM: Your Share of the Market. This is a category within your SAM that you will realistically reach in the early days of your business.
Once you establish your market segments, figure out who your ideal customer, or “buyer persona,” is within each segment. In this exercise, you should attribute specific demographics to your buyer persona—for example, a name, gender, income level, and preferences in the marketplace. This fictitious persona of your ideal customer will help you to better understand your consumer base, create stronger marketing and sales tools targeted to your consumer, and be able to attract the right type of client to your business.
4. Organization and management
Delineate your company’s business structure—whether it’s set up as a sole proprietorship, partnership, LLC, C-corp, or S-corp. Explain who is in charge, list your employees by job function, and elaborate on each person’s responsibilities. If you already have staff in place, include employees’ names and experiences, describe what each of your workers is contributing to your small firm, and how each will help it succeed. This is your opportunity to demonstrate how you’ve amassed a stellar team or explain your strategy for attracting and retaining one.
You know the old axiom: A company is only as good as its employees. Kathryn Minshew, CEO and cofounder of career-planning platform The Muse, elaborates on this tenet in a widely circulated piece of advice that was published in Colleen DeBaise's book, Inc.: Start a Successful Business: “The hard part is actually building the team that will embody your company culture and propel you forward.” This is a critical point: You must hire good people who understand your vision and who are dedicated to helping your small business flourish.
5. Description of products or services
Outline the products or services your company offers as specifically as possible. Focus first on what you will initially bring to market, rather than long-term plans. Though it’s exciting to speculate on just how big your company can become—after all, it’s that type of guts, vision, and big thinking that enabled you to launch your own business in the first place—there's no point in focusing too heavily on the distant future in the initial business plan.
You do, however, need to illustrate exactly what your company is offering, so spend a few paragraphs expanding on your concept for products and services. Discuss your service or product’s life cycle, be very specific about how it will impact consumers, and divulge whether you plan to file for copyrights or patents. Also, describe the research and development you plan to do to enhance your offerings in the near future.
6. Marketing and sales
Spelling out your complete sales and marketing strategy will provide you with a point of reference for the future. You’ll likely refer to this section and continue to tweak and update it as your company grows. Here, discuss how you plan to reach your target audience. Be sure that you have your buyer persona explicitly defined before doing this (see number 3 above).
Within the marketing strategy portion of your business plan, delineate how you plan to position your company to consumers and how you will deliver the goods and/or services you will offer. Include a positioning statement that expresses your essential value proposition and distinguishes your competitive edge. According to Bplans, a free online resource for entrepreneurs, your positioning statement needn’t be lengthy; Bplans recommends using this simple formula to construct your statement: “For [target market description] who [target market need], [this product] [how it meets the need]. Unlike [key competition], it [most important distinguishing feature].”
This sales and marketing section is the place to address product and service pricing. Although there is no exact science to setting your pricing, consider the following:
• You must break even. Plan to charge customers enough to cover your costs in creating and delivering goods or services.
• Plan for primary and secondary profit center pricing. You may decide to sell your product or services at cost or less-than-cost to offer an appealing price— but then require support or maintenance that would push the price over the amount that would make it profitable for you.
• Adhere to market rate. Your pricing should be aligned with what your audience expects. You’ll walk a fine line here: You don’t want to alienate potential customers with high pricing, yet you shouldn’t devalue your offerings with pricing that’s too low.
How you will promote and advertise your business should also be addressed in this section. Do you plan to rely on traditional advertising avenues, such as print media? Would an online platform better suit your business and reach your target audience? How about public relations? Outline how you'll get the word out about your new company.
You can also market yourself online through social media channels. It’s a business necessity to have an online presence, and deciding which social media platform will serve you best depends on your target audience. Consider your consumer demographic when deciding on where to focus your time and efforts. You’ll want to make sure to keep your brand message and voice consistent across all marketing, advertising, and promotional materials—in print and online.
7. Funding request
If you’re using your plan to seek funding, this section is where you clearly express how much you need and how you will use it. Will you opt for debt or equity? This is a question you should ponder ahead of time: Are you willing to relinquish equity in your company for the funds to get your business off the ground? What are the terms you’re seeking? What is the length of time in business that your request will cover? Make note of collateral you have to put against loans, if any. Be prepared to explain to potential investors in depth how you will use their funds. Paint them a picture in broad strokes, and highlight the major areas that need funding (for example, purchasing an inventory, funding a marketing budget, etc.).
8. Financial projections
Follow up your funding request with a detailed explanation of future financial plans. Investors want to believe they’re making a sound decision by supporting your business. When do you plan to pay off debt? Do you intend to build up your business and then sell it? Include projections for the next five years.
Don’t fret if you do not have a solid foundation in finance. It’s not as complex to create these financial projections as you might assume. This section is where you might employ some of your design savvy to create visuals such as charts and graphs to spice up otherwise dull financial details.
Your financial forecast should include the following (this information can be projected if your business is not yet established enough to have the actual documents):
• Income statement (a.k.a., profit and loss or P&L): This document essentially shows whether you’re making money. It includes a compilation of all your numbers and data, and shows your expenses deducted from your earnings to reveal whether you’re poised to be profitable.
• Cash flow statement: This statement differs from your P&L in that it’s the record of how much money you have in the bank at any given moment. In this document, you’ll calculate cash you have plus cash you receive minus cash you pay out, which equals your total cash flow. This cash flow statement helps you to understand at what points you may be low on cash (for example, while you’re waiting for a client to pay a bill), indicating that it may not be the optimal time to spend on non-urgent expenses. This document can help you determine how much funding you may need to get your small business up and running.
• Balance sheet: This statement helps determine the net worth of your company. It subtracts your assets and equity from your liabilities to arrive at your company’s net worth. From this balance sheet, investors can see the overall financial picture of your endeavor.
Here you’ll include any requested documentation, such as résumés, reference letters, credit reports, permits, licenses, contracts, patents, or other legal paperwork. It’s also where you can add any supplemental information that an investor might want or need when considering whether or not to help you with funding.
Keeping these strategies in mind, you should be ready to get started on your business plan. This documentation is essential to plotting the future of your company, so it's important to spend time on it and make sure it represents you and your business in the best way possible.