How to write a business plan

Most business plans are written for an audience of one: the founder. Then a lender asks for the plan, and the document that felt thorough turns out to answer none of the questions underwriters actually ask. Where does the cash come from each month? What happens in the slow season? How, specifically, does the loan get repaid?

This guide walks through every section of a standard business plan, in the order the finished document presents them, with particular attention to the sections a lender will weigh when you apply for financing. Writing the plan is step 3 of our full guide to how to start a business; this page covers that single step in depth.

What a business plan is for

A business plan does two jobs, and the second one is the reason to take it seriously.

The first job is external. Lenders, investors, landlords, and sometimes key hires will ask for it, and each reads it as evidence of how well you understand your own business. A banker who sees a monthly cash flow forecast with stated assumptions treats the application differently than one who sees a page of annual round numbers.

The second job is internal, and it happens while you write. A plan forces you to commit to figures you have been keeping comfortably vague: what one customer costs to acquire, what one sale actually earns after delivery costs, how many months of expenses you can cover before revenue does. Founders regularly discover the flaw in their pricing or their timeline in the middle of drafting the financial section, which is a far cheaper place to find it than in month six.

A note on length before the outline. A useful plan for a small business typically runs 15 to 25 pages, and shorter beats longer at every decision point. If a section stops earning its place, cut it. Some founders maintain a one-page lean version for their own use and expand it into the full document only when a lender or partner asks; both formats share the same skeleton below.

What goes into a business plan

Nine sections, in the order the finished document presents them. Write them in almost the reverse order: the executive summary comes first in the document and last in the drafting, because it summarizes everything else.

Executive summary

One page, two at most. It states what the business does, who buys from it, what makes it the one customers choose, what you are asking for if the plan accompanies a funding application, and the headline numbers: projected revenue, projected profitability, and the size of the request.

Write it last, after every number below it is settled, and then treat it as the most important page in the document. Many readers decide from the summary whether the rest gets read at all. A specific summary beats an inspiring one: "a mobile dog grooming service covering the north side of Columbus, projecting $140,000 in first-year revenue from 900 appointments" tells a reader more than any paragraph about passion for pets.

Company description

The facts of the entity, stated plainly. Legal name and structure, ownership and the split, location, history if any, and what stage the business is at: idea, pre-revenue, or operating. Name the problem you solve and for whom, in a sentence or two each.

If you have formed an LLC or corporation, say so and note the state. If you are still deciding on a structure, our comparison of an LLC vs. a sole proprietorship covers the trade-offs, and the plan should state which way you are leaning and when you will file.

Market analysis

This section answers three questions with evidence: who buys, how many of them there are, and who already serves them.

Describe your target customer concretely, by behavior. "Homeowners in three zip codes who spent money on lawn care last year" supports a forecast; "everyone who owns a lawn" supports nothing. Size the market bottom-up from that definition: the number of reachable customers, times a realistic purchase frequency, times your price. A bottom-up number in the thousands persuades more than a top-down slice of a billion-dollar industry, because a reader can check your arithmetic.

Then map the competition honestly, including the default option of doing nothing. For each meaningful competitor, record what they charge, who they serve well, and where the gap is that you intend to occupy. A plan that claims no competition tells the reader the research stopped early. Cite where each figure came from, whether census data, industry association reports, or your own customer interviews. Sourced numbers are what separate analysis from optimism.

Organization and management

Who runs the business, and why these people can execute this plan. Keep the biographies short and relevant. The years managing a kitchen matter in a restaurant plan, the marketing degree less so. State who owns what percentage, who makes which decisions, and, if the team has gaps, name them and say how you will fill them. Naming your own missing capabilities reads as self-awareness, and lenders price self-awareness favorably.

If you use outside professionals, an accountant, an attorney, a bookkeeper, list them. For a one-person business this section can be half a page, and it still belongs in the plan, because for many small-business lenders the owner is the single biggest factor in the decision.

Product or service

What you sell, what it costs you to deliver, and what you charge. Founders skip the middle item. Readers hunt for it. Spell out the unit economics: one landscaping visit bills $120, consumes $70 in labor and materials and travel, and leaves $50 before overhead. Every projection later in the plan inherits its credibility from this arithmetic.

Cover where the product is in its life: concept, prototype, or already selling. If something protects it, say so. That could be a patent, a license, a location, or an exclusive supplier relationship. If nothing does, the marketing section carries more weight, and you should write it accordingly.

Marketing and sales

How customers find you, what convincing one costs, and what one is worth over time. Name the channels you will actually use and the budget for each, then connect spending to outcomes: if a customer costs $40 to acquire and yields $50 of margin on a first purchase, the plan works only if customers return, and the plan should say how you make that happen.

Include the sales mechanics. Who follows up on inquiries, how long a typical close takes, what share of quotes convert. Estimates are fine at the start; label them as estimates and note when real data will replace them. The discipline this section enforces feeds directly into the revenue forecast, which is where a reader will test it.

Funding request

If the plan supports a financing application, this section states the amount, the use, and the repayment plan, in that order and in specific terms.

The use of funds should read like a budget: $30,000 of equipment itemized by line, $15,000 of opening inventory, $10,000 of working capital to cover the first three months of payroll. "Growth" is a goal; a use of funds is a shopping list. Lenders also look for the owner's own money in the project, because a founder with savings committed reads differently from one asking others to carry all the risk.

Match the instrument to the need. A one-time purchase with a long useful life suits a term loan. A gap that opens and closes with the season, or invoices that pay in 45 days while payroll runs every two, suits a revolving line of credit that you draw and repay as the gap moves. Our guide to small business loans walks through the main financing types and what lenders look for in each, and you can see Bluevine's financing options when you are ready to compare products.

State the repayment source explicitly. Name the line of the cash flow forecast that services the debt, and show what happens to coverage in your low case. Answering that question before the lender asks it is the single most persuasive move available in this section.

Financial projections

Lenders spend more time here than anywhere else in the plan. Three statements, plus assumptions:

• A cash flow forecast, month by month, for the first year. This is the heart of the plan. Revenue as it actually arrives, expenses as they actually leave, and the running cash balance at the bottom of every month. Monthly granularity exists to expose the dangerous month, the one where payroll lands before your biggest invoice clears. An annual view hides it; the monthly view is how you plan around it. Years two and three can step back to quarterly or annual.
• A profit and loss projection over the same periods, showing revenue, cost of goods sold, operating expenses, and what remains.
• A balance sheet projection, or an opening-day balance sheet for a startup: what the business owns, what it owes, and the owner's stake.

Attach the assumptions to every line, meaning units, prices, growth rates, and where each came from. Twenty appointments a week at $120, growing 5% a month after a three-month ramp, is an assumption a reader can interrogate. A revenue line that doubles annually with no stated driver is the fastest way to lose the reader you most need.

Then build a low case. Take your expected forecast, cut revenue meaningfully, and show the business still survives, or show what you would cut so that it does. Seasonal businesses should make the seasonality visible in the monthly numbers, since smoothing it away is exactly what an experienced reader checks for.

Appendix

Everything a reader might want to verify, kept out of the way of the narrative: resumes, permits and licenses, lease terms, letters of intent from customers, product photos, detailed month-by-month spreadsheets behind the summary tables, and personal and business credit context when a lender requests it. Reference each item from the section it supports so the appendix works as evidence instead of a pile.

What lenders actually read first

Underwriters do read plans out of order, and knowing their order tells you where to spend your effort.

The cash flow forecast comes first, because repayment comes out of cash flow. Expect the reader to find your monthly forecast, check whether projected cash covers the proposed payment with room to spare, and test the assumptions behind the revenue line. Debt service coverage, the ratio of cash available to payments owed, is the number under examination even when nobody says the phrase out loud.

The executive summary comes second, as a coherence check: does the ask match the use, and does the story hold together. Then the owner's stake, because skin in the game changes incentives. Then the management section, because for a small business the lender is mostly underwriting the person. The market analysis gets skimmed for one thing: evidence that the revenue assumptions rest on something.

Notice what came last. The sections founders polish hardest, the vision and the market narrative, get the lightest read. The spreadsheet founders rush gets the heaviest. Budget your writing time accordingly.

Common mistakes, and what to do instead

• Hockey-stick projections with no stated driver. Growth needs a mechanism the reader can see: more trucks, more tables, a second location, a hired salesperson. Tie each jump in the forecast to the investment that produces it.
• Top-down market sizing. One percent of a huge market is a slogan. Count reachable customers and multiply honestly, and let the smaller number be credible.
• Annual numbers only. Twelve monthly columns for year one is the standard a financing reader expects, and it is also the only view that shows you the month that could sink the business.
• Ignoring seasonality. If December is triple February, the forecast should show it, and the funding request should explain how the trough gets financed.
• A funding ask that does not match the use of funds. When the itemized uses total $47,000 and the request says $75,000, the reader notices, and the question it raises colors everything else.
• No low case. A plan that only works when everything goes right is a plan that has never met a first year of business.
• Writing it once. A plan drafted for a loan application and never opened again loses its second job entirely. Put a quarterly date on the calendar to compare actuals to forecast; the gaps are where the learning is.

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