How to Build a Business Plan

“Business opportunities are like buses. There’s always another one coming.”

– Richard Branson

Everybody says that experience is the greatest educator. In the future, I want to create businesses. Thus, I decided that I might as well see how much I could learn by challenging myself to create a business in 30-days. If you’ve ever thought about doing this, and hope to live vicariously through me, you can follow my journey here and check my socials where I post regular updates. 

Why Build a Business Plan 

The word “Business Plan” can seem daunting to someone who has never built one before. Trust me, I know. It’s not hard, though, and I’ll show you why.

To begin, a Business Plan is a document that clarifies your mission and vision. It’s like writing a thesis before you begin an essay. You want to know the major components beforehand so that when you finally begin to write the essay itself, you have already thought through the concepts, and the essay has structure.

The same goes for a business idea.

The Major Components of a Business Plan

  1. Executive Summary 
  2. Business Description 
  3. Products and Services
  4. Market Analysis 
  5. Strategy and Implementation 
  6. Organization and Management Team 
  7. Financial Plan and Projections 

These Major Components at Work

To make this a bit easier to conceptualize, I’m going to take you through an example using a business I’m executing on.

This business is a hybrid service-and-product-based business that seeks to preserve the stories, and wisdom of loved ones. I’m calling it “Project Lifebook.”

To go forward with my idea, I needed to gain clarity on my vision and the business’s next steps. As I said, when it comes to building a business, you don’t want to waste time.

Executive Summary

Your executive summary is an overall summary of the full business plan. It serves executives who might want to read one paragraph and get the gist of your business. We’re going to come back to this after we’ve written out everything else…

Business Description

Mission Statement

You want your mission statement to clearly explain the company’s purpose. It communicates why your business exists and stands to unify people in and outside of the company. 

When thinking about your mission statement, it’s a good rule of thumb to boil it down to – what your business does, how it does it, and why it does it. 

After reading a mission statement, you should have an infinitely clearer understanding of the business. Ask yourself: If someone only knew your mission statement, would that be enough to make them believe in your business? f not, brainstorm a bit more. You need to get to the heart of your business and capture that as simply as possible. 

Project Lifebook Example

Life matters, but sometimes it’s difficult to communicate that. Through conversation, we want to uncover the spirit of an individual to bridge the gap between generations. We will use cherished family photos and the written word to craft an evergreen keepsake. 

Values 

These are your business’s core guiding principles. They should be consistent and apparent throughout all areas of your business.

Project Lifebook Example
  1. Humanity 

This core tenant of our value system says that through everything, we care about and want to respect all of humanity. We don’t care if you’re young or old, we don’t care about your gender or your race. We care about your humanity. 

  1. Unique Voices and Perspectives

This is an integral aspect of the business’ service. We want to preserve the stories and wisdom of generations because we understand how unique and valuable they are. As a part of our value system, it reminds us to never forget the reason we began – people matter.

  1. Integrity 

Integrity is about having strong convictions and standing by them. We believe this is necessary. In every aspect of business and life, we want to conduct ourselves with a high standard of integrity. If humanity is our primary value, it follows-suit that we treat people with the respect they deserve.

Vision

Your vision should give others a concrete picture of where your company wants to go. If everything works out perfectly, what are the long-term results of your company’s efforts?

Project Lifebook Example

In the future, loved ones will not be forgotten throughout generations. Instead, their wisdom, memories, and spiritedness will be preserved through the power of the written word. Children and adults alike will enjoy this lifebook for its picturesque and valuable content. 

Products and Services 

Value Proposition

Your value proposition is your pitch.

You need to explain what you do and how you do it in a concise and clear manner. I explained in my post about choosing what business to create that marketing is all about knowing the value you have to offer, and communicating that correctly. 

In your value proposition, you are quite literally proposing, or presenting, your value. When you write and deliver your value proposition, you get to leverage what you know about the company, the product, and the customer. It’s my favorite aspect of a business plan because it’s where all aspects of the business come together.

Project Lifebook Example

Have you ever wanted to preserve the wisdom and stories of a loved one to pass on to future generations? Don’t know where to begin? We can help. We will create a question-list tailored to your loved one and will conduct informal interviews. Then, we will use the interviews to construct an evergreen keepsake for your family. 

Problem(s) You’re Solving 

What are the pain points of your target customer? 

People love buying things that alleviate certain pains or problems they’re experiencing. If you get very clear on the problem you’re solving, you’ll be able to find your market, and you’ll understand how you need to approach it.

Project Lifebook Example
  1. So many people live and die with all of their wisdom still inside of them. 
  2. People grow up, not knowing almost anything about the family members that have passed.
  3. Interviewing is an art. To do this yourself, you have to know how to have conversations that gets to the heart
  4. Time – so few people have the time to sit down and do this fully
  5. Communicating to your loved ones that they matter and are appreciated can be extremely difficult. 
  6. Patience

Pricing 

When you price a product, you have to begin by understanding what the product is worth to a customer — how much they’re willing to pay — and how much it’s worth to you — how much you’re putting into it. Pricing strategies differ between industries, business models, and product types. Instead of trying to explain “the best” way to structure your pricing, I’ll link a couple of articles on pricing that you might find useful: 

Product LifeBook Example

For this particular business, I did not go too deep with my pricing because the initial deliverable is going to be building the underlying structure of the business – website, operations, brand, target customer, etc. I’m focusing on email capture instead of sales because it’s this business’s MVP (minimum viable product).

When conducting competitor analysis, I gained a rough estimate of the normal rate for a similar product. I may utilize different pricing structures, and instead of having a one-time payment option, I’ll have recurring payment options.

Product Lifespan 

Your product lifespan is the time in between when your product is bought, and when it is discarded. Be realistic. 

Product Lifebook Example

I would like for this to be an evergreen keepsake which means that it doesn’t go “out of style.” The final product will be offered as both a book and an audio file. The book will be a classic, something that looks good on every coffee table and as a decorative piece for any living room bookshelf. It will be something that generations to come will embrace as a piece of preserved history. 

Benefits to the Customer

This, again, will just help you get clear on the value you’re offering. It’s important to understand the value of your offering because it allows you to both communicate that and to have a standard for your customer. 

You, as a business, cannot please everyone. If you understand your value, you’ll know when to compromise, and when not to. 

Project Lifebook Example
  1. Preservation of valuable memories and stories 
    1. Time-sensitive – you can always push things back until you can’t 
    2. Becomes more valuable over time
  2. Ease 
    1. Two factors that we take care of 
      1. Properly planning – how to do it (what questions to ask, recording, equipment, post-production, etc.)
      2. Execution
    2. Very hands-off experience for the buyer – just correspondences 
  3. Creates a memorable experience for the interviewee
  4. Very thorough 
    1. The way we try to understand the person, and then create a story is unique
  5. Two products for the price of one 
    1. Book 
    2. Audio 

Production and Manufacturing 

Depending on the type of product or service you’re trying to sell, this will look different on each business plan. The main goal is to understand your sourcing and supply chain. Who are you getting everything from? Do you need a middle man? What are the costs? Are there any hidden fees? 

Your goal is to get as granular about this as possible. Many people account for their immediate costs but forget about the in-between costs and fees. That’s a detrimental oversight. Don’t make it. Make sure you understand the entire process of how your product is going to be made, how it’s going to be distributed, and how you’re going to deal with the inevitable complaints and problems that might arise. 

Project Lifebook Example

I built a couple of sample books on Shutterfly and am going to be buying a couple of test books to see how I like their customer service, product, and delivery. If everything is to my standard then I will use Shutterfly to create the Lifebook. If it is not, then I have a couple of other options to go through. I have calculated the cost of shipping, understand the different factors that affect shipping costs, and understand the fine-print on Shutterfly’s terms. 

Research and Development 

R&D, as it is called, represents all of the activities that a company will take to continue innovating, and introducing new products or to improve existing products and services.

Project Lifebook Example

For this project, I don’t need to innovate any new products right now, but that doesn’t mean that I don’t have ideas for strengthening the model. For that, I was thinking about creating a full-blown experience for the interviewees. We would have different pricing packages, and in one, we would offer a makeup and photography session. That would work with the mission – making these individuals feel special. That is one thing I have researched a bit on but will continue to build on as the business becomes more established. 

In terms of strengthening existing offerings, I will be testing out different questions to pose to customers so that I can compile accurate and implementable feedback. 

Market Analysis

The basic outline of market analysis:

  1. Customer Personas
  1. Target Customer/Persona
  2. Industry description and outlook 
  3. Historical, current, and projected marketing data for your product/services
  4. Detailed evaluation of competitors
    1. Strengths
    2. Weaknesses
    3. Opportunities
    4. Threats
    5. Key Differentiators

Instead of trying to duplicate my other posts on Marketing, I’ll just refer you to these pieces that will give you a better understanding.

Organization and Management

You need to decide on the structure of your business and organization. Your structure will determine the functionality of your business, so choose wisely.

When it comes to choosing a legal business structure, you have a few options:

Business Structure

Sole Proprietorship

  • Gives you complete control of your business
  • Does not produce a separate business entity which means that your assets and liabilities under this Sole Proprietorship are not separate from your personal assets and liabilities. 
  • You can be held personally liable for the debts and obligations of the business.
  • You can’t sell stock
  • Banks are more hesitant to loan to Sole Proprietorships
  • Can be a good choice for low-risk businesses

Partnerships

Partnerships are a good choice for professional groups who either want to test an idea, or don’t want to do it on a large scale. There are two types of Partnerships: Limited Partnerships (LP) and Limited Liability Partnerships (LLP).

Limited Partnership (LP)

  • One General Partner with unlimited liability, and the other partners have limited liability 
    • Unlimited liability is the same as what a Sole Proprietorship has – full personal liability and responsibility for business affairs (debts, assets, etc.); must pay self-employment taxes as well
    • Limited liability is not full personal responsibility – liability can be divvied out in different ways, one of which, being percent value of equity in the business; has less control over the company than the unlimited liability member

Limited Liability Partnership (LLP)

  • Similar to Limited Partnerships but gives limited liability to every owner 
  • LLPs protect each individual partner from debts against the partnership. Additionally, no one partner must take responsibility for the actions of another. 

Limited Liability Corporation (LLC)

An LLC is like a mix between a sole proprietorship and a corporation in terms of business structure. It protects you from personal liability so, in most cases, regardless of what happens under the LLC, your personal belongings aren’t at risk. With an LLC, business profits and losses are reported on your personal income tax return rather than a business tax return which means you still have to pay a self-employment tax.

There are a few different types of LLCs.

Single-Member LLC

  • Treated as sole proprietorships for tax purposes
  • Owner and business seen as the same which means that your LLC profits are considered personal income rather than business income
  • “Owner’s draw” is how owners pay themselves – instead of taking a conventional salary, the amount and frequency of draws is up to them, but it’s ideal that they leave enough to keep growing the business

Multi-Member LLC

  • Treated as partnerships for tax purposes – business itself isn’t taxed.
  • It’s seen as a “pass-through entity” which means that though the business income is officially reported to the IRS, each member’s share of the profits is treated as their personal income and taxed independently.
  • Each member must also pay themselves through the owner’s draw method, but can set up a guaranteed payment which could act like a salary

Corporate LLC

  • Owners have to formally request, or elect, to be established as a corp LLC
  • Owners aren’t allowed to take owner’s draws, and instead are considered employees that must pay themselves a set salary on the company’s regular payroll with taxes withheld
  • As a Corporate LLC owner, you can determine your salary, but it has to be reasonable – something similar to what someone hired in a similar position would make 
  • In addition to your official salary, you can pay yourself distributions – payouts of the business’ equity to the owner, shareholder, or LLC member – or dividends – payout from the business’ profits

Corporation

The Corporation is the most complex business structure. It provides the strongest protection to its owners by separating liabilities and obligations that were incurred by the company from its owners. Corporations are regulated by the laws of the states they’re set up in, and they’re taxed as separate entities at corporate tax rates.

The different types of Corporations are:

C-Corp

  • Legal entity separate from its owners 
  • In some cases corp taxes can be taxed twice, first when the company profits, and then again when dividends are paid to shareholders on their personal tax returns

S-Corp

  • Designed to avoid the double taxation of regular C-Corps
  • Allows profits and some losses to be passed directly through an owner’s personal income without ever being subject to corporate tax rates
  • Must register with the IRS and meet criteria

B-Corp

  • For-profit corp recognized by a majority of U.S. states 
  • Different from C-Corps in purpose, accountability, and transparency, but taxed the same (legal commitment to do a certain good)
  • Driven by mission and profit 
  • Shareholders hold the company accountable to produce some sort of public benefit in addition to financial profit

Close Corp

  • Resemble B corps but have less traditional corporate structure 
  • Shed formalities 
  • Can be run by a small group of shareholders without a board of directors

Non-Profit Corp

  • Organized to do charity, education, religious, literary, or scientific work 
  • Work benefits the public 
  • Can receive tax-exempt status – they don’t pay federal or state income tax on profits made
  • Have to follow organizational rules that are similar to regular C-Corps

Cooperative

  • Business or organization owned and operated to benefit those using its services 
  • Profits distributed among user-owners (users are the owners)
  • Elected board of directors and officers run 
  • Regular members have voting power (become members by purchasing shares)

[If you want more information on any of the corporate structures, you can visit this government website.]

Project Lifebook Example

Project Lifebook falls under a single-member LLC which is subject to change as circumstances dictate.

Structure of the Organization

Are there executives? Is there a team? Are there different divisions?

A business’ organizational structure is important because it determines how activities are directed, how information flows, and how a business achieves its goals. Usually the organization of a business begins by defining the hierarchy — how does the hierarchy exist and spread information?

Centralized Versus Decentralized

Traditionally, organizations have been centralized in which a defined chain of command led the organization from the top-down. In a centralized organization, people have specific and clearly defined roles, but usually, those roles are monotonous.

Decentralized organizations have begun to rise in popularity with their presence in many startups. This type of structure allows companies to remain faster, more agile, and more adaptable since every employee has a large level of personal agency. Instead of having to wait for information and requests to waterfall down, the information is spread more quickly and acted upon more quickly. This, though, means that it is less controlled, not that there is no hierarchy in place. Even in decentralized organizations, some type of hierarchy must be in place.

Types of Org Structures

Functional Structure 

  • “Bureaucratic organizational structure” which breaks companies into different “departments.” This is about leaning into specialization.
  • Circular Structure (a type of functional structure) 
    • Still relies on hierarchy, with a group of higher-level employees occupying the innermost rings and the lower-level employees occupying the outer-most rings 
    • Instead of information flowing down from the top, it flows outward from the center

Divisional or Multidivisional Structure 

  • Similar to the functional structure in that the company is broken up into specializing groups
  • Difference is the type of specialization — Instead of specializing in a technique or type of work, this structure specializes in different products or projects.
    • For example, if you take a company like Disney and break it into its different products – Disney Channel, theme parks, merchandise, Disney+ – and that’s how you separate the organization. 

There are a few different types of divisional structures.

Product-Based – Each division dedicated to a particular product line 

Market-Based – Each division is based around specific markets, industries, or customer types

Geographical Division – Each division is based on geography – can include territories, regions, or districts

Process-Based – Designed around the end-to-end flow of different processes (a specific process – R&D; Customer Acquisition; Order Fulfillment). It considers both the activities performed by individual employees and how different activities interact with one another. 

Flatarchy Structure 

  • Used by many startups
  • It flattens the hierarchy and gives employees autonomy which allows the company to increase its speed of implementation. 

Matrix Structure 

  • The most complicated
  • Combines elements of functional and divisional models to group people into functional departments (sales, operations, marketing, etc.), then separating them further into specific projects and products
  • Works well for larger companies that have the people, products, and resources to implement this type of structure
  • The extreme specificity of the different groups usually yields great results
  • ID the people and clearly define roles 

If you want to learn more about these hierarchies, you can visit these additional resources: Small Business Chronicle, Hubspot, and Investopedia.

Project Lifebook Example

Right now, it’s just me. 

Eventually, I hope to create a full-service which would have include makeup, photography, and post-production. At that point, I will revisit the structure, but I know that I prefer flat hierarchies.

Financial Plan and Projections

A financial plan is a comprehensive picture of your current finances, your goals, and your strategies. Financial planning is an ongoing process, but creating an initial framework is important.

These are the main pillars of a financial plan: 

  1. Profit and loss statement – the backbone of your business that explains how you make money
    1. This statement explains how your business made a profit or incurred losses over a certain period.
    2. You’ll list your revenue streams and your expenses (typically over three months), and the total amount of net profit or loss
    3. The format of this statement will differ depending on the type of business you’re in and your business’s structure 
    4. Include:
      1. Revenue – what you made
      2. Cost of Goods Sold – what you sold 
      3. Gross Margin – what you made minus what you sold 
      4. Operating expenses – what it directly costs to operate to make the sales (fixed expenses – rent, utilities, insurance)
  2. Cash Flow Statement 
    1. Explains how much cash your business brought in, paid out, and what the end cash-balance was (typically each month)
    2. Explains your actual cash-position     
  3. Balance Sheet 
    1. Your balance sheet is your business’s financial position at a given moment 
    2. Include: 
      1. Assets – what people owe you, money in the bank, inventory, etc.
      2. Liabilities – what you owe others, credit card balances, loan repayments, etc.
      3. Equity – could be owner’s equity, investor’s shares, stock, retained earnings, etc. 
    3. “Balance sheet” because it balances out – assets = liabilities + equity
  4. Sales Forecast 
    1. This is your projections or forecast, which should be an ongoing part of your business and planning process 
    2. Though a forecast is very specific to the business, generally you want to break down the forecast into segments that are helpful for planning and marketing purposes
  5. Personnel Plan 
    1. The objective of this plan is to justify every member or team’s contribution to your organization. If you don’t have many people, it won’t be a complex segment, but if you have a lot of people on your team, you might need to think through their roles and contribution to the organization in comparison to their compensation. 
  6. Business ratios and analysis 
    1. These include standard business ratios which you can google, or find here.

You can use these articles to learn more about the specifics:

Project Lifebook Example

Though Project Lifebook is not selling anything, I have set up a Quickbooks account to keep track of everything going in and out. I don’t know what the future of the business will be, but when it comes to businesses, a good practice is to always keep your books straight.

Executive Summary

Though your executive summary is the first component of your Business Plan, it is written last.

It provides a summary of the main points of the whole report so that individuals who don’t have time to read the whole thing can understand the gist. Keep that in mind. Someone should be able to read the short paragraph and understand the whole.

What to include:

  • Name, location, and mission
  • Highlight of major points and key conclusions
  • What your product or service is, how you fit in the market, and how your product differs from competitors
Project Lifebook Example

Project Lifebook is a community-based business. This project will be executed locally and will be distributed through Facebook, Instagram, and an email marketing campaign. One objective is to communicate appreciation and care to the elderly in senior living. A second objective is to mass communicate the value of elderly individuals through stories and videos.

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