How To Make a Small Business Plan: A Beginner’s Guide

Developing an engaging, comprehensive small business plan should be one of your top priorities if you’re considering launching or scaling a new business or startup. A small business plan serves as a roadmap for your company and outlines business goals, as well as the strategies and tactics needed to achieve those goals.

An effective small business plan can help your organization stay accountable to reaching key milestones, while also offering insight into your overall business operations for investors, board members, lenders, team members, and other stakeholders.  

Data from the World Bank shows that 90% of businesses worldwide are small and medium-sized enterprises (SMEs). However, research from the Bureau of Labor Statistics found that only about half of small businesses reach the five year mark. By developing and implementing a concise small business plan, you can have a proactive strategy in place to drive long-term business success.

This step-by-step guide will walk you through preparation steps to help you gather information for your business strategy, along with key elements to include when you create your small business plan.

Table of contents:

• Define your business idea
• Research your market
• Determine your business structure
• Plan your finances
• Choose your marketing channels
• Develop your sales process
• Set short-term and long-term goals
• Prepare for potential challenges
• Small business plan key elements

Define your business idea

As an entrepreneur or business owner, the first step as you’re preparing to write or refresh your business plan is defining your business idea. Whether you plan to sell products, services, or a combination of the two, a concise business description that includes unique differentiators is essential to standing out to potential investors and attracting customers.  

When defining your business, remember to include:

• An overview of products or services
• The challenges or need your business idea addresses
• How your business idea solves key pain points
• A high-level value proposition and a list of the benefits your business idea offers
• Potential markets and customer segments for your business
• Intellectual property (IP) you own or plan to develop, and how you plan to protect IP

Research your market

Thoroughly researching your market can provide valuable insights to help you differentiate your business from its competitors, determine your target audience, make data-driven business decisions, reduce risk, and increase your chances of long-term success.

Market research often falls into two categories: primary and secondary. Primary research involves collecting data from original sources and may include surveys, focus groups, and interviews with your target audience, industry experts, and other relevant sources. Secondary research involves gathering data from existing sources such as industry research reports, competitor marketing and sales collateral, government publications, and academic journals.

Some criteria to take into consideration when you research your market include but aren’t limited to:

• The size of your target audience or market
• Market analysis about demand and growth potential
• Market opportunities and threats
• Industry trends
• Top pain points for your target audience
• Customer behavior and buying habits
• Competitors in the space, along with their market share and key differentiators

Determine your business structure

Understanding different business entities and structures is important because your business structure can have an impact on your taxation, personal liabilities, level of control over your business, ability to raise capital, and other factors.

The following table can help you better understand the differences between common business structures, as well as some pros and cons of each. The information isn’t meant to be an exhaustive overview and laws vary from one state to the next and in different countries. Consider consulting a business law or tax expert who can help you make an informed decision when selecting a business structure.

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Plan your finances

Whether you’re launching a sole proprietorship and will be responsible for all your business expenses or plan to seek funding, proactively planning your finances can help increase the likelihood of long-term financial stability.

Take the following factors into consideration when planning your finances.

Identify startup costs

While some businesses have limited startup costs, others require significant investment upfront to ensure long-term success.

Some of the many startup costs may include:

• Legal fees associated with establishing your business
• Insurance
• Software licensing fees
• Equipment and supplies
• Office space including rent, utilities, and furniture
• Product inventory, manufacturing, and warehousing (if applicable)
• Initial marketing and advertising costs, including building a business website
• Recruitment, payroll, and benefits costs if you’re planning to hire workers right away

Understand funding options

As you establish your business, several options for small business funding are available to help support your initial startup costs and fuel your business growth plans.

Here are a few examples of initial finding options:

• Bank loans. Traditional banks and credit unions offer different loan options, including secured loans, unsecured loans, and lines of credit. Secured loans require collateral similar to a car loan. Unsecured loans enable you to receive business financing based on your promise alone and often require an excellent credit score. A line of credit is a funded account that businesses can turn to as needed and only need to pay back the amount used.
• Small Business Administration (SBA) loans. The U.S. Small Business Administration (SBA) partners with lenders to provide small business owners with loans of up to $5.5 million. With SBA loans, the government repays a portion of loans if the borrowers are unable to make payments as promised. This reduces risk for lenders and helps small business borrowers who may have been denied other types of funding.
• Small business grants. Unlike loans, small businesses don’t have to pay back grants. However, small business loans specify that businesses need to meet certain requirements and may have restrictions for how the funds can be used.
• Investors. Securing funding directly from investors is another option for small businesses. The most common types of investors include angel investors, which typically offer funding up to $100,000, and venture capital firms, which often draw from a pool of financial resources.
• Crowdfunding. Through crowdfunding, small businesses benefit from a large pool of small investors contributing to the business without having to relinquish equity to an angel investor or venture capital firm. In exchange, businesses often offer crowdfunding investors early access or special discounts for new products or services.

Forecast revenue and expenses

Taking a strategic approach to financial projections can help show investors and other stakeholders that your business is likely to be financially viable in the years ahead.

Important figures to forecast as part of your small business plan include:

• Short-term and long-term sales and revenue projections
• Recommended pricing strategy, including any pricing tiers and whether your business offers one-time purchases or a subscription-based plan
• Data related to seasonality or other factors that may impact revenue
• Opportunities to offer additional product lines or services to increase revenue opportunities
• Projected marketing and sales investment
• An overview of your operations plan and associated expenses

Choose your marketing channels

Promoting your small business products or services using a multi-channel marketing strategy can help you expand your reach to prospective customers.

When developing a list of potential marketing channels, also outline a desired or recommended budget for each channel. Leverage data from your market research to identify which channels may be most effective based on your target audience. This approach can help your business set and achieve marketing goals and ensure you don’t exceed the budget for certain channels.

Examples of common marketing channels include:

• Company website
• Apps
• Social media networks including LinkedIn, X (formerly known as Twitter), Facebook, Instagram, and TikTok
• Video
• Email marketing
• Digital advertising
• Print advertising
• Radio
• Television
• Billboards
• Events or trade shows

Once you select marketing channels and allocate the budget, review ROI for each channel and update your marketing plan on a regular basis. If a certain marketing channel doesn’t drive results, such as customer engagement or sales, you may want to reallocate funds to a channel that drives stronger results. And as new marketing channels and trends emerge, consider how to effectively incorporate them into your small business plan to maximize business results.

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Develop your sales process

A defined sales process is critical to helping small businesses attract prospective customers, convert leads into paying customers, retain existing customers, and drive revenue growth.

Steps to incorporate into your process to ensure a strong sales strategy include:

• Prospecting. This step involves members of your sales team identifying and engaging potential customers who align with your target market. Common methods to identify prospects may include researching industry directories, conducting online searches, and leveraging social media platforms.
• Qualifying leads. Once you establish a list of prospects and have a list of leads from various marketing channels, lead qualification can help evaluate their fit for your products or services. Gain an understanding of each lead’s needs, budget, decision-making authority, and timeline for making a buying decision to determine if they are a good fit for your sales cycle.
• Communicating with leads. Reach out to qualified leads through appropriate channels, such as email, phone calls, video meetings, or in-person meetings. Actively listen and build rapport to understand their specific needs and challenges. Leveraging this information, present each prospect an offer that addresses each of their individual challenges.
• Negotiating. Prospects won’t always immediately agree to your initial offer. Follow a collaborative negotiation process as part of your sales plan and demonstrate flexibility to reach an agreement that benefits both sides.
• Nurturing relationships and driving retention. Nurture relationships with existing customers by providing ongoing support, sharing upsell or cross-sell opportunities, and following a cadence of regular communication. Implementing a customer relationship management (CRM) system can help your sales team track customer interactions and drive engagement.

Set short-term and long-term goals

A successful small business plan features three- or five-year goals as long-term objectives, along with yearly and quarterly goals to showcase how the business aims to stay on track.

Here are a few goals related to different business objectives:

• Revenue. A goal might be to realize year-over-year increases of 10% for three years. And a quarterly goal may be to identify a new digital marketing channel to increase online-specific sales by 5%.
• Customer retention. If a five-year goal is to achieve a 75% customer retention rate, a yearly goal may be to identify trends that negatively or positively impact customer retention, while a goal over the next quarter may be to implement customer feedback software to begin gathering insights about customer satisfaction.

Whether your business achieves or falls short of goals, adjusting objectives based on performance can help ensure you set ambitious, yet achievable, goals. For example, if you far exceed revenue goals one quarter, you’ll likely want to set a more challenging goal the following quarter.

Prepare for potential challenges

Keep in mind, business plans evolve over time; leaving room for flexibility as you face various challenges is important. Consider outlining possible risks or challenges in your small business plan and have a process in place to reassess business and financial priorities if necessary.

Potential business challenges may include:

• Financial downturns or other economic shifts
• Evolving customer expectations
• New competitors on the market
• Regulatory or compliance updates
• Emerging technology that impacts business relevance or day-to-day operations
• Unexpected departure of an executive or other mission-critical team member  

Developing contingency plans for common business challenges can show potential stakeholders that you’re prepared to pivot as-needed to maintain business relevance. For example, if a potential economic downturn is looming, your business may need to take steps to prepare for a recession such as paying down debt, boosting business savings and reserves, cutting costs, renegotiating contracts, or identifying additional revenue streams. Or, if a key team member leaves your organization, following an approved succession plan can help ensure your team stays on track with business goals.

Small business plan key elements

Once you’ve gathered essential information about your business, you’ll be ready to develop your business plan.

Elements of a successful business plan include:

• Executive summary
• Company description
• List of products and services
• Target audience and market
• Competitive analysis
• Sales and marketing strategy
• Operations
• Financial plan

Executive summary

The executive summary is one of the most important sections of any business plan. While it appears at the beginning of the plan and provides stakeholders with a high-level overview of your business, the executive summary is often the last part to be finalized. This is because the executive summary includes the most important highlights from the rest of the business plan.

An engaging executive summary includes:

• A compelling introduction that highlights the need for your products or services
• Industry research and trends to validate the business opportunity
• Company mission statement, vision, and values
• The legal business structure such as sole proprietorship, limited liability company (LLC), or partnership
• Projected business outcomes  
• An overview of requirements for growth including but not limited to funding, team members, and supplies
• A call to action such as a request for financial support or guidance  
• A high-level breakdown of what to expect in the rest of the plan

Company description

While the executive summary touches on your company description, prospective investors and other interested parties will want to know more about the specifics of your business.

The company description goes into more depth about key details related to your small business, including:

• The registered business name
• A brief history of the business
• The physical address (if applicable) and contact information
• Website and social media page links
• Names and bios for top executives or leaders at the company
• The business model including whether yours business-to-business (B2B) or business-to-consumer (B2C)

List of products and services

Once you’ve provided more insight into your general business background, the next step involves sharing details about the products and services your small business offers. This information helps emphasize how your business will generate revenue and meet customer needs.

As you list products and services, explain the following:

• How your products or services work and differ from competitors’
• Key challenges your offerings solve for customers
• Packaging or design details
• Product research, development, and distribution plans, including whether you manufacture your own products or buy from wholesalers
• Pricing strategy, including any pricing tiers and whether your business offers one-time purchases or a subscription-based plan

In addition to highlighting your current products and services, also outline opportunities to expand or evolve your product and service offerings in the future. A clear explanation of both current and future solutions can help stakeholders understand your long-term vision.

Target audience and market

Determining the right target audience and market is key to long-term success for any small business. Many companies cast a wide net to capture as many sales as possible, rather than identifying a focused target audience and market. Maintaining a specific focus area can better position your business to stand out as an expert on a specific solution, market, or industry.

When outlining your ideal target audience and market, consider the specific problems your products or services address, along with which consumers or business buyers would be the best fit.

As you build out the target audience and market section of your small business plan, consider highlighting:

• Market research based on publicly available data, customer interviews, surveys, and focus groups
• Top challenges and pain points your target audience and market faces
• Demographic indicators such as age, gender, race, education, location, and occupation
• Psychographic data points, including activities, interests, values, behaviors, and opinions  
• Detailed buyer personas incorporating data from the points above

Competitive analysis

Gaining in-depth knowledge on the competitive landscape is critical as you develop your small business plan. This can help show that your small business offerings stand out from the competition and illustrate that the market isn’t already overly saturated with similar products or services.

Some steps you can take to develop a detailed competitive analysis include:

• Identifying top competitors
• Assessing competitors’ online presence
• Understanding competitors’ market share
• Reading online reviews
• Reaching out to competitors’ customers for qualitative feedback
• Identifying a niche or market to differentiate your business from competitors
• Completing a SWOT analysis for each competitor and your company to understand where your small business stands compared to the competition—and how your business can capture market share

Sales and marketing strategy

With an understanding of the competition and a focused target audience in mind, a next step is outlining how your small business intends to reach and engage prospects and customers.

Common criteria of a strong sales and marketing strategy include:

• Sales and marketing goals that align with overall business objectives
• Key value propositions and concise messaging to communicate competitive advantages
• An overview of planned sales and marketing campaigns and activities
• A process or strategy to engage and retain existing customers
• Sales channels including the company website, physical stores, mobile apps, and sales representatives  
• An overview of marketing channels
• Sales and marketing technology to optimize the strategy including email marketing software, analytics tools, and customer relationship management systems
• Estimated investment in channels and technology, along with projected ROI for each

A small business owner often oversees all aspects of the business and not all business leaders necessarily have a background in marketing. Consider engaging an independent marketing professional to provide expert consultation for the sales and marketing strategy portion of your small business plan.

Operations

The operations section of a small business plan offers a detailed description of day-to-day business activities and how they will contribute to achieving the goals and objectives highlighted in other sections of the plan. This section includes business processes, a personnel overview, and responsibilities of various team members.

Information to feature in the operations section of your small business plan includes:

• Overview of required facilities, office space, equipment, and supplies, if applicable  
• Organizational chart highlighting staffing needs and worker responsibilities
• Inventory of benefits and other personnel-related investments
• Legal requirements, including but not limited to licenses or permits, trademarks, insurance, and employment regulations
• Key performance indicators (KPIs) and metrics to understand overall business health  
• Process or technology to measure KPIs

Financial plan

A successful small business plan provides transparent insight into financial goals, needs, and planning. The financial section of a small business plan typically includes financial statements and projections, along with any necessary funding requests.

In the financial section of your small business plan, charts, graphs, and other visuals can help make the content more engaging and bring your financial story to life.  

An effective financial plan includes, but is not limited to, details on the following:

• Budgets
• Cash flow statements
• Income statements
• Balance sheets
• Funding requests or requirements
• An overview of how funding would be used
• Strategic financial goals, such as paying off debt, expanding product or service offerings, acquiring other businesses, or selling your small business
• How you’ll adapt your financial plan if economic conditions or customer needs shift

Get a small business plan the easy way

Whether you’re a first time entrepreneur or have experience launching several existing businesses, creating and implementing a concrete small business plan can provide a step-by-step blueprint to accomplish strategic goals.

Rather than developing a small business plan on your own, consider partnering with an outside expert to make the plan as effective as possible. Independent professionals with business planning expertise can approach the plan with a fresh, outside perspective and apply lessons they’ve learned from prior experience.

Independent business planning professionals are available on Upwork through Project Catalog™ to help you create an impactful small business plan. Search and select from a wide range of one-on-one consultations or fixed-priced projects that align with your specific business needs and budget. Get started—browse available business planning experts today.

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This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.