The bootstrapper's ultimate guide to writing a winning business plan, from a former bank exec who wrote hers in a week and added hundreds of clients to her startup in her first year
- For all of the popularity of pitch decks, business plans still serve an important function for entrepreneurs who are building a business.
- A study of more than 1,000 US entrepreneurs found that those with a business plan were more successful than those without.
- Business Insider asked entrepreneur, business mentor, and former Wall Street bank executive Cate Luzio to distill her decades of experience into a guide.
- Her advice is the basis for these eight essential elements founders should include in a business plan, and why they matter.
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A pitch deck is not a plan.
For all of the popularity of pitch decks, business plans still serve an important function for entrepreneurs who are building a business.
A 2017 study of more than 1,000 US entrepreneurs found that those with a business plan were more successful than those without. Among pairs of otherwise identical founders, planners were 16% more likely to be profitable for at least six months out of a year.
Of course, a fancy plan won't save a bad business model, but a thoughtful strategy can give a promising idea the winning edge in a competitive market.
And that edge doesn't exclusively apply to startups seeking venture funding. Just ask former Wall Street bank executive Cate Luzio, who left her 17-year corporate career to launch Luminary NYC, a coworking and event hub for professional women.
"It's important for startups to make sure their product or service produces value and meets needs," Luzio said. "It's not about any method being the preferred way. I think it's important to have a plan with actionable steps and a mission 'North Star' for your business."
Luzio attributes Luminary's success to the business plan she wrote in one week. But as a self-financed bootstrapper, Luzio told Business Insider that she's often asked why she wrote a plan if she's not out raising money.
"I need a business plan to run the business," she said. "Business plans weren't created 50 years ago for founders to sell their companies. Business plans were created to build their business, understand cash flow and, and manage the business."
As managing director and the global head of multinational corporate banking at HSBC, Luzio had a $2 billion portfolio and a team of more than 2,000 people across 72 countries.
Over the years, Luzio has reviewed countless plans and she regularly helps entrepreneurs write their own. This February, she will lead a business plan bootcamp at Luminary in New York.
Business Insider asked Luzio to distill her decades of experience into a guide, which she emphasizes is exactly that: a guide, not a rubric.
"I don't want to focus on a one size fits all approach. I want to underscore for new entrepreneurs the importance of fully mapping out their vision," she said. "Whatever the plan or the framework you use, you have to be able to execute."
A business plan simply happens to be a very useful framework, and Luzio's advice is the basis for these eight essential elements founders should include in their plans, and why they matter.
1. Executive Summary
The first section of a business plan is best written last, once you've worked through the questions raised in the other sections.
Here is where you introduce your company's narrative, and define what success will look like. What problem or opportunity will your business address, and who are your target customers?
This is also where you'll introduce your finance strategy. Are you looking for equity investors, taking on debt, or working with existing cash? How much financing will you need from different sources, and when will you be profitable enough to deliver returns?
Boil down the work you've done in the following sections into a few sentences that get straight to the point.
2. Company Overview
If you have an elevator pitch prepared, this is where it belongs. Summarize what your company stands for, and what its guiding principles are. Why does your business do what it does? Who are the stakeholders that are concerned with your company's success?
Briefly introduce your target market or customer base, how your product or service will meet a demand, and what operational and staffing considerations are necessary for the business to function.
Lastly, Luzio said you should be very upfront about your financial needs and goals, like start-up costs and revenue forecasts. Businesses depend on cash flow, so don't be coy about how you're going to manage that necessity.
3. Business Description
Here is where you start to delve into the details of the market opportunity your company will capitalize on. Consider factors like geographies, demographics, and industries, and demonstrate how your product or service is different.
Identify who the key suppliers or partners are and the extent to which your business will depend on those relationships.
As before, remember to think carefully about the financial picture. Base your revenue and pricing models on thoughtful research and design a structure that can compete in your target market. If you're charging more or less than the competition, provide a solid rationale as to why.
4. Market Research and Analysis
Expand on the market discussion from the previous section, and demonstrate how well you understand your competitive landscape. Who are the dominant players, and what are the growth trends in your industry?
With nearly eight billion people in the world, your odds of success are improved if you can narrow your target to a more specific segment. Depending on your competition, what percentage of that segment do you realistically think your business can address, and how big does your business need to be to handle that percentage?
Round out the section with a good old-fashioned SWOT analysis. Listing the strengths, weaknesses, opportunities, and threats, is a time-honored method of keeping track of the concerns you'll need to manage for your company.
5. Operating Plan
Your company's operations will possibly be the hardest thing to plan in advance. Do your best to spell out how you will generate sales, deliver your product or service to the market, and handle payments from customers.
Think about what you'll need in terms of facilities (like offices, warehouses, storefronts, coworking spaces) and technology (like web services, payment processing, customer resource management), or other capital investments that may be specific to your business.
Review your mission-critical suppliers from earlier, and also identify any key customer relationships that could have a significant impact on your success. Luzio categorizes a key partners as any single customer who delivers more than 10% of your annual revenue.
This is also the beginning of one of the biggest ongoing challenges all business owners face: building your team. Luzio recommends outlining the key roles that need filling in the first two years of operation for your company to succeed. Determine if these must be hires or can be contracted out.
In addition to defining an organizational structure and each position's responsibilities, make a plan for recruiting, retaining, and compensating your team. You may need professional consultation to navigate HR issues, or if you'll be offering equity ownership of the company.
6. Marketing and Sales Plan
Once you've established your target customer segment, you'll need to develop a strategy for crafting the right messaging to reach them.
"How you promote the business is an important element of your success," Luzio said.
With the vast array of available marketing channels, you may need some help from public relations and marketing professionals to choose the right ones for your business and shaping the messaging that's appropriate for each.
This also figures into your hiring plan, since you many need to staff up for sales and support.
7. Financial Plan
Luzio said estimating your startup costs and projected earnings growth "is critical to see when the business becomes profitable or is targeted to be."
Startup costs include one-time and ongoing expenses that are essential to get the business up and running, and should be summarized here and laid out in greater detail in the Appendix.
Your profit-and-loss (P&L) model, also known as a pro forma income statement, is a projection of your expected income and expenses for the first 12 months, and up to a period up to five years. A summary P&L will suffice here, but be based on a more thorough model that is included in the Appendix.
Much as you would love to see the so-called hockey-stick growth curve for your business, few founders will ever see that sort of rapid scale-up. If you've done your diligence in preparing your startup costs and P&L projections, you should have a reasonable idea of when your business will break even and start earning profits.
Equity investors appear to exempt some companies or industries from expectations of foreseeable profitability, but debt investors and lenders are generally less tolerant of cash-burning businesses. They'll want to know when you expect to become EBITDA-positive, since that's when they'll begin seeing repayment on your loans.
8. Appendix
The appendix is the home for any other matters you need to include, but may not merit a fully fleshed-out section.
It's also that place for the tables, charts, and analyses that are summarized in earlier sections, such as:
- Estimated start-up costs: A more detailed breakdown of the expenses and investments required to get your business up and running.
- P&L projections: Also known as pro-forma income statements, here's where you'd go into more detail about your revenues and expenses, forecast up to five years out.
- Additional market research: Provide more specific details about the basis for the analysis and assumptions discussed in section four.
- Competitive analysis: Deeper analysis of individual competitors or potential competitors that could challenge your model.
Now that you've completed all the sections, you're ready to return to the top and work on the Executive Summary.
You can use this guide to inform your own original plan, or if you would like more detailed instructions, check out the Startup Business Plan Template from SCORE, the business mentoring organization.