How to write a business plan

Follow these tips to get your business off the ground

If your business is all in your head, it’s hard to convince lenders, investors and shareholders that you have a credible company and that you’ll use their funding well. And that’s precisely where a business plan comes in.

This highly recognized management tool is a written document that describes who you are, what you plan to achieve and how you plan to overcome the risks involved and provide the returns anticipated.

A clear, well-documented business plan is useful not just when you’re starting a new company or applying for a business loan. It provides you and your team with a roadmap and reality check for running the business, staying on track to achieve your objectives and monitoring your success.

Make it thorough but keep it simple

A business plan doesn’t have to be a complicated document running hundreds of pages long. In fact, it should be simple and concise, while giving readers all the information they need to assess your company’s projects and prospects.

There’s no guaranteed formula for writing an effective business plan. The goal is to show you're committed to building a sustainable company and that you have the expertise, skills and self-confidence necessary to make it all happen.

Get a free business plan template and example business plan.

Here are a few tips to keep in mind as you get started:

Get something on paper as quickly as possible and don't worry about every detail, especially in your first draft.
Aim to keep the information clear and to the point. Bankers want to see the facts.
Show the plan to your board of directors (if appropriate), senior management and key employees to get their input.
It’s often best to have someone inside the company write the plan. But it can be helpful to get input from an outside expert.
You can also get advice from a mentor who understands the challenges facing new immigrants who want to start a business. You can find mentors through organizations such as ACCES Employment and Futurpreneur Canada.

Business overview

The first section of your business plan should be an overview of your business. This includes:

Your legal and trading name, business address and contact information
A brief description of the business
Quick summaries of your products or services, pricing, distribution, risk factors and competitive advantage
An outline of your market and how your business fits into demographic, economic, social, industry, market and cultural trends
A description of major players, including major competitors, suppliers and distributors
Your company’s mission, vision and value statements, meaning what you do, what you see yourself doing down the road, and what your key priorities are (for example, teamwork, integrity and customer focus)
Applicable government regulations

Sales and marketing plan

This section outlines how you’ll attract customers, convince them to buy and keep them coming back for more.

A sales and marketing plan includes a detailed picture of your target customers, the estimated demand for your products or services, and an explanation of why your offering will appeal to customers. You’ll need to explain how your company will make a difference in your customers’ lives and why they’ll prefer your products to those of the competition.

Other useful elements in this section include:

A description of your unique brand identity
An outline of your customers’ purchase journey (that is, how they interact with your business)
Your marketing objectives (for example, targeted market share or number of customers)
A list of existing customers and suppliers, if any
Your plans to advertise and promote your business
A short description of your customer service policy

Operating plan

The operating plan gives details on your physical facilities (location, size, ownership), capital goods (such as machinery and technology equipment), any upcoming capital spending needs, intellectual property, furniture, research and development efforts, and any needed environmental compliance work.

Human resources plan

A solid business plan should explain how you plan to recruit and retain employees and any unique human resources challenges your business may face. You should also include an organization chart, job descriptions, operating hours, remuneration and benefits, vacation policies, performance assessment procedures and information on employee training and development.

Legal structure

You should describe the ownership structure of your business—who owns it and what kind of company it is (for example, a proprietorship, partnership, limited or incorporated company, B Corp). If you’re buying an existing business, provide details on the acquisition agreement. Keep in mind that you should have a lawyer review all contracts and legal issues.

Action plan

Here you will include a brief table or chart (one or two pages is sufficient) showing key objectives and milestones for the coming several years. It can be helpful to note down target dates and who is responsible for each task.

Executive summary

A concise, high-level executive summary (again, one or two pages is enough) is a good way to conclude the plan. This should include:

Your objectives and a description of the project (Be sure to specify whether this is a new business venture, an expansion of an existing business or the purchase of a new business.)
A business history and description of the nature of your operations
Your products or services and their unique selling points
Your financing needs
Details on management and any advisors
A brief outline of your risk assessment and contingency planning
Contact information for your financial institutions

Supporting documents

It’s important to include supporting information to back up your business plan. These can include feasibility studies, surveys, market analyses, information about key competitors and industry overviews. You can use footnotes in the main document to point to supporting documents.

Appendix: Financial plan

Your business plan should include a financial plan that explains how you think you’ll earn money, what you’ll spend it on and what financing you’ll need.

A solid financial plan should include:

Basic company information (for example, address, contact information, business start date, fiscal year end)
Sales figures (historic and projected for three years), broken down by product category and given in both dollar terms and as a percent of total sales
Variable and fixed costs (historic and projected), broken down by categories such as inventory, material, freight, duty, wages and salaries, repairs and maintenance, services and utilities, depreciation, overhead, travel, advertising, office expenses, insurance and taxes—Don’t forget to include detailed, well-documented start-up costs.
A historic and projected income statement and statement of financial position
Monthly cash flow projections for the next three years
A statement of financing requirements in each area of your business, including a description of any existing loans and what they were for
A table of performance indicators, with historic and projected data, which can include a few key metrics, such as the current ratio (current assets divided by current liabilities), age of accounts receivable, inventory turnover, interest coverage, total debt to equity, return on investment, return on assets and asset turnover
Financial information for company principals and any partners in the business—Lenders need it to be able to assess your ability to repay a loan, and it should include your personal address and contact information, your income and assets, any liabilities and the name of your spouse and their employment details.

Bankers are also interested in your personal financial status because they usually ask for some investment on your part as proof of commitment. (This investment can be raised by you privately or through family and friends.) The rule of thumb is that money attracts money; the more backers you have, the easier it is to attract new ones.

Also keep in mind that a banker will look at your credit history to gauge your reliability. Be sure that you know what credit agencies have on file about you or your company.

If you’re new to Canada, you may not have a history of credit use to show banks when you seek a business loan. An easy solution is to sign up for a credit card and use it responsibly. You can also explore government financing programs, such as BDC’s Newcomer Entrepreneur Loan.

Avoid these pitfalls

Don’t be unrealistic in your business plan. You should be able to justify any assumptions or projections.
Avoid masking financial difficulties. Be upfront with your lender if your sales fluctuate, for example, and you may prefer a flexible payment schedule. A transparent business plan is one of your best assets in gaining the trust of bankers and investors, whether they are your associates or people outside the company.
Don’t provide inadequate information. Give sufficient details on the management team, marketing plans and start-up costs.

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