sell business plan

How to Sell a Business: The Ultimate Guide (2024)

• 3 years ago

Are you considering selling a business, but need help figuring out the process? This definitive guide to selling a business will demystify the process. Keep reading to get the most value for your business.

Every business owner will eventually decide it is time to develop an exit strategy.

Whether you are selling a business to start a new one, retiring, or just passing it on to your kids, our guide will give you the steps to prepare for a sale including:

• Define the exit strategy
• Prepare financial statements
• Get an independent business valuation
• Increase the business value of your small business
• Market to potential buyers
• Negotiate terms and sell your business
• Transition period

There will be a ton of information in this guide, so make sure to download our Selling a Business Checklist to help you in the process. Keep reading for information on how to sell your business.

Step 1: Define the Exit Strategy

The first step in selling your business is defining your exit strategy. There are a variety of exit strategies that a business owner can use to sell a small business.

Which strategy is right for you will depend on a variety of factors. The most important considerations are:

• Type of business
• Business structure
• Working with a broker vs. without a broker
• Who will take control of the business after I sell my business?

After reading this section, you should know what is the best way to sell your small business.

Type of Business

Selling your small business is going to vary based on the industry the business is in. For instance, many locations have specific requirements for certain industries that may limit the prospective buyers available.

I’m sure you already know the regulations for your area, but if you need to refresh yourself on any limiting restrictions for your location and industry, the Small Business Administration is a good place to start.

This information will help when you start to market to prospective buyers.

Franchises may have special requirements that owners must go through to sell their franchise. Talk to your franchisor for more information on making a deal to sell a franchise.

Business Structure

• Sole Proprietorship
• Partnership
• Corporation
• Comparison of business structures (need to remake chart)

Depending on how the business is structured, selling it will follow a different process. An LLC and Corporation are the easiest to transfer ownership as they are intended to be separate entities from the business owners, while a sole proprietorship is the hardest to transfer ownership as it is meant to have a single owner and the income and liabilities are tied to the person.

When you think about how to sell a small business that is a sole proprietorship remember you will be selling the assets, but the new business owner will have to reorganize the business under their name.

Alternatively, you can change it to an LLC before the sale to make the transfer easier. To set up an LLC check out this Small Business Trends article .

Other than those variances, the only real differences are the tax and legal documents, which you can find information on at the IRS website .

Broker Sales or Private Sales

There are two main ways to sell your business, brokers or private sales. Let’s explore each to establish whether your small business will benefit from a broker selling it or whether you should learn how to sell a business privately.

Selling Your Small Business with a Broker

They have been through the process multiple times and are able to help guide you in getting the proper financial statements and due diligence, determining an asking price, finding potential buyers,  finding the right buyer to sell your business to, and closing the deal.

If you want to sell your business with a broker, you’ll need to reach out to one. You can search for “business brokers near me” in Google to find a business broker in your location.

Brokers will normally charge a percentage with a minimum commission that varies based on the revenue of the company being sold.

MidStreet Mergers & Acquisitions has an easy-to-understand blog of how brokers normally charge if you want to understand “how much does it cost to sell a business?”

Given the minimum commission is typically $10-12k, if your business makes less than $100k revenue per year, you will probably want to understand how to sell a business without a broker.

How Do I Sell My Business Without a Broker?

A small business for sale by an owner may result in keeping more of the business valuation once the business is sold, but unless you already have someone in mind it may not be the best way when trying to figure out how to sell a business quickly.

You’ll be responsible for gathering all the company financial statements, determining the asking price, finding potential buyers, answering all their questions, getting the best deal, and finding someone to review the closing documents before selling.

Make sure to consider the time and financial costs that will be incurred when deciding how to sell your business.

If you are trying to improve cash flow, profit, or revenue while looking for prospective new owners, you may find that it is hard work if trying to sell quickly.

If you have time to do it right and make sure to do your due diligence, you can potentially get a higher sales price and keep more of the profit.

Who Will Take Control After Selling Your Business?

There are some specific instances where getting the best value may not require all these steps. Some scenarios that may simplify the process include:

• Employee Buyouts.
• Plan to sell to a related person upon retirement.
• A competitor approaches you about merging the businesses.

These scenarios could limit many of the questions that need to be considered in steps 3, 4, and 6.

In the case of merging two businesses, there are some additional considerations that are discussed in our blog Increasing Business Value through Mergers which will go into far greater detail about how to sell your business to a competitor.

Step 2: Prepare Company Financial Statements

Potential buyers are going to want to see the long-term value of the company as demonstrated through revenue, cash flow, and profit.

This information needs to be readily available because it will impact all the other steps going forward.

You should make sure to include the following documents

• Tax returns for last 7 years (or the start of business)
• Supplier agreements
• Business licenses and insurance documents
• Proof of intellectual property rights/ownership
• Documentation of all debts and liabilities
• Documentation of all assets
• Anything else you think the buyer might want to know

The long-term sales growth, net working capital , and other financial information will help brokers and agents answer buyer financial questions while selling the business for the most money.

Step 3: Get an Independent Business Valuation

Regardless of whether you get a suggested sale price from someone who evaluates businesses, there are several ways of establishing worth you should be familiar with.

Valuations Formulas to Know Before You Sell Your Business

There are multiple ways to value a business for sale which I discuss in the blog How to Buy a Business . The following is a recap of it adjusted for sellers.

When determining how to value a business to sell the following methods can be beneficial to evaluating the value:

• Asset Valuation

Price to Sales Ratio

• Discounted Cash Flow

Asset Valuation Model

An asset Valuation Model is used in businesses that are heavily based on assets. When selling a shopping center, this is a great model. It basically adds up all equipment, inventory, and property then subtracts liabilities and debts.

In the example above, the company would be valued at $1,516,020. This process doesn’t take into consideration revenue or market direction so it might not be the most fair way to value the true worth.

Another way of valuing a business is by the price to sales (P/S) ratio. This takes the revenue of a company and decides how much to value it based on industry standards. Check out NYU Stern’s site for an idea of what multiple to use.

Using this method the P/S ratio ranges from .21 for grocery stores to 14.85 for software companies, with a total market average of 2.64-2.66.

If you compare this process to the asset valuation model, you’ll find that the revenue would only have to be around $570, 000 to justify the same sale price.

Price to Earnings Ratio

To use the price to earnings (P/E) ratio, you use the net income and industry norms. NYU Stern has a similar table for P/E Ratios.

Let’s assume that your company is a retailer, based on the NYU Stern charts, the net income would only have to be between $58,000-67,000 to be worth the same as the previous models.

Discounted Cashflow Method

This one allows you to include a variety of factors that other methods might not. Investopedia wrote an article that will help you get a deeper understanding of this step. You can read it here.

Factors taken into consideration in this method include:

• Sales and growth
• Cost of capital (inflation assumption of 3% plus the interest rate on a loan)
• Income taxes
• Changes in inventory, accounts payable and accounts receivable
• Investment income
• Depreciation

Zions Bank offers a useful calculator for the discounted cash flow method.

It will help you test a variety of different market conditions and is a really good option to help you find how to value a small business.

Make sure to do your due diligence by documenting each scenario you test. This will help you negotiate when selling your business to potential buyers.

Check out our blog about How to Value a Business for more information on valuation methods.

Step 4: Increase Business Value Before Sale

Businesses are valued differently by different people based on what they consider important. There are several things you can do to increase the potential sale price  before approaching potential buyers, including:

• Documenting plan going forward like you aren’t selling
• Improve financial positions and profit margin.
• Pay attention to the market

Let’s dig deeper into why each of these is important.

In the normal process of the workday, it’s common for everyone to have more work than time. If you make the time to get the space where every person who walks in can tell what and where everything is it will take them less time to make a more favorable impression of the business.

It will get you prepared to give buyers the best idea of how to keep the store organized. It will be worth it because you’ll know where everything is and be more prepared to answer questions about any of the topics related to the operations.

Documenting Plan Going Forward Like You Aren’t Selling

This step shows that you have thought about the long-term success of the business and shows that even though you are considering selling, you want to help the buyers succeed.

Given you have the best knowledge about how well the business is doing, what opportunities you haven’t capitalized on, and what you just haven’t gotten around to, it will give both you and the potential buyer a map of what step should be focused on next.

A documented plan may increase the valuation from buyers if they believe it is a good plan. It will also help you with finding ways to improve the valuation to get the best offers from buyers.

Improve Financial Positions and Profit Margins

If you find that the financial position of the company can be viewed in vastly different ways, you may want to investigate how to make the different market valuations more in line with each other.

For instance, if the Price-Sales ratio shows the value is $1.5 million, but the Price-Earnings Ratio shows a valuation of $800,000, buyers are going to consider the best sale price $800,ooo leaving a lot of money on the table.

If you find a way to bring the PE ratio more in-line with the $1.5 million valuation, the sale could be worth an extra $700K.

This would require looking at aspects like unnecessary expenses, reducing (or increasing size of) orders based on what will save more money, paying down debt, having a sale on poor-selling inventory, or any other number of methodologies.

Check out our video on how to improve business efficiency to get ideas.

Pay Attention to the Market

Market conditions can dramatically impact whether buyers are willing to offer you the best deal.

During recessions, buyers will want to take advantage of the opportunity, while during expansionary times, businesses will often see premium valuations to increase the chance of making a deal.

Step 5: Market to Potential Buyers

• Business brokers
• Online business marketplaces, like UpFlip’s marketplace
• Sell to a top employee
• Sell to a competitor
• Newspaper / online ads
• Ask your social network
• Commercial realtors
• Trade associations
• You’re franchisor if you are a franchise.
• Add “Small business for sale near me” in the metadata of posts and images online to trigger results during searches.

The goal here is to make people aware that you are selling your business. The suggestions above basically fall into three categories:

• Sell to someone you know.
• Have a third party help you.
• Use digital platforms to sell the business

Sell to Someone you Know

This is typically the least complicated way as you already have a relationship and can discuss the terms without really having to do any marketing.

The major pitfall with this solution is you might agree to a lower price or even agree to let them pay you off over time. If this is not handled strictly professionally, it could create issues in the relationship.

Have a Third-Party Help You

Third parties will typically have more experience with selling businesses and may be able to create better results faster despite the additional costs that come with hiring a third party.

Business Brokers are ready to help and normally charge a percentage of revenue.  They have more resources to find business owners like existing relationships that may be interested.

Franchisors might also have a list of people looking to purchase franchises that will make finding the new owner easier. If you own a franchise make sure to reach out to them.

Use Digital Platforms

If you are already proficient in using digital platforms for ads, you may find that they can be highly beneficial.

If you haven’t used ads before, then they can be a steep costly learning curve, but most of them have amazing tutorials that will help you figure them out.

Step 6: Negotiate Terms and Sale of Business

To prepare for this stage, I would recommend checking out our blog about 41 questions to ask when buying a business . It will help you be prepared for questions buyers have.

During negotiations with the buyer make sure to discuss the following topics:

• Liabilities
• Period of Time You’ll Stay During transition

We’ve already discussed most of these in previous sections, but the employees and transition period should be discussed more.

The employees of the company can be both an asset and a liability. Depending on your plans for the current employees, you may need to negotiate an agreement on how to handle them.

If you plan on eliminating positions, you may want to have an agreement on how to handle layoffs or severance packages. The balance blog offers a good read on severance packages .

Period of Time to Stay on after Transition

Many business ownership transfers require a period of time where the current owner is still active in the business. This transitional period helps secure the success of the business once the new owner takes over.

Whether it is required by a lender or the purchaser certain aspects should be included:

• Period of time you’ll stay on
• Roles during transition
• Pay during transition

The Period of time you’ll stay on could be as little as a few weeks or multiple years depending on the complexity of the business. It should be specified in writing how long the transitional period will be.

During the transition, there should be a plan for the roles to gradually be performed by the new owner.

When my dad was hired as the CEO of a company, he explained to me that for the first 3 months he was just observing and learning how they do things. Then he gradually started implementing new processes.

I think that is a pretty good philosophy to take during a transition.

The American Institute of Architects gives some good advice on mistakes to avoid during transition planning. I’d take a read through it real quick to help minimize transition issues.

Pay during the transition should also be discussed and documented. This should be based on the time and amount of work done. It will typically be comparable to management or employee pay.

Make sure to negotiate the pay at a level where the new owner can still make a profit otherwise it could jeopardize the health of the business.

If the buyer is using financing to buy the business, they may want to include this in the purchase price so they can secure financing for it.

Once you and the buyer are in agreement on the terms, it’s time to contact a lawyer to draft the agreement before the sale is completed.

Once the contract is drafted and signed, the buyer is now the new owner and you have more money to pursue other passions.

There may be one more step that is required. Which we’ll discuss next.

Step 7: Transition Period

Some loans require this to help protect the investment. If it’s part of the terms required, make the best of the time. It might even be fun.

As discussed above, you’ll probably be working like normal for a period of around three months, then gradually reduce your responsibilities and time working. Typically this transition will be less than a year.

Now you know how to sell your company. We covered the following steps:

I personally find Shark Tank and The Profit really beneficial to better understand how investors evaluate businesses. If you don’t already watch them,

I’d recommend them to gain more business awareness.

I hope this article helps you sell your business for the most value. If you need some help, reach out to UpFlip and we’ll help you sell it.

Brandon Boushy

Brandon Boushy lives to improve people’s lives by helping them become successful entrepreneurs. His journey started nearly 30 years ago. He consistently excelled at everything he did, but preferred to make the rules rather than follow him. His exploration of self and knowledge has helped him to get an engineering degree, MBA, and countless certifications. When freelancing and rideshare came onto the scene, he recognized the opportunity to play by his own rules. Since 2017, he has helped businesses across all industries achieve more with his research, writing, and marketing strategies. Since 2021, he has been the Lead Writer for UpFlip where he has published over 170 articles on small business success.

Related posts

• September 27, 2023

How to Start a Business: The Ultimate Guide (2024)

• August 3, 2022

Free Business Plan Template (With Examples)

• May 3, 2022

How to Get a Business License (In 3 Steps)

Join the discussion cancel reply.

Save my name, email, and website in this browser for the next time I comment.

This site uses Akismet to reduce spam. Learn how your comment data is processed .

2 thoughts on “How to Sell a Business: The Ultimate Guide (2024)”

Thank you for this article! I’ve opened up a small online business last year to help with expenses. Unfortunately, I have to close it down as I underestimate the time and effort required to build one while keeping up with my day job. Anyway, hopefully, you can also make an article on how to negotiate to be a co-owner/investor when selling your business. Thanks again 🙂

Thank you for the comment. I’ll add that to the list of ideas

Compare listings

Reset Password

Please enter your username or email address. You will receive a link to create a new password via email.

Table of Contents

Sign up for our newsletter for product updates, new blog posts, and the chance to be featured in our Small Business Spotlight!

How to sell a business in six steps

Wondering how to sell your business so you can make the most of your labor of love? First off, congratulations! Selling the business that you worked so hard to create and build is a big choice, and one that comes with planning, goal setting, searching (for buyers, and maybe even some soul-searching, too), valuations, and a whole lot more. So before you start advertising your business in the local classifieds, start here: how to sell your business— the right way. To help guide you, we’ve made a list of six simple steps that you can follow all the way to the bank. 🏦 How to sell a business in six steps:

• Time your sale properly
• Organize and prepare your finances
• Determine the value of your business
• Decided whether or not to use a broker
• Find a buyer

Ready to move from for sale to sold? Well, getting there will take longer than reading a few bullet points, but you’ve got to start somewhere! Let’s begin.

Step 1: Deciding to sell your business

Deciding to sell your business isn’t always an easy choice to make. It’s typically not a quick one, either. When you’ve reached this point, it usually means you’re in the midst of change, and that’s totally okay. Here are just a few reasons why people make the decision to put the proverbial “for sale” sign on their business:

• A career or a life change. For example, a divorce, a death in the family, illness, or, in terms of your professional life, you’ve decided that you’re ready for your next move and a total career change. This could be anything making the switch from running a boutique graphic design agency to opening a bakery or moving from owning a catering company to becoming a full-time accountant. You do you—and sell your business to help you get there.
• Retirement. You’ve put in your time and have decided to call it quits and join the flock of snowbirds who travel south six months of the year. We wouldn’t blame you. ✈️
• Differences: Perhaps after five years in business together, you and your partner have decided that you want different things, and selling the business is the best way to achieve your respective goals. Don’t stress, this happens. And when it does, it’s best to have the agreements made up in advance of the sale.
• It’s just not working for you: You feel overworked, underpaid, or simply bored. When this happens, you’ve got a call to make: should you stay or sell?

Whatever the case, it’s important to know the reason behind your decision. Not only will it help you sleep better at night, but potential buyers will want to know. Knowing the owner’s motivation can be a big part in their own decision making, helping them understand the reasoning behind the sale and how that might play a part in the future success of the business. When selling, remember to be open and transparent. This creates trust and a smoother process from start to finish.

Step 2: Time your sale properly

Making the decision to sell your business usually doesn’t happen overnight. But even if you magically woke up with the idea and decided to move it from dream to reality, the plan to get you there can take months—sometimes even years. This is why planning well in advance is key to making the most out of your business decision. Allowing for ample space and time in the process gives you the opportunity to make improvements that will increase the business’s valuation. For instance, you might want to clean up your finances , look at ways for reducing operational costs, and create a few campaigns to build up your sales. Or, if applicable, focusing on customer retention by launching a loyalty program, or executing a few tactics that will strengthen your brand awareness. While these tips do take time to go from ideation to implementation, they can make your business much more attractive to buyers. 

Step 3: Organize and prepare your finances

We just mentioned cleaning up your finances, but before you can do that, you’ve got to bring them all together in one organized place. Start with financial statements like balance sheets, P&L statements , and your tax returns from the past three to four years. If you’ve got the time, take the extra step to review them all with an accountant or Wave Advisor to make sure everything is in good order. You’ll also want to go into list-making mode to put together the following information:

• Equipment: What’s being sold with the business? 
• Contacts: Who are your suppliers? What are their related transactions? Anything outstanding? 
• Lease: How long is your current lease? What utilities are included? Are there options to renew? ‍

All of this information can go into an information packet for your potential buyer. This packet will provide an overview of your business, how it’s managed, and the day-to-day operations. It’s helpful for the buyer to have, so they can take over operations as seamlessly as possible.

Step 4: Valuate your business

How much is your business worth? That’s the question you want to find out as you prep for sale so you have a realistic listing price in mind. Emphasis on realistic. Don’t price the business too high or too low. When you do that, you’ll be stuck with less money than you deserve, or you’ll find that buyers are passing on the opportunity because the cost is too much. To help you get the right answer, look at hiring an appraiser to complete the valuation. As a third party, they’re neutral to the situation and have nothing to gain from the sale. Plus, they can draw up the necessary documentation that you’ll need throughout the process. Now, let’s take a step back to step two: timing your sale properly. When valuing your business, you need to give yourself enough time to get all your ducks in a row, which includes the time to boost your valuation. This can be done through cost-cutting tactics and initiatives to increase revenue, brand awareness, and customer retention. You know, all the things that a buyer wants to see before they sign the dotted line. 🖊

Step 5: Consider using a broker

When you’re selling your business, there are two ways you can go: with a broker or without one. If you’re selling to a close friend or relative, a broker might not be needed. If you decide that’s the case, you can save yourself a few bucks. But speaking of dollars, you might want to explore hiring a broker if you want the biggest bang for your buck. Brokers work off commission, so they’ll do what they can to help maximize the sale and their take-home amount. To help with the sale, they can handle the logistics of selling your business, freeing up your time so you can keep the business in good order until it's sold. For example, they might be working quietly in the background with their network of buyers to get the highest price. But before you decide to hire your broker, be sure to set your expectations, including advertisements, communication, and commission. This makes for a successful and transparent relationship, and a smoother sale.

Step 6: Find a buyer

Last but not least, you’ve got to find yourself a buyer. And you guessed it: this (likely) doesn’t happen overnight. To get you to that ideal point of having two to three potential buyers, consider boosting your advertising. This is where brokers can come in handy. Not only do they have their networks, but they’ve also got a few marketing strategies up their sleeves to help promote the sale of your business to those who are looking. Once you’ve found the buyer(s), keep in touch with them. You’ll also want to make sure they’re pre-qualified for financing before you give out any specific info about your business. Next, you’ll want to bring in your lawyer. Lawyers are extra helpful if you plan to finance the sale and need to work out the details with the buyer. On that note, make sure any agreements are put into writing, and have potential buyers sign a nondisclosure or confidentiality agreement so your business remains yours—at least until it’s theirs. Now, when it comes to price, allow yourself some wiggle room. Set a firm price or price range that you find reasonable. This lets you allow for negotiation, but on your terms. ‍ Lastly, the signed agreement. Try to get this into escrow , which means that a portion of the purchase price would be held by a third party until agreed-upon obligations are filled. These could be the transfer of assets or a resolution for any outstanding assets, as an example. ‍ After all is sold and done, you might find yourself with a few more business encounters, like a bill of sale that transfers your business assets to the lucky buyer; an assignment of lease; or a security agreement which lets you keep a lien on the business. Another legality? Your buyer might present you with a non-compete. By signing this, you’re agreeing that you won’t start a competing business that could lure your loyal customers away.

Selling a business FAQs

How much does it cost to sell a business .

This depends on the route you take. If you go with a broker and you sell your business for less than $1 million, expect to pay a commission around 10% to 12%. You’ll also have to pay fees associated with marketing, lawyers, potential transfer fees, and any improvements you make to your business to boost its appeal. 

How do you sell your share of a business?

The common way to sell your share of a business starts with an agreement. Try to put this in place with your business partner(s) ahead of any sale. This will help remove emotions and keep things running smoothly.

How do you sell a small business without a broker?

You don’t always need a broker to help sell your business. This can be especially true if you’re selling to someone you know, like a family member or friend. That said, you should still consult with your small business network to get their expertise and advice; trusted sources on the internet ( 👋 ); and those who’ve have sold businesses before.

The bottom line on selling your business

Selling your business comes down to six simple steps: the timing of your sale, organizing your finances, valuation, the choice to use a broker or not, and then finding a buyer. And even once all that’s complete, sometimes you need some help. Be sure to talk to your network of business owners or reach out to Wave Advisors for help. This is a big move, so you want to make sure that it’s the right one for you, and done right. Which, in the case of selling businesses, doesn’t always mean quick. But trust us: seeing that deposit enter your bank account will make all the hard work worth it.

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for unlimited transactions during the offer period. After the offer ends: over 10 transactions per month at 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions.

See Terms of Service for more information.

Related Posts

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

Selling a Business: A Step By Step Guide

Reviewed by

February 23, 2021

This article is Tax Professional approved

When considering selling a business, it’s time to get the compensation you deserve for all of the blood, sweat, and tears.

By understanding all the moving parts behind a business sale, you can worry less about the process and focus more on the outcome: getting a fair price for all your hard work.

I am the text that will be copied.

How to sell a business, step by step

While every entrepreneur’s journey is different, these are the steps you can typically expect to take when selling a business.

Step 1: Determine your commitments

While preparing to sell a business, it shouldn’t suffer. Selling a business takes time and energy. Getting too caught up in the process can get in the way of servicing your customer base.

Chart out an exit strategy to prepare for the sales process well in advance. For example, have a plan in place for any outstanding invoices and get the financial records up to date for prospective buyers.

You don’t need to know the exact amount of time needed to take care of every task, but it will help you come up with a timeframe for a successful sale. It will also help you plan what kind of professionals you need to hire.

Step 2: Hire professionals

Knowing how to sell a business is important, but equally important is knowing where to bring in help.

To jump to our overview of professionals to hire, click here . But as a quick rule of thumb, start with an accountant and attorney. Outside of that, it’s up to you to determine how much help you need from appraisers, brokers, or consultants.

Once you’ve found and contacted them, any of these professionals should be willing to sit down with you for a free consultation. Here are some useful questions to ask an appraiser , a broker , and a consultant .

Step 3: Make improvements to the business

Before selling a business, invest in improving its profitability and the efficiency of its day to day operations. This will help you get the biggest sale price possible by boosting the value of your business. The changes you make will depend on the type of business, but here are some ideas to get you started.

Put on a fresh coat of paint

If you have a brick and mortar location, simple updates—new fixtures and furniture, or even a (literal) fresh coat of paint—can help the business look more desirable to potential buyers.

Smooth out the operations

The business operating system (BOS) is the rulebook for how the company runs and how employees work together to achieve goals. A BOS that’s disorganized or poorly implemented doesn’t look good, and hurts the profitability of the business. Replace it with a new system, or revise the current one to make it more efficient.

Sell, sell, sell

Focusing on boosting sales before selling a business will make it look more attractive to buyers. This is especially the case with individual buyers—as opposed to organizations—who may be looking to benefit from the immediate cash flow that comes with buying a high-revenue business.

Diversify the client list

If more than 20% of your business consists of a single client, you could be at risk of giving buyers cold feet. After all, if that client decides they don’t like the new owner and decides to churn, it will put a huge dent in the profitability of the business. Leading up to a sale, try to take on new clients and diversify your portfolio, so this is less of a risk.

Step 4: Organize your financials

When it comes to financials, prospective buyers want as much transparency as possible. You’ll need at least three years of clean financial statements (balance sheet, income statements) to present to prospective buyers. Make sure that all income is accounted for.

You should also make sure you have a bookkeeping solution in place, so you can guarantee the new owner ongoing, up-to-date financial info.

Finally, if you have any assets on your business books that you’d like to keep for private use—such as vehicles or equipment—be sure to transfer them off the books. These assets need to be legally transferred into your possession, so they’re not falsely recorded as belonging to the business you’re selling.

Step 5: Set the sale price

Does your business rely on proprietary information or specialized knowledge? If so, you’ll get the most realistic business valuation from an appraiser or broker.

If you’re determining your own asking price, you should generally plan to set it at one to four times the seller’s discretionary earnings (SDE).

The SDE consists of:

• Your business’ annual net income before taxes
• Money your business makes from investments
• Depreciation and amortization of business assets
• Your personal compensation and benefits
• Non-recurring expenses.

The number by which you multiply the SDE—one to four—is determined by the current state of the market, your business’s competitiveness, and other factors. These are hard to pin down, but a qualified business consultant can help you figure out the SDE multiplier when selling a business.

Step 6: Get your paperwork in order

Besides financial records, you need certain legal documents to be prepared before you make a sale. The most important is the asset purchase agreement —a legal contract for selling your business’s physical and intellectual property.

This document typically runs 25–50 pages in length, and draws on your financial records. Often, the asset purchase agreement will also list your obligations as former owner. Most commonly this means staying on with the business for a set period, to consult with the new owner.

A non-compete may also be required. This would state that you do not intend to start a new business that would be competition to the old one you just sold.

Preparing one of these documents is a time-consuming task, which is why it’s important to hire an attorney who can handle it for you.

Step 7: Prepare a selling memo

The selling memo is an integral document when selling a business.

You provide the selling memo to prospective buyers, giving them all the information they need about the business so they can consider making a serious offer.

Your selling memo will include:

• An overall description of the business
• Information on the location
• The business’s strengths
• An overview of the competitors
• A description of the products/services
• Information on the day-to-day operations
• The marketing plan
• Key employees and managers
• Growth projections
• Potential buyer concerns
• Financial information
• The asking price and terms of sale

Check out ExitAdviser for a comprehensive rundown of the selling memo , and online tools to help you put one together.

If you hire a broker, they will prepare the selling memo for you.

Step 8: Put the business on the market

One major challenge you face when advertising a business for sale is maintaining confidentiality. If clients or employees find out you’re planning to sell, they may get skittish. And competitors could interpret the decision as a sign of weakness, and take advantage of it.

That’s why it’s usually wise to hire a broker. Not only will they have a large network to draw on, they’ll know how to discreetly approach potential qualified buyers.

However, in the event you do decide to sell a business without help from a broker, online services have made doing so easier than it once was.

BizBuySell.com tags itself as the biggest business for sale marketplace in the world, and will even help you find a broker if you change your mind about going it on your own.

Step 9: Negotiate the sale

When the right buyer is ready to purchase the business, they’ll submit a letter of intent to purchase . This document is non-binding; either you or the buyer can back out at any time.

It’s rare for a buyer to back out, though. By this point, they’ve already invested significant time in researching the business and putting together an offer.

Now, you may either accept the offer, or enter into negotiations with the potential buyer. Negotiating the sale of the business is its own special art form, and you may want to draw on advice from a business consultant during the process.

Step 10: Finalize the sale

Once you accept a letter of intent, you should expect to wait while the buyer performs due diligence. They’ll take a set period of time, from two to four months, to do this.

For the sake of due diligence, they’ll examine your business’ assets and liabilities, financial history, inventory, staff structure—just about anything that affects the day-to-day running of your business.

Due diligence is your buyer’s chance to get an in-depth look at your business, and make any necessary last minute moves—borrowing extra cash, or looking for additional staff—before officially taking over.

The sale of your business is completed when you and the buyer sign the asset purchase agreement prepared by your attorney, and any other supporting documentation that may be required depending on the specifics of your business.

The professionals you need to hire

A guide on how to sell a business can give you the steps you need to take, but professionals can ensure you’re getting the maximum value and cover you legally. That’s why it’s best to get a little help from your friends—“your friends,” in this case, being paid professionals.

At minimum, you’ll need to work with an attorney and an accountant.

An attorney can help you prepare the legal documentation for the transfer of assets, and make sure nothing you’re doing is likely to get you sued.

An accountant prepares the financial records you need to prove to prospective buyers your business is worth investing in.

Then, you should consider hiring an appraiser . For a fee— typically $3,000 to $7,500 for small businesses—an appraiser will tell you how much your business is worth so you’re getting the maximum value.

An appraiser will survey:

• How much money your business owes
• How much others owe your business
• Your business’s inventory, and other assets
• Past tax returns
• Your receivables and sales

Then, they’ll take into account the condition of the market, and your business’s place in it, to determine an asking price that will be attractive to buyers while also getting you the best price.

However, you won’t need to hire an appraiser if you hire a business broker . A broker will both appraise your business, and put it on the market for interested buyers. Typically, they’ll charge 5–10% of the commission price. Brokers find business buyers for you by preparing a prospectus for it, listing it on marketplaces, and tapping into a large professional network.

Finally, before putting up the “For Sale” sign, consider hiring a business consultant . Someone with experience in your industry can tell you ways to improve your business before making a sale so it will look more attractive to potential buyers.

Who to sell a business to

Equally important as how to sell a business is who you’re going to sell it to.

You can sell a business to a variety of individuals or entities. There are pros and cons to dealing with each.

Selling a business to an individual on the market

This is like selling your house on the market. You put it out there, and see which individual shows the most interest in becoming a small business owner (for the highest price).

Pros: Since the business is up for sale on the open market, you have the highest chance of finding someone willing to meet the conditions of the sale—for instance, an all-cash closing.

Cons: To sell on the open market, you will likely need to hire a broker who charges commission.

Selling a business to a family member

Roughly one-third of business sales are between family members. This can take the form of handing off the business to the next generation of owners.

Pros: As the business gradually changes hands and your family member takes over, you’ll still have some say in how the business is run. Also, a change of hands between family members means a smoother transition for staff and clients.

Cons: It’s unlikely you’ll be able to get the highest possible asking price for the business when selling to a family member.

Selling a business to partners

If the business operates as a partnership, you have the option of selling your shares to your partner. Most likely, when you formed a partnership, you signed a buy-sell agreement. This document outlines the price and procedure you need to follow to make the sale.

Pros: Following a predefined path for making the sale requires minimum effort on your part, and has a low impact on staff and clients.

Cons: Even as the buy-sell agreement makes for a quick change of hands, you may find yourself stuck with a price that seemed attractive when you signed the contract, but has become less appealing as the business has increased in value.

Selling a business to an employee

A trusted employee who’s great at their job and knows the business inside and out could make the perfect business owner—and the ideal buyer.

Pros: You can plan the sale well in advance. The first step is setting up a legally-binding partnership with an employee. Then, you’ve got plenty of time to arrange the hand-off, and extract yourself from daily operations, before the employee takes over completely.

Cons: As with selling to a family member, selling to an employee is unlikely to get you top dollar for the business.

Selling a business to multiple employees

You may be able to sell the business to qualified employees, if you have an Employee Stock Ownership Agreement (ESOP) in place.

Pros: Taking advantage of existing relationships with employees means you don’t need to put the business on the market. Existing employees are also more likely to run it successfully than a buyer you’ve never met before.

Cons: The ESOP needs to be put in place well before you make the sale. Setting it up demands extra paperwork and professional help .

Selling a business to another business

Large businesses and private equity groups buy companies as investments. In that case, they’re not looking to set it up with a new owner, but to use parts of the business—market share, competitiveness, profitability—to benefit a larger, similar business in their portfolio.

Pros: You’re more likely to secure a better selling price from another business than from individuals, and get an instant payout.

Cons: Depending on the sale terms, you may need to continue managing the business for a fixed period during the transition.

Further reading

• How to Find an Accountant
• Accounting Outsourcing: How to Hand off Your Financial Tasks (With Recommendations)
• How to Know If Your Small Business Is Financially Healthy
• How Long to Keep Business Tax Records and Receipts

Join over 140,000 fellow entrepreneurs who receive expert advice for their small business finances

Get a regular dose of educational guides and resources curated from the experts at Bench to help you confidently make the right decisions to grow your business. No spam. Unsubscribe at any time.

How to Sell a Business Plan

by Jim Hagerty

Published on 26 Sep 2017

Selling a business plan can be a very profitable venture; however, the plan you market must be strong and structured professionally. Whether you are selling a franchise or a simple business plan, it must contain proven success methods and direct reports. It must also be marketed to the correct prospects.

Strong business plan

Legal and financial counsel

Write a strong plan. Your business plan must be marketable. This means the overall plan must contain proven methods of success. It is, therefore, wise to work closely with an attorney, CPA or marketing firm. These professionals can help you structure your plan so it's relevant to a variety of readers. It should include clear rhetoric and reports, void of confusing industry jargon.

Identify your market. Research your market to determine if there are people looking for an opportunity your business plan will provide. Chances are there are many people in your market with the dream of starting their own business but lack the proper plan. Start with your immediate market first. Compile data and keep a database of prospects. Talk to as many people as possible.

Buy classified ads. Most newspapers have “Business Opportunities” sections in their classified advertising sections. Before buying space, examine the paper’s circulation numbers and demographics. This will ultimately determine which types of people and how many of them will see your ad.

Utilize trade publications. Most industries have their own publications. The investment industry distributes publications to its brokers and customers. There are many automotive-related periodicals. Hunting and fishing publications are also ample. These magazines, newspapers and newsletters all sell display and classified advertising space. They are great outlets in that their readers all have similar, specialized interests. Aside from purchasing ad space, submitting guest columns or stories about your services is often possible. Contacting editors is often all it takes.

Build an expert website. Websites are a great way to sell products and services. For a professional with expert advice and products, the Internet is a wonderful stage to pitch your business plan to millions of prospects. Linking to other sites and selling your products directly on your page is also a powerful way to sell your plan to multiple customers (see Resources).

Use online commerce sites. Websites like Craig's List, Facebook and eBay often serve as effective and specialized forums to sell merchandise (see Resources). Some sites are free, while others charge a fee. Many trade periodicals also have online versions of their publications. Use the free sites first.

Join professional groups. Most industries have clubs and associations made up of professionals in their field. Join an association in your targeted industry. Ask to pitch your business plan as a guest speaker at a regular meeting or networking event. Attending industry conventions and trade shows is also a good way to reach your market.

Always know your market. You won’t sell your product to prospects that aren’t in your market.

Set aside a marketing and advertising budget to promote your business plan.

Consider hiring a marketing firm to help you if you have the capital.

Get paid what you’re worth. Your ideas, proven success and time are all valuable assets. It’s not uncommon for business plans to be sold for hundreds of thousands, even millions of dollars. Don’t accept anything less than what you are comfortable with. Consult with an attorney and/or a CPA to help you determine an asking price.

• Economy & Markets
• Digital Life

Can You Sell A Business Plan?

A business plan outlines managerial objectives and promotes businesses at any given time. When you draft a business plan, you must clarify each step and position the business in all directions, thereby preparing for growth and possible expansion.

There is, however, an argument that has arisen on whether it is possible to sell a business plan. While many think it's unnecessary to sell off a plan that could be considered intellectual property, we must view this topic from the entrepreneur's angle.

Business plans differ, so it's necessary to know the different types of plans because not all business plans can be relevant when sold. Types of business plans include:

Startup business plan

Startup business plans are written for new startups. They include detailed and structured operations for the smooth running of the business. They also describe products and services, financial implications, management team and market evaluation.

Startup business plans are the target of every investor, and whenever they find one of interest, they may offer a fortune for it because ideas rule the world.

These business plans are the most sold because most investors would rather put their money into getting assets than funding liabilities. They always want the ideas fresh, and a start-up plan should suit this purpose.

Strategic business plan

Strategic business plans describe in detail the enterprise's mission and vision statements, the company's short- and long-term goals, objectives, and strategies to be used to achieve them, and the overall success of the venture.

Certain investors do not have the time or energy to run analysis and research on new strategies. They may be willing to pay for such services; this has made it possible to sell strategic business plans. You can package good business strategies on a manuscript and get paid for your hard work.

Internal business plan

An internal business plan provides information for departments. It describes their functions to achieve a certain goal. Though it may not be of high demand because circumstances existing between two businesses are not the same, it can still boost administration.

Effective communication is a skill that some business administrators may not possess, but with plans like these, they understand how to pass information to their workers. Every business challenge has a peculiar solution, so there is little potential or guarantee for a particular company's internal plan to work for another company.

Operations business plan

Operations business plans outline employees' responsibility for the long run and calculate the company's deadlines on assignments.

Entrepreneurs may not quickly sell these plans because they specifically solve internal issues in the organization. Still, on a closer look, managerial skills in organizations are always the same, so investors are willing to exchange money to learn proper operations and office management.

If you understand office operations, you can sell an idea to a particular organization, and if the managers carry out these functions, it'll indeed affect their business model.

Feasibility business plan

Feasibility business plans describe the need for the product or service, the price they may be willing to pay, and the enterprise's profitability. They can also contain recommendations and solutions to any challenge that may arise from the product or service.

Feasibility plans are in high demand by potential investors who may have experienced hitches in different aspects of their business and crave a way out. Entrepreneurs who are business savvy can generate income by drafting possible feasibility studies after researching the organization and selling the outcome.

Growth business plan

Growth business plans are also known as the pension plan. It gives a detailed description of financial implications, investment plans and a complete description of the new company. Investors who would like to pay for such plans would be more satisfied when their company's description is well detailed.

Since growth is universal, it becomes imperative for a single formula to work for various organizations. Investors may choose to apply specific purchased plans to grow their organization, too. This is another plan that entrepreneurs can sell to potential investors in real time.

Final thoughts

Since there are different types of business plans addressing various aspects of a business, it can be conventional for prospective entrepreneurs to trade a business plan for money and thereby venture into another business of their choice. It poses as a trade of its own, where the current proposed business is capital intensive.

To answer the big question, entrepreneurs can sell business plans depending on the type of plan, the current state of the prospective entrepreneur, and their future desires for their business.

© Copyright IBTimes 2024. All rights reserved.

Ukraine, Israel, TikTok: The Massive Aid Package Before US Congress

Eiffel Tower Loses Sparkle For Parisians Ahead Of Olympics

Former Number One Momota Retires From International Badminton At 29

Why Insurance Prices Have Skyrocketed

World Bank Aiming To Connect 250 Mn Africans To Energy Grid By 2030

IMF Says Global Debt Levels Face 'Great Election Year' Risk

Divisions Among Colombia's FARC Dissidents Complicate Peace Talks

French Far Right Gets Youthful Vibe With 28-year-old Leader

US Fed's Powell Says Inflation Fight May Take 'Longer Than Expected'

Mideast-related Oil Price Spike Threatens 'Relatively Good' Economic Outlook: IMF Chief Economist

• Search Search Please fill out this field.

What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for April 2024 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How to Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated April 17, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

Download a free SBA-approved business plan template built for small businesses and startups.

Download Template

One-page plan template

Download a free one-page plan template to write a useful business plan in as little as 30-minutes.

Sample business plan library

Explore over 500 real-world business plan examples from a wide variety of industries.

View Sample Plans

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

Related Articles

10 Min. Read

14 Reasons Why You Need a Business Plan

6 Min. Read

Free Hair and Beauty Salon Sample Business Plan PDF

4 Min. Read

How to Create an Expense Budget

24 Min. Read

The 10 AI Prompts You Need to Write a Business Plan

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Online Degree Explore Bachelor’s & Master’s degrees
• MasterTrack™ Earn credit towards a Master’s degree
• University Certificates Advance your career with graduate-level learning
• Top Courses
• Join for Free

Business Plan: What It Is + How to Write One

Discover what a business plan includes and how writing one can foster your business’s development.

What is a business plan? 

Think of a business plan as a document that guides the journey to start-up and beyond. Business plans are written documents that define your business goals and the strategies you’ll use to achieve those goals. In addition to exploring the competitive environment in which the business will operate, a business plan also analyses a market and different customer segments, describes the products and services, lists business strategies for success, and outlines financial planning.  

How to write a business plan 

In the sections below, you’ll build the following components of your business plan:

Executive summary

Business description 

Products and services 

Competitor analysis 

Marketing plan and sales strategies 

Brand strategy

Financial planning

Explore each section to bring fresh inspiration and reveal new possibilities for developing your business. Depending on your format, you may adapt the sections, skip over some, or go deeper into others. Consider your first draft a foundation for your efforts and one you can revise, as needed, to account for changes in any area of your business.  

1. Executive summary 

This short section introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, development goals, and why it will succeed. If you are seeking funding, summarise the basics of the financial plan. 

2. Business description 

Use this section to provide detailed information about your company and how it will operate in the marketplace. 

Mission statement: What drives your desire to start a business? What purpose are you serving? What do you hope to achieve for your business, the team, and your customers? 

Revenue streams: From what sources will your business generate revenue? Examples include product sales, service fees, subscriptions, rental fees, licence fees, and more. 

Leadership: Describe the leaders in your business, their roles and responsibilities, and your vision for building teams to perform various functions, such as graphic design, product development, or sales.  

Legal structure: If you’ve incorporated your business, include the legal structure here and the rationale behind this choice. 

3. Competitor analysis 

This section will assess potential competitors, their offers, and marketing and sales efforts. For each competitor, explore the following: 

Value proposition: What outcome or experience does this brand promise?

Products and services: How does each solve customer pain points and fulfill desires? What are the price points? 

Marketing: Which channels do competitors use to promote? What kind of content does this brand publish on these channels? What messaging does this brand use to communicate value to customers?  

Sales: What sales process or buyer’s journey does this brand lead customers through?

4. Products and services

Use this section to describe everything your business offers to its target market. For every product and service, list the following: 

The value proposition or promise to customers, in terms of how they will experience it

How the product serves customers, addresses their pain points, satisfies their desires, and improves their lives

The features or outcomes that make the product better than those of competitors

Your price points and how these compare to competitors

5. Marketing plan and sales strategies 

In this section, you’ll draw from thorough market research to describe your target market and how you will reach it. 

Who are your ideal customers?   

How can you describe this segment according to their demographics (age, ethnicity, income, location, etc.) and psychographics (beliefs, values, aspirations, lifestyle, etc.)? 

What are their daily lives like? 

What problems and challenges do they experience? 

What words, phrases, ideas, and concepts do consumers in your target market use to describe these problems when posting on social media or engaging with your competitors?  

What messaging will present your products as the best on the market? How will you differentiate messaging from competitors? 

On what marketing channels will you position your products and services?

How will you design a customer journey that delivers a positive experience at every touchpoint and leads customers to a purchase decision?

6. Brand strategy 

In this section, you will describe your business’s design, personality, values, voice, and other details that go into delivering a consistent brand experience. 

What are the values that define your brand?

What visual elements give your brand a distinctive look and feel?

How will your marketing messaging reflect a distinctive brand voice, including tone, diction, and sentence-level stylistic choices? 

How will your brand look and sound throughout the customer journey? 

Define your brand positioning statement. What will inspire your audience to choose your brand over others? What experiences and outcomes will your audience associate with your brand? 

7. Financial planning  

In this section, you will explore your business’s financial future. Suppose you are writing a traditional business plan to seek funding. In that case, this section is critical for demonstrating to lenders or investors you have a strategy for turning your business ideas into profit. For a lean start-up business plan, this section can provide a useful exercise for planning how to invest resources and generate revenue [ 1 ].  

To begin your financial planning, use past financials and other sections of this business plan, such as your price points or sales strategies. 

How many individual products or service packages do you plan to sell over a specific period?

List your business expenses, such as subscribing to software or other services, hiring contractors or employees, purchasing physical supplies or equipment, etc.

What is your break-even point or the amount you must sell to cover all expenses?

Create a sales forecast for the next three to five years: (No. of units to sell X price for each unit) – (cost per unit X No. of units) = sales forecast

Quantify how much capital you have on hand.

When writing a traditional business plan to secure funding, you may append supporting documents, such as licences, permits, patents, letters of reference, resumes, product blueprints, brand guidelines, the industry awards you’ve received, and media mentions and appearances.

Business plan key takeaways and best practices

Remember: Creating a business plan is crucial when starting a business. You can use this document to guide your decisions and actions and even seek funding from lenders and investors. 

Keep these best practices in mind:

Your business plan should evolve as your business grows. Return to it periodically, such as quarterly or annually, to update individual sections or explore new directions your business can take.

Make sure everyone on your team has a copy of the business plan, and welcome their input as they perform their roles. 

Ask fellow entrepreneurs for feedback on your business plan and look for opportunities to strengthen it, from conducting more market and competitor research to implementing new strategies for success. 

Start your business with Coursera 

Ready to start your business? Watch this video on the Lean approach from the Entrepreneurship Specialisation on Coursera: 

Article sources

Inc. “ How to Write the Financial Section of a Business Plan ,   https://www.inc.com/guides/business-plan-financial-section.html.” Accessed April 15, 2024.

Keep reading

Coursera staff.

Editorial Team

Coursera’s editorial team is comprised of highly experienced professional editors, writers, and fact...

This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

Small Business Trends

How to create a farm business plan.

If you buy something through our links, we may earn money from our affiliate partners. Learn more .

Crafting a comprehensive farm business plan is a crucial step towards transforming your agricultural visions into tangible realities. This plan serves as a blueprint, enabling you to formally articulate your thoughts, ideas, and aspirations. Engaging in this process can lead to profound insights, illuminating the path to a thriving agricultural enterprise.

Even though the term ‘farm business plan’ might evoke a sense of formal rigidity, it’s important to remember that this document is, in fact, a living, evolving entity. Just like a seedling that sprouts, grows, and changes with the seasons, your business plan is not meant to be static.

It’s something you nurture, revise, and expand as circumstances dictate and as your farm business matures. Feeling pressure to perfect your business plan from the outset could be paralyzing. Instead, we suggest you view this document as a foundation that can be continuously built upon.

To get you started, we offer a detailed farm business plan template. This invaluable resource can be tailored and expanded to suit your unique agricultural venture, whether you’re cultivating a sprawling wheat field or nurturing a boutique organic herb garden.

The most effective business plans are those that exhibit flexibility and resilience, characteristics that are at the heart of any successful farm business. Agriculture, by its very nature, is a domain subject to the whims of Mother Nature. From unpredictable weather patterns to seasonal variations, farmers of all kinds grapple with an array of external factors.

Therefore, your farm business plan should not only anticipate these challenges but also prescribe adaptive measures to navigate through them. It’s this inherent adaptability that transforms a good farm business plan into a great one.

Writing a Farm Business Plan Template: 15+ Things Entrepreneurs Should Include

A farm business plan, like any strategic document, should be comprehensive, encompassing all aspects of your operation, be it agricultural (crops) or product-based. Utilize these 15 key sections to shape your farm business plan template.

Do bear in mind that while these sections are integral, they are by no means exhaustive. Your farm business plan may necessitate additional topics based on your specific farming operations.

Creating a robust business plan is of paramount importance, whether you’re kickstarting a farm venture or acquiring an existing one. Our farm business plan template starts off with an executive summary.

Executive Summary

The executive summary provides an essential overview of your farm business. It helps to streamline communication and understanding between various stakeholders, such as internal team members, potential lenders, business partners, and customers. When drafting your executive summary, consider the following key components:

• Business Profile : Provide a snapshot of your farm business, describing its nature and scope. Are you into crop cultivation, livestock rearing, or any specialized farming practices?
• Products : Clearly outline what product or products your farm will produce. These could range from dairy products to specific crops or even services like agrotourism.
• Production Methodology : Describe how you plan to achieve your production goals. This could involve discussing your farming techniques, usage of technology, or unique methodologies.
• Target Audience : Identify the individuals or groups who will be interested in your farm products or services. These might be local consumers, restaurants, farmers’ markets, or even online customers.
• Key Strategies : Highlight the strategies you plan to implement to run and grow your business. This could cover marketing techniques, sustainability practices, or partnerships.
• Mission and Vision : Briefly outline the mission and vision of your farm business. This helps to convey your long-term objectives and core values.

Remember, your executive summary is essentially the first impression of your business plan. Making it comprehensive, clear, and compelling will help attract interest and support from stakeholders.

Goals and Objectives

A well-crafted business plan should encapsulate both personal and economic goals and objectives. Many successful farm business plans also address environmental stewardship and community outreach. You may want to include goals around preserving farm resources for future generations, ensuring that both the operational and stewardship aspects remain within the family.

Introduction

Your introduction should provide information about the business owners, including their backgrounds and levels of industry experience.

Mission Statement and Values of Your Farming Business Plan

This section enables you to express the core values that led you to the farming business, whether it’s an urban farming venture or a homemade product-based farm. Your mission statement should reflect these values. Sustainable practices and conservation are often key motivations that draw people to farming, so don’t be shy to share your commitment to such principles.

Industry History

Understanding your place within the wider agricultural landscape is key. Be sure to research farms that have historically dominated your region, whether they specialize in vineyards, urban farming, or livestock rearing. Use this research to make educated projections about the future.

Company Background and History

Share the history of your farm if it has been a long-standing family venture or the journey leading up to your purchase if it wasn’t. If your farm business is a startup, focus on the business experience and backgrounds of the involved parties.

Competitor Analysis

Understanding your competition is crucial. In the agricultural sector, farmers often share resources, such as a high-tech corn planter , or cooperate in marketing endeavors. Factor in such synergies when analyzing competitors.

Target Market

Clearly define your target market. This can include area groceries, farmers’ markets, or online customers. If you’ll be relying on online sales, ensure your website is professionally designed, keyword optimized, and easily discoverable.

Products and Services

Describe each product or service offered by your farm, highlighting those features most appealing to your target market.

Organization, Human Resources, and Management Plans

These interconnected elements cover your farm’s day-to-day operations, employee roles and responsibilities (including their job descriptions ), and overarching management plans.

SWOT Analysis

Conduct a SWOT analysis to identify your farm’s strengths, weaknesses, opportunities, and threats. This will help you strategize on how to leverage your strengths, mitigate your weaknesses, exploit opportunities, and neutralize threats.

Your vision is the roadmap for your farm’s future. It should express not just your financial aspirations but also your plans for the farm operation in the long run.

Growth Strategy

A comprehensive growth strategy should outline your plans for debt reduction, savings, and business expansion. Keeping detailed farm production records is key to evaluating the effectiveness of your growth strategy.

Financial Plan

Your financial plan should include elements like balance sheets, income statements, projected cash flows, loan repayment schedules, and depreciation factors.

Marketing Strategy

A robust marketing strategy is essential for your farm’s success. Look into brochures, advertisements, and joining co-op groups. Resources from institutions like the University of Minnesota and Cornell University offer comprehensive insights into effective marketing strategies for farm businesses.

Establishing a Farming Business Entity

Discuss the legal structure of your farm business. Will it be a sole proprietorship, a partnership, an LLC, or a corporation? Outline the pros and cons of each and why the chosen structure is the best fit for your farm business.

Detailed Description of Farm Operations

Include a section that provides an in-depth look at your day-to-day farm operations. This can cover everything from crop rotation plans, livestock breeding programs, to the use of technology and machinery in your farming activities.

Risk Management Strategies

Address potential risks and challenges your farm might face, such as natural disasters, market fluctuations, or pest infestations. Discuss the strategies you plan to implement to mitigate these risks, like insurance coverage, diversification, and emergency response plans.

Sustainability and Environmental Impact

Highlight your farm’s approach to sustainability and its impact on the environment. Discuss practices like organic farming, conservation techniques, and renewable energy usage, which demonstrate your commitment to environmental stewardship.

Community Involvement and Social Responsibility

Describe how your farm business plans to engage with and contribute to the local community. This could include hosting educational farm tours, participating in farmers’ markets, or supporting local food programs.

Supply Chain and Vendor Relationships

Detail your farm’s supply chain and vendor relationships. Explain how you plan to source inputs like seeds, feed, or equipment, and any partnerships with local suppliers or distributors.

Technology and Innovation

Discuss the role of technology and innovation in your farm business. This could include the use of precision agriculture, innovative irrigation systems, or the adoption of farm management software to enhance efficiency and productivity.

Training and Development Plans

Explain how you intend to train and develop your staff. Include plans for ongoing education, skill development, and potentially, leadership training for future farm managers.

Expansion and Diversification

Outline your long-term plans for expansion and diversification. This could involve adding new crops, branching into agrotourism, or exploring value-added products like farm-produced jams or cheeses.

Exit Strategy

Consider including an exit strategy for your farming business. This could be a plan for succession, selling the business, or transitioning to a different type of agricultural operation.

Wrap up your business plan with a conclusion that reiterates your farm’s core mission and vision, and express your enthusiasm and commitment to making your farm business a success.

Frequently Asked Questions

Include a FAQ section at the end of your business plan to address common questions potential investors or partners may have about your farm business. This can include queries about your business model, funding needs, or market potential.

Provide an addendum for additional documents that support your business plan. This can include resumes of key team members, detailed financial projections, market research data, or letters of support from future customers or partners.

Do I Need a Business Plan for My Farm?

Even if you’re knee-deep in the dirt, tending to your crops or livestock, every farming enterprise has the core elements of a business at its heart. These include aspects such as operations, marketing, human resources, and finances. When you embark on developing a farm business plan, it might astonish you to see where the journey takes you. You could end up discovering facets of your farm business that you hadn’t previously considered.

One of the many advantages of constructing your business plan is the opportunity it affords to involve others. Employees, family members, even your loyal farm dog might have innovative small farm business ideas that could significantly enhance your farm’s productivity and marketability. A different perspective can often yield solutions for issues you might not have even been aware of. Therefore, encourage an open exchange of thoughts and ideas. Who knows, the next great idea could be lying right under your hay bale!

More than just a document outlining your farm’s structure, your farm business plan should serve as a valuable decision-making tool. With it, you can confidently navigate the varied terrain of farm management, from daily operations to larger strategic initiatives. When you’ve got a meticulously crafted, robust farm business plan, it doesn’t just narrate your farm’s story, but also provides you with a roadmap to future growth and success.

Beyond this, a top-notch farm business plan can also be a lever that helps you access critical financing. Lenders and investors are more likely to support your venture when they see a well-structured, thoughtful business plan that articulates your vision, illustrates your understanding of the market, and demonstrates your commitment to fiscal responsibility.

So, where to begin? Let’s dive into our fundamental guide to crafting a farm business plan using our adaptable template. This resource has been designed to help you capture every aspect of your agricultural venture, laying a strong foundation for a bountiful future.

How Do I Write a Small Farm Business Plan?

Don’t sit down to write the whole thing. Chip away, one section at a time. Keep in mind that the plan doesn’t have to be the definitive last word. You can make adaptations.

How do you start a farm business plan?

Start with one piece of the business plan. One of the hardest sections of a business plan to write is the Mission Statement . If you get bogged down there, continue and come back to it later.

How much do farm owners make a year?

As you can imagine, the net income varies greatly by type of farm business.

The bottom line after expenses may not be high. Farmers need to consider net worth as assets grow and the farm property increases in value.

How much does it cost to start a small farm?

Getting set up to raise 100 beef cattle costs lots more than getting set up to raise 100 rabbits.

Things like property acquisition, soil preparation, equipment and machinery and the key costs. Other costs may be i rrigation systems , packaging and trucking.

What is the most profitable farming business?

Poultry farming is currently the most profitable – and common – farm business in the world. It includes chicken, turkey, quail, ducks and goose, that are being raised for meat or eggs.

It’s also one of the most expensive businesses to start, requiring significant capital investment. The industry is very labor-intensive and labor costs are high.

Image: Depositphotos

Comments are closed.

© Copyright 2003 - 2024, Small Business Trends LLC. All rights reserved. "Small Business Trends" is a registered trademark.

JPMorgan CEO Dimon sells about $33 mln shares, completes planned sale

• Medium Text

Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.

Reporting by Pritam Biswas in Bengaluru; Editing by Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles. New Tab , opens new tab

Business Chevron

UAW wins big in historic union vote at Volkswagen Tennessee factory

Workers at Volkswagen's Tennessee plant have voted to join the United Auto Workers, in a seismic victory for the union as it drives beyond its Detroit base into the U.S. South and West.

New BT chief dusts off plan for sale of Irish corporate unit

Allison Kirkby, the FTSE-100 telecoms group's new CEO, has instructed Citi to advise on a potential sale of its remaining business in Ireland, Sky News learns.

City editor @MarkKleinmanSky

Wednesday 17 April 2024 15:46, UK

The new boss of BT Group is dusting off plans for a sale of its Irish corporate business four years after her predecessor called off a deal.

Sky News has learnt that the FTSE-100 telecoms giant is working with bankers at Citi on a potential disposal of the unit.

The review of its options is at an early stage and may not result in a transaction, sources said on Wednesday.

Nevertheless, it represents one of the first corporate actions being evaluated by Allison Kirkby, BT's new chief executive.

BT Ireland is the main alternative fixed-line communications provider in the country with more than 650 employees.

The division serves business and wholesale customers, but does not sell to consumers.

It owns and operates a full-service, fixed telecom network and boasts a high-capacity fibre network with nationwide reach across Ireland.

Keep up with all the latest news from the UK and around the world by following Sky News

In 2019, BT reached a preliminary agreement to sell the business to Mayfair Equity Partners, a leading London-based investor.

The talks fell apart in the spring of 2020.

At the time, the unit was valued at between €300m and €400m.

It was unclear how much BT Ireland might fetch in a sale today.

In a statement following an enquiry from Sky News, a BT Group spokesperson said: "We continually review our operations to ensure they align with our global strategy.

"We have an excellent business in Ireland and no decisions have been taken."

Be the first to get Breaking News

Install the Sky News app for free

Shares in BT have fallen by more than a third over the last year, leaving it with a market value of £10.2bn.

Related Topics

Huawei just gave Tim Cook a new headache in China

• Bad news for Apple: iPhones have yet another new competitor in China.
• Huawei just released a new line of smartphones called the Pura 70.
• The devices give Chinese consumers another reason to abandon their iPhones.

Tim Cook would like you to think everything is going swimmingly for Apple in China.

A highlight reel of the Apple CEO's recent trip to the country , posted to his Weibo account, showed him being papped by fans at the opening of a new store in Shanghai's Jing'an district, taking selfies on an iPhone with celebrity models, and casually strolling the historic Bund.

"Every time I am in China, I can feel the unique charm here again. Thank you very much for the warm reception!" Cook wrote in the social media post .

Here's the thing. The Apple chief actually had a major dilemma facing him in China at the time he posted the video last month: iPhone sales were down by an alarming 24% in the first six weeks of the year, per data from Counterpoint Research.

And despite the charm offensive from Cook, there's a risk that downward spiral is about to get a whole lot worse.

Related stories

On Thursday, Huawei released a new series of smartphones called the Pura 70. They come fitted with an advanced new camera system that looks similar to the trio of lenses on the back of the iPhone Pro models , and starts at $760.

Critically, the new phones give Huawei a fresh opportunity to take a bigger bite out of Apple's share of the China smartphone market. It's already won over some consumers since launching the Mate 60 Pro series last year.

The Mate 60 raised some fears in the US last year after the discovery that they were being powered by advanced chips that Washington had sought to prevent China obtaining by imposing tight export controls.

Those chips, made domestically , helped Huawei make huge gains in China by enabling features that rival those seen in iPhones. They're now believed to be in the new Pura 70 devices too, per Reuters , which spoke to a customer who tested their network speed.

Counterpoint estimated a 64% surge in smartphone sales for Huawei in the first six weeks of the year. The Pura 70 could continue that momentum. Ivan Lam, senior analyst at Counterpoint, told Reuters he thinks Huawei could almost double phone shipments this year to 60 million units.

This is not the sort of thing Apple wants to hear, of course.

China has been its most important international market for several years, but that's under threat from the rise of domestic rivals that can entice Chinese consumers with devices that look and feel nearly identical to iPhones.

Apple has already shown weakness in the face of domestic competition in China . Net sales in the Greater China region were $20.8 billion in the final three months of last year, down from $23.9 billion in the same period of 2022.

Wedbush analysts wrote last week that Apple is "navigating one of the more difficult China demand environments we have seen the last five years." They expect another decline in iPhone sales in the region in Apple's quarterly earnings on May 2.

Cook might be putting on a brave face, but iPhone sales in China may keep sliding if Huawei has its way.

Watch: Apple's antitrust lawsuit is just one of its major battles

• Main content