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If you’re wondering how to write a business plan, you’ve likely been considering launching your own design firm for quite a while. When getting your new enterprise off the ground, crafting a business plan is one of the initial steps. Think of it as a road map for your firm’s success: A solid one is essentially method of formally structuring your ideas and laying a foundation for the direction you see your design firm taking in the future—both short-term and long-term. If you plan to seek funding for your company, you’ll need to draft a traditional business plan; however, if you’re self-funding, a simple outline will suffice.
Scroll on to find AD PRO’s comprehensive guide, with explainers for how to determine the format that’s best for your practice to the key sections to include in your business plan and more.
What type of business plan is right for you?
Typically, business plans fall into one of three categories:
This brief, simplified document summarizes your business goals and introduces your concept to potential investors, who may not have time to fully digest a lengthy document. Viewable at a glance, a one-page business plan works well for initial meetings, and it offers a substantial starting point for your company—though you may need a more detailed plan in the future.
Slightly longer than the one-pager, a lean start-up plan includes a summary and a bulleted list containing your firm’s financial information, business strategies, metrics, and forecasts. This type of business plan usually functions as an internal tool; thus, it’s not necessary to include all the sections and dense information of a formal traditional business plan (see below). This simple-to-navigate, 5-to-10-page document should clearly delineate your business strategy, the tasks you need to complete to achieve goals along with their due dates, projected sales, spending, and cash flow. Updating this plan regularly (at least twice a year) is essential, as it will guide the growth of your company and help keep all internal team members informed. As such, your lean start-up plan should evolve organically in tandem with your business.
You’ll need to create a more formal business plan to share company information with key players such as potential investors to fund your endeavor, lenders to support loan applications, or even future employees. Since you’ll be using this document to explain your strategies for your business with those who may finance or join your company, you’ll want to precisely outline your plan in detailed sections.
Where to begin?
Your business plan is a living document that will evolve with your business. It should plot out how your business will operate, state your goals, and precisely express your vision for your company. Check out these solid tips before you begin drafting your business plan—regardless of the type of document you choose to create.
Do not further complicate the already stressful process of starting your own design firm by constructing a convoluted plan. Create a simple bulleted blueprint that cites goals and your strategies for achieving them; then, update it as your company warrants it. For a traditional business plan, keep it to less than 40 pages. If you’re having trouble distilling the essence of your company down to 30 or 35 pages, consider hiring an expert to help you write it. Sites like UpWork and WriterHire offer business plan writers for hire by the hour to help you draft your document. Or there are business plan writing consultancies such as LivePlan or Toptal. However, outsourcing business-plan writing can be costly. According to UpMetrics, for expert writers to create a basic business plan, it can cost between $500 and $2,500, a comprehensive business plan costs $2,500 to $10,000, and an industry-specific plan can run up to $20,000.
Even if you go with a traditional, external business plan, keep it concise. Get to your essential points as quickly and efficiently as possible—you don’t want to risk losing a potential investor out of boredom! And don’t spend too much time making your business plan pretty. As a designer, your instinct may be to focus on stunning graphics, and while they can indeed enhance the appearance of the document, the actual content is what’s most important. Use simple graphs, charts, and photos to break up the text and illustrate your message without obscuring it.
Tailor your business plan to suit your needs, and craft it so that the intended audience can clearly understand it. Use clear, concise, and straightforward language, and avoid any lingo only an A&D professional would understand—especially if you intend to use the plan as a pitch to investors or for a loan application.
Brush up on who your competition is, know what they are doing well (and poorly), and make it evident in your business plan how you will distinguish your brand from the rest. However, never ever speak disparagingly about other design firms. A mistake like that reflects negatively on you rather than any potential opponents. Instead, focus on what makes your company stand out against the rest. Perhaps your firm offers online design services, specializes in custom millwork, or provides clients with assistance from a personal account director. Highlight whatever sets you and your firm apart transparently in your business plan.
Keep your expectations in check and never inflate your financials. While it’s always helpful to think positively and believe that your business will succeed financially, do not overestimate your earning potential and revenue forecast. Overpromising and underdelivering is a recipe for disaster for your budding design firm. Instead, be honest about what services you will offer and how much you will bill for them. Evaluate what comparable companies charge for similar services before giving your quote. Make your projections realistic, particularly if you are seeking funding. Explain your business model, detail how you plan to earn money, and explicitly state the reasoning behind your figures. And always be 100% certain to base all your financial information in solid facts.
Figure out what you want to accomplish and by what date, and then backtrack from there. Consider: Where would you like your company to be financially one year from now? What revenue goals would you like to achieve by that time? Then determine what you must do in 12 months, six months, and three months to arrive at your objective in a timely fashion. Work these milestones into your business plan. You’ll be pleased as you see results accumulate throughout the year—even more so when you realize your objective by your firm’s one-year anniversary.
Don’t let the task of drafting your business plan paralyze you. Start out simply by jotting down your business ideas. Glean inspiration from whatever it was that motivated you to embark on your own design firm to begin with. Don’t worry about “writing your business plan” right now if that feels too daunting. Make preliminary notes and worry about constructing your ideas into your formal business plan later.
Starting can be the hardest part. Perhaps it would help for you to begin with a simple one-page plan. Then, you can use that document as an outline for your formal business plan and go back and fill in more details later. Remember: No one knows your business better than you do. Let your passion for starting your new company be the impetus to start writing. And don’t be afraid to let your enthusiasm come through in the final document. Being honest about your motivation and your plans will better convey your vision and help your readers understand what your small business is all about.
What are the components of a business plan?
Now you understand what type of business plan will work for you and how to approach the task. But what are the essential components of a business plan? Entrepreneurs have varying ideas on what’s essential and what you can skip. But when starting your first-ever business, consider following the advice of the US Small Business Administration and make sure that your business plan contains these nine recommended sections.
As the single most important part of your business plan, the executive summary should briefly convey to the reader the essence of your company and pique their curiosity to want to know more. Brevity is key. This synopsis states what your business, product, or service actually is; it should name your company’s mission, cite your short- and long-term goals, and highlight your strategies for attaining these goals. Be bold and put in writing how and why you think your company will be successful. What sets your firm apart from the competition? Get this information out there immediately. Also, include basic facts about your employees, management team, location, and financial statistics.
Sometimes investors will ask to see only your executive summary as they consider whether or not to grant you funding. If they are intrigued by what they read, then they may ask for your entire business plan. So be sure to hit the high notes immediately in the executive summary—this might be the only shot you get to make an impression. Think of it as a glorified elevator pitch. After reading this executive summary, the audience should have a very good sense of what your business is, what you plan to achieve, and when.
Interestingly enough, it makes sense to write your executive summary last, even though it appears first in your business plan. This synopsis encompasses all components of your business plan, whittled down to a brief summary. Don’t expound too verbosely in this section—again, keep it brief. Don’t let the executive summary exceed a page or two.
This section of your business plan is your company description—go into detail about the concept behind your business, what you do, and what you plan to accomplish. What challenge does your firm address? And what are your solutions? Name specific businesses, design firms, organizations, and/or clients that your small business will target and serve. Explain what you have to offer and what you’re selling. Use concrete examples and eliminate superfluous language. Investors and clients can spot the fluff. Outline what makes your company distinct from the competition. Although you’ve touched on distinguishing your business in the executive summary, here is where you go into specific detail. As a small business owner, anticipate questions your audience might have about your venture, and answer them. Showcase your best qualities and talk up why your firm is going to make an impact. Take this opportunity to toot your own horn—tastefully and succinctly, of course. Play up your strengths and sell your company.
Doing a comprehensive market analysis is crucial so that you understand the industry and can prove so. Seek out emerging trends and identify themes in the marketplace. Have a crystal clear picture of your targeted customer segment. It’s also critical to do a competitive analysis to evaluate what your competition is offering. Research potential competitors to see their strengths and weaknesses and to determine how you can create more effective solutions. When attempting to discern who your target audience is and who your ideal consumers are, a strong small business plan will identify market segments, the size of each, and additional target groups that could be interested in your business. The typical way to distinguish market categories is to use a metrics called TAM, SAM, and SOM. These approaches are defined as the following:
- TAM: Your Total Available or Addressable Market. This group includes everyone you wish to reach with your product/service.
- SAM: Your Segmented Addressable Market or Served Available Market. This is the portion of the total available market you will target.
- SOM: Your Share of the Market. This is a category within your SAM that you will realistically reach in the early days of your business.
Once you establish your market segments, identify your ideal customer (or “buyer persona”) within each segment. When creating a buyer persona, attribute specific demographics to this fictitious customer including a gender, name, income level, and preferences in the marketplace. This fictitious ideal customer will help you to better understand your consumer base, create a stronger marketing plan and sales tools targeted to your customer/client, and be able to attract the right type of client to your business.
Delineate your company’s business structure—whether it’s set up as a sole proprietorship, partnership, LLC, C-corp, or S-corp. Clearly explain who is in charge, list your employees by job function, and elaborate on each job title’s responsibilities. If you already have staff in place, then include employees’ names and experiences, describe what each of your workers is contributing to your small firm and how each will help it succeed. Demonstrate that you’ve amassed a stellar team or explain your strategy for attracting and retaining one.
It’s true that a company is only as good as its employees, so hiring highly skilled, top-tier workers is of utmost importance. Kathryn Minshew, CEO and cofounder of career-planning platform The Muse, elaborates on this concept in Colleen DeBaise’s book Inc.: Start a Successful Business: “The hard part is actually building the team that will embody your company culture and propel you forward,” she asserts. This is a critical point to stress. You must hire good people who understand your vision and are dedicated to helping your small business flourish.
Outline the products or services your company offers—and be as specific as possible. First, focus on what you will initially bring to market. Present an issue and offer a solution and craft a convincing narrative to engage your potential audience. Illustrate exactly what your company is offering, and spend a few paragraphs expanding on your concept for products and services. Discuss your service or product’s life cycle, how it will impact consumers, and divulge whether you plan to file for copyrights or patents. Also, describe the research and development you plan to do to enhance your offerings in the near future.
While it’s exciting to speculate on just how big your company can become—after all, it’s that type of guts, vision, and big thinking that enabled you to launch your own design business in the first place—there’s no point in focusing too heavily on the distant future in the initial business plan.
While a plethora of marketing strategies exist—and your plan might be vastly different from your competitors—it’s a critical step to spell out your complete marketing and sales strategy in your business plan. You’ll likely refer to this section in the future and continue to tweak and update it as your company grows.
The main purpose of this bullet point is to identify your strategic plan, discuss how you'll attract and retain customers, and outline how your sales plan will work. Be sure that you have your buyer persona explicitly defined before completing this step (see number 3 above), as it will help you to define your consumer base.
Within the marketing strategy portion of your business plan, delineate how you plan to position your company to consumers and how you will deliver the goods and/or services you will offer. Include a positioning statement that expresses your essential value proposition and distinguishes your competitive edge. Bplans, an online resource that offers free templates for entrepreneurs, recommends using this simple formula to construct your positioning statement: “For [target market description] who [target market need], [this product] [how it meets the need]. Unlike [key competition], it [the most important distinguishing feature].”
The sales plan portion of this section picks up where the marketing plan leaves off—meaning the objective of the marketing plan is to reach customers, and the sales plan details the sales process once you’ve attracted the client. Essentially, the sales plan defines how you close the deal. An effective sales and marketing plan work in tandem to connect to the target audience and then convert them to paying clients.
This sales and marketing section is where you’ll address product and service pricing. When setting your pricing, consider the following:
- You must break even. Plan to charge customers enough to cover your costs in creating and delivering goods or services.
- Plan for primary and secondary profit center pricing. You may decide to sell your product or services at cost or less-than-cost to offer an appealing price, but that might not be the most prudent strategy because you’ll then require support to push the price over the amount that would make it profitable.
- Adhere to market rate. Your pricing should be aligned with what your audience expects. You’ll walk a fine line here: You don’t want to alienate potential customers with high pricing, yet you shouldn’t devalue your offerings with pricing that’s too low.
How you will promote and advertise your business should also be addressed in this section. Do you plan to rely on traditional advertising avenues, such as print media? Would an online platform better suit your business and reach your target audience? How about public relations? Outline how you’ll get the word out about your new company.
Social media channels also offer a viable marketing platform. It’s a business necessity to have an online presence, and deciding which social media platform will serve you best depends on your target audience. Consider your consumer demographic when deciding on where to focus your time and efforts. You’ll want to make sure to keep your brand message and voice consistent across all marketing, advertising, and promotional materials—in print and online.
If you’re using your plan to seek funding, this section is where you clearly express how much money you need from stakeholders and how you will use it. Decide before requesting funding if you will opt for debt or equity. Are you willing to relinquish equity in your company for the funds to get your business off the ground? What are the terms you’re seeking? What is the length of time in business that your request will cover? Make note of collateral you have to put against loans, if any. Be prepared to explain to potential investors in depth how you will use their funds. Paint them a picture in broad strokes, and highlight the major areas that need funding (for example, purchasing an inventory, funding a marketing budget, etc.).
Follow up your funding request with a detailed explanation of future financial plans. Investors want to believe they’re making a sound decision by supporting your business. Make it clear what your projections are for the next five years. Anticipate when you plan to pay off debt and decide if your intention is to build up your business and then sell it. And while your business goals may be aggressive, be sure to remain realistic. Accuracy is essential, so it’s advisable to review past financial performance before making future projections (if possible).
Although budding entrepreneurs might find completing the financial forecast section of the business plan to be the most daunting, it might not be as complicated as you think. Don’t fret if you feel you do not have a solid foundation in finance—it’s not a requisite. Instead, focus on what you do know how to do best and employ some of your design savvy in this financial projections section of your business plan to spice up otherwise dull financial details with visually appealing charts and graphs.
Your financial forecast should include the following information stated simply and concisely. (Feel free to project these details if your company is not yet an existing business or established enough to have the actual financial statements):
- Sales forecast: Estimate your sales projection over a given period, say three or six months. Outline this forecast into the key revenue streams that you expect to have. Again, root this information in anticipated business you have in the works and not what you hope to accomplish in that given time.
- Expense budget: Delineate planned spending that includes your operating costs such as rent, utilities, personnel costs, marketing and advertising expenses.
- Profit and loss (P&L) statement or income statement: Using your sales forecast and expense budget as a guide, this document helps you to calculate your projected profit. Include a compilation of all your numbers and data, this statement essentially shows whether you’re making money. It outlines your expenses deducted from your earnings to reveal whether you’re poised to be profitable.
- Cash flow statement: This financial statement shows how much money moves in and out of your business. It differs from your P&L in that it’s the record of how much money you have in the bank at any given moment. In this document, you’ll calculate cash you have plus cash you receive minus cash you pay out, which equals your total cash flow. This cash flow statement helps you to understand at what points you may be low on cash (for example, while you’re waiting for a client to pay a bill), indicating that it may not be the optimal time to spend on non-urgent expenses. This document can help you determine how much funding you may need to get your start-up business up and running.
- Balance sheet: This statement offers a financial overview of your small business and helps determine the net worth of your company. It subtracts your assets and equity from your liabilities to arrive at your company’s net worth. From this balance sheet, investors can see the overall financial picture of your endeavor.
Increase the credibility of your business plan by including this section, which demonstrates that you’ve considered all aspects of your business idea and are willing to defend them with cold, hard facts. Your business plan should be solid enough to stand on its own without the appendix, which is supplementary and just adds enhanced validity with data.
In this section, you’ll include any requested documentation, such as résumés, reference letters, credit reports, permits, licenses, contracts, patents, or other legal paperwork. It’s also where you can add any supplemental information that an investor might want or need when considering whether or not to help you with funding. A well-done and thoroughly thought-out business plan might also include potential risks that could impact your financial plan. Investors appreciate seeing that you’ve done your homework and are willing to present all potential outcomes of your new venture.
Keeping these strategies in mind, you should be ready to get started on your business plan. This documentation is essential for plotting the future of your company, so take your time, think it through extensively, and make sure it represents you and your business honestly and effectively.
