How to Build a Business Plan: Every Section Explained

How to Build a Business Plan: Every Section Explained

As a business consultant who’s reviewed 300+ plans, I’ll cut through the fluff. Your business plan isn’t a formality,it’s your roadmap to funding and growth. Below, I break down each section investors and lenders actually care about. Write these last after finalizing your numbers and strategy.

Executive Summary: The Hook (Written Last, Read First)

This is the only section investors read before skipping to the financials. Do not write it first. Wait until you’ve nailed your financials and strategy. It must contain:

• Your value proposition in one sentence
• Key metrics (e.g., "Serving $2M TAM with 15% market share by Year 3")
• Funding ask and use of funds
• Traction (revenue, users, partnerships)

Why it matters: Investors reject 90% of plans for weak summaries. If you can’t summarize your entire business in 300 words, you don’t understand it. Banks need this to assess risk quickly.

Company Description: Your Foundation

Cover:

• Mission (e.g., "Democratize affordable solar for rural homes")
• Vision (e.g., "100% renewable energy access by 2035")
• Legal structure (LLC, S-Corp, etc.)
• Location (and why it matters for operations)

Why it matters: Lenders verify your legal standing. Investors check if your mission aligns with your strategy. A vague mission like "To be the best" signals disorganization.

Market Analysis: Prove the Opportunity

Break this into three parts:

1. TAM/SAM/SOM:
   • TAM (Total Addressable Market): Total revenue if you captured 100% of the market (e.g., "$50B global home solar market").
   • SAM (Serviceable Addressable Market): Your slice (e.g., "Rural U.S. homeowners: $5B").
   • SOM (Serviceable Obtainable Market): Realistic first-year target (e.g., "1,000 customers in Year 1: $2M revenue").
2. Competitor analysis: Name 3 direct competitors. Show why you’re better (price, tech, speed).
3. Positioning: "We’re the only solar installer offering 24/7 mobile support in rural areas."

Why it matters: Investors reject plans with inflated TAMs. Banks need SAM/SOM to validate revenue potential. If you can’t define your market size, you’re guessing.

Organization and Management: The Team That Wins

Detail:

• Current team structure (e.g., "CEO: 10 years in renewable energy. CTO: ex-Tesla").
• Key hires needed (e.g., "Hire VP of Sales by Q3").
• Advisory board (e.g., "Former SunPower CFO advising on scaling").

Why it matters: Investors bet on the jockey, not the horse. A weak team kills even great ideas. Banks check if your leadership can execute the plan.

Products and Services: Your Core Asset

Include:

• Value proposition (e.g., "AI-driven logistics software cutting delivery costs by 30%").
• IP status (patents filed? trademarks? e.g., "Patent pending for routing algorithm").
• Development stage (e.g., "MVP tested with 50 enterprise clients").

Why it matters: Investors need to know if your product is defensible. Banks assess if you have a scalable solution. No IP? You’re easily copied.

Marketing and Sales Strategy: How You’ll Grow

Cover:

• Primary channels (e.g., "Digital ads for B2B, trade shows for enterprise").
• Customer Acquisition Cost (CAC) (e.g., "CAC: $120, LTV: $1,200").
• Sales funnel (e.g., "Lead → Demo → Trial → Pay: 20% conversion rate").

Why it matters: Banks want to see CAC < LTV (lifetime value). Investors need to know you can scale profitably. A high CAC without clear paths to reduce it = red flag.

Financial Projections: Your Reality Check

Must include:

• 3-year P&L (Profit and Loss) with revenue, COGS, operating expenses.
• Cash flow statement (showing when you’ll run out of cash).
• Break-even analysis (when revenue covers all costs).
• Assumptions (e.g., "10% monthly user growth based on pilot data").

Why it matters: This is the only section that gets scrutinized. Banks reject plans with negative cash flow beyond 12 months. Investors demand realistic assumptions,not "best-case" fantasy.

Funding Requirements: Be Specific

State:

• Exact amount (e.g., "$500,000").
• How it’s used (e.g., "60% product development, 30% sales, 10% operations").
• Equity vs. debt (e.g., "Offering 15% equity for $500,000. no debt").

Why it matters: Vague asks get ignored. Investors want to know exactly how their money creates value. Banks need to see debt repayment terms. If you say "for growth," you’ve failed.

The Bottom Line

Your business plan isn’t a static document,it’s a living tool. Update it quarterly as you gather data. Investors and lenders don’t care about perfect grammar. they care about proof. If you can’t answer "Why should I trust you?" in each section, start over. I’ve seen brilliant ideas fail because the plan lacked these specifics. Now go build something that works.