Reviewed July 2020
Writing a
Business Plan
Ag Decision Maker
www.extension.iastate.edu/agdm
File C5-68
Every business needs to have a written business
plan, whether creating or expanding a business.
Formulating a business plan should be one of the
first things done when starting a new business,
because the primary goal of most business plans is
to raise outside-investor capital. The business plan
is the tool to convince others their investment is
worthy.
Although a comprehensive and well thought out
business plan is important to the success of your
business venture, many people drag their feet
when it comes to preparing one. The major reason
people don’t want to write a business plan is that
it is extra work that they don’t find enjoyable.
But if you are serious about creating a successful
business, you need to be serious about creating a
good business plan.
A business plan is not the same thing as a
feasibility study. The feasibility study determines
whether the idea/project of a good or service is
viable. The business plan is formalized, after the
business opportunity is created. A feasibility study
includes financial analysis, while the business plan
focuses more on implementing well-thought out
tactics and strategies. See Information File C5-69,
Create Your Own Business Plan, for a business
plan outline and template, www.extension.iastate.
edu/agdm/wholefarm/pdf/c5-69.pdf.
Reasons for Writing a Business Plan
Before you start writing your business plan,
determine the purpose of your plan. That means
you need to identify why you are writing it and
how to prepare it properly. Below are eight reasons
for writing a business plan. Identify which ones
are relevant in your situation.
1. Putting the pieces together -Determine the
purpose of your plan. Until you prepare your
business plan, you won’t know if the internal
logic of your proposal is consistent. In other
words, do the pieces fit together? Writing the
business plan will lead you to well-researched and
insightful answers ahead of time to identify holes
in your project and force you to critically think
through various aspects of your plan that you
previously had not identified. Building a business
plan allows you to proactively determine the
most tangible answers to some of the most critical
business decisions. Think of the business plan like
a substitute teacher, ready to answer questions
anytime there’s an absence (because odds-are you
won’t make every decision yourself).
2. Creating a blueprint for action -The business
plan provides you with a “blueprint” or “action
plan” for creating your business or business
expansion. The more specific your business plan,
the easier it is to implement the plan and build
your business. Without a business plan, objectives
often become arbitrary, while business planning
tends to make benchmarks more intentional and
consequential.
Business planning is a 2-stage process. The
first stage is creating the plan and the second is
implementing the plan. A great business plan
is worthless if it is not properly implemented.
This is why it is critical that you are intimately
involved in writing the business plan. If you are
not involved in writing the business plan, how can
you implement it?
3. Focusing founders/management team -
During this stage of business development, the
founders often become weary from the relentless
onslaught of issues facing them. The business plan
helps to focus their activities and presents issues
in an organized manner. It tends to bring structure
and organization to a process that may be become
chaotic.
Many small businesses employ contractors or
freelance professionals, e.g. accounting, marketing,
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Writing a Business Plan
legal assistance, etc. With a business plan in place,
the pertinent sections can get to the right support
staff, while keeping everyone on the same page.
Writing a business plan can go a long way in better
understanding the competition and the market by
more broadly illuminating consumer trends and
preferences, potential disruptions, or other pitfalls
that aren’t plainly visible.
4. Obtaining financing -Business plans are often
used to obtain financing from venture capitalists
and banks. These capital sources will likely need
a business plan and many times business plans
are the most-effective way of proving business
viability. In this sense the business plan is a
promotional piece to present and describe your
business venture, how you will put it together and
why it will be successful. The basic premise is to
show that you know what you are doing and why
your business will be successful.
Look upon lenders as partners. They can point out
shortcomings and deficiencies of the plan. Lender
concerns about financing your business should
be looked upon as opportunities to strengthen
your project and increase its chances of success.
However, understand the lenders role in your
project. It is not the lender’s responsibility to be
the financial manager of your business and make
it successful. The lender’s purpose is to generate
returns for the lending institution while protecting
their investment in your business.
Business plans can be used to attract equity
investors to your business. A business plan forms
the basis of the offering presentation to potential
investors. The business plan is the tool you’ll
use to convince people that working with you
(investing in your company) is a smart choice.
Your attorney will use the business plan in the
creation of your offering documents.
5. Attracting key managers and employees
-An important element of creating a successful
business is your ability to attract key managers
and employees. These individuals will want to
be assured that you know what you are doing
and that your business concept is viable. A well
designed business plan is essential in this process.
If a general manager has already been selected, the
business plan should describe why this person is
capable of achieving success.
6. Obtaining contracts -Entrepreneurship
is a risky business. That risk becomes more
manageable once tested against a well-crafted
business plan. The success of many businesses
is based on their ability to have commitments or
contracts in place from users. However, potential
users need to be assured that you can actually
deliver on the commitment. Once again, a well-
designed business plan is essential for these
commitments.
7. Creating joint ventures, mergers and
acquisitions -Create a company profile, including
history of the organization, your product or service
offerings, target market and audience, what makes
your business unique, etc. These profiles, found
best in the first written parts of your plan, can be
used to attract customers and talent.
Many rural businesses focus on moving up
the supply chain to take advantage of profit
opportunities closer to the consumer. To
achieve this, it is common for businesses to
create relationships with existing business in the
supply chain through joint ventures, mergers or
acquisitions. One of the purposes of this strategy is
to take advantage of skills and experience of these
businesses. Once again, a well-designed business
plan is essential for creating these relationships.
8. Avoiding the big mistake -About half of
small businesses are not around to see their 5th
anniversary. While there are many reasons for
failure many of the most common are purposefully
addressed in business plans: no market need;
lack of capital; inadequate managerial team; stiff
competition; or pricing.
Research, research, research! Consider spending
twice as much time researching, evaluating and
thinking as actually spent writing the plan.
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Writing a Business Plan
How to Write the Plan
Business plans help to run your business,
determined viable from the feasibility study!
A good plan guides you through each stage of
starting and managing. The business plan should
be written in plain, easy-to-read language. Use
short simple sentences and easy to understand
terms. Avoid jargon and terms that are unfamiliar
to people outside of your industry.
There is no right or wrong way to writing a
business plan. What is important is picking
the format where the plan meets your needs.
Determine what you want to cover in your
business plan and make headings for each of
the items. Begin each major section on a new
page with the appropriate title (e.g. Marketing
Plan). Make sure your business plan covers all
of the relevant topics. To help you organize your
business plan use Information File C5-69, Create
Your Own Business Plan, www.extension.iastate.
edu/agdm/wholefarm/html/c5-69.html.
Fine tune your business plan. It is extremely rare
to achieve the finished version of a plan in the first
draft. It may need to be re-written several times.
So, review, revise and rewrite.
The purpose of rewriting the plan is to fill in
gaps, solidify the logic and make the plan easier
to understand by the reader. It is not to add
extraneous materials. So if you find the length of
the plan expanding greatly after each rewrite, your
efforts are probably counterproductive. At some
point in time you need to declare the plan finished
- for now - remembering that the plan will need to
be updated as conditions change.
The business plan is a promotional document. So,
in addition to your own purposes, consider the
viewpoint of others you are writing the plan for
(banker, investor, customer, etc.). The business
plan may be used as a sales document. The content
and quality of the plan should be representative of
your company. Represent your company’s image
and convince the reader you understand all aspects
of the business.
Be honest. Do not be overly optimistic or try to
hide limitations or weaknesses. Be sure to support
the goals and the claims you make in the business
plan. Include supporting evidence. This includes
statistics, studies and other research support.
It is usually a good idea to have someone
proofread your business plan who is not involved
in the project. He/she can help you identify aspects
of your business plan that may need additional
clarification and explanation.
A great business plan will always have a strategic
and aggressive marketing plan, including
marketing objectives like:
• Introducing new products
• Extending or regaining market for existing
products
• Entering new territories
• Boosting sales in a particular product, market
or price range
• Cross-selling or bundling
• Entering into long-term contracts with
desirable clients
• Raising prices
• Refining a product
• Having a content marketing strategy
• Enhancing manufacturing or product delivery
Proofread your plan for the following:
• Poor organization
• Vague statements
• Errors in logic
• Gaps in the plan
• Repetitive statements
• Inconsistency
• Misspelled words
• Poor grammar
• Incomplete sentences
• Mathematical errors
Questions to Answer in Writing the Plan
There are certain elements that are critical for
a business plan. Below are eight questions your
business plan should answer. The quality of your
business plan will depend on how well you can
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Writing a Business Plan
answer them. You can use these as a “checklist” of
the completeness of your plan.
1. Who are we?
2. What do we do?
3. What do we have to offer?
4. Why will someone pay for our product or
service?
5. What resources do we have?
6. Why will we be successful?
7. Why would someone participate/invest?
8. How will we measure performance?
Who Should Write the Plan
Involvement in creating the business plan
is critical. Although it is common and often
preferable to have someone help you write
the business plan, the founders are ultimately
responsible for creating the ideas and content of
the business plan. Stated simply, if you are not
intimately involved in writing the business plan,
you will not know what it contains. If you don’t
know what the business plan contains, how can
you implement the plan? If you cannot implement
the plan, how can you create a successful business?
So, the primary responsibility for writing the
business plan is with you, the founders. You
can hire someone (consultant) to help prepare
the plan. He/she can challenge and question
assumptions and conclusions. But you are
responsible for the content of the plan. The role of
consultants or professional writers is only to assist
you in this important process.
Place one person in charge of preparing the plan.
You may divide the responsibility of preparing
and/or writing various sections of the plan among
the founders, or you may hire a consultant to assist
you in preparing the plan. However, one person
needs to be responsible for moving the process
forward and integrating the various sections.
It is often a wise investment to hire a consultant
to review a draft of the plan. Having an outsider
review the plan, especially someone who
knows the industry and is familiar with writing
business plans, can be invaluable in pointing out
deficiencies and shortcomings of the plan. Finding
and correcting these deficiencies can greatly
improve your odds of business success.
How Long Should It Be
Focus on the quality of your business plan, not its
length. The length of the business plan should be
the shortest version needed to adequately cover
the topic. The business plan should properly and
succinctly tell your story. Does it address the
relevant issues? Anything more is not a sign of
depth or completeness. Rather, it will dissuade
people from reading the plan because of its length.
Remember, focus on content - not length.
How is Your Business Unique
Rural agriculture includes many types of
businesses. Businesses range from a few producers
marketing products directly to local consumers to
large-scale integrated processing/manufacturing
businesses. So, a business plan is a unique
document. The actual content of the business plan
will vary depending on the nature and complexity
of the business, the stage of development and the
type of financing needed. Likewise, the individuals
whom you are writing the business plan for can
vary substantially.
The plan must fit the needs of the business. For
example, the marketing needs of a commodity
processing business like ethanol are much different
than those of a niche food business. The financial
needs of a processing business are much greater
than those of a direct marketing business. So the
focus on investors and lenders is much greater. In
addition, the need for risk management strategies
is much greater due to the capital intensive nature
of the business and the volatility of commodity
markets. Conversely, the management needs of
both types of businesses are substantial, although
of a different type.
Because your business is unique, the role of
developing a strategy to achieve success is
important.
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Writing a Business Plan
This institution is an equal opportunity
provider. For the full non-discrimination
statement or accommodation inquiries, go to
www.extension.iastate.edu/diversity/ext.
Reviewed by Gary Wright, extension farm
management field specialist,
Originally written by Don Hofstrand,
retired extension value added
agriculture specialist
www.extension.iastate.edu/agdm
Answer the three strategic planning questions:
1. Where are we now?
2. Where do we want to be?
3. How do we get there?
Although all three questions are relevant, it is
essential the business plan answers the question
“how do we get there?”.
Who are the Readers of Your Plan
Make your business plan adaptable based upon
your audience. Although this is a diverse group,
it is a finite one. Strive for versions directed at
a particular audience, by including the specific
reader’s interest (lender, supplier, etc.).
Most businesses have several types of stakeholders.
A stakeholder is someone who has a stake or
interest in the outcome of the business. In addition
to the business founders, stakeholders include
equity investors, bankers, key employees and
others. Different stakeholders have different
priorities. These priorities need to be balanced in
the business plan.
Table 1 shows issues to emphasize or deemphasize
depending on whom the plan is written for.
For example, bankers are usually looking for cash-
flow while investors may be looking for growth.
This is not to say that the content and direction of
the business plan should be altered. However, it
does mean that the focus of the plan may shift.
This means that you may have more than one
version of the business plan. This works well, as
long as the same story is told - just with different
emphasis.
Implementing the Business Plan
Preparing a business plan is only one step in
creating a viable business. Writing a great business
plan is meaningless unless you properly implement
the plan. Many start-up business ventures fail
because they do not focus their efforts on properly
implementing the plan. Essentially this is a plan
for implementing the plan. A portion of the
business plan should focus on the steps required
to implement the plan. It should include a timeline
and milestones for when various aspect of the plan
are accomplished.
Visit the Ag Decision Maker website, for more
information on new business development,
www.extension.iastate.edu/agdm/vdstart.html.
Table 1. Business Plan Targeting Summary*
Stakeholder Issues to emphasize Issues to deemphasize
Banker Cash-flow, assets, solid growth Fast growth, hot market
Investor Fast growth, potential Assets, large market, management
team
Strategic Partner Synergy, proprietary Sales force, assets, products
Large customers Stability, service Fast growth, hot market
Key employees Security, opportunity Technology
Merger & acquisition specialist Past accomplishments Future outlook
* Portable MBA for Entrepreneurship, William D. Bygrave, John Wiley and Son, Inc., 1994
