Three Steps to Take Before Creating Your Business Plan

Whether you are new to entrepreneurship or about to launch yet another in a string of businesses, your head may already be spinning over the large number of tasks yet to complete before you are ready to greet your first client. But in the midst of all this activity, don’t neglect the important preparatory steps to take before embarking on your formal business planning process. With a bit of pre-planning, a comprehensive, written business plan can be the driving force behind all future business decisions.

Here are three steps to take before putting your business plan on paper:

1. Clearly Understand What You Are Selling

There are probably a lot of other businesses out there already selling the same products or services you plan to sell.

Before writing your business plan, think about what else you need to sell: your brand. You may be able to easily describe your product or service in a few words, but is that really all you are selling? The answer is no. To compete, you will need to offer a better buyer experience. That experience, in addition to your product or service, is what you are actually selling.

Taken together, they become important elements to your brand. Defining a path to make that happen is integral to your business plan.

2. Find Your Market Niche

Just as you need to identify what makes the customer experience unique for your business, you also need to identify a market niche for your product or service. Business market research is vitally important to this step.

For example, if you are providing human relations consulting, will you promote your services to all types of businesses or does your market intelligence show businesses with fewer than 30 employees are currently underserved? Identifying and creating a market niche for your business can help insulate your business from larger competitors targeting a broader customer base.

3. Identify Your Specialty

Careful strategizing before putting together your business plan will ensure you are a master at what you offer and do not spread yourself too thin, jeopardizing quality.

Just as you should identify a market niche, you should also determine how to divide your products or services into more manageable pieces. Specializing can help make best use of limited time and resources. For example, a new start-up offering communications services that has found its market niche with one or two business sectors should consider strategizing further to identify an area of service specialization, such as media relations or website content, rather than offering a broad menu of services. Taken together, these steps will help you fine-tune the scope of your business.

By doing so before writing your business plan, you will be able to put together a more meaningful and useful document to guide your future business activities.

Why Pre-Planning Matters More Than Most Founders Realize

Most entrepreneurship advice jumps straight to the mechanics of writing a business plan—financial projections, market sizing, organizational charts—without addressing the foundational thinking that should precede all of that. The document itself is not the hard part. The hard part is having clear, defensible answers to the questions the document forces you to confront.

Founders who skip the pre-planning phase often produce business plans that are technically complete but strategically vague. They describe a business that could theoretically serve many different customer segments with many different offerings, which is not a strategy at all. Investors, lenders, and acquirers read through that vagueness immediately. Clarity of focus, even at an early stage, signals that the founder has done the work of thinking rigorously about where they compete and why they win.

Translating Pre-Planning Into a Fundable Plan

If part of your planning involves raising outside capital—whether from angel investors, venture funds, or a bank—the pre-planning work described above feeds directly into the materials that capital providers will scrutinize most closely. A sharp niche definition makes your target market analysis more credible. A clear statement of your specialty makes your competitive differentiation section more convincing. And a well-articulated brand narrative anchors the entire document.

For businesses that may eventually seek a capital raise, getting these fundamentals right early saves substantial rework later. Capital providers—particularly institutional investors—expect founders to demonstrate that they have thought carefully about positioning before they ask for money. A business plan that reflects pre-planning discipline is a meaningful signal of founder quality.

For companies at a later stage considering a transaction, the same logic applies. Businesses with a clear niche and a demonstrable specialty are far easier to position to buyers and easier to value than businesses that have drifted into serving everyone. If you are thinking about boosting business value before a sale, sharpening your strategic focus is one of the highest-leverage things you can do.

A Framework for Working Through the Three Steps

Many founders find it useful to approach these pre-planning steps as a structured exercise before opening a business plan template. Here is one way to work through them:

• Product/service audit. Write down every product, service, or outcome you could theoretically offer. Then force-rank them by profitability, scalability, and your own competence. The top one or two items are your starting specialty.
• Customer segmentation exercise. List every type of customer you could serve. Then score each segment on three dimensions: size of the need, your ability to reach them cost-effectively, and the strength of your competitive position. The segment with the highest combined score is your initial niche.
• Brand promise articulation. In one sentence, describe the specific experience your target customer will have that they cannot get from anyone else. If you cannot write that sentence clearly, you have more pre-planning work to do.

Once you can answer all three of these prompts with confidence, you are ready to translate them into a formal plan. The resulting document will be sharper, more persuasive, and more useful as an operational guide than one written without this preparation. For businesses preparing for a transaction, the investment banking guide is a useful next reference for understanding how advisors evaluate and position businesses in the market. If you are approaching a transaction and want expert support structuring your story, consider reaching out to speak with an advisor.

Frequently Asked Questions

Why should I do pre-planning work before writing a formal business plan?

A business plan is only as useful as the strategic thinking that underlies it. Pre-planning forces you to make clear choices about what you sell, who you serve, and where you specialize—choices that must be made before the financial projections and operational details can be written in a credible way. Skipping this step typically results in a plan that is technically complete but strategically unconvincing.

How do I identify my market niche?

Start by mapping the full range of customer segments that could theoretically benefit from your product or service. Then evaluate each segment on the size of the unmet need, your ability to reach and serve them cost-effectively, and the competitive landscape within that segment. The niche with the strongest combination of those factors is usually the right starting point.

What is the difference between a market niche and a specialty?

A market niche defines who you serve—the specific customer segment you are targeting. A specialty defines what you do particularly well—the specific product, service, or capability that differentiates you within that niche. Both are necessary: a niche without a specialty is just a segment, and a specialty without a niche lacks focus on the customer whose problem you are solving.

How does pre-planning affect my ability to raise capital or sell the business later?

Investors and acquirers consistently reward businesses that demonstrate strategic clarity. A company that has a well-defined niche and a demonstrable specialty is easier to value, easier to position in a sales process, and more credible to institutional capital providers than one with an unfocused or sprawling strategy. The pre-planning work you do at inception compounds in value over the life of the business.