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Trading Business Plan

Published Mar.29, 2024

Updated May.04, 2024

By: Alex Silensky

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Table of Content

According to a report, 13% of day traders maintain consistent profitability over six months, and a mere 1% succeed over five years. This is primarily due to inadequate planning and undercapitalization. A well-crafted trading business plan can help you avoid these pitfalls, and this article will guide you.

In this article, you’ll learn:

• The current trends and growth forecasts in the stock trading industry
• A breakdown of the costs involved in starting a trading company
• The key components of a trading business plan (with a trading business plan example)
• Strategies for securing funding and overcoming the barriers to entry

By the end of this article, you’ll understand what it takes to create a business plan for an investment company , positioning your trading business for long-term success in this lucrative but highly competitive industry.

Pros and Cons of Trading Company

Let’s explore the pros and cons associated with running a trading company before diving into the specifics of a trading site business plan. Understanding them will help you make informed decisions:

• Potential for significant profits.
• Flexibility in terms of time and location.
• Opportunity for continuous learning and skill development.
• High risk due to market volatility.
• Emotional stress and psychological pressure.
• Requirement for constant vigilance and discipline.

Trading Industry Trends

Industry size and growth forecast.

According to a report , the global stock trading and investing applications market size was at around $37.27 billion in 2022 and projects to grow at a CAGR of 18.3% from 2023 to 2030 (Source: Grand View Research). The following factors drive this growth:

• Increasing internet penetration
• Rising disposable income
• Growing awareness of investment opportunities.

(Image Source: Grand View Research)

The Services

As per our private equity firm business plan , a stock trading business offers various services, including:

• Facilitating Trades on behalf of clients
• Algorithmic trading services to automatically execute trades
• Market Insights (research reports, market analysis, and economic forecasts)
• Technical and Fundamental Analysis (price charts, historical data, and company fundamentals)
• Investment Recommendations
• Seminars and Webinars
• Online Courses
• Demo Accounts
• Portfolio Diversification
• Stop-Loss Orders
• Hedging Strategies
• Direct Market Access (DMA)
• Global Market Access
• Trading Platforms
• Mobile Apps
• High-Frequency Trading (HFT)
• Legal and Compliance Services
• Educate clients about Risk Disclosure

How Much Does It Cost to Start a Trading Company

According to Starter Story, you can expect to spend an average of $12,272 for a stock trading business. Some key startup costs include:

How Much Can You Earn from a Trading Business?

Earnings in the trading business can vary significantly and depend heavily on:

• Trading strategy and approach
• Market conditions and volatility
• Risk management techniques
• Capital allocation and leverage

While specific income figures are difficult to predict due to these factors. However, here are some statistics showing the earning potential of a stock trading business:

• According to Investopedia, only around 5% to 20% of day traders consistently make money.
• According to Indeed Salaries, the average base salary for a stock trader in the U.S. is $80,086 per year.
• 72% of day traders ended the year with financial losses, according to FINRA.
• Among proprietary traders, only 16% were profitable, with just 3% earning over $50,000. (Source: Quantified Strategies)

What Barriers to Entry Are There to Start a Trading Company

Barriers to entry into the stock trading business include:

• Regulatory Requirements: Obtaining necessary licenses and registrations from governing bodies like the SEC and FINRA is a complex and time-consuming process.
• Capital Requirements: Trading activities require significant capital to manage risks and leverage opportunities, which can be a substantial challenge for new or small firms.
• Technological Expertise: Developing or acquiring sophisticated trading platforms, algorithms, and data analysis tools is costly and requires specialized expertise.
• Market Knowledge and Experience: Gaining in-depth knowledge and practical experience in the complex and dynamic financial markets takes years of dedicated study.
• Competitive Landscape: Breaking into the highly competitive trading industry dominated by established firms and well-funded proprietary trading desks is challenging for new entrants.

You can overcome these barriers by developing unique strategies, leveraging innovative technologies, and offering competitive and specialized services to differentiate yourself in the market. Do check our financial advisor business plan to learn more.

Creating a Trading Business Plan

A well-researched stock trading business plan is crucial to start a trading business. A general trading company business plan is a comprehensive document that defines your goals, strategies, and the steps needed to achieve them. It helps you stay organized and focused and increases your chances of securing funding if you plan to seek investors or loans.

Steps to Write a Trading Business Plan

You can use a business plan template for a trading company or follow these steps to prepare a business plan for a personal trading business:

Step 1: Define Your Goals and Investment Objectives

Step 2: Conduct Market Research

Step 3: Develop Your Trading Strategy

Step 4: Establish Your Business Structure

Step 5: Develop a Financial Plan

Step 6: Outline Your Operational Procedures

Step 7: Create a Marketing and Growth Strategy

Step 8: Implement Risk Management

Step 9: Create an Exit Strategy

What to Include in Your Trading Business Plan

Executive summary, company overview.

• Market Analysis
• Trading Strategy and Risk Management
• Operations and Technology
• Financial Projections
• Management and Organization
• Appendices (e.g., research, charts, legal documents)

Here’s an online trading business plan sample of ABC Trading:

ABC Trading, a recently established stock trading firm, provides online trading services to individuals and institutional investors. Key highlights of our business include:

• Vision – Becoming a leading online trading platform with a wide range of trading products and services.
• Values – Our core focus is innovation, excellence, integrity, and customer satisfaction.
• Target market – Tech-savvy and risk-tolerant investors looking for alternative ways to invest their money and diversify their portfolios.
• Revenue model – Commissions and fees for each trade, as well as subscription fees for premium features and services.
• Financial goal – Break even in the second year of operation and generate a net profit of $1.2 million in the third year.

ABC Trading is seeking $500,000 seed funding to launch its platform, acquire customers, and expand its team.

Company Name: ABC Trading

Founding Date: January 2024

Location: Delaware, USA

Registration: Limited Liability Company (LLC) in the state of New York

Regulated By: Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)

Our team comprises seasoned professionals with diverse finance, mathematics, computer science, and engineering backgrounds.

Marketing Plan

Marketing Strategy: We aim to leverage online channels, such as social media, blogs, podcasts, webinars, and email newsletters, to create awareness, generate leads, and convert prospects into customers.

Marketing Objectives:

• Reach 100,000 potential customers in the first year of operation
• Achieve a 10% conversion rate from leads to customers
• Retain 80% of customers in the first year and increase customer lifetime value by 20% in the second year

The customer profile of ABC Trading includes the following characteristics:

• Age: 25-65 years old
• Gender: Male and female
• Income: Above $100,000 per year
• Education: Bachelor’s degree or higher
• Occupation: Professionals, entrepreneurs, executives, or retirees
• Location: US or international
• Trading experience: Intermediate to advanced
• Trading goals: Income generation, capital appreciation, risk diversification, or portfolio optimization
• Trading preferences: Stocks, options, or both
• Trading style: Technical, trend following, or volatility trading
• Trading frequency: Daily, weekly, or monthly
• Trading risk: Low, medium, or high

Marketing Tactics:

• Create and distribute engaging and informative content on social media platforms
• Offer free trials, discounts, referrals, and loyalty programs
• Collect and analyze customer feedback and data to improve and personalize the customer experience
• Partner with influencers, experts, and media outlets in the trading and finance niche

Marketing Budget:

We will allocate $10,000 for our marketing campaign, which we will use for the following purposes:

Operations Plan

ABC Trading’s operations plan ensures the smooth and efficient functioning of the company’s platform and services and compliance with the relevant laws and regulations.

Operation Objectives:

• Maintain a 99% uptime and availability of the company’s platform and services
• Ensure the security and privacy of the company’s and customers’ data and funds
• Provide timely and professional customer support and service

Operation Tactics:

• Use cloud-based servers and services
• Implement encryption, authentication, and backup systems
• Hire and train qualified and experienced customer service representatives and technicians
• Monitor and update the company’s platform and services regularly
• Follow the best practices and standards of the industry and adhere to the applicable laws and regulations

Operation Standards:

Financial Plan

ABC Trading’s financial plan is to provide a realistic and detailed projection of the company’s income, expenses, and cash flow for the next three years, as well as the key financial indicators and assumptions that support the projection.

Financial Objectives:

• Achieve a positive cash flow in the second year of operation.
• Reach a break-even point in the second year of operation.
• Generate a net profit of $1.2 million in the third year of operation.
• Maintain a healthy financial ratio of current assets to current liabilities of at least 2:1.

Financial Assumptions:

• Launch its platform and services in the first quarter of 2024
• Acquire 10,000 customers in the first year, 20,000 customers in the second year, and 30,000 customers in the third year
• Average revenue per customer will be $50 per month, based on the average number and size of trades and the subscription fees
• Average operating expense per customer will be $10 per month, based on the average cost of salaries, rent, utilities, marketing, and legal fees
• Pay a 25% tax rate on its net income
• Reinvest 50% of its net income into the company’s growth and development

Projected Income Statement:

Projected Cash Flow Statement

Projected Balance Sheet

Fund a Trading Company

To successfully establish and operate a trading company, raising funds to finance daily operations and business expansion is crucial. There are different ways with their advantages and disadvantages:

1. Self-funding (Bootstrapping)

Self-funding, also known as bootstrapping, is when the founder or owner of the trading company uses their own personal savings, family business ideas , assets, or income to finance the business. This is the most common and simplest way to fund a trading company, especially in the early stages.

• Complete ownership and control
• Flexibility in decision-making
• Potential for higher long-term returns
• Limited access to capital
• Personal financial risk
• Slower growth potential

2. Debt Financing

Debt financing involves borrowing money from lenders, such as banks, credit unions, or microfinance institutions, to fund the trading company’s operations. The borrowed funds must be repaid with interest over a specified period.

• Retain ownership and control
• Potential tax benefits from interest deductions
• Disciplined approach due to repayment obligations
• Debt burden and interest payments
• Collateral requirements and personal guarantees
• Difficulty in securing financing for startups

3. Angel Investors

Angel investors are wealthy individuals who invest their own money into early-stage or high-potential trading companies in exchange for equity or convertible debt. Angel investors typically provide smaller funding than venture capitalists and offer mentorship, guidance, and access to their network.

• Access to capital and industry expertise
• Potential for additional mentorship and guidance
• Lower risk compared to traditional investors
• Dilution of ownership and control
• Potential for conflicting visions and expectations
• Limited resources compared to larger investors

4. Venture Capital (VC) Funding

Venture capital firms are professional investment firms that provide capital to high-growth startups in exchange for equity ownership. They typically invest large sums of money and are active in the company’s management and strategic direction.

• Access to substantial capital for growth
• Expertise and industry connections from the VC firm
• Validation and credibility for the business
• Significant dilution of ownership and control
• Intense pressure for rapid growth and return on investment

Depending on your business model, goals, and needs, you may also consider other options, such as grants, subsidies, partnerships, etc. Ensure to check for relevant documents, like the hedge fund private placement memorandum . The best way to fund your trading company is the one that suits your situation and preferences.

OGSCapital: Your Strategic Partner for Business Success

At OGSCapital, we specialize in professional business plans that empower startups, established companies, and visionary entrepreneurs. With over 15 years of experience, our seasoned team combines financial acumen, industry insights, and strategic thinking to craft comprehensive plans tailored to your unique vision. Whether you’re seeking funding, launching a new venture, or optimizing your existing business, we’ve got you covered.

If you have any further questions regarding how to write a business plan for your trading business, feel free to contact us. Our team at OGSCapital is here to support you on your entrepreneurial journey. You can also check our hedge fund business plan sample here.

Download Trading Business Plan Template in PDF

Frequently Asked Questions

What does a trading business include?

A trading business involves trading stocks and other financial instruments under a legal business structure. It includes:

• Market analysis
• Trading strategy
• Risk management

How does a trading company work?

A stock trading company facilitates the buying and selling of stocks (shares) on behalf of investors. These companies operate within stock exchanges, executing trades based on specific trading strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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• Sample Business Plans

Trading Business Plan

Starting a trading business can be challenging because you have to build contacts, negotiate, and whatnot. But amidst worrying about all these things, planning is the last thing you want to worry about.

While anyone can start a new business, you need a detailed business plan when it comes to raising funding, applying for loans, and scaling it like a pro!

Need help writing a business plan for your trading business? You’re at the right place. Our trading business plan template will help you get started.

Free Business Plan Template

Download our free trading business plan template now and pave the way to success. Let’s turn your vision into an actionable strategy!

• Fill in the blanks – Outline
• Financial Tables

How to Write A Trading Business Plan?

Writing a trading business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:

1. Executive Summary

An executive summary is the first section planned to offer an overview of the entire business plan. However, it is written after the entire business plan is ready and summarizes each section of your plan.

Here are a few key components to include in your executive summary:

• Introduce your Business: Start your executive summary by briefly introducing your business to your readers.This section may include the name of your trading business, its location, when it was founded, the type of trading business (E.g., retail trading, wholesale trading, import-export), etc.
• Market Opportunity: Summarize your market research, including market size, growth potential, and marketing trends. Highlight the opportunities in the market and how your business will fit in to fill the gap.
• Mention your product range: Highlight the product range of your trading business you offer your clients. The USPs and differentiators you offer are always a plus.For instance, you may include consumer goods, industrial & construction supplies, or beverages as your product range.
• Marketing & Sales Strategies: Outline your sales and marketing strategies—what marketing platforms you use, how you plan on acquiring customers, etc.
• Financial Highlights: Briefly summarize your financial projections for the initial years of business operations. Include any capital or investment requirements, associated startup costs, projected revenues, and profit forecasts.
• Call to Action: Summarize your executive summary section with a clear CTA, for example, inviting angel investors to discuss the potential business investment.

Ensure your executive summary is clear, concise, easy to understand, and jargon-free.

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2. Business Overview

The business overview section of your business plan offers detailed information about your company. The details you add will depend on how important they are to your business. Yet, business name, location, business history, and future goals are some of the foundational elements you must consider adding to this section:

• Retail trading
• Wholesale trading
• Export-import
• Dropshipping
• Describe the legal structure of your trading company, whether it is a sole proprietorship, LLC, partnership, or others.
• Explain where your business is located and why you selected the place.
• Owners: List the names of your trading company’s founders or owners. Describe what shares they own and their responsibilities for efficiently managing the business.
• Mission Statement: Summarize your business’ objective, core principles, and values in your mission statement. This statement needs to be memorable, clear, and brief.
• Business History: If you’re an established trading business, briefly describe your business history, like—when it was founded, how it evolved over time, etc.Additionally, If you have received any awards or recognition for excellent work, describe them.
• Future Goals: It’s crucial to convey your aspirations and vision. Mention your short-term and long-term goals; they can be specific targets for revenue, market share, or expanding your services.

This section should provide a thorough understanding of your business, its history, and its future plans. Keep this section engaging, precise, and to the point.

3. Market Analysis

The market analysis section of your business plan should offer a thorough understanding of the industry with the target market, competitors, and growth opportunities. You should include the following components in this section.

• Target market: Start this section by describing your target market. Define your ideal customer and explain what types of services they prefer. Creating a buyer persona will help you easily define your target market to your readers.For instance, business owners, wholesalers, or retailers would be an ideal target audience for a trading business.
• Market size and growth potential: Describe your market size and growth potential and whether you will target a niche or a much broader market.For instance, the retail trading market size in the USA was $7.9 trillion in 2022, so it is crucial to define the segment of your target market and its growth potential.
• Competitive Analysis: Identify and analyze your direct and indirect competitors. Identify their strengths and weaknesses, and describe what differentiates your trading business from them. Point out how you have a competitive edge in the market.
• Market Trends: Analyze emerging trends in the industry, such as technology disruptions, changes in customer behavior or preferences, etc. Explain how your business will cope with all the trends.For instance, eCommerce has a booming market; explain how you plan on dealing with this potential growth opportunity.
• Regulatory Environment: List regulations and licensing requirements that may affect your trading company, such as business registration, insurance, licensing, etc.

Here are a few tips for writing the market analysis section of your trading business plan:

• Conduct market research, industry reports, and surveys to gather data.
• Provide specific and detailed information whenever possible.
• Illustrate your points with charts and graphs.
• Write your business plan keeping your target audience in mind.

4. Products And Services

The product and services section should describe the specific services and products that will be offered to customers. To write this section should include the following:

• Describe your products: Mention the trading products your business will offer. This may include product categories, product range, product features, product sourcing, etc.For instance; for wholesale trading business consumer goods, food & beverage, industrial & construction supplies, etc. are some of the product ranges.
• Logistics & shipping
• Warehousing & storage
• Distribution & fulfillment
• Additional Services: Mention if your trading company offers any additional services. You may include services like, product customization & branding, packaging & labeling, supply chain consultation, etc.

In short, this section of your trading plan must be informative, precise, and client-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.

5. Sales And Marketing Strategies

Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:

• Unique Selling Proposition (USP): Define your business’s USPs depending on the market you serve, the equipment you use, and the unique services you provide. Identifying USPs will help you plan your marketing strategies.For example, advanced equipment, vast product range, or experience & expertise could be some of the great USPs for a professional trading company.
• Pricing Strategy: Describe your pricing strategy—how you plan to price your products and stay competitive in the local market. You can mention any discounts you plan on offering to attract new customers.
• Marketing Strategies: Discuss your marketing strategies to market your services. You may include some of these marketing strategies in your business plan—social media marketing, brochures, email marketing, content marketing, and print marketing.
• Sales Strategies: Outline the strategies you’ll implement to maximize your sales. Your sales strategies may include direct sales calls, partnering with other businesses, offering referral programs, etc.
• Customer Retention: Describe your customer retention strategies and how you plan to execute them. For instance, introducing loyalty programs, discounts or offers, personalized service, etc.

Overall, this section of your trading business plan should focus on customer acquisition and retention.

Have a specific, realistic, and data-driven approach while planning sales and marketing strategies for your trading business, and be prepared to adapt or make strategic changes in your strategies based on feedback and results.

6. Operations Plan

The operations plan section of your business plan should outline the processes and procedures involved in your business operations, such as staffing requirements and operational processes. Here are a few components to add to your operations plan:

• Staffing & Training: Mention your business’s staffing requirements, including the number of employees or traders needed. Include their qualifications, the training required, and the duties they will perform.
• Operational Process: Outline the processes and procedures you will use to run your trading business. Your operational processes may include inventory management, sales & marketing, order processing, customer service, etc.
• Equipment & Machinery: Include the list of equipment and machinery required for trading, such as office equipment, warehouse equipment, transportation vehicles, packaging & testing equipment, etc.Explain how these technologies help you maintain quality standards and improve the efficiency of your business operations.

Adding these components to your operations plan will help you lay out your business operations, which will eventually help you manage your business effectively.

7. Management Team

The management team section provides an overview of your trading business’s management team. This section should provide a detailed description of each manager’s experience and qualifications, as well as their responsibilities and roles.

• Founders/CEO: Mention the founders and CEO of your trading company, and describe their roles and responsibilities in successfully running the business.
• Key managers: Introduce your management and key members of your team, and explain their roles and responsibilities.It should include, key executives(e.g. COO, CMO.), senior management, and other department managers (e.g. operations manager, customer services manager.) involved in the trading business operations, including their education, professional background, and any relevant experience in the industry. Organizational structure: Explain the organizational structure of your management team. Include the reporting line and decision-making hierarchy.
• Compensation Plan: Describe your compensation plan for the management and staff. Include their salaries, incentives, and other benefits.
• Advisors/Consultants: Mentioning advisors or consultants in your business plans adds credibility to your business idea.So, if you have any advisors or consultants, include them with their names and brief information consisting of roles and years of experience.

This section should describe the key personnel for your trading business, highlighting how you have the perfect team to succeed.

8. Financial Plan

Your financial plan section should provide a summary of your business’s financial projections for the first few years. Here are some key elements to include in your financial plan:

• Profit & loss statement: Describe details such as projected revenue, operational costs, and service costs in your projected profit and loss statement . Make sure to include your business’s expected net profit or loss.
• Cash flow statement: The cash flow for the first few years of your operation should be estimated and described in this section. This may include billing invoices, payment receipts, loan payments, and any other cash flow statements.
• Balance Sheet: Create a projected balance sheet documenting your trading business’s assets, liabilities, and equity.
• Break-even point: Determine and mention your business’s break-even point—the point at which your business costs and revenue will be equal.This exercise will help you understand how much revenue you need to generate to sustain or be profitable.
• Financing Needs: Calculate costs associated with starting a trading business, and estimate your financing needs and how much capital you need to raise to operate your business. Be specific about your short-term and long-term financing requirements, such as investment capital or loans.

Be realistic with your financial projections, and make sure you offer relevant information and evidence to support your estimates.

9. Appendix

The appendix section of your plan should include any additional information supporting your business plan’s main content, such as market research, legal documentation, financial statements, and other relevant information.

• Add a table of contents for the appendix section to help readers easily find specific information or sections.
• In addition to your financial statements, provide additional financial documents like tax returns, a list of assets within the business, credit history, and more. These statements must be the latest and offer financial projections for at least the first three or five years of business operations.
• Provide data derived from market research, including stats about the industry, user demographics, and industry trends.
• Include any legal documents such as permits, licenses, and contracts.
• Include any additional documentation related to your business plan, such as product brochures, marketing materials, operational procedures, etc.

Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.

Remember, the appendix section of your trading business plan should only include relevant and important information supporting your plan’s main content.

The Quickest Way to turn a Business Idea into a Business Plan

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

This sample trading business plan will provide an idea for writing a successful trading plan, including all the essential components of your business.

After this, if you still need clarification about writing an investment-ready business plan to impress your audience, download our trading business plan pdf .

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Frequently asked questions, why do you need a trading business plan.

A business plan is an essential tool for anyone looking to start or run a successful trading business. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.

Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your trading company.

How to get funding for your trading business?

There are several ways to get funding for your trading business, but self-funding is one of the most efficient and speedy funding options. Other options for funding are:

• Bank loan – You may apply for a loan in government or private banks.
• Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
• Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your business, usually online.
• Angel investors – Getting funds from angel investors is one of the most sought startup options.

Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.

Where to find business plan writers for your trading business?

There are many business plan writers available, but no one knows your business and ideas better than you, so we recommend you write your trading business plan and outline your vision as you have in your mind.

What is the easiest way to write your trading business plan?

A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any trading business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software .

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Trading Plan Template & Examples: Step-by-Step Guide to Creating a Solid Trading Plan

Bonus Material:

Trading plans are an important part of any trader’s toolkit. The problem is, most traders don’t actively lay out a plan before they begin trading.

The result? They lose money and wonder why . Furthermore, many traders don’t know how to create a trading plan , or what to include.

Successful traders understand that trading plans are crucial to profiting consistently. In this article, I’ll walk you through creating your own plan, step-by-step, plus you can get a head start by using my free trading plan template, download below :

What is a trading plan?

A trading plan is an integral part of a trader’s strategy, outlining how trades are executed. It establishes rules for buying and selling securities, position sizing, risk management, and tradable securities. By following this plan, traders maintain discipline, consistency, and leverage proven strategies.

Why you should create a trading plan

Ask a new trader what they intend to do before the trading day and then ask them what they did at the end of the day. They almost certainly didn’t follow their plan. 

Trading plans are there for us to follow. Trading plans mean we take trades that are consistent with our rules and risk, and it means we remove a lot of emotion and discretion . This is important because humans are not rational agents and outsourcing this work means we can achieve a better P&L and make more money. 

A trading plan should resemble a business plan. A trader’s capital is their business and so we need to include everything that might be useful, but it should always cover the below.

What to include in your trading plan

• The time required to spend on your trading

Your trading goals and targets

• Your risk tolerance and risk management rules

Available capital for trading

Specific markets you wish to trade, the trading strategies you’ll use, your motivation for trading.

Read more information on what to include in your trading plan (with examples) below, and download your free template here:

The time required for trading

We need to define the time we need in order to trade successfully. For example, if you’re in full-time employment, then it’s unrealistic to spend six hours a day trading the market.

For example: Here is a part of my trading plan…

“To trade the UK stock market on a full-time basis I realistically need to spend at least 8-10 hours per day in order to take advantage of intraday opportunities and manage open positions in real time”.

It’s important to set realistic targets in trading. Once you have a target, you can reverse engineer how to achieve it.

For example: A target of increasing a trading account by 20% is an achievable target. To do that, we need to look at our trading capital and work out which trading strategies we’ll use.

Using breakouts to trend follow is a strategy I have had much success with, and I explain how I do this in my guide to breakouts.

There are several trading styles:

• Swing trading: This is a common strategy that attempts to capture moves over several days or weeks. Swing traders look for shorter term trends and then move onto the next trade.
• Momentum trading: This is a trend-following strategy based on upward movement and momentum. It can be a successful strategy over months and years as the stock continues to move higher. This is often coupled with increasing fundamental strength and accelerating earnings.
• Scalping or intraday trading (also known as ‘day trading’): Intraday strategies refer to trades placed and closed within the same trading session. 

Your risk tolerance and risk management rules 

Risk management is the most important part of trading. Position sizing is the first and last line of defence in our trading accounts.

If you take position sizes with 20% of your account, then that means you are risking 100% of that position every time it is risked in the market. Even if the chances are 99%, then eventually that 1 in 100 chance of the stock going to 0p and losing 100% of the position will happen.

Whilst a 20% drawdown on the trading account isn’t fatal, the law of compounding means that we will now need to gain 25% of our account just to get back to where we started. 

Never underestimate the numbers here – a 33% drawdown requires a near 50% gain just to get back to where we started. 

It’s important to put in place risk management rules that will protect the account and prevent us from taking on too much risk.

Only you will know how much risk you’re willing to take, but if you put yourself in a position where you could do yourself material damage, then eventually that outcome will be presented.

If taking a loss hurts, then it means you are trading too large. Most traders blow their accounts due to overexposure. I’ve never heard of a single trader who blew their account due to continuously taking small losses. Position sizing and risk management is covered in detail in my trading handbook.

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Traders should always be clear about what money should be used for trading and what money should stay in their bank accounts. 

Far too many traders have drawdowns in their trading accounts and decide to top up their account with a bank transfer.

Unfortunately, they end up putting far too much money into their account and do not keep track of their losses.

You should never trade with money you can’t afford to lose. I’ve had emails from people asking me what to do because they’ve lost the deposit for their house and they haven’t told their partner. Sadly, there is little that can be done at that point because the money is already lost.

In your trading plan you should be clear about how much is going into your trading account and how much you will top this up each month if that is going to be your strategy to grow your account further. 

However, the best way of growing your trading account is by making money trading successfully in the market. Once you can consistently do this, then it makes sense to increase your funds and scale up. 

A trading plan should also include the specific markets you wish to trade. Do you plan on trading UK stocks, US stocks, foreign exchange (forex), or cryptocurrencies? Once you’ve picked a market, you still need to drill deeper. 

For example: If you pick UK stocks will you trade all of these, or just AIM, or just the Main Market? Will you trade only small cap stocks? Will you trade both SETS and the SETSqx platforms ? 

In my case, I trade all UK stocks, and don’t discriminate between any of them. However, my focus is on smaller stocks under £500 million market cap. 

Your trading strategies are the ways you are going to make money. This part of the trading plan is important because by defining your strategies it will be clear to follow.

For example: I want to trade small-cap stocks that have momentum behind them, and I will find this momentum through technical breakouts and positive RNS announcements.

I will trade gaps and also place orders into the auctions in order to get better fills. I will use various brokers for different types of execution. I will take secondary raises that have news catalysts that can potentially drive the shares higher.

What is your why? What are your goals, and what is your motivation? Trading is hard and there are ups and downs – it’s easy to motivate yourself when the going is good and you’re making lots of money. But it can be harder when you’re suffered several losses in a row, and you keep seeing your account grind lower or flat for weeks on end. 

Writing down your why will make it easier to stay focused and commit to the long-term process and improvement.

For example:

• I want to trade because I enjoy the challenge and I also want to be my own boss.
• I want the freedom that comes with the lifestyle of a full time trader and I want to be around my wife and future children as they grow up.
• I want to offer my family a better life, and by continuing to work on my skillset is putting me closing towards my goals.

Good trading plan example

How do you write a trading plan?

• Know your trading playbook
• Manage your risk 
• Have a realistic profit target

1. Know your trading playbook

You should have a playbook of trades that you know how to execute in the market. A playbook is a list of trades, each with step-by-step instructions on how to trade the pattern. 

If you don’t know what you should trade in your trading plan then building a playbook of trades is a good place to start. 

2. Manage your risk

Risk management is a crucial skill for any trader. I’ve written an in-depth article on trading risk management for further information.

The reason risk management is so important is that without it we would blow up our accounts. Nobody would think about driving a car with no brakes because it would obviously crash – risk management is the brakes and safety system for our trading accounts.

Everyone has different risk profiles. Some are happy to take on high amounts of risk accepting that they may take hefty losses in order for the possibility of excess return. 

Full-time traders like myself tend to be more cautious knowing that if they lose too much capital, they may have to go back to work. 

You should include in your trading plan how much you’re prepared to risk on particular trades in your playbook and how much in your account overall.

3. Have a realistic profit target

Having an idea of a profit target will mean that you don’t end up falling into the trap of never selling. Far too many traders watch a stock rise, see it pullback, then immediately regret not nailing down profit into strength.

By setting out clear take profit targets this avoids indecisiveness and will ensure you execute ruthlessly. 

Bonus tip: Trade the stocks in play

Trading is about being in stocks that are moving. Volatility is the lifeblood of a trader, and a dead stock means dead money. 

The stocks ‘in play’ are the stocks that have moved or are moving in recent sessions, and the stocks we should be immediately keeping tabs on. Stocks can cycle in and out being in play, and so we need to keep track of those that offer the greatest volatility to trade.  

Download my free one-page trading plan template

My opening plan trading template has everything you need to begin the trading day. It forces you to check and review your open positions, so you’re always knowing what to do. 

It also suggests to list the current stocks in play, and how you can trade them, and in what size. Additionally, it asks “What can happen?” so a trader using this template will never be caught out.

By thinking ahead about potential scenarios and how to trade them, this gives the trader an advantage over others who do not put the work in. Traders who punt around their money without a clue or a plan are commonly referred to as “liquidity”.

To download the free template, click the button below and follow the instructions.

About The Author

Michael taylor.

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Trading Business Plan Template

Written by Dave Lavinsky

Trading Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their trading companies.

If you’re unfamiliar with creating a trading business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a trading business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Trading Business Plan?

A business plan provides a snapshot of your trading company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Trading Company

If you’re looking to start a trading company or grow your existing company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your trading business to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Trading Companies

With regards to funding, the main sources of funding for a trading company are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for trading companies.

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How to write a business plan for a trading company.

If you want to start a trading business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your trading business plan.

Executive Summary

Your executive summary provides an introduction to your trading business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of trading company you are running and the status. For example, are you a startup, do you have a trading business that you would like to grow, or are you operating a chain of trading companies?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the trading industry.
• Discuss the type of trading business you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail what type of trading business you are operating.

For example, you might specialize in one of the following types of trading businesses:

• Retail trading business: This type of business sells merchandise directly to consumers.
• Wholesale trading business: This type of business sells merchandise to other businesses.
• General merchandise trading business: This type of business sells a wide variety of products.
• Specialized trading business: This type of business sells one specific type of product.

In addition to explaining the type of trading business you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, the number of products sold, and reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the trading industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the trading industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section:

• How big is the trading industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your trading business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, schools, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of trading business you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other trading businesses.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of retailers or wholesalers, re-sellers, and dropshippers. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of trading business are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for customers to acquire your product or service?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a trading company, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of trading company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you sell jewelry, clothing, or household goods?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your trading company. Document where your company is situated and mention how the site will impact your success. For example, is your trading business located in a busy retail district, a business district, a standalone facility, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your trading marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your trading business, including answering calls, scheduling shipments, ordering inventory, and collecting payments, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your trading business to a new city.  

Management Team

To demonstrate your trading business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing trading businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a trading business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.  

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge per item or per pound and will you offer discounts for bulk orders? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.  

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your trading business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.  

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and traders don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a trading business:

• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your facility location lease or a list of your suppliers.  

Writing a business plan for your trading business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the trading industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful trading business.

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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s business plan advisors can give you a winning business plan.

Other Helpful Business Plan Articles & Templates

Analyzing Alpha

Setup a Trading Business: The Complete Guide

By Leo Smigel

Updated on October 13, 2023

Trading as a business involves trading stocks and other financial instruments under a legal business structure, such as a sole proprietor, partnership, or limited liability company (LLC).

Everyone wants to make money, and everyone wants to be free.

You can accomplish both if you’re a successful trader.

And you’re in luck because there’s one thing I know how to do exceptionally well – it’s trading as a business.

You might say, Leo, I don’t need to start a trading business – I’m a new trader. Well then, I’ve got a question: How many successful companies do you think started without a plan? Sure, there are some, but I would bet those with a sound plan faired better over the long run.

And trading is no different. Trading is most successful when it’s done most businesslike.

And for those who are already profitable and ready to go full-time, I’ve got some massive tax-saving tips for you, so stay tuned.

I’ve also sprinkled secrets about becoming a full-time trader that you’ll be hard-pressed to find elsewhere.

I will explain everything you need to know step by step and show you how to become a professional trader running your own successful trading company, whether you’re incorporated.

Before You Can Start Trading

Before creating any business, you need to start with a solid plan and understand where you fit in the market.

But before we jump into the nitty-gritty details of running your trading business, you need to answer five show-stopping questions.

1. What Is Your Why?

Why do you want to be a trader? Many traders start trading because they want to get rich.

Now, it’s possible to become rich trading; however, understand that if you’re not a profitable trader already, the chances of success are slim.

Most studies say that only 5% of traders become profitable. And according to the Small Business Association, this is in stark contrast to starting a business where 33% are still around after year ten.

In other words, if it’s money you’re after, it’s much easier to create an online business than to become a profitable trader.

And no matter how smart you are, trading will slap you around until you’re begging to quit.

You need more than the pursuit of money to keep you in this game.

You need an unwavering passion to play, and you need an advantage.

2. What’s Your Trading Edge?

A trading edge is an observation or approach that creates an advantage over the rest of the market players. Anything that can add a few points to the winning side of the equation builds an edge in your favor.

Most traders lose money in the financial markets because they lack an edge.

I’m also going to say something controversial here:

Risk management isn’t an edge – it’s just good trading – and I can prove it.

Let’s play the coin toss game. If you guess correctly, you get a dollar and lose a dollar if you don’t. You can play this game all day long and cut your losses short, but you’re never going to make a million dollars.

Why? Because you have no edge. The probabilities are not stacked in your favor.

You need an edge to make it full-time, and you need multiple to make it a career.

You need to be the casino – you need to have multiple edges that compound over time. Don’t be a gambler with the odds stacked against you.

So how do you find an edge?

Most edges come from a better understanding of market structure, faster execution speed, or better data and analysis.

For example, a market structure edge may be an exceptional ability to exploit the post-earnings announcement drift (PEAD) anomaly. Another may be the early identification of trends through sophisticated technical or data analysis.

You want to ensure you are on the right side of the stock market as much as you can.

And if you’re struggling to find an edge, I’ve got you covered.

I backtested Scot1and’s slingshot trading strategy at a high level to verify if it has an edge – which it does. If you’re not familiar with Scot1and, he’s a professional trader. He shares his trades publicly on Twitter and has multiple triple-digit years under his belt, with his highest being 305% and last year (2021) being 150%.

Scot1and wanted to find a way to get into solid stocks before the runup and invented the slingshot trading setup. That’s one of his many edges. And this setup can work for you, too, assuming it meshes with your market philosophy and psychological makeup – but more on that later.

Once you have successfully identified and defined your edge, or better yet, edges, it’s time to consider your risk tolerance.

3. What’s Your Risk Tolerance?

Risk tolerance refers to the degree of risk you’re able to take. And while there are multiple ways to define risk, we’ll consider volatility and drawdown for our purpose.

Since your comfort level with uncertainty determines risk tolerance, it can be challenging to be aware of your risk appetite until faced with a potential loss.

You should strive to gain a clear understanding of your risk appetite and your ability to stomach large swings in the value of your portfolio.

When traders trade above their risk tolerance levels, at best, they’ll lose sleep and make suboptimal decisions the next day, and at worst, they’ll sell out at the exact wrong time.

Risk tolerance is all about understanding yourself – a key characteristic you should possess as a flourishing trading business owner.

And let me tell you when you start a trading business, and it becomes your primary source of income, your risk appetite will change a lot – even for algorithmic traders.

Most traders’ greatest struggle in establishing a profitable trading business revolves around trading psychology.

Finding edges in the market isn’t difficult. I just showed you the slingshot strategy, which is a potential edge that you can incorporate into your trading.

What’s hard isn’t knowing what you should do; it’s doing what you should do – it’s trading like a business.

And risk tolerance is just one aspect of trading psychology.

Psychology And Trading

Trading psychology refers to the emotional aspects of an investor or trader’s decision-making process – it’s how emotions affect your trading, and trading affects your emotions.

There are some important considerations to make here.

Most traders fall into thinking they can achieve trading success with little thought of their psychological makeup.

Successfully aligning your trading strategy with your psychology implies you may need to give up on or change some of your values and beliefs.

For instance, do you value your need to be “right”?.

A trader who values being “right” is more likely to refuse to set a stop and take a slight percentage loss in case the trade goes haywire.

Do overnight moves keep you up at night?

Then perhaps day trading is a better style for you.

You need to find a trading style that suits your trading psychology and addresses your strengths and weaknesses.

This doesn’t mean a risk-averse person can’t adopt a swing-trading style. It also doesn’t mean that if you value being right, you’re perpetually wrong when following your stops.

It just means that traders need to understand why they’re embracing a trading approach and have safeguards against their deficiencies – often, you can flip a weakness on its head.

For example, let’s go back to someone struggling to stop out.

The first issue might be that they do not understand what they’re trading and why they’re trading it. If they’re trading specific mean reversion scenarios, they shouldn’t be using stops – position sizing is the key to risk management; however, let’s assume that the trader was a long-only swing trader.

If they’re a breakout trader not following their stops, likely, they don’t have a deep understanding of what a breakout is and how they work.

Now I could spend hours discussing breakouts, but for now, let’s understand two things:

• Roughly 70% of breakouts fail.
• Successful breakouts rarely retrace to the low of the day.

With this market knowledge, this trader that has to be right now understands that her win percentage should be between 25-35% and where to place their stop. Additionally, their understanding aligns with their market understanding allowing her to be correct and less likely to pull the cord on the stop.

I find deep understanding solves most trading psychology challenges – but just because you’ve got your edge and your psychology in order doesn’t mean you can trade like a business just yet.

4. What Are Your Return Assumptions?

Return assumptions refer to the returns a trader or investor expects to make from a particular investment or their trading activities via their trading efforts in the financial markets.

All active traders share one common goal: to utilize their trading capital to make as much money as possible while assuming a certain level of risk.

For that reason, it’s critical to set your expectations right and figure out a rough idea of what kind of return you might achieve before you kick off your trading endeavors.

So, how do you determine a reasonable rate of return?

Whether you’re a business or a trader, the answer is the same.

Look at you and your competition’s average annual returns per each different system or setup, and determine a number you think you can realistically achieve.

Target Compound Annual Growth Rate (CAGR)

This average annual return is the target compound annual growth rate or CAGR. It’s the average return or profit you make divided by your capital.

To keep the math easy, if you make $10,000 on a $100,000 account, your annual return is 10%.

You need to calculate an appropriate CAGR accurately as it flows through to all of your other business calculations, like how much money your trading business needs to generate each year to cover its expenses.

Without history to back it up, investors shouldn’t set their target CAGR above 15%, and traders shouldn’t set their CAGR above 40%.

And yes, good traders have the potential to compound their capital faster than investors due to the structural advantages of having less money to move.

Here are the top ten filers by 10-year annualized performance to give you context.

Now, I know for some of you, these CAGR numbers are tiny, but exceptional returns are the exception, not the rule.

Minimum Absolute Return

Understanding what you can likely achieve makes it time to figure out precisely what you need to succeed.

The absolute minimum return refers to the minimum return that a trader sets over a predetermined time frame.

This return needs to cover your business expenses, which I’ll cover shortly, and the owner’s draw. The draw is the salary you need for yourself and your dependent’s living expenses.

The minimum absolute return is typically your breakeven level. It’s not the target.

Target Absolute Return

The target is your target absolute return. This is the profit you want your trading business to create over the period, typically a year.

You calculate your target absolute profit target by multiplying your target CAGR by starting capital and subtracting fees, which we’ll cover shortly.

I would advise against creating a profit target and working backward since you may need to inflate your CAGR artificially.

The last thing you want to do is overestimate your trading income and underestimate your trading loss.

Maximum Drawdown

Maximum drawdown refers to your maximum downside risk over a period. It’s the maximum observed loss from a peak to a trough.

For instance, if your portfolio value is $100,000 and you lose $30,000, your drawdown would be ($30,000 – $100,000) / $100,000 = 30% or $30,000 in dollar terms.

It’s important to note that maximum drawdown only measures the extent of the most considerable loss, excluding the frequency of significant losses.

Maximum drawdown determines how much capital you’ll need to start your trading business, assuming you’ve included multiple market cycles in your analysis.

Capital Required

Armed with an understanding of your absolute minimum return and maximum drawdown, we can finally determine how much capital you’ll need to start your trading business.

Capital required refers to the amount of money a trader needs to carry out trading activities within the financial markets.

Consider your capital as the raw material that powers your trading activity in the stock market or any business.

So let’s go through the math.

If you need to generate $50,000 per year and expect your minimum CAGR to be 10%, you would need $50,000 / 10% = $500,000 without a drawdown.

Keep in mind if your CAGR return is that low, it’s likely you don’t possess enough of an edge, but I kept the numbers simple for explanation purposes!

But that’s not all. If your maximum drawdown is 20% or $200,000, you’ll also need to add that to your initial capital.

And with all businesses, you’ll need to put in a considerable amount of time.

5. Time Commitment

Time commitment refers to the number of hours per week applied to your new trading business.

It’s essential to treat and act “businesslike” at all times.

Only by approaching each trading day with full intent and purpose can you aspire to succeed.

This extends beyond just executing your trading strategies.

It also includes learning, studying, researching new strategies, and improving your mindset as a trader.

Can you fit it all into your schedule? Do you have enough time to make it work?

These are critical questions to ask yourself before starting your trading startup.

Let’s think about this a little more.

Understanding A Trading Business

Although different from the traditional brick-and-mortar business, a trading business’s anatomy can be broken down similarly.

Think of your trading strategies as your new products and services.

Through these strategies, you’ll be generating your trading income.

And just like how traditional businesses need to constantly improve their products and services based on customer and market feedback, you’ll be doing the same, which leads me to my next point…

Trading Losses Are Expenses

Trading losses are going to be inevitable. You want to take advantage of this market feedback to improve your product. Be sure to analyze each loss and learn from them. They will be your best teacher.

But at the same time, you simply want to treat your losses as a cost of doing business.

Think of the casino business and a game of roulette.

Of course, the casino makes money when the player loses.

But does the player always lose?

So, if we have a player who is always betting on the color red, they have an almost 50-50 chance of winning each time.

There will be times when the player hits lots of reds in the short-run, and the casino loses money.

However, the house always wins.

In the long run, given that the roulette contains a neutrally colored zero, the casino has the edge (remember, we spoke about the edge earlier).

Act like a casino; if you have an edge in the financial markets, you will win long-term.

Short-term losses are simply the cost of conducting business.

Capital Preservation

But continued losses should signal to the management team that it’s time to rethink the plans.

Intelligent management knows preserving your capital to live another day is more important than making more money in the short term.

New traders often have this backward.

The truth is that the only aspect of the trading process you have significant control over is how much money you will lose in a trade.

It’s critical to size your bets correctly.

And speaking of plans, let’s go over what your trading business plan should include.

Your Trading Business Plan

A trading business plan, similar to a typical business plan, is a document that details everything that you need to know to run your trading business. It includes your objectives, how you intend to make money, your edge, what you will trade and why, and how you will grow your business.

It’s time to address the actual birth of your business as a new independent trader.

What Is Your Company’s Mission Statement?

A company’s mission statement defines its culture, values, ethics, fundamental goals, and agenda. The statement outlines what the company does, how it does it, and why. Prospective investors may also refer to the mission statement to see if the company’s values align with theirs.

A well-crafted mission statement articulates the purpose of your business.

It helps to serve as a framework for your business. Outlining what your business stands for, along with your objectives and values.

What is your mission statement? Why are you doing this? Is it just for the money? What’s your driving purpose for embarking on a trading career?

It’s critical to understand the why because it empowers the how.

What Is Your Company’s Philosophy?

A company philosophy refers to “the way we do things around here.” Conventionally, it relates to the fundamental beliefs of the people and the organization.

Your company’s philosophy boils down to your market beliefs.

Do you believe that it is fundamentals or emotions that drive the markets?

Or is it the Fed?

Your trading edges come from a deep understanding of how you view the market. And you need this deep understanding to stick to your strategies during a drawdown.

The last thing you want to do is have a shaky market philosophy and jump ship at the wrong time.

So what is your market philosophy? These will guide your principles.

What Are Your Company’s Principles?

Company principles refer to the principles that a company abides by throughout its day. These could be building a great workplace culture, conservative cash flow use, or taking significant, calculated risks.

What principles does your company abide by throughout your trading day?

These should stem from your philosophy.

For instance, if you believe that the Fed moves the market, are you selling your positions if the Fed is not printing money?

If you’re a trend follower, do you implement Paul Tudor Jones’ rule of refusing to purchase any stock below its 200-day moving average?

Having the various principles aligned with your market philosophy and mission will help you maintain the necessary discipline with your trading.

It will also help you understand what assets to trade.

Your Trading Universe

This is the range of financial instruments that a trader plans to trade across the investable universe, including all tradable assets. In reality, most investors do not invest so broadly and have a narrower universe that could be constrained to event-driven biotech stocks.

This is your total addressable market, and your edge governs it.

Assuming the above, if biotech is in a long-term downtrend, do your edges still allow you to make a profit? If not, you may need to grow your edges and the total addressable trading universe.

What Are Your Company Rules?

Company rules refer to the established rules, in writing, made by the company’s higher level of authority and bound to follow by all employees and stakeholders.

Often these rules revolve around conduct, hours worked, and customer service levels. And larger trading organizations should define these; however, the rules I’m referring to for a trading business help you protect your capital and add discipline to your trading operations to boost profitability — essentially money management rules, which I like to think of in four distinct categories.

1. Portfolio Management Rules

Portfolio management entails building and overseeing a selection of investments or investment strategies that will meet the long-term goals set above.

Most investors take the approach of diversifying their assets, which is a reliable measure.

However, a superior alternative is implementing uncorrelated strategies within the same asset class.

For instance, buyers tend to reduce their leverage during sell-offs, which causes both stocks and bonds to drop, even though these two asset classes are generally uncorrelated.

Therefore, having a mix of long and short stock strategies can help you offset this risk.

What are your portfolio management rules?

An example would never be allocating more than 25% of capital to a single strategy.

2. Risk Management Rules

Risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. These risks stem from various sources, including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents, and natural disasters.

Remember that the aspect of trading you have considerable control over is how much you’re willing to lose on any given trade.

So, always go into a trade knowing your pre-defined price targets to take profits and the price points you’re willing to get out for a small loss if the trade goes against you.

The worst thing you can do is hold on to a losing trade that invalidates your thesis, hoping it will eventually become a winner.

An example of a breakout strategy risk management rule would be to set your stop at the low of the day, invalidating the idea if it moves against you, but never more than the average daily range.

3. Position Sizing Rules

Position sizing refers to the size of a position within a particular portfolio or the dollar amount that an investor will trade. Investors utilize position sizing to determine how many security units they can purchase, which helps them control their risk and maximize returns.

How much you will earn or lose from your trades is directly tied to the size of your trading positions.

Your position size will also impact your ability to diversify your trading positions.

If too large a portion of your trading account is tied up in one trading position, you won’t have the necessary capital to open other trades.

We never know which of our positions will be the big winners.

There is no worse feeling than watching the market rally, and you are in 3-4 positions that decide to sit out the rally.

Keep in mind that even with proper position sizing, there is a risk that an active trader’s position loses more than their specified risk if a stock gaps below the stop-loss order.

This is why it’s essential to position size correctly, especially around earnings announcements, which you may want to avoid altogether.

A common position sizing rule is to never risk more than 25% of your account on any single trade.

4. Leverage Trading Rules

Leveraged trading, also known as margin trading, margin finance, or trading on margin, allows you to open a trading position with a broker using a small amount of capital to take a much larger position.

Suppose you commit $10,000 on a 10X leveraged financial instrument. You’ll be trading as if you had put in $100,000.

Thus, any capital gains you make have a tenfold effect, but the same applies to losses, so using leverage implies an element of risk.

If you’re taking on leverage, ensure that your edges are well defined and diversified, and you have a clear leverage rule.

I will never go above 500% leverage, and this scales down as the volatility of the instrument increases.

Leverage is extremely risky in almost all cases. But there is one exception to this:

When trading crypto, using leverage can help mitigate the risk of an exchange hack at the cost of margin interest fees.

SWOT Analysis

With your rules established, it’s time to perform a SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis is a technique for assessing these four aspects of your business.

SWOT analysis is a simple tool that can help you analyze what your company currently does best and devise a successful strategy for the future.

1. What Are Your Strengths?

Strengths define what you excel at.

Perhaps you have a programming background, and you can create trading algorithms.

Perhaps you’re a decisive person who can make solid, carefully constructed decisions rather quickly.

Perhaps you’re able to stay calm and collected and perform under pressure.

For me, as you’ve probably guessed, it’s the first one that helps mitigate my weakness.

2. What Are Your Weaknesses?

Weaknesses prevent you from operating at your prime.

For instance, you may have difficulty dealing with market sell-offs and tend to get “sucked in” by the emotion of everyone else panicking.

The best way to mitigate this is to have a plan to take advantage of these opportunities.

The second best way is to reread your business plan and stay away from the news and social media on such days.

Plus, keep in mind that these sell-offs are often an opportunity in the market. Smart institutions often accumulate on sell-off days due to their liquidity constraints. If you’re a breakout trader, you should identify what stocks are acting stronger than the market.

As they say, one man’s misfortune is another man’s opportunity.

So, take note of your weaknesses and negative triggers. That way, you’ll be able to easily spot them and make logical decisions rather than emotional, irrational ones that will hurt your profitability.

My weakness?

I pay both my living and business expenses from my trading income. I would feel immense pressure to make money every day and override my trading systems in the early days.

I’m sure you can all guess what happened.

Understand what your weaknesses are, that they may change over time, and figure out how to mitigate them.

3. What Are Your Opportunities?

These refer to favorable external factors to grow your business or competitive advantage.

For instance, can your trading strategies be applied to additional trading instruments or different markets?

Crypto trading is attractive as an algorithmic trader as it trades 24/7 against relatively unsophisticated traders.

4. What Are Your Threats?

In contrast to opportunities, threats refer to factors that potentially harm your business.

Government measures towards reducing fossil fuel use towards energy production in favor of renewable energy sources pose a threat to any non-renewable energy sector business or energy stock in your portfolio.

And these types of risks apply to your trading business.

Changes in capital gains tax laws, crypto regulation, or even black swan events are threats.

Do you have proper hedging strategies in place?

With an understanding of your strengths, weaknesses, opportunities, and threats, it’s time to do some benchmarking.

Performance Measurement

Performance measurement is the process of collecting, analyzing, and reporting information regarding the performance of an individual, group, organization, system, or component.

They say what gets measured gets improved. And like other traditional businesses, trading businesses are no different.

To monitor your trading performance, you require data.

You can collect data manually from your trading platform and record it in a spreadsheet, but I highly recommend that discretionary traders use journal software that records the information.

Although there are hundreds of metrics you could track, you should track the following key performance indicators (KPIs) classified by market and strategy at a bare minimum:

• Profit & Loss
• Total number of trades
• Win percentage
• Average time in trade
• Largest winning trade
• Largest losing trade
• Average winner
• Average loser
• Maximum drawdown
• Profit factor
• Gain-to-Pain Ratio

Feel free to check out my website for definitions and example calculations for these metrics if you have questions.

Operating Costs

As promised earlier, we need to understand your trading business’s fixed and variable costs to determine the absolute minimum return.

Fixed costs are expenses that remain constant for a period of time irrespective of the level of outputs. Variable costs are expenses that change directly and proportionally to business activity level or volume changes.

So, what do these look like for your new trading business?

Fixed Costs

Here are some fixed costs trading businesses have at varying degrees:

• Computer & equipment
• Trading software
• Administration software
• Internet & telephone

You’re most likely already paying for the trading software, and the good news is that most of the home office expenses are relatively inexpensive.

But don’t forget to consider the most significant expense of them all — paying your managing member.

To understand your trading business’s true profitability, you need to track your monthly draw in your accounting software.

Variable Costs

Here are some variable costs involved with your trading business:

• Transaction fees
• Slippage costs
• One-time data costs

Office Location

Another aspect you also want to think about is if and where to set up an office.

As a trader, you can set up an office anywhere you like across the globe — granted, some time zones are more convenient than others.

You can set up your own home office.

You can also buy or rent your own business office.

A big driver of this decision is how well you can balance life and work while at home.

If you’ve got kiddos at home and cannot concentrate, the answer is typically straightforward.

Additionally, scaling to multiple employees is a little easier if you’re an algorithmic trader, as you can more easily separate roles.

These aspects determine whether it makes sense to stay at home or hang up a shingle somewhere outside of your personal space.

Regardless of where your office is, you’ll want to make sure you maximize the tax benefits.

Benefits For Incorporating

There are many benefits of incorporating your business, including asset protection through limited liability, corporate identity creation, perpetual life of the company, transferability of ownership, and an ability to build credit and raise capital and tax savings.

But if trading is your primary source of net income, you should consider incorporating it for tax purposes.

Securities are considered capital assets. The sales of these assets are taxable income considered as capital gains.

This can create massive tax liabilities on your trading operations, so it’s usually ideal for an active trader to incorporate as a company.

Additionally, trading is not considered a business activity by the IRS, so it is not possible to deduct business expenses as they are ineligible for tax deductions in this case.

This is noteworthy since costs such as software, internet access, and data access can be significant for most active traders.

However, you can receive similar tax treatment to other business owners by creating a separate business entity to conduct your trading activities.

You can form a sole proprietorship, partnership, or S-Corp, and file for trader tax status (TTS), which exempts you from the $3,000 capital loss limitation and wash sales adjustments.

A trader can form a single-member LLC to elect S-Corp trader status. The main tax benefits of creating an S-Corp are to arrange tax deductions for health insurance premiums and a retirement plan contribution.

In addition, an S-Corp does not pass through negative self-employment income (SEI), and the employee benefit deductions work tax efficiently.

C-Corps are not ideal for a trader status because the IRS might charge a 20% accumulated earnings tax and the 21% flat tax.

Before incorporating a company, ensure you qualify for it. The business must be eligible for claiming TTS.

While there’s no specific ruleset, we can look at prior court cases to determine eligibility guidelines.

As a trader, you need at least four trades per day. Trade executions on approximately four days per week. More than 15 trades per week, 60 per month, and 720 per year.

Your average holding period must be under 31 days.

Additional factors include having a material trading account size ($25,000 for pattern day trader designation on securities and $15,000 for other instruments).

Spending over four hours per day with the intention to run a business to make a living.

Plus, having trading computers, multiple monitors, and a dedicated home office.

Please keep in mind I’m not a lawyer or an accountant; please consult these professionals so they can understand your specific situation and tax law.

The Bottom Line

We’ve covered much of what you need to know for setting up your trading as a business.

It requires several moving parts, from determining your why, identifying an edge, creating your rules, and even getting into the nitty-gritty of incorporating a legal entity.

The exact, crystal clear method you specifically choose to become a successful trading business owner will not be drawn on a map for you.

Just kidding, there is a map.

It’s called Analyzing Alpha.

Be sure to subscribe to our newsletter below to receive exclusive email content that’s jam-packed with value to help you on your journey to becoming a truly successful and profitable trader.

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Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

• Present the company’s mission.
• Describe the company’s product and/or service offerings.
• Give a summary of the target market and its demographics.
• Summarize the industry competition and how the company will capture a share of the available market.
• Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

• Describe the company’s position in the industry.
• Describe the existing competition and the major players in the industry.
• Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their needs, and their geographical location.
• Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
• Give an overview of the estimated sales volume vis-à-vis what competitors sell.
• Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

• Describe the products that the company will offer for sale and its unique selling proposition.
• List the different advertising platforms that the business will use to get its message to customers.
• Describe how the business plans to price its products in a way that allows it to make a profit.
• Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

• Describe the organizational structure of the company.
• List the owners of the company and their ownership percentages.
• List the key executives, their roles, and remuneration.
• List any internal and external professionals that the company plans to hire, and how they will be compensated.
• Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

• Describe the location of the business, including office and warehouse requirements.
• Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
• Describe the manufacturing process, and the time it will take to produce one unit of a product.
• Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
• Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

• Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

• Quotes of building and machinery leases
• Proposed office and warehouse plan
• Market research and a summary of the target market
• Credit information of the owners
• List of product and/or services

Related Readings

Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:

• Corporate Structure
• Three Financial Statements
• Business Model Canvas Examples
• See all management & strategy resources
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How to create a trading plan

A trading plan is an essential part of a successful trader’s toolkit. Regardless of your trading routine and how often you trade, you should think of it like a business – you’re investing time and money, after all. And just like any business venture, a thorough plan is integral to success.

Your trading plan will be like a business plan, giving a framework for the decisions you make. Having your plan in place doesn’t guarantee success – far from it. But what it will do is help you to trade logically, and to understand how to handle both positive and negative outcomes. This will help you to develop as a trader.

Why do you need a trading plan?

Trading certainly isn’t easy. No one can ever be sure how the markets are going to move on any given day. Successful traders approach trading as a lifelong journey, where there are always lessons to be learned. Inevitably, this involves making mistakes as well.

Without a doubt, trading is psychologically taxing. Your trading plan will be useful in all situations, but even more so during the difficult moments of your trading career. When nothing seems to be going your way, your plan becomes essential to the actions you take. Think of it as your contract with yourself: your plan will keep you on track, make you focus, help you avoid hindsight bias, and keep you aiming for your long-term goals.

Steps to making a trading plan

To help you make your trading plan, we have put together some of the essential details and thought processes that should go into its creation. As with anything in trading, there are various opinions about what is and isn’t essential. Remember, it’s your trading plan. You should carefully consider each of the following points, but at the end of the process, your plan probably won’t be identical to anyone else’s. 

Here’s how to create a trading plan:

Define your reasons for trading

It’s not good enough to simply say you want to make money. You need to put plenty of thought into your reasons for trading. Dig deep – think about why you want to make money. Do you want to buy something like a new car? Do you want to spend money on your family? Perhaps you want to retire?

Whatever it might be, document it in your trading plan. Needs and motivations can change, but don’t worry, you can alter your plan in future if need be. The important thing is to look deep within your character and answer honestly, so that you have a personal motivation for putting your trading plan together.

Set your goals 

Once you have established the big picture and understand your motivation, it’s time to break this down into smaller, time-based goals. Many situations in trading mirror those in life; it’s all too easy for your biggest dreams and ambitions to remain unfulfilled.

This is how you can go about breaking your goals down:

Set your crazy, big, passionate, lifechanging goal. This should be informed by your reasons for trading and it can be anything you want it to be – this is where you get to think big. After this, you can start being practical and breaking your plan down into achievable steps.

Set your six-month goal. Think about where you need to be in order to achieve your big goal. You might need to spread this out over many years, which is fine too. Make sure your plan works for you.

Set your monthly goal. Once you know your six-month goal, you can have a better idea of how this will break down into monthly goals.

Finally, set your weekly and daily goals. Align these with your other goals and consider how you will adopt good daily habits to help you achieve your aims.

Remember that there are always setbacks. This is your preferred route to take, not the only one that is open to you. Dream big, but remain realistic at the same time and don’t beat yourself up if you take a detour. Be careful about time frames too, as dreams can take a while to achieve. Trading is a lifelong journey after all.

Establish risk management principles

You need to have a risk management plan for every trade, and it’s essential you follow the rules you set for yourself.

Break it down like this:

The rule of thumb is never to risk more than 2-3% of your capital per trade. This makes sense both financially and psychologically. Financially, you are much more likely to recover smaller losses. If you lost 25% on a trade, you’d have to make a 33% gain on your next trade to get back to even. Psychologically, smaller losses are easier to deal with too. Imagine how it would feel to lose 25% of your capital on two trades in a row.

Set a daily loss limit. When you reach this limit, simply walk away. 10% is often the recommended maximum limit, but you should set an amount that is right for you. The important part is to stick to it.

Define profit limits too. Greed can be destructive, and you need to get out of trades at the right time. Lock in your profits on a per trade and a daily basis.

Define profit and loss parameters on your account as a whole. At what point do you step away and reassess your trading? At what point do you pull money out of your trading account? Make sure this is all pre-planned.

Here’s an example. Imagine you start out with $5,000. You may put in your plan that you will stop trading and reassess if your account drops to $4,000 in value.

Conversely, you may decide that if you grow your account to $7,500 from $5,000, you will withdraw $1,000 and attempt to grow the remaining $6,500. This is an important step as it makes your trading gains real and tangible.

While risk management should certainly feed into your trading plan, it’s also good practice to have a complete risk management plan. This will allow you to define your overall approach to risk in more depth and set your own strategies. Find out how to manage your risk in full.

Establish a trading routine

Successful trading is driven by consistency, in behavior, attitude, and discipline. If you’re not trading professionally, chances are you have a lot of other commitments, so you need to build it into your daily routine.

You can be as specific as you like with this. You might decide that you will trade between 6 a.m. and 8 a.m. Once you’ve decided this, be more specific. Will you have a cup of coffee first? Will you shower beforehand? Will you start by analyzing longer-term charts, before looking for shorter-term opportunities?

You don’t have to trade every day. If you’re feeling unwell or distracted, don’t trade. The markets will be there tomorrow. The important thing is that when you’re trading, you need to have a consistent and focused approach.

Decide how to track your trades

Tracking your trades doesn’t have to be complex, but you do need to do it. Whether you use a spreadsheet or a ring binder, the outcome will be the same – the important part is that you are doing it.

Whenever you place a trade, simply take a screenshot of the chart. Print it out or add it into your spreadsheet. Do the same for the result when the trade is complete.

Organize your trades by market, strategy, or another way that suits you.

Tracking your trades will help you to:

Identify patterns in markets, and in your approach to trading.

Learn from your losses. Study trades and look for correlations.

Reflect. You’ll have a physical record of how far you’ve come.

Trading plan takeaways

These are the key rules to follow when building a trading plan:

Have a physical copy of your plan and keep it handy. There is no such thing as a successful ‘mental’ trading plan.

Make your plan your own. Trading is a personal endeavor and you need to include the elements that will work for you, based on your own goals.

Treat your trading plan as a living document. It’s important to have it set in stone at the beginning, but it will continue to evolve as your trading journey progresses.

Keep it simple. Your trading plan is a framework and won’t include every single scenario – but it should be applicable to general trading situations.

Separate your plan from your trading activity. This might sound counterintuitive, but it’s important you construct your plan objectively based on your goals, not on your current emotions.

Still have questions?

MORE ON TRADING CONCEPTS

Practice trading – reach your potential

650+ Trading Company Names: The Ultimate Guide to Brand Success

Trading company names, best trading company name ideas, trading company name suggestions.

Choosing the perfect name for your trading company can be an exciting yet challenging task. The name should not only be unique and catchy but also reflect your business’s essence and values. It should attract global clients and stand out in today’s competitive business environment.

Catchy Names For Trading Company

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Choosing the right name for your trading business is an important decision. It should reflect your business ethos, resonate with your customers, and set the tone for all your future interactions. A well-chosen name can help make your trading business stand out in a competitive market.

Good Names For Trading Business

Company name ideas for trading.

You can also check out:

How To Name Your Trading Company (A Step By Step Guide)

Starting a trading company can be an exciting and rewarding venture. You get to explore different markets, build relationships with suppliers and customers, and see your business grow. But before you can hit the ground running, you need to give your company a name.

Choosing the right trading company name is crucial as it will serve as the foundation of your brand identity. It should be memorable, easy to pronounce, and represent the values and mission of your company. In this guide, we’ll take you through the step-by-step process of naming your trading company.

Step 1: Know Your Target Market

The first step in naming your trading company is understanding who you will be selling to. Is your target market local or global? Will you be catering to a specific industry or niche? Knowing your target market will help you choose a name that resonates with your audience.

Step 2: Brainstorm

Step 3: keep it simple, step 4: be creative, step 5: do your research.

Before settling on a name, it’s important to do your due diligence and research if there are any companies with a similar or identical name. This will help you avoid potential legal issues and confusion in the market.

Step 6: Consider Your Branding

Step 7: test it out, step 8: choose a name that will grow with your company.

Trading Basics

• Order Types
• Money Management
• Day Trading Salary
• The Pattern Day Trading Rule
• Stock Earnings
• Trading Patterns

Chart Patterns

• Candlesticks Explained
• 6 Bullish Candlesticks
• 8 Bearish Candlesticks
• Doji Candlestick
• Double Bottom W
• Symmetrical Triangle
• Ascending Triangle
• Descending Triangle
• The Bear Trap
• The Golden Cross
• Head and Shoulders

Trading Strategies

• How to Use Scans in Day Trading
• How to Trade the Head and Shoulders Strategy
• How to Create a Trading Plan
• Options Trading Guide for Beginners

More Education

• Day Trading Blog
• The SimCast Podcast
• Stock Trading Indicators
• Trading as a Business
• Trading Psychology

Trading As A Business

Answers to all your questions about how to get started with your trading business..

• What Is A Trading Business?

Why You Need A Trading Business Plan?

• Your Trading Purpose
• Your Trading Process/System
• Risks/Costs of a Day Trading Business
• How Much Starting Capital Do You Need For Your Trading Business?
• Define Your Trading Team
• How To Grow Your Trading Business

How to Start a Stock Trading Business

What is a trade book, what to include in your trade book, day trading computers and monitors, parting thoughts on starting a day trading business.

• PARTING THOUGHTS

How To Set Up A Stock Trading Business From Home

Not many people approach stock trading like an ordinary business. Sure, they want to make gobs of money, and fast. But, rarely do you see the budding day trader plan out his trading business like he would any other brick and mortar startup. Perhaps this is why there are so many casualties in this industry – because very few treat day trading as a serious business.

It is no surprise. There are a myriad of advertisements across the internet offering get-rich-quick opportunities in the market. Gurus and furus offer their services for a nominal fee and promise millions, just like their best students have made. Heck, they even show you their brokerage statements to prove it!

But is it that simple? And what structure do these services provide for you? Do they teach you how difficult the path to success will be? Do they tell you how many students have dropped out of their programs on account of failure?  

Better yet, do they provide a structure and a framework for how to plan your career, much like you would a business?

Day trading without a true business plan is a lot like gambling. You say to yourself, I’m going to throw my life savings at these internet gurus’ wisdom and hope for the best. A year later, you’ve probably coughed up half your savings, if you’re lucky to still have any.   

Let’s just hope you kept a side gig in the process.

Such is the plight of many aspiring entrepreneurs in the trading world, unfortunately. So, in this post, we’ll lay out for you just how treacherous the path can be, and offer you a better structure to kick-start your trading business.

What Is a Trading Business?

  A trading business is like any other business. You may decide to incorporate or act as a sole proprietor. Regardless, starting a day trading business is very simple. All it takes is applying with a brokerage and loading money into your trading account. For that reason, it can be a dangerous business to start, with such a low barrier to entry.

Just like any other endeavor, you’ll be required to pay taxes on your profits. However, there are certain limitations to the tax rules for day trading that you should be aware of. We will touch on these in a moment, but suffice it to know that like other businesses, you will need to be aware of what write-offs can apply to your business along with the short and long-term capital gains you’ll be responsible for.

Unlike a brick-and-mortar business, you don’t need anything but a computer or mobile device to start a trading business. You won’t have the expense of restaurant equipment, medical malpractice insurance, or the headache of managing employees. These days you can place a stock order with iPhone apps or more advanced trading software on computers. That and an internet connection are all you need to get started. Literally.

But just as buying stoves and ovens, tables and chairs, and having the best recipes in the world won’t guarantee a successful restaurant business, so having the best computer, broker, or guru won’t guarantee you’ll make money in the market.

Why You Need a Trading Business Plan?

One of the most overlooked, yet most important parts of a successful trading business, is the trading business plan. Why do you need a trading business plan? For a handful of reasons:

• It will force you to research your business and the likelihood of success.
• A trading business plan will help you stay grounded with realistic expectations.
• During the rough times, it will guide you into re-evaluating your process.

What Are the 6 Elements of a Good Trading Business Plan?

Every business needs a business plan. Usually, you’ll have an executive summary, description of your team, products/services, market outlook, financials, etc. But for trading, the variables are a bit different. Your team is really just you, with some exceptions. Your product is your trade plan, and your financials are just your available capital. Let’s look at each of the 6 elements of a good trading business plan more in-depth:

1. Your Trading Purpose

We’re big proponents of purposeful trading. Everyone’s “why” is going to be different, but it’s important to lay this out. It doesn’t have to be for anyone but you. That being said, the more you think about why you want to trade, the more it should motivate you to succeed at it. Every entrepreneur has a why or a purpose for what they do. Could it be as simple as “making more money?” Sure. But we’d encourage you to dig a little deeper and find more than just that. Here are some examples of why you might want to start a trading business:

• To work for yourself
• Increase wealth
• Learn a new skill
• Spend more time at home
• Be available to your family and friends
• Have the ability to give more
• Pay off debts

There are many reasons why people trade. Spend some time thinking about why you want to start a day trading business and write this down, mull it over, and expound on it. The more concrete your reasons become, the more tangible your efforts will be to achieve success.

Think of them like outcomes. Sure, profitability is the ultimate goal. But what does profitability afford you? Time? Love? Charity? This should be the start of your trading business plan.

2. Your Trading Process/System

Would you open a new restaurant without a menu? How about a proven recipe? Would you just run to the grocery store every day and cook up whatever you felt like that night? Absolutely not. Restaurants work well if they are scalable in a very systematic way. It all starts with the layout of the kitchen. The grill is on one side, the sauté in the middle, and the food prep, washing and storage in another area. Depending on how fancy you get, you’ll have a salad prep, dessert, coffee area, etc. It’s all designed to flow in a cyclical rhythm to keep things running smoothly.

The menu also very rarely changes in restaurants, unless the chef adds a special here or there. And the recipes are often guarded secrets that never change. Perhaps seasonal offerings will vary, but the staples of the restaurant are usually known and predictable. So should your trading system be . In your trading business plan, you must lay out not only the strategies you will use, but in what type of market those strategies will work well. Get the seasonal allegory there? You see, trading the markets is a lot like other businesses in that the more systematic you are the more consistent you’ll be, and the more your patrons (your profits) will want to come back and dine with you. Screw around with too many recipes (strategies) at once, come to the market disheveled, unorganized, and unprepared, and you’ll end up with a kitchen in chaos, customers walking out the door, and your profits disappearing. It has to be a well-oiled machine. To avoid chaos, this section of your trading business plan should involve a Trade Book. We’ll discuss your trade book more in-depth below.

3. What Risks/Costs Are Involved in a Day Trading Business

Starting a new business is risky. There’s no way around it. If you want to get ahead in life, you’re going to have to risk something: money, time, failure, other opportunities. Humans crave security. But trading markets doesn’t provide that. It provides uncertainty. Now, you may be thinking that if you make a million dollars in the stock market then you’ll have security. And that may be true. However, the odds of success are not in your favor. And as a rule of thumb, the market is a game of uncertainty at its very core. In order to win, you must learn the science of probability and the need to overcome your own human emotions . Couple that with an artistic sense of intuition and discretion, along with a favorable market condition, and you might be successful. As part of that, outlining what risks and costs are involved in your day trading business would be a good place to start. We recommend that you consider the following when calculating your risk/costs

• Computer and other hardware costs
• Software fees, charting tools, scanning software, etc.
• Broker fees: commissions, short locate fees, ECN fees, etc.
• Educational courses, books, and materials
• Chat room/mentorship subscriptions or service fees
• Maximum drawdowns in your account
• Time associated with being in the market (9:30am - 4pm EST)
• Extra time devoted to review, study, and analysis
• Re-investment of capital
• Funds to top up your account
• Time frame needed for profitability (Most traders, like businesses, take 2-4 years.)

These are just some of the costs and risks associated with trading. If you end up with a catastrophic loss, how will that impact your trading business plan?

While there are many free resources available to traders, we’d venture to say that most traders will spend many thousands of dollars just learning how to trade – not to mention how much they lose in the markets.

Obviously, we’re big proponents of learning how to trade the safe way – in a simulator . Unfortunately, most new traders like to learn the hard way. Whichever way you go, we encourage you to keep your costs and risks in check. Outline them and budget for these items long before you pull the trigger on your trading business.

4. How Much Starting Capital Do You Need For Your Trading Business?

Before we answer this question, we cannot stress enough how important it is to first PROVE that you can trade consistently in a simulator for many, many months. Funding your trading account is not the first thing you need to be thinking about. Spending time in a simulator is the first thing you need to think about. Period. Spend the time necessary to backtest and outcome test your strategies in our analytics here at TradingSim. You can trade the market for the past 3 years at any time, testing your strategies. Once you’re successful and consistent, then think about funding your account. There, now that we’ve gotten that out of the way, let’s talk about funding your account.

What Is the Pattern Day Trading (PDT) Rule?

Assessing how much money you need to start with depends largely upon your financial standing. The Pattern Day Trading rule was enacted shortly after the bull run of 1999-2000. It limits how many day trades you can make within a 5-day period to only 3 — that is, if you’re account is below $25,000. This is something to consider when you fund your account. If you plan on day trading, starting above $25k might be wise. That being said, we’re big proponents of proving to yourself what you can do in the market before you add to your account. We’ve written before about the PDT rule and ways around it . There are options like offshore brokerage accounts, opening multiple US-based cash brokerage accounts, etc. We won’t dive into that here, but if you’re unfamiliar with these options, be sure to check them out. As a general rule, start small. Start small enough that your account can grow without the headaches of forced errors due to having a small, restricted account. But not big enough that it will cost you dearly if you make rookie mistakes. And trust us. You’re going to make rookie mistakes. Plenty of them.

Generating Income During Your Early Trading Days

For your business trading plan, be sure to outline what you will do for income. It takes most traders many years to reach consistency in the markets. And by consistency, we mean being able to not only make a living but also continue to bankroll your trading account. To that end, take the stress off your shoulders by trading part-time until certain goals are reached. Or, if you decide to go full-time, be sure to outline your expenses, and the amount of savings you will need to set aside for 1-3 years of ups and downs in the market. In addition, lay out your contingency plan. Define ahead of time what you will need to do if certain milestones aren’t reached. Lastly, discuss this with your partner. There’s nothing worse than having your family responsibilities jeopardized because of a whimsical and ill-planned trading business. As the saying goes, err on the side of caution. Imagine the worst, then double that, then add a little more on top. That’s the kind of “risk” cushion you need for your trading business.

5. Define Your Trading Team

Every good business has a good team. Whether it is a board of directors, consultants, or management team; the best businesses have good leadership. Organize your trading business the same way. Granted, your trading business won’t be structured the same way your normal business is structured. You’re the only one responsible for clicking the buy and sell button in the market. However, there are people you can add to your team to help you along the way.

How To Find a Good Mentor for Trading

Finding a good mentor in stock trading is easier to find nowadays. There are a lot of “mentorship” services available online. Not all of them are created equally, though. When you’re searching for an educational service or mentorship, we recommend taking your time. Think of it like car shopping. The best car buyers do their research online first, narrow down what they want in a car: brand, price, color, miles, trim level, etc. Then, it is a matter of heading to the dealership to test drive, ask questions, etc. Just like a dealership, you’re going to find hungry salesman wanting “to do business with you today!” But you need to be on guard. It’s your money, your experience, and ultimately your decision. Stand your ground and always take everything with a grain of salt. Look at online reviews like TrustPilot. Ask around on Twitter. Look under the hood with “trial” memberships. Really do your due diligence. Yet, understand that no mentorship or educational service is going to be perfect. In fact, you should go into each educational service expecting to learn something new from as many mentors as possible. In this way, you’ll learn that your biggest asset is being your own trading coach. Now, to bring this full circle for your trading business plan, do your research first. Outline the top 10 trading educators you can find. Exhaust yourself with the effort, then narrow down your results to the top 5. Start there, and give yourself time to work through your list. In your trading business plan, identify which services you will try and which ones you might avoid. Also, include non-trading mentors in your business plan. Perhaps your spouse, a close business friend, or a confidant can provide a fresh perspective. And one of the best ways to find a team is by picking up trading buddies along the way. All of these educational services have tons of people just like you. Reach out to them and try to connect! We would also be remiss to not recommend a good psychology coach. We’re big fans of Dr. Brett Steenbarger and his books. Don’t go without them.

6. How To Grow Your Trading Business

This section of your trading business plan may not fully materialize until you are well on your way to consistency in trading. You see, the path to success in trading looks something like this:

• Make a little
• Profit more
• Make big money

You won’t really know how to make big money unless you find a system that is scalable. In fact, many millionaire day traders find themselves at a place in their career where they have to adjust their strategies because their accounts have become too big for the strategies they used when their accounts were smaller.

While this isn’t something you should worry too much about early in your career, it should be in the back of your mind.

Typical businesses require some form of marketing to grow, right? Not only that, but they need a scalable system. Build a successful restaurant, systematize its operation, then you can turn it into a franchise. Voilá!

Trading is very similar. The market is all about compounding your profits. When you find a scalable trading system, you’ll want to spend the necessary time growing it. This requires having the right strategy, the right risk management , proper experience, and the emotional capacity to trust your system despite larger account swings up and down.

Keep this section of your trading business plan open. Add to it as you evolve as a trader and your strategies evolve. Conduct research on what the largest players in the market do to compound their large gains.

Now that we’ve outlined the 6 best elements of a successful trading business plan, let’s get into the nitty-gritty of creating your day trading business. We’ll uncover topics like how to create a trade book, the best tools for your trading business, and more.

Create A Trade Book for Trading Strategies

Essential to your trading business is your trade book. Aside from your trading business plan, this is hands down the most important part of your trading business. Every trader should have one.

A trade book is a compilation of your trading education, style, strategies, statistics, rules, and more. It is a road map for where you want to be as a trader, and how you are going to get there. It will take a lot of the guesswork out of trading and ground you in a tested strategy. That is not to say that your trade book is set in stone. It will undoubtedly evolve as your career progresses. Along the way, you’ll want to add bits of information, evolved strategies, and more. A trade book should be a document that you keep handy and consult frequently to ensure that you’re trading according to the process you have outlined for yourself. This will keep you from the pitfalls of overtrading, trading less than stellar setups, and falling off the bandwagon into “style drift”.

Everyone’s trade book will be different. However, at a minimum, you should have all the criteria and information you need to execute trades successfully each and every day, from start to finish.

Here are a handful of items you should have in your trade book:

• Your trading “why”
• Education materials
• Current areas of improvement needed
• Your trading edge/strategy
• Trading rules for your strategy
• Money management rules
• Trade management rules
• Best trade examples with annotations
• Worst trades with annotations
• Any data or statistics to support your trading edge

Let’s take a look at a few examples of these 10 trade book chapters and how you can flesh them out for your own purposes.

1. Areas to Improve and Maintain Discipline

This section of your trade book will need to be updated from time to time as you grow as a trader. The goal here is not to be hard on yourself, but to be realistic with the weaknesses you are showing in your trading.

Here is a snapshot of a personal list of things that this author wrote in his own trade book:

• Tendency to enter trades before technical criteria are met
• Exhausting myself before the move I want occurs
• Limiting my profits by being happy with getting back the money I lost on the trade
• Going in with too much size without the A+ setup revealing itself
• Lack of patience and management once a trade is going in my favor
• Impulsive entry or exits based on time frames that are too low to base decisions off of
• Making decisions based upon p/l
• Internalizing bad performance
• Overtrading in an effort to time the entry perfectly
• Being aware of the Alpha mindset that wants to force trades
• Resetting after every trade
• Breathing exercises for calmness and relaxation

As you can see, there are a lot of issues facing traders. Some of these may affect you, or you may have your own set of struggles to overcome. As you trade, keep a journal to jot down the weaknesses you want to work on, and set a goal each week to tackle those issues.

2. Explaining Your Edge/Strategy in the Market

This is another important aspect of your trading book, perhaps the most important. The goal of your trade book is to define how you trade, what you trade, and when you trade so that you stay rooted in a systematic approach to your trading business.

Your edge will vary, but here is an example of what your edge description might look like in your trading book:

My edge is a combination of things that involve a certain sentiment on the daily time frame, followed by smaller time frames. Here are a handful of what I consider my edges:

• Reversals off daily/weekly moving averages, usually in bear or bull flag formations.
• Trading Range springs and upthrusts, or Mean Regression trades
• Wyckoff Wave Patterns that consolidate into a tight price action with Volume Dry Up (VDU) and pocket pivots as entry points waiting to take off.
• Parabolic reversals intraday
• Shorting manipulated low float stocks that are very extended

Within these, my trading strategies for entries remain the same as outlined below in the Trading Plan section. I am looking for the exact same entries on any time frame.

Once you broadly define your edge like this, you will also create a solid trade plan on how you execute these strategies. But before we get to that, you should also take the time to set your trading rules.

3. Trading Book Trading Rules

For your trading rules, we suggest you take time to think about what time you’ll trade, your position size, any mental hacks you need, stop loss criteria, and more. These can be broad or very specific. It will be up to you to tweak this over time to find the set of rules that work best for you.

A great example of a set of rules for trading is found in a book called The Complete Turtle Trader by Michael W. Covel. In this book, Covel uncovers the amazing story of how a small group of traders became millionaires by applying to Dennis Richards's experiment for training traders to become successful by following his strategies.

Richards was a floor trader for the Chicago Mercantile Exchange who made 10s of millions of dollars in the 70s and beyond. His “turtle traders,” as he called them, were given a set of rules to follow that looked like this:

• Entry: Buy when the price breaks above the 20-day high
• Stop loss: 2 ATR from the entry price
• Trailing stop loss: 10-day low
• Risk management: 2% of your account
• Vice versa for short trades

They were trend traders and the rules were very simple. However, your rules might be very different and more involved. Here is an example of a few typical rules that traders like to follow:

• Always cut your losses quickly
• Never average down on a losing trade
• Take profits at 20-25%
• Maintain at least a ⅓ risk/reward ratio

Again, this is just a small sampling of rules. It will be up to you to determine the rules you need in place for not only your strategy but your mindset and personality as well. This will help you keep your trading business going for the long haul.

4. How to Create a Trading Plan

• Daily Max Loss
• Daily Profit Goal
• Stock Change %
• Stock Catalyst
• Volume Metrics
• Average True Range
• Relative Volume
• Indicators needed
• Confirmation of strategy
• Entry Signal
• Trade Management Rules

Fill out all these metrics and you’ll be well on your way to having a solid trading plan. Be sure to really flesh out the details of each criteria, and then give examples of trades that fit these criteria.

To help visualize this, here is a snapshot of a trade book trading plan:

5. Money and Risk Management for Your Strategies

No trading plan is complete without defining your money and risk management protocol. Every trade might be slightly different, but as a rule of thumb, we recommend only risking about 0.5-2% of your entire capital on any given trade.

Here is an example of how you might define your risk management strategy for shorting a head and shoulders pattern:

Risk Per Trade : $450 or HOD, whichever comes first

Profit Target Per Trade : $1000 +

Max Loss Per Trade : $750

Trade Limits :

• Give the stock enough time to bounce and fail and return back into the trading range.
• Look for a squeeze before a drop if the stock feels weak
• The earliest entry can be on an “undercut and rally” or “overthrow and drop” if momentum is really waning.

Time Constraints : Pre/Post and Normal hours depending on volume, after 10:30am usually the best

Stop Loss Mechanism : Hard stop just above High of Day (HOD) and LOD on early entry. Hard Stop just above higher low / lower high on “right shoulder” entry.

Break-even Win% : This will depend on your statistics with the trading strategy.

6. Use Statistics in Your Trading Book

One of the absolute best ways to determine your chances of success on a strategy is to test it in a simulator by outcome testing your results. At TradingSim, we have the analytics that allow you to do just that.

As you test your strategies and begin to populate your trading book, be sure to include the statistics you’ve found in the simulator for each edge that you document.

Studying your winners and losers based upon the specific strategies you use will give you the confidence to take these trades in real life. So be sure to specify your win rates and any caveats for your strategy by testing these outcomes in a simulator first.

If you’re going to be a day trader, you’ll need a decent computer and a monitor. While we’ve heard of people day trading on their phones or iPads, it’s less than ideal. The reason for this is that you need to not only be able to analyze charts in real-time, but you may need to check other data as well. You’ll need screen space for your broker, your charting platform, any newsfeeds or chat rooms, twitter, etc. A solid computer and multiple monitors make this more efficient. Likewise, you’ll probably want multiple chart windows up simultaneously. This helps you keep track of the movements in individual stocks as the day progresses. Not having screen space for this might result in missed trades. And we wouldn’t want that!

Day Trading Stock Brokers

While we are not in the business of recommending stock brokers, this will be a key component of your trading business, so the decision shouldn’t be taken lightly. We recommend that you try many different brokers and do your own research before pulling the trigger on one.

When you are picking the right broker for day trading, you want to consider the type of trading you want to do. For example, many day traders like to short. In order to do this, you will need a broker with a solid list of shortable stocks. Not every broker will have this.

Consult with your broker and ask around the net for answers to some of the following questions:

• Do you have a good list of hard-to-borrow stocks?
• What trading platform do you provide?
• Are pre-market and after-hours trading allowed?
• What are trade cut-off times?
• Do you have margin, and what are the rates?
• What is customer support like?
• Does the platform include a mobile app?

At the very least, you should be able to demo their product to get a feel for it and decide whether or not it is a good fit for you and your trading style.

Charting and Trading Platforms

While many brokers will include a charting and trading platform, you may find that their charts don’t satisfy your needs. After all, there are quite a few standalone charting services available that cater specifically to charting, regardless of brokers or trade execution. Many traders will run their charting platforms as a standalone so that they can employ unique trading indicators and technical analysis tools that their broker might lack. This can empower your trading, enabling you to dive deeper into volume and price action without needing a clunky brokerage chart. It also frees you to choose which broker might provide the best service or execution independent of their software.

Trader Tax Accounting

There are two things guaranteed in life, death and taxes, right? Well, day trading has the potential to rack up a lot of taxes, so you’re going to need an accountant who knows what they are doing. Making a few investments here and there can easily be handled by your typical CPA. However, there are a lot of rules and regulations involved with actively trading. Wash/sale rules, what constitutes an active trader, marked-to-market rules, and many other things can affect your status and tax liability as a day trader. For that reason, we recommend you hire a professional who knows what they are doing before you jump into trading. Be sure to consult with them on your other businesses, how much you plan to trade, and any other income sources you have. While we don’t recommend any specific accountant over another, there are a few trading-specific accountants that we know of: https://tradersaccounting.com/ https://tradertaxcpa.com/ https://greentradertax.com/ Use them at your own discretion and risk, but understand that reconciling thousands, if not hundreds of thousands of trades, takes specialized software and accounting. You might be able to figure it out on your own by using https://www.tradelogsoftware.com/ . But the help of a knowledgeable accountant is always advantageous.

Finding a Day Trading Community

Day trading is a lonely business. You’re sitting at your desk for hours on end, pouring over charts and data. Not only that, but you will experience emotional highs and lows during this process. To that end, we recommend that you find a good day trading community to support you. We’ve written before on chat rooms and how to make the most of them, so be sure to check that article out. In it, we discuss the role that chat rooms play in the market and in trading development. Not all chat rooms or educational services are created equally, though. So, be sure to vet services properly and as inexpensively as possible until you find one that resonates with your style of trading and social interaction. Being a part of a community also serves as an accountability tool in the market. A good business will likely have some type of review board that oversees and provides accountability for the business. In trading, you’re responsible for your own actions. And, for that reason, it would be ideal for you to have a trusted group of trading partners that you can bounce ideas off, conduct review sessions, and keep yourself on track both mentally and professionally.

The Best Simulation Software for Your Trading Business

While we may seem biased, we truly believe that this piece of the puzzle is one of the most important and overlooked aspects of day trading. So many traders are willing to risk their hard-earned cash before they have a proper understanding of how markets work. It is irresponsible and risky, at best.

Here at TradingSim, we offer the best simulator for market replay , simulation, and analytics. Unlike most stock market simulators, we allow you to replay Level 2 and intraday data for up to 3 years. As a day trader, you’ve got the ability to “relive” the market as much as you want, and when you want.

Because day trading can be both systematic and discretionary, you’ll enjoy the built-in analytics software that TradingSim offers. In order to test your trading skills and outcome test your performance on a specific strategy, you’ll need this. Any great trader knows the power of statistics. Be sure to spend time in the sim testing your process before entering the market with real money.

Not convinced? Don’t take our word for it. The most prolific trading psychologist in the world has this to say about simulation trading:

Indeed, it’s often because of our need to make money and our overconfidence that we pursue shortcuts in our learning processes as traders and take too much risk. That leads to volatility of P/L and losses, which in turn trigger our nervousness, tension, stress, fear, and worry.

What I’ve long liked at TradingSim is the focus on learning trading–and doing that in safe ways where we can’t trigger and traumatize ourselves.

Think about every performance field: athletics, acting, music. In none of those do we start out by following people online, doing some reading, and then trying to make a living from our performance. Rather, we recognize that it takes years of practice and mentoring to become a professional athlete, movie star, or recording artist.

When we take shortcuts in the development process, our unrealistic expectations set us up for disappointment, frustration, and pain.

Many, many times the answer to emotional disruptions in trading is to work on our trading.

Dr. Brett Steenbarger, Ph.D.

What Are the Best Day Trading Courses?

Day trading courses abound on the internet. You can find free ones on YouTube, or pay tens of thousands of dollars to join “exclusive” day trading clubs, services, and challenges. There are also many books written on day trading and the many different styles of trading. Though we won’t recommend one over the other, what we do recommend is that you spend as little money as possible to begin with on education. The internet abounds with free resources. We’re even dedicated to helping the cause here at TradingSim with our blog and educational material. That being said, once you’ve scoured the net and read as much as you can, we do recommend trying as many services as you can comfortably afford that cater to your desired style of trading. If it is shorting small-cap stocks and momentum, find a good trading service that teaches you how to do this. Regardless of the style of trading, we recommend that you use discretion to find a trading course that offers an approach to tape reading, volume and price analysis, and trader development. Study some of the great ones, like Richard D. Wyckoff. You won’t go wrong with an understanding of sound technical analysis, which you can apply to any style of trading.

Finding a System for Your Day Trading Business

As part of your educational growth and development, you’ll eventually need to land upon a solid system. For example, if it is the methods of Wyckoff that truly speak to your style of trading, then perhaps you want to establish a trading system solely dependent on springs and upthrusts. You’ll learn more about what makes springs and upthrusts work so well inside trading ranges if you spend the time necessary to develop a trading system based on these strategies. Here is an example of what this might look like on a chart: Spring But this is only one example. We discuss these types of price action trading strategies more in-depth in another article. And if you’re struggling to find a “system” for your trading, be sure to give our post on “ how to find an edge ” a quick read.

Keeping a Routine Schedule - Just Like Normal Employees

If you’re going to be a professional day trader, you need a professional routine. The markets open and run from 9:30am until 4pm EST every single day. You need to be there, obviously.

Routines may stifle creativity or balance if taken to extremes, but your need for routine in the markets will depend largely on your trading system. For example, if your system requires you to be present at the opening bell, then you might need to wake up early, have an exercise routine, do some meditation, then research the morning movers for that day in the pre-market.

This kind of routine will allow you to come to the market prepared. Less preparation = Less profits in the long run. Without plans, your system is really just a series of impulsive and reactionary trading ideas that may or may not work. In essence, don’t be a gambler.

The more routine you become in your trading business, the more disciplined you will become. Likewise, the more disciplined you become, the better chance of success you will have.

Here are some tips we recommend you adopt in your routine:

• Rise early in the morning
• Feed your brain and your belly
• Exercise before the day begins
• Arrive at your desk at routine time each morning
• Give yourself plenty of time to research the day’s trades
• Plan your trades before you take them
• Allow for breaks midway through each day
• Balance your work life with family time
• Leave room for review each day
• Become self-aware as to how healthy your routines is
• Be willing to change certain aspects of your routine

No matter the routine, it is imperative that you treat yourself well and pay attention to your mind and body. Day trading can be a destructive career if you don’t.

Parting Thoughts on How to Start a Trading Business

We hope this has helped you gain a proper understanding of what it takes to run a day trading business. While many different factors can affect the success of a new business, giving yourself the best chance of success from the outset can make a huge difference. Take great care that you don’t embark on this journey lightly. Treat it with utmost respect and diligence, just as you would any other endeavor as an entrepreneur. And if we can help you along the way, please reach out to us. We wish you the best!

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How To Start A Trading Company

• How-To Guides
• Software Tutorials

Introduction

Welcome to the world of trading! Starting a trading company can be an exciting and potentially lucrative venture. Whether you are interested in importing and exporting goods, or dealing with local suppliers and customers, it’s important to lay a solid foundation for your business. In this article, we will guide you through the essential steps to start a trading company .

Before diving into the specifics, it’s crucial to understand the nature of trading. Trading involves the buying and selling of goods, services, or securities. This can range from physical products like electronics or clothing to intangible items such as software licenses or financial instruments. As a trading company, your role is to facilitate these transactions, connecting buyers and sellers and ensuring smooth operations.

In order to successfully launch your trading company, it’s vital to have a clear business plan that outlines your goals, target market, and strategies. This will serve as the roadmap for your business and guide you in making informed decisions along the way.

When starting a trading company, you need to identify your target market. Are you focused on local customers or international clients? Understanding your target market is crucial for tailoring your products, pricing, and marketing strategies. Conduct thorough market research to gain insights into customer preferences, industry trends, and competitor analysis. This information will help you position your trading company effectively and make informed business decisions.

Additionally, it’s important to research the products you plan to trade. This involves analyzing market demand, identifying reliable suppliers, and evaluating product quality. A comprehensive understanding of your products will allow you to offer competitive pricing, ensure customer satisfaction, and build a reputable brand image.

Registering your trading company is a legal requirement in most jurisdictions. Check with your local authorities to determine the necessary permits, licenses, and registrations needed to operate legally. Take the time to understand the legal and tax obligations specific to trading companies in your area.

Once your company is registered, it’s time to set up your office and infrastructure. This includes finding a suitable location, acquiring necessary equipment and technology, and setting up efficient administrative processes. A well-organized office and infrastructure are essential for smooth operations and optimal productivity.

Securing funding and creating a budget is another crucial step in starting a trading company. Determine your initial capital requirements, project your cash flow, and explore financing options such as loans or partnerships. Developing a realistic budget will help you manage your finances effectively and prevent unexpected financial setbacks.

Finding reliable suppliers is vital for maintaining a steady inventory and meeting customer demands. Research potential suppliers, verify their credibility, and negotiate favorable terms and prices. Building strong relationships with your suppliers is key to ensuring a consistent supply chain and minimizing disruptions.

Establishing an online presence is essential in today’s digital age. Create a professional website that showcases your products and services, and implement effective digital marketing strategies to attract customers. Social media platforms, search engine optimization (SEO), and online advertising can all contribute to expanding your reach and driving sales.

Finally, as your trading company grows, it is important to constantly evaluate and refine your strategies. Regularly analyze market trends, customer feedback, and financial performance to identify areas for improvement and capitalize on new opportunities. Adaptability and innovation are key in the fast-paced world of trading.

Starting a trading company can be a challenging but rewarding endeavor. By following these essential steps, you will be well on your way to building a successful trading business . So, let’s dive in and explore each step in detail!

Step 1: Define your business plan

One of the first and most crucial steps in starting a trading company is defining your business plan. A business plan serves as the blueprint for your company, outlining your goals, strategies, target market, and financial projections.

Begin by clarifying the vision and mission of your trading company. What sets you apart from competitors? What specific products or services will you offer? Clearly define your unique selling proposition (USP) that will attract customers and differentiate your business in the market.

Identify your target market and conduct thorough market research. Understand the needs, preferences, and purchasing behavior of your potential customers. Analyze industry trends, market size, and potential growth opportunities. This information will help you develop effective marketing strategies and tailor your products or services to meet customer demands.

Next, outline your marketing and sales strategies. How will you reach your target market? Will you focus on offline channels, online platforms, or a combination of both? Determine your pricing strategies, promotional activities, and distribution channels. A well-defined marketing and sales plan will ensure that you effectively communicate your value proposition to potential customers and generate sales.

Financial planning is a critical component of your business plan. Calculate your startup costs, fixed and variable expenses, projected revenue, and profit margins. Determine your pricing structure based on market research and competition analysis. Create a detailed financial forecast that covers at least the first three years of your trading company’s operations. This will help you secure funding, set realistic goals, and monitor the financial health of your business.

Another important aspect of your business plan is evaluating the competitive landscape. Identify your direct and indirect competitors and analyze their strengths, weaknesses, and market positioning. What opportunities can you capitalize on? How will you differentiate your trading company to gain a competitive advantage? Understanding your competition will enable you to fine-tune your strategies and develop a unique value proposition.

Lastly, create an organizational structure that outlines the roles and responsibilities within your trading company. Determine how many employees you will need and what skills and experiences are required for each position. Clearly define the hierarchy, reporting lines, and communication channels to establish a well-structured and efficient organization.

Remember, a clear and well-defined business plan is essential for guiding your trading company’s growth and success. Continuously review and update your business plan as your company evolves and market conditions change. It will serve as a roadmap to keep you on track and help you make informed decisions along the way.

Step 2: Choose a target market

Choosing a target market is a critical step in starting a trading company. Your target market consists of the specific group of customers that you will focus on serving. Identifying and understanding your target market is essential for tailoring your products, marketing strategies, and customer service to meet their needs and preferences.

Start by conducting thorough market research to gather insights about your potential customers. Consider demographic factors such as age, gender, location, and income level. Analyze their purchasing behavior, motivations, and pain points. This information will help you create buyer personas, which are fictional representations of your ideal customers. These personas will guide your marketing efforts and ensure that you’re targeting the right audience.

Next, evaluate the size and growth potential of different market segments. Look for segments that align with your products or services and are viable for your trading company’s success. Consider factors such as market demand, competition, and profitability. You may even consider niche markets that have a specific need or a unique set of customers that are currently underserved.

Understanding your target market’s needs and preferences is crucial for developing products and services that resonate with them. Conduct surveys or interviews to gather feedback and insights directly from your potential customers. This will help you refine your offerings and ensure that you’re delivering value that meets their expectations.

Once you have identified your target market, it’s important to develop a clear positioning strategy. Positioning refers to how you want your trading company to be perceived by your target market. Determine the key differentiators that set you apart from competitors and communicate these unique selling points in your marketing efforts. Strive to create a strong brand identity that resonates with your target market and builds trust and loyalty.

Keep in mind that your target market may evolve over time, so it’s essential to regularly evaluate and fine-tune your approach. Monitor market trends, customer feedback, and competitor activities to ensure that your target market remains relevant and your strategies continue to meet their changing needs.

Remember, choosing the right target market is crucial for the success of your trading company. By understanding and catering to the needs of your target market, you will be able to develop products and services that resonate with customers and establish a strong brand presence. So take the time to research and define your target market, and let it guide your business strategies.

Step 3: Research your products

Thoroughly researching your products is a crucial step when starting a trading company. The success of your business largely hinges on the products you trade, so it’s essential to have a comprehensive understanding of their market demand, quality, and sourcing options.

Begin by identifying the specific products or categories that you plan to trade. Consider your target market’s needs and preferences, and ensure that the products align with their requirements. Conduct market research to assess the demand for these products, analyzing factors such as market size, growth potential, and competition. This research will help you identify the most profitable and viable products for your trading company.

Once you have narrowed down your product selection, delve into supplier research. Identify reliable and trustworthy suppliers who can consistently provide high-quality merchandise. Look for suppliers who have a proven track record, strong industry connections, and a good reputation. Consider factors such as production capabilities, delivery times, pricing, and customer service. Building strong relationships with reliable suppliers is essential to ensure a steady supply of goods and maintain customer satisfaction.

A crucial aspect of researching your products is evaluating their quality. Ensure that the products align with industry standards and regulations, and meet the expectations of your target market. Assess the quality control processes of your suppliers, and consider conducting product testing to ensure consistency and reliability. Providing high-quality products will help you gain customer trust and establish a positive reputation in the market.

Another important consideration when researching your products is pricing. Analyze the pricing strategies of your competitors and determine a pricing structure that will be competitive while allowing for a reasonable profit margin. Consider factors such as production costs, market demand, and perceived value. Remember to keep your target market’s budget and price sensitivity in mind to ensure that your pricing remains attractive to potential customers.

As part of your product research, it’s also beneficial to identify any potential challenges or limitations. Consider factors such as import restrictions, licensing requirements, or any legal or cultural considerations specific to the products you wish to trade. Understanding and addressing these challenges upfront will save you time and potential obstacles down the line.

Continuously monitor and evaluate your product research as the market evolves. Stay updated on industry trends, technology advancements, and customer feedback. This will allow you to adapt your product offerings to meet changing market demands and preferences.

Remember, thorough product research is essential for the success of your trading company. By understanding the market demand, assessing supplier options, evaluating product quality, and considering pricing strategies, you will be well-equipped to make informed decisions and offer products that resonate with your target market.

Step 4: Register your trading company

Registering your trading company is a crucial step in establishing your business legally and ensuring its compliance with relevant regulations. The specific registration requirements may vary depending on the jurisdiction in which you operate, so it’s essential to research and understand the process in your locale.

Start by choosing an appropriate legal structure for your trading company. Common options include sole proprietorship, partnership, limited liability company (LLC), or corporation. Each structure has its own benefits and implications in terms of liability, taxes, and ownership, so consult with legal and financial professionals to determine the best fit for your business.

Once you have decided on the legal structure, you will need to register your business name. Check if your desired name is available and complies with local regulations. Some jurisdictions may require you to conduct a name search or reserve the name before registering it officially.

Next, you will need to obtain the necessary permits and licenses to operate legally. These may include general business licenses, trade-specific permits, and tax registrations. Research the requirements in your industry and location to ensure full compliance.

Depending on the nature of your trading company, you may also need to consider additional regulatory considerations. For example, if you plan to import or export goods, you may need to register with customs authorities or obtain trade licenses. If you deal with specific products, such as pharmaceuticals or firearms, there may be additional regulatory requirements to fulfill.

During the registration process, you may be required to provide certain documents, such as identification, proof of address, and business plans. Make sure to gather all necessary paperwork in advance to streamline the registration process.

It’s also important to consider the tax obligations of your trading company. Determine the applicable tax laws and regulations in your jurisdiction and register for the necessary taxes, such as sales tax or value-added tax (VAT). Consult with a tax professional to ensure compliance and effective tax planning.

Lastly, keep in mind that the registration process may involve fees and waiting times. Allocate sufficient time and budget for the registration process, and be prepared to provide any additional information or documentation requested by the relevant authorities.

Registering your trading company is a critical step in establishing your business legally and ethically. It provides the necessary framework to operate compliantly and build credibility with customers, suppliers, and financial institutions. So take the time to understand the registration requirements in your jurisdiction and ensure all necessary registrations and permits are obtained.

Step 5: Set up your office and infrastructure

Setting up your office and infrastructure is an important step in creating a solid foundation for your trading company. A well-organized and efficient workspace allows for smooth operations and optimal productivity. Here are some key considerations to keep in mind when setting up your office and infrastructure.

Start by finding a suitable location for your office. Consider factors such as accessibility, proximity to suppliers and customers, and the availability of necessary infrastructure. Depending on your business requirements, you may choose to operate from a commercial space, lease office space, or work remotely.

Next, equip your office with the necessary furniture, equipment, and technology. This may include desks, chairs, computers, printers, scanners, and communication systems. Assess your business needs and budget to determine the essential items required to support your daily operations.

Establish effective administrative processes to ensure smooth workflow. This includes setting up systems for managing documents, organizing files, and maintaining efficient communication. Implementing project management tools and collaboration software can also streamline teamwork and enhance productivity.

Invest in robust cybersecurity measures to protect your business and customer data. This includes setting up firewalls, implementing secure backup solutions, and training employees on best practices for data protection. Data breaches can have severe consequences for your trading company, so prioritize cybersecurity from the very beginning.

Create a professional and functional workspace that promotes productivity and creativity. Consider interior design elements that inspire and motivate your team. Providing a comfortable and pleasant environment can positively impact employee morale and performance.

Consider your storage needs and set up an effective inventory management system. Depending on the nature of your trading company, you may require space to store products, whether it’s a physical warehouse or a designated area within your office. Implement inventory management software to track and manage your stock effectively.

Establish communication channels with your team, suppliers, and customers. This may include email, phone systems, video conferencing tools, and a dedicated customer support system. Prompt and effective communication is essential for building strong relationships and ensuring smooth collaboration.

Lastly, ensure compliance with health and safety regulations. Create a safe and ergonomic workspace for your employees, providing adequate lighting, ventilation, and ergonomic furniture. Display necessary safety protocols and emergency contact information in visible areas.

Remember, setting up your office and infrastructure is not just about having a physical space—it’s about creating an environment that supports your business operations and fosters growth. Invest time and effort into creating a well-equipped and organized workspace that aligns with your business needs and values.

Step 6: Secure funding and create a budget

Securing funding and creating a budget are crucial steps in starting a trading company. Adequate financial resources and effective budgeting will ensure the smooth operation of your business and help you achieve your goals. Here are some key considerations for this step:

Assess your financial needs by calculating your startup costs and estimating your ongoing expenses. Startup costs may include registration fees, office setup, equipment purchases, initial inventory, marketing expenses, and legal fees. Ongoing expenses could consist of rent, utilities, salaries, marketing campaigns, inventory restocking, and other operating costs.

Explore funding options such as personal savings, loans from banks or financial institutions, or seeking investment from angel investors or venture capitalists. Determine the amount of funding required and create a detailed plan on how the funds will be used. This will help in presenting a compelling case to potential investors or lenders.

Consider bootstrapping your trading company by starting with your own funds or seeking support from friends and family. Bootstrapping allows you to maintain full ownership and control over your business, but it may limit the scale and speed of your growth.

Create a comprehensive budget that covers all your expenses and projections for a specific period, usually the first year. Include both fixed costs (such as rent and utilities) and variable costs (such as marketing and inventory). Be realistic and conservative in your estimations, allowing for unexpected expenses and market fluctuations.

Regularly review and track your financial performance against your budget. This will help you identify areas of overspending or underutilized resources. Adjust your budget as necessary to ensure your trading company remains financially sustainable.

Implement effective financial management practices, including bookkeeping, invoicing, and timely payment collection. Use accounting software or engage the services of a professional accountant to maintain accurate and up-to-date financial records. This will enable you to make informed decisions based on your financial position.

Monitor your cash flow closely to ensure ongoing liquidity. A positive cash flow ensures you have enough funds to cover expenses as they arise. Identify strategies to improve cash flow, such as negotiating favorable payment terms with suppliers or offering incentives for early customer payments.

Consider implementing cost-saving measures without compromising on quality. This may include optimizing your inventory management, negotiating better deals with suppliers, or exploring more cost-effective marketing strategies.

Seek guidance from financial professionals or business mentors who can provide insightful advice on funding options, budgeting, and financial management. Their expertise can help you make sound financial decisions and avoid costly mistakes.

Remember, securing funding and creating a budget are essential steps in building a strong financial foundation for your trading company. With careful planning, effective budgeting, and diligent financial management, you will be well-positioned to navigate the financial aspects of your business and drive its success.

Step 7: Find reliable suppliers and negotiate contracts

Finding reliable suppliers and negotiating contracts are key steps in ensuring a smooth and successful trading business. A dependable and trustworthy supplier network is crucial for maintaining a consistent supply chain and delivering high-quality products to your customers. Here’s what you need to consider in this step:

Start by conducting thorough research to identify potential suppliers. Look for suppliers that specialize in the products you plan to trade and have a solid reputation in the industry. Attend trade shows, industry conferences, and connect with other businesses in your niche to gather recommendations and insights.

Evaluate the credibility and reliability of potential suppliers by reviewing their track record, certifications, and customer feedback. Consider factors such as their experience, financial stability, production capabilities, and quality control processes. Request samples of their products to assess their quality firsthand.

Reach out to shortlisted suppliers and initiate conversations to gauge their responsiveness and willingness to collaborate. Share your business requirements, including expected order volumes, delivery timelines, and specific product specifications. This will help you assess whether the suppliers can meet your needs effectively.

Negotiate favorable terms and conditions with your chosen suppliers. This includes pricing, payment terms, delivery schedules, and return policies. Aim for a mutually beneficial agreement that ensures a fair price for your products while maintaining a profitable margin for your trading company. Be prepared to negotiate and compromise to achieve a win-win situation.

Consider building long-term relationships with reliable suppliers. Working closely with a select group of suppliers can lead to improved communication, better understanding of your business needs, and more efficient supply chain management. Long-term relationships also make it easier to address any issues or concerns that may arise in the future.

Clearly document all the agreed-upon terms and conditions in a written contract. The contract should outline the products or services being supplied, pricing and payment terms, delivery schedules, quality standards, and any other relevant details. This legal document will protect both parties and provide clarity in case of any disputes or disagreements.

Maintain regular communication with your suppliers to ensure a smooth flow of information and address any concerns promptly. Regularly review and evaluate the performance of your suppliers based on factors such as product quality, on-time delivery, and responsiveness. Provide constructive feedback when necessary to help them improve their services.

Continually monitor the market for new suppliers and potential cost-saving opportunities. The trading industry is dynamic, and it’s important to stay informed about emerging suppliers, industry trends, and competitor activities. Regularly assess your supplier network to ensure it aligns with your business objectives and offers the best value for your trading company.

Remember, finding reliable suppliers and negotiating contracts is crucial for the success of your trading business. Investing time and effort in building strong, positive relationships with reputable suppliers will ensure a steady supply of high-quality products and help you meet the expectations of your customers.

Step 8: Create a website and establish an online presence

In today’s digital age, creating a website and establishing a strong online presence is essential for the success of your trading company. An effective website not only serves as a virtual storefront but also acts as a powerful marketing tool to attract and engage potential customers. Here’s how to approach this crucial step:

Start by defining your website’s objectives and target audience. Determine what you want to achieve with your website, whether it’s to showcase your products, provide information, generate leads, or facilitate online transactions. Understanding your target audience will help you design a website that caters to their needs and preferences.

Plan the structure and layout of your website. Organize your content in a logical and intuitive manner, making it easy for visitors to navigate and find the information they need. Consider the user experience (UX) and create a visually appealing design that aligns with your brand identity.

Choose a domain name that reflects your trading company’s brand and is easy to remember. Ensure that the domain name is available and register it with a reputable domain registrar. Consider obtaining SSL (Secure Sockets Layer) certification to provide a secure and trustworthy browsing experience for your visitors.

Develop compelling content that effectively communicates your value proposition to potential customers. Clearly articulate the benefits of your products and services and address any pain points your target audience may have. Utilize persuasive copywriting techniques and include compelling visuals to engage and entice visitors.

Optimize your website for search engines to improve your online visibility and attract organic traffic. Conduct keyword research to identify relevant keywords for your trading industry, and strategically incorporate them into your website’s content, meta tags, and URLs. Implement proper HTML structuring and utilize SEO best practices to improve your website’s search engine ranking.

Create an easy-to-use e-commerce platform if you plan to sell products online. Simplify the purchasing process, provide secure payment options, and ensure a streamlined checkout experience for your customers. Integrate a reliable and secure payment gateway to instill trust and confidence among online shoppers.

Establish an active presence on social media platforms that are relevant to your target audience. Engage with your audience, share valuable content, and participate in conversations to boost brand awareness and foster customer loyalty. Also, consider utilizing email marketing to nurture and communicate with your customer base.

Regularly update your website with fresh and informative content. This could include new product releases, industry news, educational blog posts, or customer success stories. Provide valuable resources to establish your authority in the trading industry and encourage visitors to return to your website.

Monitor website analytics to gain insights into user behavior and make data-driven decisions. Analyze metrics such as page views, bounce rates, and conversion rates to identify areas for improvement and track the effectiveness of your marketing efforts.

Last but not least, ensure that your website is responsive and mobile-friendly. With an increasing number of users accessing the internet through mobile devices, it’s crucial to provide a seamless browsing experience across different screen sizes and devices.

Creating a well-designed website and establishing a strong online presence will enable your trading company to reach a wider audience and compete in the digital marketplace. By offering a user-friendly experience, valuable content, and seamless online transactions, you can attract and retain customers, driving the success of your trading business.

Step 9: Market your trading company

Marketing plays a crucial role in the success of your trading company by increasing brand awareness, attracting customers, and driving sales. To effectively market your trading business, you need to implement a well-structured and targeted marketing strategy. Here’s how to approach this step:

Start by defining your target audience and understanding their needs, preferences, and buying behavior. This will help you tailor your marketing messages and choose the most effective tactics to reach them. Consider demographic factors, interests, and geographical locations to create buyer personas that represent your ideal customers.

Develop a strong brand identity that aligns with your target audience and differentiates your trading company from competitors. This includes creating a memorable logo, consistent visual branding, and a compelling brand story. Your brand should evoke emotions, establish credibility, and resonate with your customers.

Create a comprehensive marketing plan that outlines the marketing channels and tactics you will use to reach your target audience. This can include both online and offline strategies, such as social media marketing, content marketing, advertising, trade shows, and direct outreach. Determine the most effective marketing mix based on your target audience’s preferences and industry trends.

Establish a strong online presence through digital marketing strategies. Develop a professional website that showcases your products or services, optimizes it for search engines, and integrates with social media platforms. Utilize social media marketing to engage with your audience, share valuable content, and build brand loyalty. Implement email marketing campaigns to nurture leads and maintain communication with your customers.

Utilize content marketing to establish your trading company as an industry leader. Create valuable and informative content that answers your audience’s questions, addresses pain points, and demonstrates your expertise. This can include blog posts, videos, webinars, and whitepapers. Share your content through your website, social media platforms, and industry publications to build credibility and attract leads.

Consider paid advertising campaigns to increase your brand visibility and reach a wider audience. This can include search engine marketing (SEM) campaigns, display ads on relevant websites, and social media advertising. Set clear objectives and monitor the performance of your ads to ensure they deliver a positive return on investment (ROI).

Network and collaborate with other businesses in your industry to expand your reach and tap into new customer segments. Participate in industry events, conferences, and trade shows to establish connections and generate leads. Collaborate with complementary businesses for cross-promotion and mutually beneficial partnerships.

Engage with your customers and build strong relationships through excellent customer service. Respond to inquiries promptly, address any concerns or issues professionally, and go the extra mile to exceed customer expectations. Positive word-of-mouth recommendations and customer referrals can be powerful marketing tools.

Regularly monitor and analyze your marketing efforts to determine the effectiveness of your strategies. Track key metrics such as website traffic, conversion rates, social media engagement, and sales revenue. Use this data to identify areas for improvement and optimize your marketing campaigns accordingly.

Remember, marketing is an ongoing process that requires continuous evaluation, adaptation, and creativity. By implementing a well-rounded marketing strategy, you can effectively promote your trading company, build brand awareness, and attract a loyal customer base.

Step 10: Manage and grow your business

Managing and growing your trading business is an ongoing process that requires careful planning, effective management, and a proactive approach. As your company evolves, it’s important to adapt to the changing market dynamics and seize opportunities for growth. Here are key factors to consider in this step:

Regularly review and analyze your business performance to assess the effectiveness of your strategies and make informed decisions. Monitor key performance indicators (KPIs) such as sales revenue, profit margin, customer satisfaction, and market share. Identify areas of improvement and implement necessary changes to optimize your operations.

Invest in your workforce by hiring and retaining talented individuals who align with your company’s values and objectives. Provide training and development opportunities to enhance their skills and expertise. Foster a positive and inclusive work culture that encourages innovation, teamwork, and continuous learning.

Manage your supply chain effectively to ensure a steady flow of high-quality products and minimize disruptions. Continuously evaluate and strengthen relationships with your suppliers. Keep track of market trends and customer demands to anticipate changes in product demand and adjust your inventory and procurement strategies accordingly.

Stay updated with industry trends and emerging technologies that can enhance your trading operations. Embrace automation and digital tools to streamline processes and improve efficiency. Leverage data analytics and business intelligence to gain insights into market trends, customer behavior, and performance metrics, allowing for data-driven decision-making.

Seek opportunities for expansion and diversification to grow your trading business. This can involve entering new markets, introducing new product lines, or targeting different customer segments. Conduct market research and feasibility studies to assess the potential risks and rewards of these growth strategies.

Strategically manage your finances and cash flow to ensure ongoing stability and sustainability. Keep a close eye on your budget, monitor expenses, and maintain healthy relationships with financial partners. Explore financing options, such as business loans or equity investments , if additional capital is required to support your growth strategies.

Continuously engage with your customers and solicit feedback to understand their changing needs and preferences. Regularly assess and optimize your customer acquisition and retention strategies to enhance customer satisfaction and loyalty. Implement customer relationship management (CRM) systems to effectively manage your customer interactions and provide personalized experiences.

Monitor your competition and industry landscape to stay ahead of market trends and capitalize on emerging opportunities. Analyze their strategies, pricing, marketing tactics, and customer base. Learn from their successes and failures, and differentiate your trading business by offering unique value propositions and exceptional customer service.

Build a culture of innovation and adaptability within your trading company. Encourage creativity, experimentation, and the willingness to embrace change. Stay agile and responsive to market shifts, technological advancements, and evolving customer needs.

Finally, regularly revisit and update your business plan to reflect new goals, market insights, and growth strategies. This will provide a roadmap for your business as you navigate through various stages of growth.

Managing and growing your trading business requires an ongoing commitment to excellence and staying attuned to the evolving market landscape. With effective management practices, continuous improvement, and a forward-thinking mindset, you can position your trading company for long-term success and profitability.

Starting a trading company can be an exciting and rewarding venture, but it requires careful planning, diligent execution, and ongoing adaptability. The steps outlined in this guide provide a roadmap to help you navigate the various aspects involved in establishing and growing your trading business. From defining your business plan and choosing a target market to securing funding, finding reliable suppliers, and creating an online presence, each step is essential for building a solid foundation for your trading company’s success.

As you embark on your trading journey, remember that success doesn’t happen overnight. It requires dedication, perseverance, and continuous learning. Keep a pulse on market trends, industry developments, and customer preferences to stay ahead of the competition and identify growth opportunities.

Effective management, financial discipline, and a customer-centric approach are instrumental in managing and growing your trading business. Regularly analyze your performance, adapt your strategies, and invest in the development of your team and infrastructure to ensure long-term success.

Building relationships with reliable suppliers, offering high-quality products or services, and delivering exceptional customer experiences are critical for maintaining a competitive advantage and fostering customer loyalty. Embrace technology, leverage data insights, and embrace innovation to stay ahead of market dynamics and optimize your operations.

Lastly, remember that success is not solely measured by financial achievements. Strive to maintain integrity, uphold ethical business practices, and contribute positively to the communities in which you operate. Building a reputable and socially responsible trading company will not only benefit your bottom line but also enhance your brand image and strengthen customer trust.

Now that you have been equipped with the knowledge and guidance to start and manage a successful trading company, it’s time to put your plans into action. Embrace the exciting challenges and opportunities ahead, stay adaptable, and never stop learning. Best of luck in your trading venture!

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Blog / Small business tips / Company name vs trading name: what’s the difference?

Company name vs trading name: what’s the difference?

Did you know, it’s possible to register your business name at Companies House, but then trade under one, or even multiple different names for your company? 

Some businesses in the UK can have several trading names with only their original name being the one registered with Companies House. 

So, why do organisations do this? Are there advantages?

It’s important for business owners and, particularly those just starting out to understand th e difference between a company name and a trading name .

In this article, we will explore both the benefits and restrictions of using a trading name vs a company name, as well as the factors a business owner should take into consideration before opting to go down this route.

Table of contents

What is a company name.

• What is a trading name?  
• What is a trademark?  

Company name vs trading name: the benefits

• Are there any restrictions on using a trading name?  

Company name, trading name or trademark?

When you register your business with Companies House, you are creating a limited company . 

Having a registered company name will demonstrate to both investors and potential customers that you are a legitimate operator. 

Under the terms of the Companies Act 2006 , in order for a company to be accepted and registered with Companies House, it must abide by the following conditions:

• It cannot give the impression that the business is connected with HM Government or any local or public authority
• No sensitive words or expressions, unless these have prior approval
• It must not be the same as or too similar to the name of another registered company
• The appropriate ending should be included (i.e. Ltd, CIC, Plc)
• It cannot include certain characters, punctuation, or symbols

Sensitive words include terms that could be contentious or politically offensive. They are expressions that imply a company could have a certain special status. Examples of these include words such as ‘Royal’, ‘Trust’ or ‘Association’. 

To learn more about choosing a name for your business, see our blog on how to find the perfect name for your business .

Use our Company Name Check tool to bulk check company name availability at ease Ensure your company name complies with Companies House before you register your UK limited company. Apply in minutes, for only £14.99, with Tide – we’ll take care of the rest. Turn your dreams into a reality and register your company today ! 🚀

What is a trading name?

When you register a company name with Companies House, it means that no other company can register this exact name. But it doesn’t automatically protect you by trade mark law. 

Trading names do not have the same level of protection. To stop other companies trading under your business name, you’ll need to register a trademark. 

The definition of a trading name is a name (or names) that a person, partnership, or company may use which is different from the name they have registered with Companies House. 

A business may be permitted to use as many trading names as required, but these cannot be registered as official names of the company.

It’s quite common for UK companies to adopt a trading name to run their business with. This is essentially a different name to that which their business has been registered under . Some limited companies even run multiple businesses with various trading names, yet all under the umbrella of a single limited company. 

As well as limited companies, sole traders and partnerships are also permitted to use trading names too.

What is a trademark?

A trademark is a legal symbol, typically a name, logo or slogan that distinguishes a company’s products or services from others. It serves as a form of intellectual property protection , meaning that it cannot be used by competitors. 

If you’re registering a company simply to protect the name, with no intention to trade, a trade mark could be a better option.

While obtaining trademarks is a strategic move to secure and strengthen your business’s brand, it involves fees and legal expenses – a trademark application in the UK starts from £170. 

Despite the risks and potential restrictions, using a trading name is frequently favoured by many UK companies. There are a number of potential advantages to this approach:

• Save time and money. Using multiple trading names under one company can reduce your admin, such as filing confirmation statements and annual accounts. This is because you would only have to file these documents in the name of the registered company.
• Differentiate various sections of your business. You can offer your services with separate trading names, so it’s clear to potential customers. For example, the company you have registered with Companies House may be a specialist web design business, but you also provide content services and technical SEO.
• Helps the branding of your business. If the domain name and social media handles for your registered company have already been taken, you could work around this by using the trade name that matches your desired brand name, website and social media profiles.

For more tips and ideas about branding , see our blog article on how to build a brand for your business .💡

Are there any restrictions on using a trading name?

As explained earlier, trading names do not have the same level of protection as a registered company name. 

Here’s the main restrictions around using a trading name vs a company name:  

• If someone wanted to register your trading name as a limited company , then they would be able to do so. They could even prevent you from using it!
• If you select a trading name that’s too similar to an existing business or sole trader , you could be sued for ‘passing off’. This could cause huge disruption to your business and potentially damage your reputation and standing with your customer base too. 
• For business documentation such as invoices, purchase orders, business letters, and any licence applications, you’re legally required to put your registered company name and address. If you also have a trading name, this would go on the company letterhead. The company’s registered name and address would go in the footer of the letter.

By using a trading name, there is also a risk that you may be infringing a trademark . It’s recommended to carry out a UK trademark search in addition to a business name check prior to using a trading name.

Choosing a name for your business is not as easy as one might think – it takes some consideration. 

Your company name is the official name under which your business is registered, representing its legal identity. While a trading name acts as an alias that can be used for commercial purposes, it isn’t a legal title. 

Trademarks, however, go beyond identification; they are legally protected symbols associated with a business’s products or services. 

While a company and trading name signify the business itself, trademarks focus on protecting elements of your brand. They provide exclusive rights and prevent competitors from using similar marks. 

Whichever you choose, bear in mind that Companies House deals with company registration and the Intellectual Property Office register trademarks.

Registering your company with Tide has never been easier. It’s fast, it’s secure and it costs £14.99 instead of £50 – we’ll take care of the rest for you. Get a free business bank account and unlock a suite of finance management tools to help save your business time and money.

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Caroline Wire

Senior Small Business Copywriter

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The difference between a trading name, business name and company name

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Trade name vs. business name: what’s the difference.

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Starting your own business is a rewarding journey, but it can also be incredibly challenging and complex. You’ll need to navigate all sorts of legal requirements, including licensing your business. Doing that correctly will require you to know the difference between a trade name vs. LLC. 

A limited liability company (LLC) is a specific type of business entity, and it’s very different from your trade name. Depending on the nature of your business venture, you might need both or neither. In this trade name vs. LLC breakdown, you’ll learn the subtle differences between these two name types so you can use them to achieve your business goals. 

What Is a Legal Business Name?

Your legal business name is the official name that your company is registered under with the government. It’s the name that appears on all formal documents, including your tax filings, legal contracts, and banking information. This name is fundamentally linked to your company’s legal structure. 

Generally, you’ll register your legal business name with the state body that regulates businesses. Each state’s process is a bit different, but some common steps involve checking to see whether the business name is already taken, submitting an application, and paying a registration fee.

The good news is that you can usually have the same business name as someone else, so long as they are registered in a different state. However, if the other business has trademarked its name, you’ll have to choose a different legal business name. 

If your business is headquartered in another country, like the United Kingdom or Canada , you’ll need to file a request with the appropriate entity in your home nation. Again, the process should involve checking whether someone else is using the name, filing an application, and paying a fee. 

Business Structures and Legal Names

Your business structure will have a huge impact on your legal name. Here’s how different structures affect it:

Sole Proprietorships

If you operate a sole proprietorship, you’ll typically do business under your own name. This simplifies things quite a bit. The downside to this approach is that your personal assets could be seized to cover the entity’s liabilities. 

That’s why most small business owners file for an LLC or other type of entity. Even if you work alone, filing an LLC is a great idea. Check out our breakdown of LLCs vs. sole proprietorships to see whether forming an LLC might be right for you. 

When forming an LLC, your legal business name is the one you register with the state, including the designation of “LLC” or “Limited Liability Company.” If you do business under that name, there are no differences between your trade name vs. LLC. However, it’s rare for companies to use their entire legal business name in branding and advertising.

Corporations

A corporation’s legal business name is the one registered with the state. The corporate identifier is either “Inc.” or “Corporation.” Typically, small businesses won’t form corporations, as the internal structure of these entities is complex. 

General Partnerships

In general partnerships, the legal name is either the surname of the partners or a registered business name, if chosen. For instance, if you and the co-owner of your business both have the last name of “Jones,” your legal business name may be “Jones & Jones, GP.” The “GP” stands for “general partnership.”

How to Register a Business Name?

Registering a business name is a multi-step process. While registering your entity as an LLC is easier than creating a corporation, it is vital that you choose the best framework for your venture. 

The first step in both processes involves selecting a unique business name. It needs to be distinctive, marketable, and memorable. Start by brainstorming a list of potential names and ensure your name ties to the services or products you offer.

Next, search for the names on your list to ensure that it isn’t already spoken for. Most states have an online database where you can search for business names. Even if a name is available, you may not want to use it if it is too similar to another business in your state. Doing so can lead to confusion among customers or legal troubles.

After you’ve confirmed that your name is available, submit an application with the state agency along with your registration fee. When forming an LLC, you’ll need to include your business name in your Articles of Organization. If you are forming a corporation, list the name as it appears in the state database in your Articles of Incorporation. 

While not mandatory, you should also consider filing a trademark for your name. A trademark offers additional protection, especially if you operate in multiple states or have plans for a major expansion. 

What Is a Trade Name ?

A trade name, also known as “Doing Business As” (DBA), is the name under which the public knows your company. It’s different from your legal business name and is used for branding and marketing purposes. 

Many LLCs and corporations use a condensed version of their full legal name as their trade name. When it comes to a trade name vs. LLC, the trade name is shorter and more user-friendly. As such, it’s easier to incorporate into marketing materials and merchandise. 

How to Register a Trade Name?

To register a trade name, you need to file a DBA with either your state or local government, depending on local laws. This process includes checking name availability, filling out the necessary forms, and paying a registration fee.

When you apply for your LLC or corporation, you’ll also have a chance to claim a DBA. If you haven’t already formed an LLC, think of a trade name to go with your full legal business name so you can file for both simultaneously. If you’ve already formed your LLC, you can file a DBA as an addendum. 

Pros of a Trade Name

Using a trade name has several advantages, including:

• Branding flexibility: A trade name allows you to create a brand that’s distinct from your legal business name.
• Simplicity for sole proprietor s: This enables you to do business under a personal name without forming an LLC.
• Privacy protection: You can use a trade name to protect your privacy.
• Scalability: Trade names allow your business to branch into new markets without creating a new legal entity.

There are a lot of perks to using trade names. However, there are some downsides, too. 

Cons of a Trade Name

The drawbacks of using a trade name include:

• No legal protection: A trade name doesn’t provide legal protection for the name or your assets.
• Potential confusion: Customers might get confused if there are major differences between your trade name vs. LLC name.
• Limited exclusivity: Since trade names are usually registered locally, another business in an adjacent area might use a similar one.
• Renewal requirements: Some jurisdictions require you to renew your DBA annually.

Using a trade name can be a great way to enhance your branding efforts. However, it is most effective when paired with an LLC. 

How to Trademark a Trade Name?

A trade name and trademark aren’t the same. Just because you registered a DBA doesn’t mean that the name is trademarked or protected. Other people outside your area can still use the name. 

If you want to trademark your DBA, you’ll need to file an application with the United States Patent and Trademark Office (USPTO). This process involves ensuring your trade name is unique and not merely descriptive of your goods or services. 

Navigate Your Business Identity with doola

Now that you know the difference between a trade name vs. LLC, it’s time to register your business and protect your brand identity. Not sure where to begin? Connect with doola and let us help. Our user-friendly LLC formation services are just what you need to jumpstart your brand’s growth and protect yourself from liability.

Can an LLC have a trade name?

Yes, an LLC can operate under a trade name different from its registered legal name. This is quite common, especially if the legal name is long-winded or difficult to market. 

Do I need to register a trade name if I have an LLC?

Not necessarily, but if you want to do business under a different name than what’s registered with your LLC, you should register your trade name, too. 

Can I use the same trade name as another business?

You can use the same trade name as another business if it operates in a different region or industry. However, you should avoid doing so whenever possible, as using a name that is similar or identical can create confusion. 

Can I change my trade name after forming an LLC?

Yes, you can change your trade name after forming an LLC by filing a new DBA registration. 

Do I need an LLC if I already have a trade name?

Having a trade name doesn’t replace the legal benefits of an LLC. For that reason, you might still consider forming an LLC for liability protection and other benefits. 

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

300+ Business Name Ideas to Inspire You [+7 Brand Name Generators]

Published: March 11, 2024

Your ticket to standing out in a crowded market is having a business name that is unique, memorable, and attention-grabbing. To help you get started, I’ve put together a comprehensive list of business name ideas that can set you up for success as you launch a business .

These unique business names will help you build a memorable brand — one that your customers will recognize online, in advertisements, or at stores — and one that will ensure your products and services stand out from the competition.

As the former head of marketing for two different startups, I’ve learned that choosing the right business name is critical. Below, I’ll share some of my top business name ideas to inspire you as you brainstorm your own. Then, I’ll dive into what makes a business name great, how to name your business, and some of my favorite examples of creative business names.

Business Name Ideas

How i developed the best company name ideas for this list, 7 attributes of a great company name, how to name a business, company name examples, creative business name generators.

To kickstart your company naming journey, here are some unused company name ideas. These business name ideas aren’t just for inspiration — they’re available to use, so feel free to use any that suits your business.

Once you choose a business name, use HubSpot’s free Brand Kit Generator to create a logo for your new business.

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9 templates to help you brainstorm a business name, develop your business plan, and pitch your idea to investors.

• Business Name Brainstorming Workbook
• Business Plan Template
• Business Startup Cost Calculator

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Small Business Name Ideas

• BlissSlim (Weight loss products)
• Jellysmith (Jelly company)
• SalesPushy (Sales training and consulting)
• Formonee (Fintech platform)
• GoAhead Co. (Design agency)
• Jump & Pass (Health and wellness)
• Wire2me (Financial services)
• Savvy Scholars (Elearning platform)
• S3 (Smart, Safe, and Secure) (Web security services)
• Blaze Cloud (Cloud storage)
• Your Security First (Security company)
• Sudden Supply (Supply chain management)
• Strategene (Asset management)
• DareDeserve (Tutoring and/or support services)
• Conveniently Timely (Delivery tools and services)
• HerdDream (Farming operations)
• Whole Life Synergy (Financial or long-term care planning)
• PeopleFirstPro (HR training)
• MissionMentor (Life coaching)
• Golden Years Guidance (Retirement planning)
• CapitalCurrent (Accounting and other financial services)
• TeachTech (IT training services)
• Tacteach (Life skills training)
• AccomplishNet (Networking services)
• Expedite Access (Product and fulfillment sourcing)
• GoalGenius (Goal-setting products)
• FearlessPeak (Adventure tour services)
• TimeQuest (Ancestry research)
• DreamTide (Health and wellness products)
• SynergyCycle (Corporate event services)
• EduGuru (Tutoring services)
• Tactink (Project management)
• Flyquest (Aviation training services)
• BoldSwap (Stock portfolio management services)
• Hobyz (Product hub with hard-to-find products for hobbyists)
• IdeaBoost (Creative services)
• JoinVisions (Networking services)
• StellarServe (Customer service)
• Aspirecraft (Creative services)
• Ambition Forge (Startup services)
• Quantumful (Data analysts)
• Ultimate Climb (Mountaineering classes)

Unique Business Name Ideas

• Quirky Observations (Boutique consulting firm)
• Dr. ChuckleMeds (Pharmacy)
• Sell-O-Rama (Ecommerce marketplace)
• Farm With Crowdee (Agriculture crowdfunding)
• ExploreAbundance (Life coaching)
• BuildCatalyst (Construction services)
• FunTastic Ventures (Local tour services)
• GlowGrid (Nightlight products)
• Social Bridge (Social media services)
• Odysseyshare (Gaming center)
• TogetherPath (Dating adventure services)
• CelsiusSpark (Personal trainer services)
• BagBurst (Accessories for new parents)
• Mitchell Crow (Vintage fashion brand)
• WhizWhip (Healthy snacks)
• StandoutStanley (Alternative athletic gear)
• EclectiChairs (Quirky furniture)
• ActioNexus (Motivational organization)
• Ignition Leap (Recruiting agency)
• Impacter (Influencer member org)
• Primerise (Startup services)
• Excelship (Financial services)
• Turbotonic (Beverage products)
• Progress Path (Project management)
• Idea Craftery (Creative services)
• PropelPal (Freelance agency)
• Cadence Core (Talent agency)
• Innovexpress (Creative agency)
• Connectverse (Networking services)

Catchy Business Name Ideas

• Shimmer Shake (Dance company)
• Odd Coupling (Dating services)
• RiseShineSustain (Environmental organization)
• YesAchievers (Tutoring services)
• Timeframe Genius (Project management)
• Goalcraft (Life coaching)
• ProfitPioneer (Financial advisory)
• VacayVentures (Group vacation services)
• NexusCore (Workout equipment)
• WindRush Trading (Financial services)
• Elevolution (Hiring services)
• Innoviary (Ad agency)
• Trekwise (Travel services)
• Braventure (Risk-taking services)
• Bubblit (Beverage products)
• PulseCharge (Fitness products)
• GlamGo (Fashion products)
• Culinatine (Restaurant)
• Eternivault (Online archiving services)
• Clicknect (Online services)
• ZenZest (Health and wellness)
• RideRev (Transportation services)
• SnapSavor (Photo services)
• MotionFit Studio (Fitness services)
• StellarSoul (Lifestyle services)
• Dream Mashup (Design services)
• Quantum Quota (Data analysts)
• Zenitharian (Future planning)
• Disco's Edge (Nostalgia products)
• StyleQuest (Secondhand store)

Marketing Company Business Name Ideas

• Expandfluence
• MovementNow
• Welcome/Story
• Positioning Awareness
• Marketsters
• Presence Rebrand
• LeadGen Pro
• OptiSuccess
• BrandReclaim
• ContentCrafters
• Tech Triggers
• Persuade360
• InfluenceRise

Real Estate Company Name Ideas

• ImagineLands
• HouseManage Pro
• Urbanspace Agency
• Rustic Manor Realty
• Inner Harmony Realty
• Cosmos Dwellings
• Noble Houses
• WisdomWise Homes
• RadiantHomes Realty
• PropSol Management
• EliteHome Ventures
• TopTerra Estates
• InfinityHouse Agency
• LuxeDomain Realty

Tech Company Name Ideas

• TrustTech Innovations
• Enigma Tech
• Secure Frontiers
• ShareHub Technologies

Consulting Business Name Ideas

• Focused Minds
• Triumphtician
• Imperial Insights
• ProSpectra Solutions
• CatalystX Strategies
• SocialBuzz Advisors
• AlphaStrategists
• TransformNet Consulting

Software Company Name Ideas

• EffortlessCoding
• SafetyShield Solutions
• Illuminate Coding
• TechCuriosity Labs
• Engineerenigma
• Code Conundrum
• VelocityByte

To create and curate the list of business name ideas above, I used the following process, combining research, AI, and a dash of creativity.

First, I wrote out a list of words to describe the emotions that small businesses strive to elicit, like loyalty, productivity, and satisfaction. Then, I added words for business goals for all types of businesses, like quality, cash flow, and awareness. Finally, I added motivational words to the list, like commit, imagine, and uplift. This led to a list of about 200 words.

I used an AI tool to generate some business name ideas. I started with the prompt, “Create 20 original business names inspired by the following ideas.” Then, I edited each prompt with different sections of the list.

The steps above created 816 potential business names. I figured this was a great collection of business names, and it would be easy to pull out 100+ names with potential. But a quick review gave me just 74 business names I liked and most of those needed a lot of editing.

So, I tried again. To develop more useful business names for inspiration, I created a list of popular brand names from different industries. Then, I asked the AI tool to create more business names for each category that aligned with the tone and feel of each industry.

I also edited the prompts and results by asking for business name alternatives with a specific tone or “vibe.” This last step helped to yield business name ideas that matched what I liked best about existing companies’ brand names. I added to these names by grabbing some options from a business name generator.

Free Business Startup kit

Once I had a list of about 200 business name ideas, it was time to start editing. Some of the AI business names were great. But others needed more personality, so I sat down with a notebook and my list of names to experiment.

The Make My Persona tool was useful for this process. I used this tool to build an ideal persona for each business type. These personas helped me keep the customer in mind as I edited each business name.

Sometimes, just changing a few letters, capitalization, or spacing was enough. Other times, the act of writing inspired completely new business name ideas. Through this process, I came up with 155 new business names. The list of names felt pretty unique, so I didn’t think that I would find much during a domain check.

But I was wrong: The domain check cleared out 73 of the 155 names I’d come up with. Overall, I lost 47% of my list of business names.

At first, I was frustrated — but this was actually a positive outcome. It meant that the names I’d come up with were workable for a successful business. But it was also a reminder of how important it is to come up with more than a couple of business name ideas when you’re naming your new business.

For business names where the .com domain was unavailable but other domains were open, I did an online search for the business name. This step reminded me that any new business isn’t just competing with other companies in a given industry. It's also competing with bands, Twitch streamers, YouTube influencers, and more.

For example, “Propellant” sounds like an exciting and easy-to-remember business name for a startup. But it’s also a word in the dictionary and a component of rocket fuel. So even if this domain was available, it probably wouldn’t be a great business name, because it would be hard to find online.

In total, this process took many hours and several rounds of edits to bring you a list of over 160 business names. Your naming process may not take quite as long, but chances are it will feel even more complex and urgent.

I know that the steps above might sound like a lot of work for just a word or two. But your business name is the center of your new brand. Over time, the name will take on more meaning as you grow your business and establish your value proposition.

Don't forget to share this post!

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How to Write an Investment Proposal [Template + Examples]

How to Write a Partnership Proposal [Examples + Template]

16 Examples of Positioning Statements & How to Craft Your Own

Startup Due Diligence: What it Is & Why it Matters

What is a Go-to-Market Strategy? GTM Plan Template + Examples

The Importance of Having a Startup Exit Strategy

10 Top Tech Startups To Watch

The Biggest Pros and Cons of Working for a Startup

15 Startup Newsletters for Entrepreneurs

Use this free workbook to come up with a standout business name.

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How To Get A Startup Business Loan In 5 Steps

Updated: Dec 25, 2023, 11:03pm

How To Get a Startup Business Loan With No Money

Getting a business loan is more challenging for startups than for established businesses—but it’s still possible. New business owners can improve their approval odds by choosing the right type of financing, familiarizing themselves with their credit scores and identifying the most competitive lending options available. Here’s how to get a startup business loan .

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1. Evaluate What Kind of Loan You Need

Many small business owners opt for financing through traditional banks and credit unions. However, there are several types of business financing that can help startups get off the ground. Common types of startup business loans include:

• Online term loans . Term loans are generally issued by online and traditional lenders, and involve a bank extending a lump sum of cash, repaid over a set period of time, at a set interest rate. Annual percentage rates (APRs) on the best small business loans start around 9%, and maximum limits typically extend from $250,000 to $500,000. That said, startup owners may not qualify for the highest loan amounts and most competitive interest rates.
• Business lines of credit . With a business line of credit , a lender extends funds up to a certain amount and the business owner can access the financing on an as-needed basis. Interest only accrues on the portion of the credit line accessed from month to month. Furthermore, the borrower can access funds repeatedly after making payments during the draw period.
• SBA 7(a) loans . The 7(a) loan program is offered through the U.S. Small Business Administration (SBA) and extends business loans up to $5 million to eligible applicants. Funds can be used to cover working capital, equipment purchases and business expansion expenses, and interest rates range from 2.25% to 4.75% plus a base rate.
• SBA Microloans . SBA Microloans are available to eligible business owners up to $50,000. Loans are typically offered to startups in disadvantaged areas and to those owned by minorities and women. Repayment terms may be as long as six years, with interest rates ranging from 8% to 13%, depending on the lender.
• Asset-based financing . Asset-based financing is a form of secured business financing that lets startup owners borrow against valuable assets like inventory, machinery and equipment, accounts receivable and real estate. This type of financing is less risky for lenders, so the terms are often more competitive than other types of loans. However, secured financing means the bank can repossess the collateral if the borrower defaults.

2. Check Your Business and Personal Credit Scores

Lenders evaluate an applicant’s credit score to gauge the amount of risk they pose. Applicants with a higher credit score are more likely to make on-time payments and, therefore, have higher approval odds. Business credit scores are typically available after six months to one year of operations, so new businesses may not have one, especially if the startup is brand new.

That said, loans are often personally guaranteed—meaning the borrower legally agrees to repay the debt with their personal funds if the business fails to repay—so lenders also look at the applicant/business owner’s personal credit score.

Prepare for the application process and gauge your approval odds by requesting copies of your business credit reports and checking your personal credit score before applying for a loan.

3. Gather and Prepare Required Documents

The exact documents required to get a business loan vary by lender. However, there are some documents that most lenders use to assess and verify an applicant’s identity and a business’ existence. For example, lenders often request tax returns going back at least two years, as well as financial records like bank statements, accounts receivable, credit card sales and outstanding invoices from the past four months—at a minimum.

As a startup founder, you can also improve your approval odds by drafting a comprehensive business plan. This can demonstrate to lenders that the business is financially stable enough to repay its debts based on future revenue and expense projections. Lenders also may request copies of business licenses and registrations applicable to your business or industry, as well as banking information for direct deposit.

4. Research and Compare Lenders

Depending on your personal and business qualifications, you may qualify for a startup loan through multiple lenders. To identify the best startup business loans for your needs, consider these factors when comparing lenders:

• Annual percentage rates . In general, business loan APRs start around 9%, but rates may be higher for startup business loans, and they can even be lower for the most qualified applicants. Visit each lender’s website or contact a customer support representative to determine available APRs.
• Fees and other costs . Business lenders often charge origination fees ranging from 3% to 5% of the total loan amount to cover the costs of handling paperwork and verifying application information. Others also charge prepayment penalties for borrowers who pay off their loans early or late payment fees for those who miss their due date. These fees can increase the overall cost of borrowing, and some lenders eliminate them to remain competitive.
• Lender reputation . Even if a lender looks good on paper, take time to read online reviews to evaluate its reputation among current and past borrowers. Likewise, reach out to other members of your business community to learn about others’ experiences with the financial institution. Consider choosing another lender if your research reveals any red flags, like negative customer support experiences.

5. Submit Your Application

Once you choose a lender, familiarize yourself with its application process and make sure you compiled the correct documentation. Application and underwriting processes tend to vary by lender, so look into whether you can apply online or via telephone—or if you’ll need to visit a branch. After you submit your application, a lender representative may contact you to request additional documentation such as proof of collateral or further financial records.

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How To Get a Startup Business Loan With Bad Credit

You’ll first have to be able to demonstrate a track record of financial success to get a business loan with bad credit. That said, lenders will still often look at the owner’s and business’s credit history.

Here are a few things you can do to boost your chances:

• Improve your credit. Check your personal credit report for inaccuracies. Pay down your credit card debt and focus on other ways to increase your credit score quickly.
• Look for SBA lenders. Some SBA partner lenders offer certain SBA loans to businesses that haven’t yet launched, such as microloans.
• Seek out nonprofit assistance. Volunteer-run programs like a local Small Business Development Center or SCORE offer one-on-one assistance for new entrepreneurs and may be able to give you more specific individualized advice.
• Take advantage of special programs. If you’re part of an underrepresented group, such as a minority or rural resident, you may be eligible for special startup business loan programs.
• Apply through a CDFI. These financial institutions focus on underserved communities and may be better aligned to help with your business and personal lending needs.

Pros and Cons of Startup Business Loans

As you’re considering taking on debt for your new business, consider these points.

• Maintain ownership of your company
• Predictable monthly payments with fixed-rate loans
• Spread the cost of starting a business over several years
• Improve your credit score if you make on-time payments
• May be difficult to qualify for
• Loan costs from fees and interest may be very high
• May need to provide loan collateral
• High loan payments can put your business at risk of failure
• May need to repay the loan from your personal funds if the business fails

What Do I Need for a Startup Business Loan?

When you apply for a startup business loan, lenders can require a broad range of documents to evaluate whether or not to lend you and your business money. Ultimately, lenders need to determine if your business can repay the loan.

If you apply for a loan, you’ll often need:

• A robust business plan. If your business has been recently formed, a business plan with financial projections will be crucial for lenders to determine your ability to repay a loan.
• Business and personal credit scores. A lender may use both the credit score of the business and your own score to see how you’ve managed debt in the past.
• Collateral. As a new business, lenders may require you to back the loan with collateral or an asset that a lender can take possession of if you fail to repay the loan.
• Business revenue. If your business has any revenue, lenders will use this information to evaluate your application.
• Time in business. For most lenders, regardless of how recently formed, you’ll need to provide documentation showing your time in business.

Although your business may have been recently formed, many of the requirements for a standard business loan will also be necessary.

What Factors Do Lenders Consider in Business Loan Applications?

Small business lenders consider a wide range of factors when considering a business loan application, including your credit score, collateral, revenue, time in business, business plan, experience in the industry and more.

What If I’m Rejected for a Startup Business Loan?

If you’re rejected for a startup business loan , there are a number of things you can do to fund your new business. Start by contacting the lender directly to find out why your application was rejected. This information can provide insight into changes you can make to improve your credit profile and future approval odds. Then, continue to develop your business’ finances until it is established enough to qualify for a startup business loan or other financing.

If you don’t have time to improve your credit score or build your business before reapplying for a business loan, consider an alternative form of financing .

Startup Business Loan Alternatives

Startup business loans can help cover the costs of getting a new venture off the ground—or growing it into a larger operation. However, strict qualification requirements can make it difficult to get a traditional business loan. These are some popular startup business loan alternatives.

Business Credit Cards

Business credit cards let business owners access financing on a revolving, as-needed basis. Funds can be used for a wide range of purposes—including everything from buying furniture and other office supplies to larger purchases like equipment—and the application process is more streamlined than for business loans. Because lending decisions are based solely on the borrower’s personal credit score, it’s often easier to qualify for a business card than a loan.

APRs range from around 13% to 25%, but some cards offer introductory 0% APRs that let business owners make interest-free purchases for up to two years. What’s more, cardholders only pay interest on unpaid balances that carry over to the next billing cycle. So, credit cards can help startups cover monthly operating costs while avoiding interest.

Personal Loans for Business

Startup founders who are unable to qualify for a business loan may have better luck applying for a personal loan. Not only is the application process often less rigorous than for business loans, but personal loan qualification requirements are also generally less robust.

And, while loan amounts may be lower than those available through business lenders, qualified applicants may qualify for lower APRs with a personal loan than a business loan—as low as 3% for the most creditworthy applicants.

These characteristics make personal loans an excellent option for startups without established revenue or financial projections. However, some personal loan lenders don’t allow borrowers to use funds for business purposes, and borrowers are personally liable for repaying personal loans—though this is also the case for many business loans. Finally, commingling business and personal loan funds can complicate bookkeeping, tax and legal matters.

Related : Best Personal Loans

Personal Savings

For some, borrowing is not the only way to finance a new business. Business owners who have sufficient personal savings can use those funds to start or grow their businesses. Not only do personal savings eliminate the need to pay origination fees and interest, but using cash to finance a startup can help a business owner avoid giving equity to investors.

That said, investing personal money can be a risky move and may result in a business owner losing their savings if the business fails. Many startup founders also lack the spare cash to invest in their ventures—much less enough to start or grow a business without additional funding.

Friends and Family

Alternatively, startup owners may consider borrowing money from friends or family to get their business off the ground. Borrowing cash from family eliminates the need to meet traditional qualification requirements, but the approach does come with its own challenges. Before asking someone for a loan, a business owner should consider whether they’re comfortable entering into that kind of relationship.

Borrowing money from friends and family can complicate existing relationships, so it’s important to ensure all parties understand the terms of the loan. To reduce future conflict, startup founders should get the loan agreement in writing, including the loan amount, interest rate, repayment terms and other factors.

Crowdfunding

Crowdfunding offers startup founders a way to raise funds for their business without having to borrow from a traditional financial institution or friends and family. Business owners can start a crowdfunding campaign using an online fundraising platform like Kickstarter or Indiegogo.

Once the campaign is set up, users can donate funds that become available to the business at the close of the crowdfunding round. The business owner doesn’t need to meet any traditional qualification requirements, and donors do not receive any business equity in exchange for their generosity.

Find the Best Small Business Loans of 2024

Frequently asked questions (faqs), is it hard to get a startup business loan.

Getting a startup business loan can be more difficult than getting approved for financing as an established business. This is because most lenders gauge their risk of borrowing based on the financial stability and history of an applicant’s business. When considering a new business’ application, financial institutions must instead base lending decisions on business plans, revenue projections and other theoretical information.

Therefore, it is imperative that startups take time to draft a comprehensive business plan that demonstrates their ability to make on-time debt payments. Startup owners also can increase their approval odds by waiting to apply for a loan until after they can demonstrate established revenue.

How do I qualify for a business startup loan?

Lenders typically look at a business owner’s personal and business credit scores to evaluate whether they qualify for a business startup loan. Many startups, however, are too young to have an established credit score, and financial institutions must rely solely on the applicant’s personal score.

In addition to credit scores, lenders look at a range of documents to gauge the business’ financial stability and the risk of nonpayment it poses. Common requirements include tax returns and other financial records, as well as a business plan and necessary business licenses, registrations and legal documents.

Is it possible to get a startup loan if I have bad credit?

It is possible to get a startup loan with bad credit, but it’s more difficult than for better-qualified applicants. Prospective borrowers can bolster their loan applications by developing a comprehensive business plan that specifies how the company plans to make money and describes the business’ marketing strategy. Some financial institutions also specialize in lending to low-credit borrowers, but these loans may come with higher interest rates and origination fees.

How much can I get for a startup business loan?

Some small business lenders may be willing to issue microloans of $50,000 or less to startup businesses. Other lenders may be willing to offer you a larger loan, but it can be difficult to find those lenders.

What credit score do I need to get a small business loan?

Small business lenders generally require a credit score of 620 or higher to be approved for a loan. Banks often have stricter credit score requirements of 680 or higher.

Get Forbes Advisor’s ratings of the best lending platforms and helpful information on how to find the best loan based on your credit score.

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Kiah Treece is a small business owner and personal finance expert with experience in loans, business and personal finance, insurance and real estate. Her focus is on demystifying debt to help individuals and business owners take control of their finances. She has also been featured by Investopedia, Los Angeles Times, Money.com and other financial publications.

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Italy and China sign a 3-year action plan as Italian leader Meloni tries to reset relations

Italy’s Prime Minister Giorgia Meloni shakes hands with Chinese Premier Li Qiang in Beijing, Sunday, July 28, 2024, ahead of a forum with Italian and Chinese business leaders. Meloni is on an official visit to China this week to try to reset relations at a time of both fears of a trade war with the European Union and continued interest in attracting Chinese investment in auto manufacturing and other sectors. (Filippo Attili/Italian Premier Press Office Via AP)

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BEIJING (AP) — Italy and China signed a three-year action plan on Sunday to implement past agreements and experiment with new forms of cooperation, Italy’s Prime Minister Giorgia Meloni said on an official visit to the Chinese capital.

Meloni is trying to reset relations with China as fears of a trade war with the European Union are interwoven with continued interest in attracting Chinese investment in auto manufacturing and other sectors.

“We certainly have a lot of work to do and I am convinced that this work can be useful in such a complex phase on a global level, and also important at a multilateral level,” she said in remarks at the start of a meeting with Chinese Premier Li Qiang.

Her five-day visit comes several months after Italy dropped out of China’s Belt and Road Initiative, a signature policy of Chinese leader Xi Jinping to build power and transportation infrastructure around the world to stimulate global trade while also deepening China’s ties with other nations.

Still, Italy remains keen to pursue an otherwise strong economic relationship with China. Stellantis, a major automaker that includes Italy’s Fiat, announced in May that it had formed a joint venture with Leapmotor, a Chinese electric car startup, to begin selling EVs in Europe.

Li, addressing Italian and Chinese business leaders after the meeting with Meloni, said that China’s push to upgrade its economy will increase demand for high-quality products, expanding opportunities for cooperation between companies from their two countries.

He pledged to open Chinese markets further, ensure that foreign companies get the same treatment as Chinese ones and create a transparent and predictable business environment, responding to frequently heard complaints from businesses operating in the world’s second-largest economy.

“At the same time, we hope the Italian side will work with China to provide a more fair, just and non-discriminatory business environment for Chinese companies doing business in Italy,” he said.

Meloni told the business leaders that the two sides had signed an industrial collaboration memorandum that includes electric vehicles and renewable energy, which she described as “sectors where China has already been operating on the technological frontier for some time ... and is sharing the new frontiers of knowledge with partners.”

Electric vehicles have also become a symbol of growing China-EU trade tensions, with the European Union imposing provisional tariffs of up to 37.6% on China-made electric vehicles in early July. The two sides are holding talks to try to resolve the issue by an early November deadline.

Meanwhile, China launched an anti-dumping investigation into European pork exports , just days after the EU announced it would impose the tariffs on Chinese EVs.

Meloni, who arrived in Beijing on Saturday, is making her first trip to China as prime minister. She has held talks with Li before, meeting in New Delhi last September during the annual G-20 summit, which brings together the leaders of 20 major nations.

Italy’s decision to join the Belt and Road Initiative in 2019 appeared to be a political coup for China, giving it an inroad into Western Europe and a symbolic boost in a then-raging trade war with the United States. But Italy says the promised economic benefits didn’t materialize, and its membership created friction with other Western European governments and the United States.

Associated Press writer Giada Zampano in Rome contributed to this report.

A New Tax on Imports and a Split From China: Trump’s 2025 Trade Agenda

Donald J. Trump plans to sharply expand his use of tariffs if he returns to power, risking disruption to the economy in an attempt to transform it.

“We will impose stiff penalties on China and all other nations as they abuse us,” former President Donald J. Trump said at a recent rally. Tariffs of up to 10 percent on most foreign goods are possible. Credit... Jordan Gale for The New York Times

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By Charlie Savage Jonathan Swan and Maggie Haberman

• Dec. 26, 2023

Former President Donald J. Trump is planning an aggressive expansion of his first-term efforts to upend America’s trade policies if he returns to power in 2025 — including imposing a new tax on “most imported goods” that would risk alienating allies and igniting a global trade war.

While the Biden administration has kept tariffs that Mr. Trump imposed on China , Mr. Trump would go far beyond that and try to wrench apart the world’s two largest economies, which exchanged some $758 billion in goods and services last year . Mr. Trump has said he would “enact aggressive new restrictions on Chinese ownership” of a broad range of assets in the United States, bar Americans from investing in China and phase in a complete ban on imports of key categories of Chinese-made goods like electronics, steel and pharmaceuticals.

“We will impose stiff penalties on China and all other nations as they abuse us,” Mr. Trump declared at a recent rally in Durham, N.H.

In an interview, Robert Lighthizer, who was the Trump administration’s top trade negotiator and would most likely play a key role in a second term, gave the most expansive and detailed explanation yet of Mr. Trump’s trade agenda. Mr. Trump’s campaign referred questions for this article to Mr. Lighthizer, and campaign officials were on the phone for the discussion.

Essentially, Mr. Trump’s trade agenda aims at backing the United States away from integration with the global economy and steering the country toward becoming more self-contained: producing a larger share of what it consumes and wielding its might through one-on-one dealings with other countries.

Mr. Trump, who calls himself a “tariff man,” took steps in that direction as president, including placing tariffs on various imports, hamstringing the World Trade Organization and starting a trade war with China. If he is elected, he plans a more audacious intervention in hopes of eliminating the trade deficit and bolstering manufacturing — with potentially seismic consequences for jobs, prices, diplomatic relations and the global trading system.

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