business planning 101

How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated July 29, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan

Related Articles

5 Min. Read

How To Write a Business Plan for a Life Coaching Business + Free Example

3 Min. Read

What to Include in Your Business Plan Appendix

7 Min. Read

How to Write a Bakery Business Plan + Sample

1 Min. Read

How to Calculate Return on Investment (ROI)

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

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

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Start free trial

Start selling with Shopify today

Start your free trial with Shopify today—then use these resources to guide you through every step of the process.

Business Plan: What It Is and How to Write One in 9 Steps

Business plans aren’t just for entrepreneurs who need to secure funding—they can help you plan and evaluate new ideas or growth plans, too. Find out how to write a business plan and get the most out of the process in this comprehensive guide.

A great business plan can help you clarify your strategy, identify potential roadblocks, determine necessary resources, and evaluate the viability of your idea and growth plan before you start a business .

Not every successful business launches with a formal business plan, but many founders find value in the process. When you make a business plan, you get to take time to step back, research your idea and the market you’re looking to enter, and understand the scope and the strategy behind your tactics.

Learn how to write a business plan with this step-by-step guide, including tips for getting the most of your plan and real business plan examples to inspire you.

What is a business plan?

A business plan is a strategic document that outlines a company’s goals, strategies for achieving them, and the time frame for their achievement. It covers aspects like market analysis , financial projections, and organizational structure. Ultimately, a business plan serves as a roadmap for business growth and a tool to secure funding.

Often, financial institutions and investors need to see a business plan before funding any project. Even if you don’t plan to seek outside funding, a well-crafted plan becomes the guidance for your business as it scales.

The key components of a business plan

Putting together a business plan will highlight the parts of your company’s strategy and goals. It involves several key business plan components that work together to show the roadmap to your success.

Your business plan’s key components should include: 

• Executive summary: A brief overview of your entire plan.
• Company description: An explanation of what your business does and why it’s unique. 
• Market analysis: Research on your industry, target market, and competitors.
• Organization and management: Details about your business structure and the people running it.
• Products or services: A description of what you’re selling and how it benefits customers. 
• Customer segmentation: A breakdown of your target market into different groups.
• Marketing and sales plan: The strategy for promoting and selling your products and services.
• Logistics and operations: An overview of how your business will run its daily activities and manage resources.
• Financials: A complete look at projected income, expenses, and funding needs. 

How to write a business plan in 9 steps

• Draft an executive summary
• Write a company description
• Perform a market analysis
• Outline the management and organization
• List your products and services
• Perform customer segmentation
• Define a marketing plan
• Provide a logistics and operations plan
• Make a financial plan

Few things are more intimidating than a blank page. Starting your business plan with a structured outline and key elements for what you’ll include in each section is the best first step you can take.

Since an outline is such an important step in the process of writing a business plan, we’ve put together a high-level overview to get you started (and help you avoid the terror of facing a blank page).

Once you have your business plan template in place, it’s time to fill it in. We’ve broken it down by section to help you build your plan step by step.

1. Draft an executive summary

A good executive summary is one of the most crucial sections of your business plan—it’s also the last section you should write.

The executive summary distills everything that follows and gives time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your business that persuades them to read further.

Again, it’s a summary, so highlight the key points you’ve uncovered while writing your plan. If you’re writing for your own planning purposes, you can skip the summary altogether—although you might want to give it a try anyway, just for practice.

An executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing in all of the salient information a bit stressful—but it’s not impossible. 

Your business plan’s executive summary should include:

• Business concept. What does your business do?
• Business goals and vision. What does your business want to accomplish?
• Product description and differentiation. What do you sell, and why is it different?
• Target market. Who do you sell to?
• Marketing strategy. How do you plan on reaching your customers?
• Current financial state. What do you currently earn in revenue?
• Projected financial state. What do you foresee earning in revenue?
• The ask. How much money are you asking for?
• The team. Who’s involved in the business?

2. Write a company description

This section of your business plan should answer two fundamental questions: 

• Who are you?
• What do you plan to do? 

Answering these questions with a company description provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment. 

For example, clean makeup brand Saie shares a letter from its founder on the company’s mission and why it exists.

Clarifying these details is still a useful exercise, even if you’re the only person who’s going to see them. It’s an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies.

Here are some of the components you should include in your company description:

• Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or incorporated company?)
• Your business model
• Your industry
• Your business’s vision, mission, and value proposition
• Background information on your business or its history
• Business objectives, both short and long term
• Your team, including key personnel and their salaries

Brand values and goals

To define your brand values , think about all the people your company is accountable to, including owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge.

Your company description should also include both short- and long-term goals. Short-term goals, generally, should be achievable within the next year, while one to five years is a good window for long-term goals. Make sure your goal setting includes SMART goals : specific, measurable, attainable, realistic, and time-bound.

Vision and mission statements

Once you know your values, you can write a mission statement . Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single sentence.

Next, craft your vision statement : What impact do you envision your business having on the world once you’ve achieved your vision? Phrase this impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise.

3. Perform a market analysis

Market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it.

No matter what type of business you start, whether a home-based business or service-based, it’s no exaggeration to say your market can make or break it. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. 

If you choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale. Your market analysis should include an overview of how big you estimate the market is for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan.

How big is your potential market?

The potential market is an estimate of how many people need your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as possible to validate your estimated potential market.

Since this can be a daunting process, here are some general tips to help you begin your research:

• Understand your ideal customer profile. Look for government data about the size of your target market , learn where they live, what social channels they use, and their shopping habits.
• Research relevant industry trends and trajectory. Explore consumer trends and product trends in your industry by looking at Google Trends, trade publications, and influencers in the space.
• Make informed guesses. You’ll never have perfect, complete information about your total addressable market. Your goal is to base your estimates on as many verifiable data points as necessary.

Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry.

Read more: What is a Marketing Analysis? 3 Steps Every Business Should Follow

SWOT analysis

A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. 

That involves asking questions like: 

• What are the best things about your company? 
• What are you not so good at? 
• What market or industry shifts can you take advantage of and turn into opportunities? 
• Are there external factors threatening your ability to succeed?

SWOT is often depicted in a grid or otherwise visual way. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market.

Competitive analysis

There are three overarching factors you can use to differentiate your business in the face of competition:

• Cost leadership. You have the capacity to maximize profits by offering lower prices than the majority of your competitors. Examples include companies like Mejuri and Endy .
• Differentiation. Your product or service offers something distinct from the current cost leaders in your industry and banks on standing out based on your uniqueness. Think of companies like Knix and QALO .
• Segmentation. You focus on a very specific, or niche, target market, and aim to build traction with a smaller audience before moving on to a broader market. Companies like TomboyX and Heyday Footwear are great examples of this strategy.

To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape.

You’ll always have competition in the market, even with an innovative product, so it’s important to include a competitive overview in your business plan. If you’re entering an established market, include a list of a few companies you consider direct competitors and explain how you plan to differentiate your products and business from theirs.

For example, if you’re selling jewelry , your competitive differentiation could be that, unlike many high-end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your customers.

If you’re entering a market where you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours. For example, if you’re selling an innovative new piece of kitchen equipment, it’s too easy to say that because your product is new, you have no competition. Consider what your potential customers are doing to solve the same problems.

4. Outline the management and organization

The management and organization section of your business plan should tell readers about who’s running your company. Detail the legal structure of your business. Communicate whether you’ll incorporate your business as an S corporation or create a limited partnership or sole proprietorship.

If you have a management team, use an organizational chart to show your company’s internal structure, including the roles, responsibilities, and relationships between people in your chart. Communicate how each person will contribute to the success of your startup.

5. List your products and services

Your products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers.

If you sell many items, you can include more general information on each of your product lines. If you only sell a few, provide additional information on each. 

For example, bag shop BAGGU sells a large selection of different types of bags, in addition to home goods and other accessories. Its business plan would list out those categories and key details about the products within each category.

Describe new products you’ll launch in the near future and any intellectual property you own. Express how they’ll improve profitability. It’s also important to note where products are coming from—handmade crafts are sourced differently than trending products for a dropshipping business, for instance.

6. Perform customer segmentation

Your ideal customer, also known as your target market, is the foundation of your marketing plan , if not your business plan as a whole. 

You’ll want to keep this buyer persona in mind as you make strategic decisions, which is why an overview of who they are is important to understand and include in your business plan.

To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes:

• Where they live
• Their age range
• Their level of education
• Some common behavior patterns
• How they spend their free time
• Where they work
• What technology they use
• How much they earn
• Where they’re commonly employed
• Their values, beliefs, or opinions

This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on who your customers are and what they value.

For example, a college student has different interests, shopping habits, and pricing sensitivity than a 50-year-old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer.

Put your customer data to work with Shopify’s customer segmentation

Shopify’s built-in segmentation tools help you discover insights about your customers, build segments as targeted as your marketing plans with filters based on your customers’ demographic and behavioral data, and drive sales with timely and personalized emails.

7. Define a marketing plan

Your marketing efforts are directly informed by your ideal customer. That’s why, as you outline your current decisions and future strategy, your marketing plan should keep a sharp focus on how your business idea is a fit for that ideal customer.

If you’re planning to invest heavily in Instagram marketing or TikTok ads , for example, it makes sense to include whether Instagram and TikTok are leading platforms for your audience. If the answer is no, that might be a sign to rethink your marketing plan.

Market your business with Shopify’s customer marketing tools

Shopify has everything you need to capture more leads, send email campaigns, automate key marketing moments, segment your customers, and analyze your results. Plus, it’s all free for your first 10,000 emails sent per month.

Most marketing plans include information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience.

• Price: How much do your products cost, and why have you made that decision?
• Product: What are you selling and how do you differentiate it in the market?
• Promotion: How will you get your products in front of your ideal customer?
• Place: Where will you sell your products? On what channels and in which markets?

Promotion may be the bulk of your plan, since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix.

8. Provide a logistics and operations plan

Logistics and operations are the workflows you’ll implement to make your business idea a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were seeking investment.

Cover all parts of your planned operations, including:

• Suppliers. Where do you get the raw materials you need for production, or where are your products produced?
• Production. Will you make, manufacture, wholesale , or dropship your products? How long does it take to produce your products and get them shipped to you? How will you handle a busy season or an unexpected spike in demand?
• Facilities. Where will you and any team members work? Do you plan to have a physical retail space? If yes, where?
• Equipment. What tools and technology do you require to be up and running? This includes everything from software to lightbulbs and everything in between.
• Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you use a third-party fulfillment partner?
• Inventory. How much will you keep on hand, and where will it be stored? How will you ship it to partners if required, and how will you approach inventory management ?

This section should signal to your reader that you’ve got a solid understanding of your supply chain, with strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you anticipate breaking even on your initial spending.

9. Make a financial plan

No matter how great your idea is—and regardless of the effort, time, and money you invest—a business lives or dies based on its financial health. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future.

The level of detail required in your financial plan will depend on your audience and goals, but typically you’ll want to include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include financial data and projections.

Here’s a spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections if needed.

Let’s review the types of financial statements you’ll need.

Income statements

Your income statement is designed to give readers a look at your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information.

Balance sheets

Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own), and on the other side, all your liabilities (what you owe). 

This provides a snapshot of your business’s shareholder equity, which is calculated as:

Assets - Liabilities = Equity

Cash flow statements

Your cash flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid.

When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent .

It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required.

📚 Read more: Cash Flow Management: What It Is & How To Do It (+ Examples)

Why write a business plan?

Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans are commonly associated with getting a business loan. 

Business plans also help owners identify areas of weakness before launching, potentially avoiding costly mistakes down the road. “Laying out a business plan helped us identify the ’unknowns’ and made it easier to spot the gaps where we’d need help or, at the very least, to skill up ourselves,” says Jordan Barnett, owner of Kapow Meggings .

There are several other compelling reasons to consider writing a business plan, including:

• Strategic planning. Writing out your plan is an invaluable exercise for clarifying your ideas and can help you understand the scope of your business, as well as the amount of time, money, and resources you’ll need to get started.
• Evaluating ideas. If you’ve got multiple ideas in mind, a rough business plan for each can help you focus your time and energy on the ones with the highest chance of success.
• Research. To write a business plan, you’ll need to research your ideal customer and your competitors—information that will help you make more strategic decisions.
• Recruiting. Your business plan is one of the easiest ways to communicate your vision to potential new hires and can help build their confidence in the venture, especially if you’re in the early stages of growth.
• Partnerships. If you plan to collaborate with other brands , having a clear overview of your vision, your audience, and your business strategy will make it much easier for them to identify if your business is a good fit for theirs.
• Competitions. There are many business plan competitions offering prizes such as mentorships, grants, or investment capital. 

If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, making a business plan is an excellent starting point.

Business plan types

Business plan types can span from one page to multiple pages, with detailed graphs and reports. There’s no one right way to create a business plan. The goal is to convey the most important information about your company for readers.

Common business plans we see include, but are not limited to, the following types:

Traditional business plans

These are the most common business plans. Traditional business plans take longer to write and can be dozens of pages long. Venture capitalist firms and lenders ask for this plan. Traditional business plans may not be necessary if you don’t plan to seek outside funding. That’s where a lean business plan comes in.

Lean business plans

A lean business plan is a shorter version of a traditional business plan. It follows the same format, but only includes the most important information. Businesses use lean business plans to onboard new hires or modify existing plans for a specific target market. If you want to write a business plan purely for your own planning purposes when starting a new small business, a lean business plan is typically the way to go. 

Nonprofit business plans

A nonprofit business plan is for any entity that operates for public or social benefit. It covers everything you’ll find in a traditional business plan, plus a section describing the impact the company plans to make. For example, a speaker and headphone brand would communicate that they aim to help people with hearing disabilities. Donors often request this type of business plan.

📚 Read more: 7 Business Plan Examples to Inspire Your Own (2024)

7 tips for creating a small business plan

There are a few best practices when it comes to writing a business plan. While your plan will be unique to your business and goals, keep these tips in mind as you write.

1. Know your audience

When you know who will be reading your plan—even if you’re just writing it for yourself to clarify your ideas—you can tailor the language and level of detail to them. This can also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as impactful.

2. Have a clear goal

When creating a business plan, you’ll need to put in more work and deliver a more thorough plan if your goal is to secure funding for your business, versus working through a plan for yourself or your team.

3. Invest time in research

Sections of your business plan will primarily be informed by your ideas and vision, but some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re selling to, whether there’s demand for your products, and who else is selling similar products or services.

4. Keep it short and to the point

No matter who you’re writing for, your business plan should be short and readable—generally no longer than 15 to 20 pages. If you do have additional documents you think may be valuable to your audience and your goals, consider adding them as appendices.

5. Keep the tone, style, and voice consistent

This is best managed by having a single person write the plan or by allowing time for the plan to be properly edited before distributing it.

6. Use a business plan template

You can also use a free business plan template to provide a skeleton for writing a plan. These templates often guide you through each section—from financial projects to market research to mission statement—ensuring you don’t miss a step.

7. Try business plan software

Writing a business plan isn’t the easiest task for business owners. But it’s important for anyone starting or expanding a business. 

Fortunately, there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan software also has business plan templates and tutorials to help you finish a comprehensive plan in hours, rather than days.

A few curated picks include:

• LivePlan : the most affordable option with samples and templates
• Bizplan : tailored for startups seeking investment
• Go Small Biz : budget-friendly option with industry-specific templates

📚 Read more:  6 Best Business Plan Software Platforms (2024)

Common mistakes when writing a business plan

Other articles on business plans would never tell you what we’re about to tell you: Your business plan can fail. 

The last thing you want is for time and effort to go down the drain, so avoid these common mistakes:

• Bad business idea. Sometimes your idea may be too risky for potential investors or too expensive to run, or there’s no market. Aim for small business ideas that require low startup costs.
• No exit strategy. If you don’t show an exit strategy, or a plan for investors to leave the business with maximum profits, you’ll have little luck securing capital.
• Unbalanced teams. A great product is the cost of entry to starting a business. But an incredible team will take it to the top. Unfortunately, many business owners overlook a balanced team. They focus on potential profits, without worrying about how it will be done operationally. 
• Missing financial projections. Don’t forget your balance sheet, cash flow statements, P&L statements, and income statements. Include your break-even analysis and return-on-investment calculations in your financial projections to create a successful business plan.
• Spelling and grammar errors. All the best organizations have an editor review their documents. If someone spots typos while reading your business plan, sloppy errors like those can evoke a larger sense of distrust in your capabilities to run a successful company. It may seem minor, but legibility and error-free writing helps make a good impression on your business plan’s audience. 

Updating and revising a business plan

Business plans aren’t static documents. The business world moves fast and your plan will need to keep up. You don’t want it to get stale. 

Here’s a good rule of thumb for business plan revisions:

• Monthly: Update KPIs like sales, website traffic, and customer acquisition costs. Review your cash flow. Is your money situation as expected? Make the necessary changes.
• Quarterly : Are you hitting your targets? Be sure to update your financial performance, successful marketing campaigns, and any other recent milestones achieved.
• Yearly : Think of this as a big overhaul. Compare projections to actuals and update your forecasts. 

When updating your plan, don’t just go with your gut. Use data like surveys and website analytics to inform each update. Using outdated information will only lead to confusion and missed opportunities.

Remember not to just update one part of your plan—it’s all connected. Fortunately, with business plan software you can easily give your plan attention and help your business thrive. 

How to present a business plan

Here are some tips for presenting your business plan to stakeholders.

Understand your audience

Start by doing homework on who you’ll be presenting to. Are they investors, potential partners, or a bank? Each group will have different interests and expectations. 

Consider the following about your presentation audience:

• Background: What’s their professional experience?
• Knowledge level: How familiar are they with your industry?
• Interests: What aspects of your plan will excite them most?
• Concerns: What might make them hesitant about your idea?

Depending on who you’re presenting to, you can tweak your presentation accordingly. For example, if you’re presenting to a group of investors, you’d probably want to highlight financial projections and market analysis. 

Structure your presentation

Once you know your audience, you can organize your presentation. Think of this as the story you’ll tell listeners. A well-structured presentation helps listeners follow along and remember key points. 

Your opening should grab attention and give a snapshot of what’s to come. It’s kind of like an elevator pitch that gives an overview of your business idea. 

From there, break your presentation into clear sections:

• Problem: What issue are you solving?
• Solution: How does your business address this problem?
• Market: Who are your potential customers?
• Competition: Who else is in this space, and how are you different?
• Business model: How will you make money?
• Financial projections: What are your expected costs and revenues?
• Team: Who’s involved, and what makes them qualified?

Use visual aids to support your points. Graphs, charts, and even simple illustrations can make your information more digestible. Remember to practice your timing, too. A good presentation flows smoothly, giving each section the right amount of attention for its intended audience. 

Handle objections and questions

Facing objections or questions can be nerve-wracking, but it’s actually a great opportunity. It shows your listeners are engaged and thinking critically about your idea. The key is to be prepared and stay calm. 

Try to anticipate potential questions. Put yourself in the listener’s shoes: What would you want to know if you were them? Come up with clear answers to these questions ahead of time.

When handling questions:

• Listen carefully: Make sure you fully understand the question before answering.
• Stay positive: Even if the question seems critical, respond with enthusiasm.
• Be honest: If you don’t know something, it’s OK. Offer to find out and follow up. 

Use questions as a way to highlight the strengths of your business plan. If a question needs more thought or refresh, it’s perfectly fine to say, “That’s a great question. I’d love to look further into it and get back to you with a detailed answer.”

Handling questions well shows that you’re knowledgeable, thoughtful, and open to feedback—all things that will impress listeners and make them feel confident in your business plan. 

Prepare your business plan today

A business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. 

Whether you’re working on starting a new online business idea , building a retail storefront, growing your established business, or purchasing an existing business , you now understand how to write a business plan that suits your business’s goals and needs.

Feature illustration by Rachel Tunstall

• How to Start a Dropshipping Business- A Complete Playbook for 2024
• The Ultimate Guide To Dropshipping (2024)
• AliExpress Dropshipping- How to Dropship From AliExpress
• How to Start a Clothing Line in 12 Steps (2024)
• How To Source Products To Sell Online
• How To Do Crowdfunding: With Expert Tips and Examples From Successful Campaigns
• How to Start a Candle Business (with Examples)
• What Is Affiliate Marketing and How to Get Started
• Pinterest Marketing 101- How to Promote Your Business on Pinterest
• Getting Started on IG- A Beginner’s Guide to Instagram Marketing

Business plan FAQ

How do i write a business plan.

Learning how to write a business plan is simple if you use a business plan template or business plan software. Typically, a traditional business plan for every new business should have the following components:

• Executive summary
• Company description, including value proposition
• Market analysis and competitive analysis
• Management and organization
• Products and services
• Customer segmentation
• Marketing plan
• Logistics and operations
• Financial plan and financial projections

What is a good business plan?

A good business plan clearly communicates your company’s purpose, goals, and growth strategies. It starts with a strong executive summary, then adequately outlines idea feasibility, target market insights, and the competitive landscape. 

A business plan template can help businesses be sure to follow the typical format of traditional business plans, which also include financial projections, details about the management team, and other key elements that venture capital firms and potential investors want to see.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are: 

• To clarify your plans for growth
• To understand your financial needs
• To attract funding from investors or secure a business loan

What are the different types of business plans?

The types of business plans include startup, refocusing, internal, annual, strategic, feasibility, operations, growth, and scenario-based. Each type of business plan has a different purpose. Business plan formats include traditional, lean, and nonprofit. Find a business plan template for the type of plan you want to write.

Keep up with the latest from Shopify

Get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

By entering your email, you agree to receive marketing emails from Shopify.

popular posts

The point of sale for every sale.

Subscribe to our blog and get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

Unsubscribe anytime. By entering your email, you agree to receive marketing emails from Shopify.

Latest from Shopify

Aug 29, 2024

Aug 28, 2024

Learn on the go. Try Shopify for free, and explore all the tools you need to start, run, and grow your business.

Try Shopify for free, no credit card required.

Small Business Trends

How to create a business plan: examples & free template.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Executive summary.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

Company Description

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Market analysis.

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

Competitive Analysis

Organization and management team.

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Products and Services Offered

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Marketing and Sales Strategy

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

Logistics and Operations Plan

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Income Statement

Cash flow statement.

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

Tips on Writing a Business Plan

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

What is a Business Plan?

Why you should write a business plan.

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

What are the Different Types of Business Plans?

Using Business Plan Software

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

Can i write a business plan by myself, is it possible to create a one-page business plan.

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

What is a business plan outline, what are the 5 most common business plan mistakes, what questions should be asked in a business plan.

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

How is business planning for a nonprofit different.

• Skip to primary navigation
• Skip to main content

Better Knowledge. Your Insight Is Sharper

From Idea to Implementation: Essential Business Planning Strategies

Updated: August 28, 2024 · Reviewed by: Ahmad Nasrudin

This post may contain affiliate links, meaning we may earn a small commission if you purchase through our links. This helps support our work.

Business planning is a crucial step in starting and growing a successful enterprise. It provides a roadmap for your venture, outlining your goals, strategies, and financial projections.

Whether you’re a budding entrepreneur or an established business owner, a well-crafted business plan can help you:

• Define your business goals and objectives
• Conduct thorough market research
• Develop a sound financial strategy
• Attract investors and secure funding
• Measure progress and make informed decisions

In this comprehensive guide, we’ll walk you through the process of creating a business plan, from understanding the key components to developing effective strategies. By the end, you’ll be equipped to build a solid foundation for your business and increase your chances of success.

Understanding Business Planning

What is a business plan.

A business plan is a comprehensive document that outlines your business strategy, goals, and financial projections. It serves as a roadmap for your venture, guiding your decisions and attracting potential investors.

There are several types of business plans, each with its own specific focus:

• Operational plans: These plans focus on a business’s day-to-day operations, including production, marketing, sales, and customer service.
• Strategic plans: Strategic plans outline a company’s long-term goals and objectives, and the strategies for achieving them.
• Marketing plans: Marketing plans focus on the specific marketing strategies and tactics that a business will use to reach its target market.

Why is a business plan important?

A well-crafted business plan offers numerous benefits, including:

• Improved decision-making: A business plan helps you make informed decisions by providing a clear framework for your business strategy.
• Attracting investors and securing funding: Investors are likelier to invest in businesses with well-thought-out plans.
• Enhanced credibility: A business plan demonstrates your understanding of the market, your industry, and your business’s potential.
• Increased focus and accountability: A business plan helps you stay focused on your goals and measure your progress.
• Risk mitigation: By identifying potential risks and challenges, a business plan can help you develop strategies to mitigate them.

A business plan is essential for any entrepreneur or business owner, providing a foundation for success and growth.

Creating a Business Plan

What are the key components of a business plan.

A well-structured business plan typically includes the following key components:

• Executive summary: A concise business overview, including your mission, vision, and key value proposition.
• Company description: A detailed description of your business, including its legal structure , ownership, and management team.
• Market analysis: An in-depth analysis of your target market, competition, and industry trends.
• Organizational structure: A breakdown of your company’s organizational chart and responsibilities.
• Products or services: A detailed description of your offerings, including their features, benefits, and pricing.
• Marketing and sales plan: Your strategy for promoting your products or services and generating sales.
• Financial projections: Your projected income statement, balance sheet, and cash flow statement.

Each of these components is essential for a comprehensive business plan. Together, they provide a clear picture of your business, its market potential, and its financial viability.

How long should a business plan be?

While a business plan has no strict length requirement, it is typically 15-25 pages long . However, the length may vary depending on the complexity of your business and the level of detail required.

A shorter plan may be sufficient for a small, simple business, while a larger, more complex business may require a more detailed plan. The key is to ensure that your plan is clear and concise and provides the necessary information to attract investors or secure funding.

Who should read my business plan?

Your business plan can be valuable to a variety of stakeholders, including:

• Investors: Investors may use your business plan to assess the potential return on their investment.
• Lenders: Lenders may use your business plan to evaluate your creditworthiness and determine whether to provide funding.
• Employees: Employees can use the business plan to understand the company’s goals, strategy, and their role within the organization.
• Suppliers: Suppliers may use your business plan to assess your financial stability and future growth potential.
• Partners: Partners can use your business plan to understand your business goals and how you plan to collaborate.

By sharing your business plan with relevant stakeholders, you can build relationships, secure funding, and gain valuable insights and support.

Free Up Your Learning Journey

Note: While those offer many free courses, some might require payment for certificates or additional materials. Please check individual course details.

Market Analysis

What is market research.

Market research is the process of gathering and analyzing information about a market. It helps you understand your target market, competition, industry trends, and consumer behavior.

There are two main types of market research:

• Primary research: Collecting original data through surveys, focus groups, interviews, or observations.
• Secondary research: Analyzing existing data from government agencies, industry reports, academic studies, and other sources.

How can I conduct market research?

There are numerous methods for conducting market research, both online and offline. Here are some common approaches and resources:

• Surveys: Gather quantitative and qualitative data by creating surveys using online tools like SurveyMonkey or Google Forms.
• Focus groups: Conduct group discussions to obtain insights and feedback from potential customers.
• Interviews: Interview individuals in your target market to gain deeper understanding and perspectives.
• Online research: Use search engines, industry databases, and social media platforms to find information on market trends, competitors, and consumer behavior.
• Government data: Utilize government agencies like the U.S. Census Bureau and the Bureau of Labor Statistics for demographic data and economic indicators.
• Industry reports: Consult reports from organizations like Forrester, Gartner, and IBISWorld for in-depth market analysis.
• Social media listening: Monitor social media platforms to track conversations and sentiment about your industry and competitors.

When conducting market research, consider the following tips:

• Define your research objectives: Clearly outline what you want to learn from your research.
• Choose appropriate methods: The research methods best suit your objectives and resources.
• Develop a sampling plan: Determine who you will survey or interview and how you will select your sample.
• Analyze your data: Use statistical tools and techniques to analyze your research data and draw meaningful conclusions.
• Interpret your findings: Consider the implications of your research findings and how they can inform your business strategy.

By following these guidelines and combining various research methods, you can gather valuable insights to inform your business decisions and develop effective marketing strategies.

What is a target market?

Your target market is the specific people most likely to purchase your product or service. Identifying your target market is essential for effectively marketing your business and tailoring your offerings to meet their needs.

Here are some strategies to help you identify your target market:

• Create customer personas: Develop detailed profiles of your ideal customers, including their demographics (age, gender, income, education, location), psychographics (lifestyle, interests, values, beliefs), and behaviors (purchasing habits, brand preferences, online behavior).
• Analyze your existing customers: If you have an existing business, analyze the characteristics of your current customers to identify patterns and trends.
• Conduct market research: Use surveys, focus groups, and interviews to gather data about potential customers and their preferences.

By understanding your target market, you can tailor your marketing efforts and product offerings to meet their specific needs and preferences, increasing your chances of success.

Financial Projections

What financial statements should i include.

When creating your business plan, you should include the following financial statements :

• Income statement: Also known as a profit and loss statement, this shows your business’s revenue, expenses, and net income over a specific period.
• Balance sheet: This statement shows your business’s assets, liabilities, and equity at a specific point in time.
• Cash flow statement: This statement shows the cash flow in and out of your business over a specific period.

These three interrelated statements provide a comprehensive picture of your business’s financial health.

How do I create financial projections?

Financial projections are estimates of your business’s future financial performance. To create accurate projections, you’ll need to use a combination of historical data, industry benchmarks, and assumptions about future growth.

Here are some steps to follow:

• Gather historical data: Collect data on your past sales, expenses, and cash flow.
• Analyze industry trends: Research industry trends and forecasts to identify potential opportunities and challenges.
• Make assumptions about future growth: Make reasonable assumptions about your business’s future sales, expenses, and other factors.
• Create financial projections: Use this information to create projections for your income statement, balance sheet, and cash flow statement.

Remember that financial projections are just estimates, and actual results may vary. It’s important to regularly review and update your projections as your business grows and changes.

What is a break-even analysis?

A break-even analysis is a financial tool that helps you determine the sales volume you need to cover your costs and start making a profit. It calculates your break-even point, the point at which your total revenue equals your total costs.

To calculate your break-even point, you’ll need to know your fixed costs (costs that remain constant regardless of sales volume) and your variable costs (costs that vary with sales volume). You can then use the following formula:

• Break-even point = Fixed costs / (Selling price per unit – Variable cost per unit)

By understanding your break-even point, you can assess the feasibility of your business model and make informed decisions about pricing, sales targets, and cost-cutting measures.

Attracting Investors and Securing Funding

How can i attract investors.

Attracting investors requires effective communication , networking, and showcasing your business’s potential. Here are some key strategies:

• Create a compelling pitch deck: Develop a visually appealing and informative presentation highlighting your business idea , market opportunity, financial projections, and team.
• Network with potential investors: Attend industry events, connect with investors through online platforms, and leverage your professional network to identify potential investors.
• Highlight your business’s potential: Emphasize the growth potential of your business, the return on investment for investors, and the unique value proposition of your product or service.

What types of funding are available?

There are various funding sources available for businesses, each with its own advantages and disadvantages:

• Angel investors: Individuals who invest their own money in early-stage businesses. Angel investors often provide capital in exchange for equity.
• Venture capital firms: Companies that invest in high-growth businesses. Venture capital firms typically invest larger sums of money and expect higher returns.
• Banks: Banks offer loans to businesses, which can be used to finance operations, purchase equipment, or invest in growth.
• Crowdfunding platforms: Online platforms that allow individuals to raise funds from many people. Crowdfunding can be a valuable source of funding for startups and small businesses.

The most suitable funding source for your business will depend on your specific needs, its stage, and your ability to meet the requirements of different investors.

What should I include in my funding pitch?

A strong funding pitch should clearly articulate the following:

• Your business idea: Explain what your business does and the problem it solves.
• Market opportunity: Demonstrate the size and growth potential of your target market.
• Competitive advantage: Explain what sets your business apart from competitors.
• Financial projections: Present your financial projections, including revenue, expenses, and profitability.
• Team: Highlight your team members’ skills, experience, and passion.
• Investment requirements: Clearly state the funding you seek and how the funds will be used.

By following these guidelines and tailoring your pitch to your specific audience, you can increase your chances of attracting investors and securing the funding you need to grow your business.

Measuring Progress and Making Informed Decisions

How can i track my business’s progress.

Tracking your business’s progress is essential for identifying areas of strength and weakness, making informed decisions, and ensuring you’re on track to achieve your goals. Key performance indicators (KPIs) are metrics you can use to measure your business’s performance against specific goals.

Some examples of KPIs include:

• Sales revenue: Total revenue generated by your business.
• Profit margin: The percentage of revenue that remains after deducting expenses.
• Customer acquisition cost : The cost of acquiring a new customer.
• Customer retention rate: The percentage of customers who continue to do business with you.
• Market share: The percentage of a market that your business controls.
• Employee satisfaction: The level of satisfaction among your employees.

By tracking these KPIs and comparing them to your goals, you can identify areas where you are succeeding and areas where you need to improve.

How can I make informed decisions?

Making informed decisions is crucial for the success of your business. Here are some tips for making effective decisions:

• Regularly review your business plan: As your business evolves, it’s important to review and update it to ensure it aligns with your current goals and strategies.
• Analyze data: Use data from your KPIs and other sources to identify trends, opportunities, and challenges.
• Be prepared to adapt: The business landscape constantly changes, so adapt your strategy as needed.
• Seek advice and guidance: Don’t be afraid to seek advice from mentors, advisors, or other experts.
• Trust your instincts: While data and analysis are important, sometimes you must trust your gut and make decisions based on intuition.

By following these tips, you can make informed decisions to help your business grow and succeed.

Additional Tips

How often should i update my business plan.

Your business plan should be a living document that evolves as your business grows and changes. Reviewing and updating your plan regularly is important to ensure it remains relevant and effective.

The frequency of updates will depend on several factors, including:

• Business growth: As your business expands, you must update your financial projections and market analysis.
• Market changes: If your industry or target market undergoes significant changes, you may need to revise your business strategy.
• Performance: If your business is not meeting its goals, you may need to adjust your plan.

A general guideline is to review and update your business plan annually or more frequently if necessary.

Can I use a business plan template?

Using a business plan template can be a helpful starting point, but it’s important to customize it to fit your specific business. Templates can provide a structure and outline but may not include all the necessary sections or address your unique needs.

Advantages of using a template:

• Saves time: Templates can help you start quickly and avoid common mistakes.
• Provides structure: Templates can help you organize your thoughts and ensure that you include all the essential elements of a business plan.

Disadvantages of using a template:

• Lack of customization: Templates may not be tailored to your specific industry or business model.
• Limited flexibility: Templates can be restrictive, limiting your ability to add or remove sections as needed.

When choosing a template, look for one that is well-structured, easy to use, and adaptable to your specific business needs.

Should I seek professional help?

While you can create a basic business plan on your own, consulting with a business advisor or accountant can provide valuable guidance and expertise. Professionals can help you:

• Develop a comprehensive plan: Ensure that your plan includes all the necessary components and is well-structured.
• Conduct market research: Gather and analyze data to inform your business strategy.
• Create financial projections: Develop accurate financial projections based on industry benchmarks and your business’s specific circumstances.
• Identify potential challenges and opportunities: Assess the risks and rewards associated with your business venture.
• Provide guidance and support: Receive ongoing support and advice as you implement your business plan.

If you’re unsure about your ability to create a high-quality business plan, consider consulting with a professional. They can help you develop a plan to increase your chances of success.

Start building your dream business today. Click here to learn more.

• Business Fundamentals: Your Simplified Guide for Success
• Business Plan: Guide for Startups & Investors (Funding, Strategy)
• The Ultimate Guide to Entrepreneurship and Starting a Business
• The Ultimate Guide to Understanding Different Types of Organizations
• The Essential Guide to Business Resilience for Aspiring Entrepreneurs

About Ahmad Nasrudin

Introverted writer with a passion for storytelling. Leveraged analytical skills from financial background (equity research, credit risk) at a leading rating agency to enhance writing with a unique statistical and macroeconomic perspective. Learn more about me

• Values, Attitudes and Lifestyles (VALS): Categories and Why They Matter
• Roles of Business: Satisfying Needs and Wants and Creating Value, Jobs, Income
• Business Size: How Business Scale Shapes Success (Importances, Measurement, Classification)
• Stakeholder Conflict: Balancing Interests for Business Success (Types, Examples, Resolution)
• Lower-Level Management: Examples, Roles and Skills

Finding Investors

How Funding Works

Idea Validation Bootcamp

Pitch Deck Bootcamp

Pitching Investors

Product MVP

Product/MVP

Idea Validation

Customer Acquisition

Emotional Support

How To Write A Business Plan: A Comprehensive Guide

The Startups Team

How To Write A Business Plan: A Comprehensive Guide

A comprehensive, step-by-step guide - complete with real examples - on writing business plans with just the right amount of panache to catch an investor's attention and serve as a guiding star for your business.

Introduction to Business Plans

So you've got a killer startup idea. Now you need to write a business plan that is equally killer.

You fire up your computer, open a Google doc, and stare at the blank page for several minutes before it suddenly dawns on you that,  Hm…maybe I have no idea how to write a business plan from scratch after all.

Don't let it get you down. After all, why would you know anything about business planning? For that very reason we have  4 amazing business plan samples  to share with you as inspiration.

For most founders,  writing a business plan  feels like the startup equivalent of homework. It's the thing you know you have to do, but nobody actually wants to do.

Here's the good news: writing a business plan doesn't have to be this daunting, cumbersome chore.

Once you understand the fundamental questions that your business plan should answer for your readers and how to position everything in a way that compels your them to take action, writing a business plan becomes way more approachable.

Before you set fingers to the keyboard to turn your business idea into written documentation of your organizational structure and business goals, we're going to walk you through the most important things to keep in mind (like company description, financials, and market analysis, etc.) and to help you tackle the writing process confidently — with plenty of real life business plan examples along the way to get you writing a business plan to be proud of!

Keep It Short and Simple.

There's this old-school idea that business plans need to be ultra-dense, complex documents the size of a doorstop because that's how you convey how serious you are about your company.

Not so much.

Complexity and length for complexity and length's sake is almost never a good idea, especially when it comes to writing a business plan. There are a couple of reasons for this.

1. Investors Are Short On Time

If your chief goal is using your business plan to secure funding, then it means you intend on getting it in front of an investor. And if there's one thing investors are, it's busy. So keep this in mind throughout writing a business plan.

Investors wade through hundreds of business plans a year. There's no version of you presenting an 80-page business plan to an investor and they enthusiastically dive in and take hours out of their day to pour over the thing front to back.

Instead, they're looking for you to get your point across as quickly and clearly as possible so they can skim your business plan and get to the most salient parts to determine whether or not they think your opportunity is worth pursuing (or at the very least initiating further discussions).

You should be able to refine all of the key value points that investors look for to 15-20 pages (not including appendices where you will detail your financials). If you find yourself writing beyond that, then it's probably a case of either over explaining, repeating information, or including irrelevant details in your business plan (you don't need to devote 10 pages to how you're going to set up your website, for example).

Bottom line: always be on the lookout for opportunities to “trim the fat" while writing a business plan (and pay special attention to the executive summary section below), and you'll be more likely to secure funding.

2. Know Your Audience

If you fill your business plan with buzzwords, industry-specific jargon or acronyms, and long complicated sentences, it might make sense to a handful of people familiar with your niche and those with superhuman attention spans (not many), but it alienates the vast majority of readers who aren't experts in your particular industry. And if no one can understand so much as your company overview, they won't make it through the rest of your business plan.

Your best bet here is to use simple, straightforward language that's easily understood by anyone — from the most savvy of investor to your Great Aunt Bertha who still uses a landline.

How To Format Your Business Plan

You might be a prodigy in quantum mechanics, but if you show up to your interview rocking cargo shorts and lime green Crocs, you can probably guess what the hiring manager is going to notice first.

In the same way,  how  you present your business plan to your readers equally as important as what you present to them. So don't go over the top with an extensive executive summary, or get lazy with endless bullet points on your marketing strategy.

If your business plan is laden with inconsistent margins, multiple font types and sizes, missing headings and page numbers, and lacks a table of contents, it's going to create a far less digestible reading experience (and totally take away from your amazing idea and hours of work writing a business plan!)

While there's no one  right  way to format your business plan, the idea here is to ensure that it presents professionally. Here's some easy formatting tips to help you do just that.

If your margins are too narrow, it makes the page look super cluttered and more difficult to read.

A good rule of thumb is sticking to standard one-inch margins all around.

Your business plan is made up of several key sections, like chapters in a book.

Whenever you begin a section (“Traction” for example) you'll want to signify it using a header so that your reader immediately knows what to expect from the content that follows.

This also helps break up your content and keep everything nice and organized in your business plan.

Subheadings

Subheadings are mini versions of headings meant to break up content within each individual section and capture the attention of your readers to keep them moving down the page.

In fact, we're using sub-headers right now in this section for that very purpose!

Limit your business plan to two typefaces (one for headings and one for body copy and subheadings, for example) that you can find in a standard text editor like Microsoft Word or Google Docs.

Only pick fonts that are easy to read and contain both capital and lowercase letters.

Avoid script-style or jarring fonts that distract from the actual content. Modern, sans-serif fonts like Helvetica, Arial, and Proxima Nova are a good way to go.

Keep your body copy between 11 and 12-point font size to ensure readability (some fonts are more squint-inducing than others).

You can offset your headings from your body copy by simply upping the font size and by bolding your subheadings.

Sometimes it's better to show instead of just tell.

Assume that your readers are going to skim your plan rather than read it word-for-word and treat it as an opportunity to grab their attention with color graphics, tables, and charts (especially with financial forecasts), as well as product images, if applicable.

This will also help your reader better visualize what your business model is all about.

Need some help with this?

Our  business planning wizard  comes pre-loaded with a modular business plan template that you can complete in any order and makes it ridiculously easy to generate everything you need from your value proposition, mission statement, financial projections, competitive advantage, sales strategy, market research, target market, financial statements, marketing strategy, in a way that clearly communicates your business idea.

Refine Your Business Plans. Then Refine Them Some More.

Your business isn't static, so why should your business plan be?

Your business strategy is always evolving, and so are good business plans. This means that the early versions of your business plans probably won't (and shouldn't be) your last. The details of even even the best business plans are only as good as their last update.

As your business progresses and your ideas about it shift, it's important revisit your business plan from time to time to make sure it reflects those changes, keeping everything as accurate and up-to-date as possible. What good is market analysis if the market has shifted and you have an entirely different set of potential customers? And what good would the business model be if you've recently pivoted? A revised business plan is a solid business plan. It doesn't ensure business success, but it certainly helps to support it.

This rule especially holds true when you go about your market research and learn something that goes against your initial assumptions, impacting everything from your sales strategy to your financial projections.

At the same time, before you begin shopping your business plan around to potential investors or bankers, it's imperative to get a second pair of eyes on it after you've put the final period on your first draft.

After you run your spell check, have someone with strong “English teacher skills” run a fine-tooth comb over your plan for any spelling, punctuation, and grammatical errors you may have glossed over. An updated, detailed business plan (without errors!) should be constantly in your business goals.

More than that, your trusty business plan critic can also give you valuable feedback on how it reads from a stylistic perspective. While different investors prefer different styles, the key here is to remain consistent with your audience and business.

Writing Your Business Plan: A Section-By-Section Breakdown

We devoted an entire article carefully breaking down the  key components of a business plan  which takes a comprehensive look of what each section entails and why.

If you haven't already, you should check that out, as it will act as the perfect companion piece to what we're about to dive into in a moment.

For our purposes here, we're going to look at a few real world business plan examples (as well as one of our own self-penned “dummy” plans) to give you an inside look at how to position key information on a section-by-section basis.

1. Executive Summary

Quick overview.

After your Title Page — which includes your company name, slogan (if applicable), and contact information — and your Table of Contents, the Executive Summary will be the first section of actual content about your business.

The primary goal of your Executive Summary is to provide your readers with a high level overview of your business plan as a whole by summarizing the most important aspects in a few short sentences. Think of your Executive Summary as a kind of “teaser” for your business concept and the information to follow — information which you will explain in greater detail throughout your plan. This isn't the place for your a deep dive on your competitive advantages, or cash flow statement. It is an appropriate place to share your mission statement and value proposition.

Executive Summary Example

Here's an example of an Executive Summary taken from a sample business plan written by the Startups.com team for a fictional company called Culina. Here, we'll see how the Executive Summary offers brief overviews of the  Product ,  Market Opportunity ,  Traction , and  Next Steps .

Culina Tech specializes in home automation and IoT technology products designed to create the ultimate smart kitchen for modern homeowners.

Our flagship product, the Culina Smart Plug, enables users to make any kitchen appliance or cooking device intelligent. Compatible with all existing brands that plug into standard two or three-prong wall outlets, Culina creates an entire network of Wi-Fi-connected kitchen devices that can be controlled and monitored remotely right from your smartphone.

The majority of US households now spend roughly 35% of their energy consumption on appliances, electronics, and lighting.  With the ability to set energy usage caps on a daily, weekly or monthly basis, Culina helps homeowners stay within their monthly utility budget through more efficient use of the dishwasher, refrigerator, freezer, stove, and other common kitchen appliances.

Additionally, 50.8% of house fires are caused in the kitchen — more than any other room in the home — translating to over $5 billion in property damage costs per year.  Culina provides the preventative intelligence necessary to dramatically reduce kitchen-related disasters and their associated costs and risk of personal harm.

Our team has already completed the product development and design phase, and we are now ready to begin mass manufacturing. We've also gained a major foothold among consumers and investors alike, with 10,000 pre-ordered units sold and $5 million in investment capital secured to date.

We're currently seeking a $15M Series B capital investment that will give us the financial flexibility to ramp up hardware manufacturing, improve software UX and UI, expand our sales and marketing efforts, and fulfill pre-orders in time for the 2018 holiday season.

2. Company Synopsis

Your Company Synopsis section answers two critically important questions for your readers: What painful  PROBLEM  are you solving for your customers? And what is your elegant  SOLUTION  to that problem? The combination of these two components form your value proposition.

Company Synopsis Example

Let's look at a real-life company description example from  HolliBlu * — a mobile app that connects healthcare facilities with local skilled nurses — to see how they successfully address both of these key aspects.  *Note: Full disclosure; Our team worked directly with this company on their business plan via Fundable.

Notice how we get a crystal clear understanding of why the company exists to begin with when they set up the  problem  — that traditional nurse recruitment methods are costly, inconvenient, and time-consuming, creating significant barriers to providing quality nursing to patients in need.

Once we understand the painful problem that HolliBlu's customers face, we're then directly told how their  solution  links back directly to that problem — by creating an entire community of qualified nurses and directly connecting them with local employers more cost-effectively and more efficiently than traditional methods.

3. Market Overview

Your Market Overview provides color around the industry that you will be competing in as it relates to your product/service.

This will include statistics about industry size, [growth](https://www.startups.com/library/expert-advice/the-case-for-growing-slowly) rate, trends, and overall outlook. If this part of your business plan can be summed up in one word, it's  research .

The idea is to gather as much raw data as you can to make the case for your readers that:

This is a market big enough to get excited about.

You can capture a big enough share of this market to get excited about.

Target Market Overview Example

Here's an example from HolliBlu's business plan:

HolliBlu's Market Overview hits all of the marks — clearly laying out the industry size ($74.8 billion), the Total Addressable Market or TAM (3 million registered nurses), industry growth rate (581,500 new RN jobs through 2018; $355 billion by 2020), and industry trends (movement toward federally-mandated compliance with nurse/patient ratios, companies offering sign-on bonuses to secure qualified nurses, increasing popularity of home-based healthcare).

4. Product (How it Works)

Where your Company Synopsis is meant to shed light on why the company exists by demonstrating the problem you're setting out to solve and then bolstering that with an impactful solution, your Product or How it Works section allows you to get into the nitty gritty of how it actually delivers that value, and any competitive advantage it provides you.

Product (How it Works) Example

In the below example from our team's Culina sample plan, we've divided the section up using subheadings to call attention to product's  key features  and how it actually works from a user perspective.

This approach is particularly effective if your product or service has several unique features that you want to highlight.

5. Revenue Model

Quite simply, your Revenue Model gives your readers a framework for how you plan on making money. It identifies which revenue channels you're leveraging, how you're pricing your product or service, and why.

Revenue Model Example

Let's take a look at another real world business plan example with brewpub startup  Magic Waters Brewpub .*

It can be easy to get hung up on the financial aspect here, especially if you haven't fully developed your product yet. And that's okay. *Note: Full disclosure; Our team worked directly with this company on their business plan via Fundable.

The thing to remember is that investors will want to see that you've at least made some basic assumptions about your monetization strategy.

6. Operating Model

Your Operating Model quite simply refers to how your company actually runs itself. It's the detailed breakdown of the processes, technologies, and physical requirements (assets) that allow you to deliver the value to your customers that your product or service promises.

Operating Model Example

Let's say you were opening up a local coffee shop, for example. Your Operating Model might detail the following:

Information about your facility (location, indoor and outdoor space features, lease amount, utility costs, etc.)

The equipment you need to purchase (coffee and espresso machines, appliances, shelving and storage, etc.) and their respective costs.

The inventory you plan to order regularly (product, supplies, etc.), how you plan to order it (an online supplier) and how often it gets delivered (Mon-Fri).

Your staffing requirements (including how many part or full time employees you'll need, at what wages, their job descriptions, etc.)

In addition, you can also use your Operating Model to lay out the ways you intend to manage the costs and efficiencies associated with your business, including:

The  Critical Costs  that make or break your business. In the case of our coffee shop example, you might say something like,

“We're estimating the marketing cost to acquire a customer is going to be $25.  Our average sale is $45.  So long as we can keep our customer acquisition costs below $25 we will have enough margin to grow with.”

Cost Maturation & Milestones  that show how your Critical Costs might fluctuate over time.

“If we sell 50 coffees a day, our average unit cost will be $8 on a sale of $10.  At that point we're barely breaking even. However as we scale up to 200 coffees a day, our unit costs drop significantly to $4, creating a 100% increase in net income.”

Investment Costs  that highlight strategic uses of capital that will have a big Return on Investment (ROI) later.

“We're investing $100,000 into a revolutionary new coffee brewing system that will allow us to brew twice the amount our current output with the same amount of space and staff.”

Operating Efficiencies  explaining your capability of delivering your product or service in the most cost effective manner possible while maintaining the highest standards of quality.

“By using energy efficient Ecoboilers, we're able to keep our water hot while minimizing the amount of energy required. Our machines also feature an energy saving mode. Both of these allow us to dramatically cut energy costs.”

7. Competitive Analysis

Like the Market Overview section, you want to show your readers that you've done your homework and have a crazy high level of awareness about your current competitors or any potential competitors that may crop up down the line for your given business model.

When writing your Competitive Analysis, your overview should cover  who  your closest competitors are, the chief  strengths  they bring to the table, and their biggest  weaknesses .

You'll want to identify at least 3 competitors — either direct, indirect, or a combination of the two. It's an extremely important aspect of the business planning process.

Competition Analysis Example

Here's an example of how HolliBlu lays out their Competitive Analysis section for just one of their competitors, implementing each of the criteria noted above:

8. Customer Definition

Your Customer Definition section allows you to note which customer segment(s) you're going after, what characteristics and habits each customer segment embodies, how each segment uniquely benefits from your product or service, and how all of this ties together to create the ideal portrait of an actual paying customer, and how you'll cultivate and manage customer relationships.

Customer Definition Example

HolliBlu's Customer Definition section is effective for several reasons. Let's deconstruct their first target market segment, hospitals.

What's particularly successful here is that we are explained why hospitals are optimal buyers.

They accomplish this by harkening back to the central problem at the core of the opportunity (when hospitals can't supply enough staff to meet patient demands, they have to resort on costly staffing agencies).

On top of that, we are also told how  big  of an opportunity going after this customer segment represents (5,534 hospitals in the US).

This template is followed for each of the company's 3 core customer segments. This provides consistency, but more than that, it emphasizes how diligent research reinforces their assumptions about who their customers are and why they'd open their wallets. Keep all of this in mind when you are write your own business plan.

9. Customer Acquisition

Now that you've defined who your customers are for your readers, your Customer Acquisition section will tell them what marketing and sales strategy and tactics you plan to leverage to actually reach the target market (or target markets) and ultimately convert them into paying customers.

marketing Strategy Example

Similar to the exercise you will go through with your Revenue Model, in addition to identifying  which  channels you're pursuing, you'll also want to detail all of relevant costs associated with your customer acquisition channels.

Let's say you spent $100 on your marketing plan to acquire 100 customers during 2018. To get your CAC, you simply divide the number of customers acquired by your spend, giving you a $1.00 CAC.

10. Traction

This one's huge. Traction tells investors one important thing: that you're business has momentum. It's evidence that you're making forward progress and hitting milestones. That things are happening. It's one of the most critical components of a successful business plan.

Why is this so important? Financial projections are great and all, but if you can prove to investors that your company's got legs before they've even put a dime into it, then it will get them thinking about all the great things you'll be able to accomplish when they do bankroll you.

Traction Example

In our Culina Traction section, we've called attention to several forms of traction, touching on some of the biggest ones that you'll want to consider when writing your own plan.

Have I built or launched my product or service yet?

Have I reached any customers yet?

Have I generated any revenue yet?

Have I forged any strategic industry relationships that will be instrumental in driving growth?

The key takeaway here: the more traction you can show, the more credibility you build with investors. After all, you can't leave it all on market analysis alone.

11. Management Team

Here's what your Management Team section isn't: it's not an exhaustive rundown of each and every position your team members have held over the course of their lives.

Instead, you should tell investors which aspects of your team's experience and expertise directly translates to the success of  this  company and  this  industry.

In other words, what applicable, relevant background do they bring to the table?

Management Team Example

Let's be real. The vast majority of startup teams probably aren't stacked with Harvard and Stanford grads. But the thing to home in on is how the prior experience listed speaks directly to how it qualifies that team member's current position.

The word of the day here is relevancy. If it's not relevant, you probably don't need to include it in your typical business plan.

12. Funding

Funding overview.

The ask! This is where you come out and, you guessed it,  ask  your investors point blank how much money you need to move your business forward, what specific milestones their investment will allow you to reach, how you'll allocate the capital you secure, and what the investor will get in exchange for their investment.

You can also include information about your  exit strategy  (IPO, acquisition, merger?).

Funding Example

While we've preached against redundancy in your business plan, an exception to the rule is using the Funding section to offer up a very brief recap that essentially says, “here are the biggest reasons you should invest in my company and why it will ultimately benefit you.”

13. Financials

Spreadsheets and numbers and charts, oh my! Yes, it's everybody's “favorite” business plan section: Financials.

Your Financials section will come last and contain all of the forecasted numbers that say to investors that this is a sound investment. This will include things like your sales forecast, expense budget, and break-even analysis. A lot of this will be assumptions, or estimates.

The key here is keeping those estimates as realistic as humanly possible by breaking your figures into components and looking at each one individually.

Financials Example

The balance sheet above illustrates the business' estimated net worth over a three-year period by summarizing its assets (tangible objects owned by the company), liabilities (debt owed to a creditor of the company), and shareholders' equity (source of financing used to fund the assets).

In plain words, the balance sheet is basically a snapshot of your business' financial status by laying out what you own and owe, helping investors determine the level of risk involved and giving them a good understanding of the financial health of the business.

If you're looking to up your game from those outdated Excel-style spreadsheets,  our business planning software  will help you create clean, sleek, modern financial reports the modern way. Plus, it's as easy to use as it is attractive to look at. You might even find yourself enjoying financial projections, building a cash flow statement, and business planning overall.

You've Got This!

You've committed to writing your business plan and now you've got some tricks of the trade to help you out along the way. Whether you're applying for a business loan or seeking investors, your well-crafted business plan will act as your Holy Grail in helping take your business goals to the next plateau.

This is a ton of work. It's not a few hours and a free business plan template. It's not just a business plan software. We've been there before. Writing your [business plan](https://www.startups.com/library/expert-advice/top-4-business-plan-examples) is just one small step in startup journey. There's a whole long road ahead of you filled with a marketing plan, investor outreach, chasing venture capitalists, actually getting funded, and growing your business into a successful company.

And guess what? We've got helpful information on all of it — and all at your disposal! We hope this guides you confidently on how to write a business plan worth bragging about.

Ronald Calderon

Great info for feedback my current business plan!

Upgrade to join the discussion.

• Sources of Business Finance
• Small Business Loans
• Small Business Grants
• Crowdfunding Sites
• How to Get a Business Loan
• Small Business Insurance Providers
• Best Factoring Companies
• Types of Bank Accounts
• Best Banks for Small Business
• Best Business Bank Accounts
• Open a Business Bank Account
• Bank Accounts for Small Businesses
• Free Business Checking Accounts
• Best Business Credit Cards
• Get a Business Credit Card
• Business Credit Cards for Bad Credit
• Build Business Credit Fast
• Business Loan Eligibility Criteria
• Small-Business Bookkeeping Basics
• How to Set Financial Goals
• Business Loan Calculators
• How to Calculate ROI
• Calculate Net Income
• Calculate Working Capital
• Calculate Operating Income
• Calculate Net Present Value (NPV)
• Calculate Payroll Tax

12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

Was This Article Helpful?

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.

How to write a business plan in 12 steps (2024 edition)

This guide breaks down how to write a business plan and what you need to think about to make your business plan as persuasive as possible.

20 August 2024

This guide breaks down how to write a business plan, step-by-step, detailing what your document needs to include and what you need to think about to make your business plan as persuasive as possible.

What is a business plan?

A business plan is an essential document that can provide immense value for new and existing companies of all sizes. It is an overview that includes an outline of your business, its key objectives and plan for achieving important goals.

This information can be used to communicate strategic actions to internal teams and also attract interest from potential partners and investors . However, writing a business plan can be a lengthy and involved process. For many, using a business plan template can be a good way to get started.

For best results, you’ll need to do a lot of thinking and planning before you start writing your business plan. This way you have all the information and resources you need at your fingertips and won’t be under time pressure to come up with something at the last minute. After all, a well-thought-out business plan can help you avoid generic information and set your company up for success.

Download your free business plan template .

Why write a business plan?

Writing your business plan helps to get your strategy nailed down and onto the page. A plan that stays in your head is probably going to be full of unrealistic assumptions and biases, whereas a strategically thought-out and organised approach forces you to notice your blind spots and find a way forward.

If you’re looking for financing, a bank or investor needs to be persuaded by your business proposal and the opportunity to work with you. Therefore, a well-written business plan can help provide potential financial partners with the confidence that your business can become profitable. Your business plan gives them a comprehensive view of all aspects of your business and details your strategy for achieving your goals.

What are the main sections of a business plan?

Whatever your line of work, your business plan will generally need to provide the following:

An executive summary

A business overview

The market opportunity

Your products/services

How to write a business plan

Make sure you cover each of the following steps when preparing your document:

1. Write an executive summary

This section of your business plan should be 1–2 pages in length and enables potential financiers or partners to get an overview of what your business does and – most importantly — what the opportunity is for them. If they’re interested in the opportunity, they’ll conduct their own due diligence - and this will start with going through your business plan and financials.

It’s a good idea to write your executive summary last, when you’ve clarified your thinking around every section of the document. As an overview section, you don’t want to add any new content that isn’t in your business plan. Aim to keep this summary succinct and engaging by using simple, plain language, as this is much more persuasive than complicated or academic wording.

Use sub-headings and bullet points to help your most important information stand out, especially as busy executives may simply scan your executive summary and use this to decide whether they want to find out more.

What to include in an executive summary?

Make sure you include details on:

What your business does

What the opportunity is

What your unique selling points / differentiators are

How much funding you’re looking for

What the funding will be used for

How you'll succeed

Remember, you’re providing the big picture overview of your business - the detail is in the rest of the document and in the appendices.

2. Write your business overview

This section of your business plan needs to be more than just a list of what your business does. Its purpose is to excite those you’re hoping will work with you or help to fund your business.

Information to address includes:

What's the purpose of your business?

What problem does your business’ product or service solve?

What niche could it fill?

What’s different about your offering?

How are you better than anyone else at what you do?

Consider what your customer value proposition is by deciding what you want to achieve and what your number 1 benefit is for your customer.

3. Identify your USP

Think about what your unique selling points (USP) or differentiators are, and what proof-points you can provide to back them up.

For example, you can use terms like “market-leading” but if you don’t provide any evidence to back up your claims, your reader will take them with a big pinch of salt!

You should certainly reference any awards or endorsements that position you as the best person to provide your product or service, as well as any client testimonials. Make sure you include any education or experience that makes you an expert in your field as well.

4. Describe the market opportunity

Show you understand your industry, market and where you fit in it. While no-one can predict the future, offer up where you think the opportunity is for your business and make sales projections based on that. 

For example, imagine your business is selling personalised cookies - there's little competition in your area and you see your market opportunity to create designs for all calendar and holiday events. You expect to increase sales by 30% in one year and 50% in three years, driven primarily by word-of-mouth referrals.

Make sure you also consider macro trends that may create opportunities for you, such as social, environmental, or technological changes that may affect buying behaviour.

5. Include a SWOT analysis

Whatever your business strengths or opportunities, they’ll always be known and unknown weaknesses and threats; there’s no such thing as certainty in business or in life!

However, you can demonstrate that you’ve examined your business through different lenses and have a thorough understanding of it by doing a SWOT (strengths, weaknesses, opportunities, threats) analysis.

Don’t worry about drawing attention to your business’ shortcomings - every opportunity has them and it’ll give investors and partners confidence in you that you won't bury your head in the sand. Naturally, it's important that you specify what you’re going to do to address these weaknesses and counter these threats.

Here are some areas you can think about to get started: reputation, technology, location, experience, staff, overheads, competition, suppliers and price.

6. Present a competitor analysis

Let’s face it, no matter what industry you’re in, or what you’re selling, there’s going to be other businesses offering the same thing. But instead of worrying about the competition, use this as a positive opportunity to up your game and work out the unique advantages you have that will keep you competitive.

Identify your top 3 competitors and analyse what they're doing well and where they’re coming up short. Try to be as objective as possible and identify how to differentiate yourself from them.

You should also look into who the industry leaders are and what the benchmarks are for your industry so that you can set yourself targets for continuous improvement.

7. Create a customer persona

A customer persona is a fictional person who represents your company's ideal customer. Naturally, the persona can be based on a real person - the more you get to know your ideal customer, the more targeted and successful your marketing efforts will be.

To create a customer persona, you need to conduct research into your ideal customer’s age, sex, income, employment, daily activities, interests and hobbies. If you’re feeling unsure about your customer persona, you may need to give your ideal customer further thought and download the customer persona template to get started.

8. Write your marketing strategy

When you’ve created your customer persona, you need to work out how you’re going to reach them. Do they hang out on social media apps, like Facebook, Instagram, Pinterest, Twitter or LinkedIn? Or are they more used to local, traditional marketing like free local papers or high foot traffic areas?

Once you’ve figured where your audience is likely to hang out, you can outline your strategies for promoting and advertising your products or services in the next 12 months.

Make a list of the marketing channels you’ll use to achieve your advertising strategy and be sure to include your budget. How much can you set aside for advertising? And where are you most likely to see a return on your efforts? Paid ads on Facebook? Half or full paid spreads in an industry magazine? Or even a direct mail out? 

For more structured help around this, check out free course: Business 101 | Get social with your business on Facebook . 

9. Design your customer retention strategy

Business success relies heavily on the relationship you’re able to build with your customers. What techniques will you use to keep them coming back? Consider the following:

What can your business do to increase the number of repeat customers? 

Does your business have a referral or loyalty program? 

Do you have a post-purchase follow up in place?

Will you use surveys to track customer satisfaction?

What ways can you continue delivering outstanding service?

Is there a way to continue educating and adding value to your customers?

10. Present your financials

Most people who are looking at investing their time and/or money in your business will want to see your financial statements - your performance to date and your projections over the short and medium term. They'll also want to know how much you’ve received in funding to date and what these other sources of funding are - including your own investment.

Current finances

You need to show how your business has performed financially over the last year, highlighting metrics such as positive cashflow , net profit and assets.

Financial forecasts

You should also provide a balance forecast projecting total assets, total liabilities and net assets over 1, 2 and 3 years, and a profit and loss forecast for the same periods detailing gross profit /net sales, total expenses and net profit/loss. Finally, you should also provide a cash flow forecast month by month over the next year.

It’s also a good idea to speak to an expert like an accountant or bookkeeper about your finances and get advice on how best to present them in this all-important section of your business plan.

11. Detail how much funding is needed

Naturally, you also need to be very clear about how much money you’re looking for and what you plan to do with it. If you’re looking for a loan , you need to detail what it’s for, over what period it’ll be repaid, and what collateral you have to secure it.

12. Propose an exit strategy

Any financial stakeholder in your business will want a return on investment. If you’re pursuing this type of funding, you should include some detail on your proposed exit strategy . For example, do you want to sell the company at some point or go public?

Similarly, you should outline your succession plan so the business can continue to operate if you decide to step away from it. Likewise, you need a plan for what happens if the business loses money and can’t sustain itself. Documenting this means that everyone is on the same page and potential investors have this information upfront.

Frequently asked questions about writing a business plan:

When to write a business plan.

Typically, entrepreneurs write their business plans within the first year of operations. A business plan is a tool that helps business owners refine their strategy, attract partners and financiers, and grow their business.

If a business plan is written too soon, it may lack the substance that comes with time in the market. However, it’s important to note that a business plan isn't a static document - it can and should change as the business evolves.

How long should your business plan be?

There are no hard and fast rules around how long your business plan should be - it just needs to include all the relevant information. Aim for clear, concise sections and build a business plan that is as easy to read and navigate as possible.

Using a business plan template can help you make sure you have everything covered off, while also having a document that looks as professional as possible. Make sure you run a spelling and grammar check too - any sloppy errors can undermine your credibility.

What’s a business plan on a page?

It’s important to write your business plan as it helps to embed your strategy - as well as communicate what you’re about to potential partners or investors. When you have a comprehensive business plan you can easily adapt it to suit different audiences. For example, a full business plan is essential for raising capital but a business plan on a page may be enough for potential partners or employees.

What do venture capitalists look for in a business plan?

Venture capitalists invest money into businesses with the goal of achieving a return on their investment within the short to medium term. As a result, they’re looking for an attractive market opportunity, a clear point of differentiation, a strong management team, a proven track record, solid financials and, importantly, an exit opportunity.

Where to go for help or more information?

There are many great resources out there to help you fine-tune your business strategy and write your business plan. The Australian Government has a comprehensive website dedicated to supporting businesses at all stages of their journey.

You can also get help from Business Enterprise Centres , business advisors, accountants and fellow business owners, so your venture has the very best chance of success. 

Disclaimer:  Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

Related Guides

How to get a business loan arrow right.

Discover how you can get the business loan you need to get your business up and running.

How to find investors: A guide for startups Arrow right

Business models: definitions, types and key components arrow right.

Business Planning 101: How to Make a Business Plan in

What is business planning.

Business plans aren't just for corporate giants. They're the secret weapon for startup ventures, small businesses, and solopreneurs too. A well-crafted plan is your vision or roadmap, showing you where to go and how to get there.

A robust business plan influences major decisions and helps propel your growth. This blueprint defines your business identity, sharpens your objectives, and sets the course for hitting revenue targets. 

So, don't make any ordinary plan. Make your personal game plan.

More on business planning

Ever notice solopreneurs who have a million brilliant business ideas yet they’re stuck in a cycle of zero progress? Without a game plan, enthusiasm and ideas can only take you so far.

The articles below provide more insights into creating your game plan.

{{articles-hub}}

Looking for more articles about business planning? I have a full list at the bottom of this page.

What to include in your business plan

At a minimum, your solopreneur business plan should include:

• Executive summary: A high-level snapshot of your business
• Business description: What your business is about and what makes it unique
• Market analysis: Who your customers are and what they need
• Organization and management: Who's on your team and how you structure your business
• Service or product line: The product you're selling or the service you're offering
• Marketing and sales: How you'll attract clients and encourage repeat business
• Financial projections: How your business will make money and grow

Beginner’s guide to creating a business plan

1. understand your purpose.

Starting your business plan begins with an important question: Why are you launching your business? Is it for time and work flexibility? For extra money to save up for a house? To help others fast-track their success and avoid the blunders you've made in your journey? Clarifying your purpose is extremely important. This 'why' will be the compass guiding every detail you put into your plan.

2. Write your executive summary

An executive summary is a solopreneur's best pitch. Think of it like a billboard that tells the world what your business is (but in about 1-2 pages). Talk about your target market, mission plan, what makes your brand stand out, the main product or service you're offering and how you plan to win against competitors. I recommend crafting a rough draft and revisiting it once you have a full overview of your plan.

3. Detail your company description

Your company description is where your business comes to life on paper. It's a close-up look at your product or service and the positive impact it brings to your customers. Explain what you do and how you're solving your customer's problems. This isn't the place for modesty. Flaunt your unique strengths, and make your readers believe in your business as much as you do.

4. Conduct market research

To provide a solid offering, you need to understand the people you’re marketing to. Who's out there, and what, exactly, do they want? Who's already trying to give it to them, and what are your competitors' weaknesses? Keep an eye out for trends, hungry customers, and the competition. Here, you're hunting for proof that people need what you're selling and that you have a firm grip on the pulse of your market.

5. Outline the organization and management

Every business owner runs a tight ship, and having a clear business structure is part of that. Are you a sole proprietor? A limited liability company (LLC)? Are you doing everything on your own, or will you have employees to help? Will you hire or outsource? Who are your helpers? Are there any third-party lifelines you rely on? If so, what are they?

6. Describe your products and/or services

When describing your products or services, focus on the value you're bringing to your customer. For example, if you're a writer, don't just list the different kinds of writing services you offer, but show what problems you are solving and how you can make their lives better or their businesses more successful. You're not selling a product or service — you're selling an outcome, a better tomorrow. A more positive future.

7. Plan your marketing and sales strategy

This is where you illustrate how you'll attract, convert, and retain your customers. You should be able to explain your plan simply. How will people learn about you? How will you turn an interested social media follower into a loyal customer? Finally, outline your customer retention plan. How will you keep them happy, returning, and promoting your business to other potential customers?

8. Develop financial projections

Financial planning is essential to your business's future. A financial forecast is a model that shows your business idea can (and will) be profitable. Outline your income projections, expenses, balance sheets, sales forecast, and cash flow statements for the next 2 years. These numbers will guide your business decisions and help measure your progress.

My simple 5-step business plan

1. Publish free, high-quality insights on social media : People want value. And where better to offer it than on social media, where your future tribe is already hanging out. Consistently share your expertise to build credibility and generate interest in your brand. Become the go-to authority in your niche. As your community grows, so does your pool of potential customers.

2. Link to a hub piece of long-form content : People want to scroll through bite-sized content. So, I keep my insights punchy and scannable. But I also know some people crave more. That's where my long-form content comes in. At the end of my social posts, I invite readers to dive deeper with a link to an extensive blog post or guide where I share more of my knowledge and expand on my ideas.

3. Link to my courses : Every long-form content piece should have clear next steps for the reader. You've reeled them in and served up solid insights…now what? In my case, I lead them to my courses to take their learning to the next level. By doing this, I'm not just offering a product. I'm offering an opportunity to evolve and grow. Be direct and show people the path forward.

4. Encourage people to buy : When a reader has clicked on a link to my course, my job is to make the buying decision and process as effortless as possible. To do that, I place a purchase button right on the landing page so folks can find it. I share testimonials from hundreds of other customers just like them. I make the checkout process swift and seamless so customers don’t experience bottlenecks that might make them second-guess their decision.

5. Deliver more value : Once a customer has spent their hard-earned dollars on my courses, it's my turn to 'wow' them with exceptional value. Here, I offer greater depth, going into the nitty-gritty of what I share on social media and my blog. My goal is to provide such a transformative experience that it compels my students to share it with others. That's value that echoes — and sells itself.

Best business planning books and resources

• Hurdle by Tim Berry
• Art of the Start 2.0 by Guy Kawasaki
• Successful Business Plan by Rhonda Abrams
• The Secrets to Writing a Successful Business Plan by Hal Shelton

All articles related to

Business planning, best articles on related topics.

Business Plans 101

Whether you're in startup mode or your need financing to expand your business, writing a business plan is essential. Here's how.

Whether you’re thinking about starting a business or looking for financing to expand one you’re already running , you’ll find writing a business plan beneficial, if not essential.

Many lenders won’t give you money unless they know you have a well-thought out strategy for where you’re going and how you’ll get there. Even if you’re approaching friends and family for money, people who won’t require you to have a plan, it will be helpful to write one. Simply by going through all the necessary steps to put one together, you’ll wind up with a clearer idea of what you’re trying to accomplish and many of the challenges you might face along the way. Certainly, if you’re going to try to get money from a bank, a government-backed lender, a venture capitalist, or a community development financial institution (CDFI), you will need a formal business plan.

This article is part of a series that will teach you how to write the perfect business plan – discussing why you should have one, the different types of business plans you can develop, and what goes into each section. Before we get into the how-to, let’s take a deeper look into what writing a plan will do for you.

The first clue comes right in the description of what a business plan is: a roadmap for your business that outlines your goals and spells out how you aim to achieve them. In other words, it’s a guide for how to set up your business and run it on a daily basis to help you reach your long term goals. And as we said, it’s a worthwhile investment of time and effort even if you don’t need to present it to potential investors.

Nine Benefits of Writing a Business Plan

Writing a business plan will help you gather all of your ideas in one place, hone your message and crystallize your vision. This will keep you from getting scattered, sidetracked, or pulled away from what’s likely to make you the most successful.

2) Research

The knowledge you’ll gain as you explore the industry you’re working in will be invaluable. You’ll get a much better understanding of the niche you hope to fill and where you fit into the market.

3) Commitment

Taking a look at expense projections, sales and revenue forecasts, and all the other dollars and cents aspects of your business will help keep you on track as you move forward, and serve as a built-in warning system if you’re not where you’re supposed to be.

4) Exploration

It’s easy to get so focused on the nuts and bolts of your business that you lose sight of the bigger picture. A business plan will help ground you, but also figure out where you fit within the greater whole, things you may not have taken the time to consider.

5) Objectivity

Talking to friends and family about your great idea can make it seem like a can’t-miss proposition. The supportive environment can make it difficult to anticipate real-world bumps and business realities. Doing the actual math while putting your plan together will help you see whether your idea is truly sustainable or needs some work. It’s vitally important to catch things early before you invest too much time or money.

6) Teamwork

Even solo businesses have team members, whether it’s a supportive spouse or a professional accountant or attorney. Larger companies may have someone to manage sales, another person for marketing, and one for operations. No matter how many people are on your team, it’s important to share the same goals and values as you work toward the future. A business plan will serve to get everyone on the same page as you move forward.

7) Accountability

Business plans have a fairly standardized set of components. Doing the work to put the plan together will make sure you think about all of the important facets you need to cover, and give you standards to hold yourself to as you start to put the plan into effect.

8) Measurement

Laying out your goals and ideas in advance gives you something to check in with along the way to see how you’re doing. Where are you exceeding your expectations? In which areas might you be falling short? While it’s important to see your business plan as flexible, it’s great to have something in writing that helps keep you honest with yourself about your performance.

9) Recruitment

When you’re looking to attract top talent, your business plan will help give potential employees an overview of what you’re all about, and their reaction to the plan will help you know if they’re a good fit. Do they grasp the key issues involved with your business? Fill a slot you need to move forward? Great employees will appreciate how you’ve taken the time to assess your place in the market — as will lenders and investors when you need to raise money.

What Are the Different Types of Business Plans?

Okay, you’re sold. You understand the benefits of having a business plan and you’re committed to writing one. What comes next? Decide on what type to create.

Just as your goals and business will not look exactly the same as someone else’s, your business plan will be unique to you. Some elements belong in each one, and we’ll explain each of those below, but your presentation might be completely different. Most importantly, think about who the audience is and what the goals are for the plan. Most business plans will take one of the following shapes:

As its name suggests, a miniplan isn’t a lengthy document. It can be as short as two to 10 pages, as long as it covers your concept for the business, how you’ll finance and market it, and financial information such as operating expenses, cash flow, income projections and a balance sheet. It’s a great way to lay out your concept or have basic information to show to potential partners or investors. Know your audience, though. A miniplan isn’t a substitute for a longer, full-length document. If it’s for your own personal use, this might suffice. An investor or lender may be looking for something more.

Internal Working Plan

If the primary purpose of your plan is to use it to run your business, it doesn’t have to be nearly as formal as a traditional, full-scale business plan. You’ll want it chock full of details about your finances and objectives, but you can leave out the parts that would mostly be necessary for outsiders, like resumes of key executives and photos of products or prototypes.

Your final presentation can also be a bit less fancy. No need to print it out on nice stock and put it in a beautiful binder. You don’t even have to print it at all, if it’s on your computer. What’s in the plan is far more important than what it looks like. Like the old, oft-folded road maps we kept in the glove compartment before the days of smartphone GPS apps, this is a document you’ll live with, something that will help guide you and keep you on the right path.

A Formal Presentation Plan

This is likely the kind document that originally came to mind when we started talking about business plans. This is the real deal, the one that’ll take the longest, probably be the longest, and will be suitable for showing to lenders, investors and anyone else you need to impress outside the company. When we detail the components below, plan to include all of them in your final document. And pay attention to presentation, spelling and grammar. As opposed to your own in-house plan, a formal presentation plan requires recognized business language and should avoid slang, jargon and shorthand only you will understand. It must be well-written and consistent, especially where numbers and finances are concerned.

Your presentation plan should be printed on high-quality paper, with color, especially if you’ve included product photographs. It should include charts, graphs, tables and illustrations, and be professionally bound.

While having a printed document is still recommended, and may even be required by a potential lender or investor, many business documents are transmitted electronically today, so it’s smart to have a version of your plan that looks great as an electronic document. This could be a simple PDF of what you’ve had printed or something more elaborate, with clickable spreadsheets to manipulate projections. As with each of the above plans, let your needs dictate what kind of document you create.

Elements of a Business Plan

A formal plan will include all of the following items, and less formal plans, like mini or working plans, will include many of them. We’ll touch on them briefly here, and expand on each throughout the series in its own separate article.

Click on each header to open the full article.

EXECUTIVE SUMMARY

An overview of what you want to accomplish. This is usually the first page of your plan after the title page. However, you might want to save writing it until last, as it sums up all you’ve presented.

BUSINESS DESCRIPTION

A description of your company and its industry, along with the current outlook and possibilities for the future.

ORGANIZATION AND MANAGEMENT

Explain how your company will be structured. What does the management team look like? How many employees will you need? Will you have other individuals in charge of certain functions, or run everything yourself? Which tasks will be assigned to each division? What are the expenses related to operating the business?

PRODUCTS AND SERVICES

What, exactly, are you selling or providing? This is where you fully explain your concept. Include a description, the suppliers you’ll use (if any), what your costs are, how you determined them, and how your product or service is different from what’s already available.

MARKET ANALYSIS AND STRATEGIES

A look at who your competitors are, how you are different, your strengths and weaknesses compared to the competition, what kind of market share you’re hoping for, and how you will position yourself to get there.

SALES AND MARKETING

Given what you know about the existing business conditions, how will you market your product or company? How will you sell? Will you have a sales force or use outside representatives? How will you build the company, handle expansion, and recruit and compensate your employees?

FUNDING REQUEST

If the main purpose of the plan is to help you raise money, whether from investors or through a loan, this is where you’ll spell out what you need. How much are you looking for right now? How might that change over the next five years? What do you plan to do with the money?

FINANCIAL PLAN

This section will be imperative if you’re looking for money, but it’s important no matter what. Spelling out your sales projections for the future will help you closely examine costs, decide how you’ll allocate your resources, and whether you actually have a viable idea.

This is optional, but would be the place to include information like the resumes of your key management team, reference letters, product photos, copies of major contracts and other pertinent legal documents.

How to Best Use Your Business Plan

Most importantly, actually USE it, even if it’s not being submitted to a financial institution. You’ve done all the research, the thinking, the projecting, and the writing. Don’t just toss it all in a drawer and forget about it. Take it out on a regular basis, read it, and see how you’re doing.

Remember, it’s called a plan, and things don’t always go as planned, so if you see you’re veering off course, whether intentionally or inadvertently, now is the time to make whatever adjustments are necessary. A business plan is only a snapshot of where you were at the time you wrote it, and it needs regular attention and revising to stay relevant and valuable.

With all the work you did to put it together, you’re already a giant step ahead of most of your competitors. Keep it current to reflect what’s going on now, along with the knowledge about your market you’ve picked up along the way. If a sales strategy isn’t working, eliminate it and find another. When a particular marketing tool produces gangbuster results, allocate more resources that way. As the plan grows and changes with you, it will be an even better guide to your future strategy and success.

Now that you have the gist of a business plan, start working on it and revisit us over the next few weeks for a better understanding of the elements that go into it. There is more to come so stay-tuned!

Next Article: Business Plan Section 1 – Executive Summary

Apply for a loan, get started.

Loans from $5,000 - $100,000 with transparent terms and no prepayment penalty. Tell us a little about yourself, your business and receive your quote in minutes without impacting your credit score.

Thanks for applying!

Loans are originated and funded through our lending arm, Accion Opportunity Fund Community Development. By clicking “Continue to Application,” you consent to, Accion Opportunity Fund Community Development’s Terms of Use and Privacy Policy ; and to receive emails, calls and texts , potentially for marketing purposes, including autodialed or pre-recorded calls. You may opt out of receiving certain communications as provided in our Privacy Policy .

Business Plan Development

Masterplans experts will help you create business plans for investor funding, bank/SBA lending and strategic direction

Investor Materials

A professionally designed pitch deck, lean plan, and cash burn overview will assist you in securing Pre-Seed and Seed Round funding

Immigration Business Plans

A USCIS-compliant business plan serves as the foundation for your E-2, L-1A, EB-5 or E-2 visa application

Customized consulting tailored to your startup's unique challenges and goals

Our team-based approach supports your project with personal communication and technical expertise.

Pricing that is competitive and scalable for early-stage business services regardless of industry or stage.

Client testimonials from just a few of the 18,000+ entrepreneurs we've worked with over the last 20 years

Free tools, research, and templates to help with business plans & pitch decks

Business Plan 101

All the answers to your questions about how to write a business plan from the professionals who write them every day.

Almost everyone is familiar with the term “ business plan. ” However, for some reason, this crucial foundational business document is shrouded in mystery. No longer.

Below is a list of frequently asked questions from our clients, which we hope will provide insights into your business planning journey. And if we missed something, please send us an email with your business plan question and we will get back to you (and perhaps even add your question to our list).

How much does it cost to start a business?

The cost of launching a business varies greatly depending on the type of business, location, and a variety of other factors. Some businesses can be started with very little money, whereas others require a substantial investment. Here are the most common types of startup costs for new businesses:

• Business registration: These may include the cost of registering your business name, obtaining any required licenses and permits, and establishing any legal structures such as a corporation or LLC (see "What business structure should I use?").
• Business insurance: Business insurance safeguards your company in the event of a lawsuit or other unforeseen event. Businesses may require various types of insurance, including general liability insurance, errors and omissions insurance, property insurance, and vehicle insurance.
• Physical space: If you intend to open a physical location for your company, you will have to pay for rent, utilities, and any necessary renovations or remodeling (usually referred to as "buildout"). Even if you do not require a separate location for your business, any changes you make to your home are covered here.
• Equipment: Depending on the type of business you plan to launch, it may be necessary to purchase equipment. Equipment includes computers and all other fixed assets, such as machinery and vehicles.
• Fixtures & Furniture: In addition to equipment, fixtures and furniture are often required as additional fixed assets (these three items are frequently grouped together as "FF&E"). In most cases, a fixture is something that is permanently attached to the space, whereas furniture can be easily moved. A built-in shelving unit, for example, is a fixture, whereas a free-standing desk is furniture.
• Inventory: If you sell any type of product, you will need to purchase (and maintain) inventory, which includes finished goods that you buy at wholesale prices as well as raw materials that you use to make finished goods. The amount of inventory you require will depend on the type of business you have and is considered a current asset.
• Marketing and advertising: Most businesses need some sort of online presence, most often in the form of a website. Additionally, the majority of businesses will create a formal brand that represents their values or products. The costs of marketing and advertising can vary greatly. Some businesses sell their products on well-known platforms such as Etsy, which requires little to no upfront payment, whereas others may require a full-fledged ecommerce website, which can cost thousands of dollars. Other industries may require extensive television advertising campaigns.
• Professional fees: These include any legal, accounting, or consulting you need to launch your business.

Curious about what it typically costs to start different kinds of companies? Masterplans analyzed SBA data to figure out the average startup cost of the top 10 most common new businesses (you can also download our startup costs infographic ).

Is a business plan necessary to get funding?

We’ve all heard apocryphal stories about Amazon getting funded based on a diagram scribbled on the back of a napkin over lunch with a potential investor. And the term “elevator pitch” implies that you can just pitch an idea to an investor in an elevator and get money on the spot. But the chances of this happening are so slim as to be laughable, and you certainly wouldn’t want to stake your business’ potential success on a napkin diagram. If you’re serious about your idea, you need to treat it seriously, and that means taking the requisite steps to show that you’re worthy of investment.

What are the different ways to fund a business?

While there are numerous ways for an entrepreneur to fund a business, the following is a summary of the most common methods. Remember that your company does not have to choose just one method; many of the most successful startups combine multiple funding types depending on the amount, timing, and initiative, and so on.

Bootstrapping

Many entrepreneurs start and grow their businesses with their own savings and investments. Self-funded businesses frequently rely on credit cards and small loans from family and friends to supplement their own funds. Bootstrapping allows entrepreneurs to grow their businesses organically, but it can be difficult due to a lack of cash flow.

Pros of bootstrapping:

• Full control
• Flexibility
• Faster startup

Cons of bootstrapping:

• Limited funding
• Slower growth (due to lower capititalization)
• Personal risk
• No access to mentorship and advice

Business loans

Banks, credit unions, and other financial institutions provide a range of business loans, including term loans, lines of credit, and SBA loans. The most common loan type is a term loan, in which a business receives a lump sum of money and repays it with interest and principal payments over a set period of time. SBA loans are a specific type of term loan designed to provide small businesses with greater access to capital. SBA loans are partially guaranteed by the government, making them ideal for entrepreneurs who may be unable to obtain a conventional term loan. A second type of loan is a line of credit (LOC), which functions similarly to a credit card. The company is given a credit limit that it can use as needed while only paying interest on the amount borrowed. The final type of loan, known as invoice financing or merchant advance loans, is a hard money loan that provides cash up front against unpaid business. The interest rates on these loans are extremely high.

Pros of bank loans:

• Maintain ownership
• Provide capital to start or expand
• Consistent repayment schedule
• Establishes credit history

Cons of bank loans:

• Strict qualifications (credit score, etc.)
• High interest (especially on hard money loans)
• Long-term commitment
• Requires down payment

Crowdfunding

The introduction of platforms such as Kickstarter and Indiegogo has increased the popularity of crowdfunding, especially for consumer goods. Typically, the entrepreneur establishes a campaign goal and offers incentives in exchange for contributions, which are frequently in the form of early access to or perks for the company's product. Equity crowdfunding is less common, in which individual investors contribute to the business in the form of equity and eventually receive dividends from the company's profits.

Pros of crowdfunding:

• No equity dilution
• Validates products or service
• Connect with potential customers

Cons of crowdfunding:

• No funding guarantee
• Platform fees
• Expensive rewards
• Legal and regulation requirements

Angel Investors

An angel investor is a high-net-worth individual (HNWI) who provides capital to early-stage or startup companies in exchange for ownership equity or convertible debt. Individual angel investors, as opposed to institutional investors, typically invest their own money. Angel investors typically provide seed capital to entrepreneurs and startups at an early stage when traditional lending sources are unavailable. Angel investors seek high returns on their investment (i.e., outperforming the stock market), and therefore are willing to take on more risk than, say, a bank would. Angels can also offer mentoring, expertise, and access to professional networks to assist entrepreneurs in growing their startups.

Pros of angel investors:

• Typically passive investors
• Less focused on exit
• Mentorship and networking

Cons of angel investors:

• Seek high returns
• Can be difficult to find
• Dilutes ownership equity
• Legal requirements

Venture Capital

Venture capital firms (VCs), like angel investors, invest money in exchange for equity in the company. However, venture capitalists are typically institutional investors who pool funds from pension funds, endowments, and other business groups. VCs are looking for startups and early-stage businesses with high growth potential, and usually prefer companies that have already established themselves and are ready to scale. Because VC firms are compensated based on the success of their investments, they play an active role in the strategic direction of the companies in which they invest.

Pros of venture capital:

• Large investments (typically in the millions)
• Mentorship & expertise
• Typical path for companies that eventually go public

Cons of venture capital:

• High expectations
• Loss of control
• Strict milestones and performance targets

Incubators and accelerators

An incubator is a program that helps startups and early-stage companies grow and develop by giving them resources like office space, mentorship, and access to a network of people in the industry. They usually focus on a specific industry or type of business, such as technology or biotechnology. Similarly, an accelerator is a program that provides mentorship, usually over a specific amount of time, usually culminating in a demo day where the different members of the cohort present their companies to potential investors. Like incubators, accelerators can be focused on a specific industry, or they can be more generalized.

Pros of incubators and accelerators:

• Product validation and refinement

Cons of incubators and accelerators:

• Competitive application process
• Can require fees in the form of equity, services, and memberships

Grants are a type of funding provided by government agencies, non-profit organizations, private foundations, and industry-specific groups that allow businesses to start or expand operations without incurring debt. They are most often awarded to established companies (as in, not startups) that meet certain eligibility criteria, such as being minority- or veteran-owned businesses. As a result, grants are frequently tied to a specific purpose, such as research and development, hiring and training employees, expanding into new markets, and environmental sustainability initiatives. Working with a professional grant writer is a good way to improve your chances of success.

Pros of grant funding:

• No repayment (free money!)
• Targeted funding
• Validation of business

Cons of grant funding:

• Competitive
• Strict eligibility requirements
• Complex applications
• Limited use of funding
• Usually not for startups

What other purposes can a business plan serve aside from funding?

Most professional business plans are written with the goal of obtaining funding, typically from lenders or investors (see “What are the different ways to fund a business?”). However, there are several cases in which an entrepreneur might need a business plan.

Strategic Vision: A strategic business plan isn't all that different from a funding business plan. It should still contain nearly all of the same sections, with the exception of the request for and use of funds. It should be noted, though, that many strategic business plans are for expanding an existing business with a new initiative or department. If internal funding is required, it would make sense to have a detailed list of sources and uses of funding. Typically, company leaders and stakeholders use a strategic business plan to align their visions, inform decision-making, and track the company's progress toward meeting the objectives.

Immigration: There are a number of ways for prospective immigrants to the United States to obtain work visas and even permanent residency through starting their own businesses. These "investor visas" include the E-2, L1-A, EB-5, and EB-2, to name a few. For these immigration cases, the United States Citizenship and Immigration Services (USCIS) requires (or strongly recommends) a business plan. Each visa type has different requirements, but in general, an immigration business plan should make a clear and compelling case to immigration authorities that the business venture will provide economic benefit to the United States, such as by creating job opportunities.

Licencing: Some industries require a business plan as part of the licensing or permit application process. The cannabis industry is a well-known example: almost every state that has legalized adult-use or medical marijuana has a limited number of licenses available that require a business plan as part of the (ultra) competitive application process. Similar requirements may apply to beer and liquor stores, pharmacies, group homes, and other types of residential facilities. Check with your state and municipality to determine what specific regulations and laws govern licensing to operate for any business that you believe may be regulated, and make sure to address those in the business plan.

Recruiting: A well-thought-out business plan makes it much easier to attract business partners and top talent. If you have a great idea for a SaaS application and have industry knowledge, you might need to hire a CTO who has previously worked in a software development role to supplement your skillset. A detailed explanation of the opportunity in a business plan is an excellent way to reach out to these potential stakeholders and get them excited about the company's potential.

Communication: There are several specific situations in which a company may need to communicate its vision and strategy to outside stakeholders. Commercial landlords are increasingly requiring tenants to provide a business plan as part of the leasing process. Property owners have a vested interest in the success of their tenants. Obviously, a tenant going out of business would result in lost rent and the need to find a new tenant. However, reputation is far more significant. If a tenant goes out of business, it may indicate to future tenants that there is a problem with the location. 

How long should a business plan be?

It should be as long as it needs to be and as short as possible. Your business plan should cover all relevant details about your business that anyone outside the company would want to know before giving you money or letting you use their physical space. But keep your reader in mind and ask yourself: when was the last time I enjoyed reading an encyclopedia? We strive to make our plans vastly more interesting than an encyclopedia, but part of that is making sure that they’re a heck of a lot shorter. Let’s face it, people have a limited attention span, which seems to be exacerbated when reading non-fiction. So the best thing you can do is keep your business plan short while covering all of the main topics in detail. There is no maximum or minimum page count, owing to the fact that there is a wide gulf between the information needed for a used book store versus a major multinational chemical manufacturing company with multiple divisions. As a very basic guideline, most traditional business plans are between 25-50 pages long. We have compiled a collection of example business plans that you can access and use as a reference for the format and length

How do I structure a business plan?

If you’re going to DIY this project, we recommend starting out by making an outline that includes the following sections:

• Company Ownership
• Company Location
• Use of Funds

Company Overview

• Market Segmentation
• Industry Analysis
• Market Need
• Competitors
• Competitive Edge

Strategy & Implementation Summary

• Marketing Strategy

Management Summary

• Biographies of key personnel

Financial Projections

• Financial Assumptions

Appendix: First Year Financials

It’s a lot to cover, but don’t get discouraged! You can do this. At Masterplans we like to use Bishop Desmond Tutu’s quote about how to eat an elephant: one bite at a time ! So don’t get too discouraged by that daunting list. 

The next thing you’re going to do is start gathering information and just put it down on paper as each piece falls into place. 

Now it’s time to begin drafting. The first thing you need to know is that the Executive Summary comes last, so don’t even worry about it right now! See, things are moving along faster than you expected already. 

You can focus on whichever section you feel most interested in. If the market conditions are what’s inspiring you, start there. Just research it and write about it. Make sure to use footnotes for each hard fact that you cite, and remember that there needs to be hard facts in this section! And don’t forget to use reputable sources . 

Work on each section one-by one until you’re done. A business plan won’t get done in a day if you’re a novice, so be gracious to yourself. We know this is a lot of work – we do this all day long. So if you hit a wall and realize you need help, give us a call . But know that you can do this with enough time and effort. It doesn’t take a genius; it takes someone passionate and dedicated. Luckily, that’s you.

How do I write a business plan for an existing business?

It’s essentially the same steps as writing a business plan for a start-up, only you probably need to spend less time on steps like deciding what your business structure should be. You still need to gather information from the various places that it’s kept. For example, if you’ve outsourced bookkeeping, you’ll need to reach out to your bookkeeper for the numbers you’ll need to run your financial model. The steps are the same; all that is really different is that you have past performance that needs to be included in your plan. The primary difference between a business plan for an existing business is that it contains charts to show past performance, which a start-up obviously doesn’t have.

How do I write a business plan for a small business?

When you’re starting a very small business, such as a side-hustle , it can be very tempting to ask yourself “do I really need a business plan?” You might end up just skipping this step. We strongly caution against that. Every business needs a business plan, no matter how small. Use the steps outlined above under the FAQ “How do I write a business plan for a startup?” 

How do I write a business plan for a non-profit organization?

Non-profit organizations are still businesses, even though their funding typically comes from different sources. You still need a business plan, and it should still follow the same steps outlined in “How do I write a business plan for a startup?” What’s different here is that your business will be registered as a 501(c)3 corporation, and instead of owners, you’ll have a board of directors. Additionally, though you can use your business plan for funding, you will likely be applying for grants as well, and they tend to have their own detailed requirements for what needs to be included, that vary based on the organization giving the grants. Having your business plan already written can help when it comes to applying for those grants. You can simply copy and paste the sections that apply to the grant submission requirements, saving yourself time over the long term.

When working on your organization’s financials, it’s important to note a terminology change from for-profit businesses. Instead of “profit,” you will have “surplus” and your “revenue” is called “funding.” Thus, instead of a “Profit & Loss” statement, a non-profit will have a “Surplus & Deficit” statement.

How do I write a business plan for a franchise?

Franchises often claim to provide you with your own business plan, but what they really provide is a document called an FDD (Franchise Disclosure Document). You will still need to follow all the steps outlined above under the FAQ “How do I write a business plan for a startup?” What’s different for you is that you will benefit from a range of support services, like location selection, marketing support, and maybe even market analysis help, depending on the franchise in question. In the end, a franchise is just like any other type of business, and you need to be able to speak in-depth about each of the core topics of a business plan.

How long does the SBA loan process take?

If you’re applying for an SBA-backed loan, don’t expect to get your money tomorrow. You have to go through a process that includes the application review, underwriting, loan agreement, and closing. It should take a minimum of 30 days, but it can take as long as 90 days and even longer, provided you have found a lender who wants to fund your business plan.

Where do business plan financials come from?

A business plan has extensive financial charts and tables to help your lender or investor understand your business model. The numbers you use when calculating your profit and loss statement and balance sheet should be real-world numbers based on research that you’ve done. The financials include start-up costs , cash flow statement , balance sheet, profit and loss, personnel costs, and a month-by-month forecast for your first year of operations.

For example, don’t just guess what your lease will be! Look at a website like Loopnet to see what properties are currently available in your desired neighborhood by size and property type. You don’t have to lease a space to write a business plan (you often need a business plan to lease a space!), but it can be a good plan to average the rent cost from the three places you like best. 

For personnel costs, look at salary.com in your area to see what the average hourly rate is for the positions you need to hire. Don’t set your prices out of thin air either. Research your closest competitors and find out what they charge for similar products and services. It’s up to you to decide where you want to sit in terms of pricing; whether you’re offering an economy option or premium pricing, but knowing what your competitors charge can help you decide what’s a fair price for what you offer. 

There are two primary methods for creating a revenue forecast: top-down and bottom-up . A top-down revenue projection model begins with the market and works its way down, whereas a bottom-up model begins with the business and works its way up. Choosing which method to use varies by industry, but Masterplans' financial modelers usually find a way to incorporate both techniques .

There will be times when you just don’t know a number that is needed to create your financials. It’s ok (and even can be ideal) to use industry standard data. Here at Masterplans, we have access to market research tools with detailed financial benchmarks for a broad range of industries, which helps us find good data when our clients just don’t know the answer. Whenever we get the question, “where did these numbers come from?,” the answer is usually IBISWorld , which we highly recommend. You can buy individual industry reports and look at the Key Statistics to find out about things like profit margins, financial ratios, wages, and revenue per employee.

What business structure should I use? ?

This is a great question for an accountant and/or lawyer, and you should definitely consult with one before making this decision. Your options are sole proprietorship, partnership, Limited Liability Company, S-Corporation, and C-Corporation. 

• Sole proprietorship: We generally discourage use of the sole proprietorship for our customers, because the taxation is the same as your personal taxes, offering your business no benefits, and because this structure maximizes your liability if anything goes wrong. 
• Partnerships: There are several different types of partnership that you can choose, but we rarely see these come across our desks, because they do not offer the same tax benefits as an LLC. 
• Limited Liability Corporation (LLC): LLC is the king of business structures for a start-up, because it is superbly flexible, offers tax benefits, and has liability protection. You can even start an LLC as the sole owner and employee of your company! 
• Corporation: Sometimes when we ask clients what their company structure is, they just say it’s a corporation without specifying what type. But there are two types, and which one you have matters. While both types allow you to issue shares, one of the primary differences is that with S-corps, you are limited to 100 shareholders and with C-corps, you aren’t limited in that way. How does this matter? Well, if you eventually decide to go public, you probably want more than 100 shareholders!

If you want to learn more about the different types of business structures, talk to a professional and read what the SBA has to say about it .

Deliver your best with Masterplans.com

Free 30-minute consultation .

Schedule a 30-minute meeting with one of our business planning experts so that we can better understand your objectives, advise you on appropriate steps or provide a business plan development proposal.

How to Start a Business: A Startup Guide for Entrepreneurs [Template]

Updated: August 27, 2024

Published: August 26, 2024

I started a local HVAC business in the summer of 2020, and since then, I’ve learned a lot about which steps are most important for getting a business venture off the ground. To help you make your business idea a reality, I've put together a complete guide that walks you through the steps of starting a business.

The guide covers every step I’ve discovered you need to start a business, from the paperwork and finances to creating your business plan and growing your business online. At the bottom, you’ll find a library of the best free tools and resources to start selling and marketing your products and services.

Let's get started.

Table of Contents

What do you need to start a business?

How to start a business, how to make a business plan, how to decide on a company name, how to choose an ownership structure, how to register your business, how to comply with legal requirements, how to find funding for your new business, how to create a brand identity for your new business, tips for starting a business, resources to start a business, how to start a business online, top tips from founders and entrepreneurs, next steps: getting ready to launch your business.

Free Business Startup kit

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

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

• Business Plan: Your plan is a document that provides in-depth detail about your business and its short- and long-term strategies.
• Business Name: Your name is what you’ll call your company on all official documentation and licenses.
• Business Structure: Your structure refers to the type of leadership and ownership your business will operate under.
• Business Registration: Your registration is a credential with state authorities that allows your business to operate legally.
• Legal Requirements: Your other legal requirements include business licenses and permits beyond the initial registration.
• Funding: Your sources of funding refer to business grants, loans, and personal savings.
• Branding: Your branding refers to the unique identity and image you create for your business.

Every budding entrepreneur wants more visitors, more qualified leads, and more revenue. But starting a business isn’t one of those “if you build it, they will come” situations. So, if you’re one of the 26% of entrepreneurs who got started out of passion, know that you’ve still got to run the business side of the business.

So much of getting a startup off the ground has to do with timing, planning, and the market, so consider if the economic conditions are right to start a company and whether you can successfully penetrate the market with your solution.

In order to build and run a successful company , you’ll also need to create and fine-tune a business plan, assess your finances, complete all the legal paperwork, pick your partners, research apps for startup growth, choose the best tools and systems to help you get your marketing and sales off the ground … and a whole lot more.

When I first started my business, I felt overwhelmed by the sheer magnitude of requirements, which is why I’ve summed up the process to make it easier for you.

In brief, the requirements for starting a business are:

• A business plan.
• A business name.
• An ownership or business structure.
• A business registration certificate.
• A legal license or seller’s permit (as well as other legal documents).
• A source of funding.
• A brand identity.

Without these elements in place, you unnecessarily risk your new business’s future. Now, let’s go over these basic steps for starting a business.

• Write a business plan.
• Choose a business name.
• Choose an ownership structure.
• Register your business.
• Review and comply with legal requirements.
• Apply for funding.
• Create a brand identity.

Having a great business idea is only part of the journey. In order to be successful, you’ll need to take a few steps to get it off the ground. In order to refine your business idea and set yourself up for success, consider doing the following:

1. Write a business plan .

Your business plan maps out the details of your business and how you plan to run it. Yet, with 70% of entrepreneurs starting their business out of a need for a lifestyle or career change and 26% out of passion or a great idea, many don’t take the time to create a business plan.

Below are the key elements in a business plan template, details about what goes into each of them, and example sections at the bottom. You’ll also learn tips for writing a business plan .

1. Use a business plan template .

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

2. Narrow down what makes you different.

Before you start whipping up a business plan, think carefully about what makes your business unique first. If you’re planning to start a new athletic clothing business, for example, then you’ll need to differentiate yourself from the numerous other athletic clothing brands out there.

You’ll want to answer questions like some I’ve identified below (keeping in mind to adapt them to your industry):

• What makes yours stand out from the others?
• Who are you planning to create clothing for?
• Are you planning to make clothing for specific sports or athletic activities, like yoga or hiking or tennis?
• Do you use environmentally friendly material?
• Does a certain percentage of your proceeds go to charity?
• Does your brand promote a positive body image?

Understanding your brand’s position in the market will help you generate awareness and sales.

Pro tip: Remember, you’re not just selling your product or service — you’re selling a combination of product, value, and brand experience. Think through these big questions and outline them before you dive into the nitty-gritty of your business plan research.

3. Keep it short.

Business plans are shorter and more concise nowadays than they used to be. While it might be tempting to include all the results of your market research , flesh out every single product you plan to sell, and outline exactly what your website will look like — that’s actually not helpful in the format of a business plan.

Know these details and keep them elsewhere, but exclude everything but the meat and potatoes from the business plan itself. Your business plan shouldn’t just be a quick(ish) read — it should be easy to skim, too, like the example below.

Pro tip: If someone who doesn’t know a lot about your service can easily digest your business plan, you’re doing it right.

The executive summary should be about a page long. It should cover:

• Overview . Briefly explain what the company is, where you’ll be located, what you’ll sell, and who you’ll sell to.
• Company profile. Briefly explain the business structure, who owns it, what prior experience/skills they’ll bring to the table, and who the first hires might be.
• Products or services . Briefly explain what you’ll sell.
• The market. Briefly explain the main findings from your market analysis and the product market fit .
• Financial considerations . Briefly explain how you plan to fund the business and what your financial projections are.

Featured Resource: Executive Summary Template

On the marketing side, you’ll want to cover answers to questions like:

• How do you plan to penetrate the market?
• How will you grow your business?
• Which channels will you focus on for distribution?
• How will you communicate with your customers?

Marketing trends change year after year, so be sure to keep up on the latest trends by subscribing to the Hubspot Marketing blog .

Pro tip: Samar Owais, Founder of Emails Done Right , shared her top advice: “Never stop marketing. You don‘t have to use every marketing strategy, tactic, or medium out there but you do have to market consistently. Pick 1-3 things that work and don’t stop doing them even when you're over capacity.”

On the sales side , you’ll need to cover answers to questions like:

• What’s your sales strategy ?
• What will your sales team look like, and how do you plan to grow it over time?
• How do you plan to scale for growth ?
• How many sales calls will you need to make to make a sale?
• What’s the average price per sale?

Speaking of average price per sale, you’ll want to go into your pricing strategy as well.

Featured Resource: Marketing & Sales Alignment Template

How to Write a Business Proposal [Examples + Template]

11 Top Free Accounting & Bookkeeping Software Apps for 2022

Niche Markets: Examples, Benefits, Expert Insight, & How You (a Savvy Entrepreneur) Can Find Yours

The Straightforward Guide to Value Chain Analysis [+ Templates]

The 11 Best Crowdfunding Sites for Businesses (& Key Tips From Successfully Crowdfunded Entrepreneurs)

Amazon Affiliate Program: How to Become an Amazon Associate to Boost Income

A Complete Guide to Successful Brand Positioning

Powerful and easy-to-use sales software that drives productivity, enables customer connection, and supports growing sales orgs

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Tips White Papers
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• United Kingdom
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

Labor Day Sale! 33% Off Entrepreneur +

Unlock this article and get unlimited access to our entire site. Use code SAVE33 at checkout - for new subscribers only.

Already have an account?

How to Write a Business Plan 101 This guide to writing a business plan will outline the most important parts and what should be included in an effective plan.

A business plan is a written description of your business's future, a document that tells what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of one.

Business plans are inherently strategic. You start here, today, with certain resources and abilities. And you want to get to there, a point in the future (usually three to five years out), at which time your business will have a different set of resources and abilities as well as greater profitability and increased assets. Your plan shows how you will get from here to there.

Related: 7 Steps to a Perfectly Written Business Plan

The rest of this article is locked.

Join Entrepreneur + today for access.

Already have an account? Sign In

Successfully copied link

• Small Business
• How to Start a Business

How to Start a Business: A Comprehensive Guide and Essential Steps

Building an effective business launch plan

• Search Search Please fill out this field.

Conducting Market Research

Crafting a business plan, reviewing funding options, understanding legal requirements, implementing marketing strategies, the bottom line.

• How to Start a Business: A Comprehensive Guide and Essential Steps CURRENT ARTICLE
• How to Do Market Research, Types, and Example
• Marketing Strategy: What It Is, How It Works, How To Create One
• Marketing in Business: Strategies and Types Explained
• What Is a Marketing Plan? Types and How to Write One
• Business Development: Definition, Strategies, Steps & Skills
• Business Plan: What It Is, What's Included, and How to Write One
• Small Business Development Center (SBDC): Meaning, Types, Impact
• How to Write a Business Plan for a Loan
• Business Startup Costs: It’s in the Details
• Startup Capital Definition, Types, and Risks
• Bootstrapping Definition, Strategies, and Pros/Cons
• Crowdfunding: What It Is, How It Works, and Popular Websites
• Starting a Business with No Money: How to Begin
• A Comprehensive Guide to Establishing Business Credit
• Equity Financing: What It Is, How It Works, Pros and Cons
• Best Startup Business Loans
• Sole Proprietorship: What It Is, Pros & Cons, and Differences From an LLC
• Partnership: Definition, How It Works, Taxation, and Types
• What is an LLC? Limited Liability Company Structure and Benefits Defined
• Corporation: What It Is and How to Form One
• Starting a Small Business: Your Complete How-to Guide
• Starting an Online Business: A Step-by-Step Guide
• How to Start Your Own Bookkeeping Business: Essential Tips
• How to Start a Successful Dropshipping Business: A Comprehensive Guide

Starting a business in the United States involves a number of different steps spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also requires decisions about a business’ location, structure, name, taxation, and registration. Here are the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

• Entrepreneurs should start by conducting market research to understand their industry space, competition, and target customers.
• The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy.
• Securing funding in the form of grants, loans, venture capital, and/or crowdfunded money is crucial if you’re not self-funding.
• When choosing a venue, be aware of local regulations and requirements.
• Design your business structure with an eye to legal aspects, such as taxation and registration.
• Make a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. The U.S. Small Business Administration (SBA) breaks down common market considerations as follows:

• Demand : Is there a need for this product or service?
• Market size : How many people might be interested?
• Economic indicators : What are the income, employment rate, and spending habits of potential customers?
• Location : Are the target market and business well situated for each other?
• Competition : What is the market saturation ? Who and how many are you going up against?
• Pricing : What might a customer be willing to pay?

Market research should also include an analysis of market opportunities, barriers to market entry, and industry trends, as well as the competition’s strengths, weaknesses, and market share .

There are various methods for conducting market research, and these will vary depending on the nature of the industry and potential business. Data can come from a variety of places, including statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, and questionnaires.

A comprehensive business plan is like a blueprint. It lays the foundation for business development and affects decision-making, day-to-day operations, and growth. Potential investors or partners may want to review and assess it in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital. 

Business plans will differ according to the needs and nature of the company and should only include what makes sense for the business in question. As such, they can vary in length and structure. They can generally be divided into two formats: traditional and lean start-up. The latter is less common and more useful for simple businesses or those that expect to rework their traditional business plan frequently. It provides a vivid snapshot of the company through a small number of elements.

The process of funding a business depends on its needs and the vision and financial situation of its owner.  The first step is to calculate the start-up costs . Identify a list of expenses and put a dollar amount to each of them through research and requesting quotes. The SBA has a start-up costs calculator for small businesses that includes common types of business expenses.  

The next step is to determine how to get the money. Common methods include:

• Self-funding , also known as “ bootstrapping ”
• Finding investors willing to contribute to your venture capital
• Raising money online by crowdfunding
• Securing a business loan from a bank, an online lender, or a credit union
• Winning a business grant from a donor, usually a government, foundation, charity, or corporation

Different methods suit different businesses, and it’s important to consider the obligations associated with any avenue of funding. For example, investors generally want a degree of control for their money, while self-funding puts business owners fully in charge. Of course, investors also mitigate risk; self-funding does not.

Availability is another consideration. Loans are easier to get than grants, which don’t have to be paid back. Additionally, the federal government doesn’t provide grants for the purposes of starting or growing a business, although private organizations may. However, the SBA does guarantee several categories of loans , accessing capital that may not be available through traditional lenders. No matter the funding method(s), it’s essential to detail how the money will be used and lay out a future financial plan for the business, including sales projections and loan repayments . 

Businesses operating in the U.S. are legally subject to regulations at the local, county, state, and federal level involving taxation, business IDs, registrations, and permits.

Choosing a Business Location

Where a business operates will dictate such things as taxes, zoning laws (for brick-and-mortar locations), licenses, and permits. Other considerations when choosing a location might include:

• Human factors : These include target audience and the preferences of business owners and partners regarding convenience, knowledge of the area, and commuting distance.
• Regulations : Government at every level will assert its authority.
• Regionally specific expenses : Examples are average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing.
• The tax and financial environment : Tax types include income, sales, corporate, and property, as well as tax credits; available investment incentives and loan programs may also be geographically determined.

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications , it’s important to understand them fully. If necessary, consult a business counselor, a lawyer, and/or an accountant.

Common business structures include:

• Sole proprietorship : A sole proprietorship is an unincorporated business that has just one owner, who pays personal income tax on its profits.
• Partnership : Partnership options include a limited partnership (LP) and a limited liability partnership (LLP) .
• Limited liability company (LLC) : An LLC protects its owners from personal responsibility for the company’s debts and liabilities.
• Corporation : The different types of corporations include C corp , S corp , B corp , closed corporation , and nonprofit .

Getting a Tax ID Number

A tax ID number is the equivalent of a Social Security number for a business. Whether or not a state and/or federal tax ID number is required will depend on the nature of the business and the location in which it’s registered.

A federal tax ID, also known as an employer identification number (EIN) , is required if a business:

• Operates as a corporation or partnership
• Pays federal taxes
• Has employees
• Files employment, excise, alcohol, tobacco, or firearms tax returns
• Has a Keogh plan
• Withholds taxes on non-wage income to nonresident aliens
• Is involved with certain types of organizations, including trusts, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives, and plan administrators

An EIN can also be useful if you want to open a business bank account, offer an employer-sponsored retirement plan, or apply for federal business licenses and permits. You can get one online from the Internal Revenue Service (IRS) . State websites will do the same for a state tax ID.

Registering a Business

How you register a business will depend on its location, nature, size, and business structure.  For example, a small business may not require any steps beyond registering its business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all.

That said, registration can provide personal liability protection, tax-exempt status, and trademark protection, so it can be beneficial even if it’s not strictly required. Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.  

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will need a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

• Whether the business has a physical presence in the state
• If the business often conducts in-person client meetings in the state
• If a large portion of business revenue comes from the state
• Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case the business would register in the state in which it was formed (this would be considered the domestic state) and file for foreign qualification in any additional states.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling. 

Marketing plans will vary according to the specifics of the industry, target market, and business, but they should aim to include descriptions of and strategies for the following:

• A target customer : Including market size, demographics, traits, and relevant trends
• Value propositions or business differentiators : An overview of the company’s competitive advantage with regard to employees, certifications, and offerings
• A sales and marketing plan : Including methods, channels, and a customer’s journey through interacting with the business
• Goals : Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, and sales targets
• An execution plan : Should detail tactics and break down higher-level goals into specific actions
• A budget : Detailing how much different marketing projects and activities will cost

BIPOC and LGBTQIA+ small business owners can now apply for a chance to win $250,000 in advertising and consulting services from Good Impressions.

How Much Does It Cost to Start a Business?

Business start-up costs will vary depending on the industry, business activity, and product or service offered. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s start-up costs calculator for common types of expenses associated with starting a small business.

What Should I Do Before Starting a Business?

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

What Types of Funding Are Available to Start a Business?

Start-up capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for the purposes of starting a business, although some private sources do.

Do You Need to Write a Business Plan?

Business plans are comprehensive documents that lay out the most important information about a business. They reference its growth, development, and decision-making processes, and financial institutions and potential investors and partners generally request to review them in advance of agreeing to provide funding or to collaborate.

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of your target market, competition, industry, goals, company structure, funding requirements, legal regulations, and marketing strategy, as well as conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. " Calculate Your Startup Costs ."

U.S. Small Business Administration. “ Fund Your Business .”

U.S. Small Business Administration. “ Grants .”

U.S. Small Business Administration. “ Loans .”

U.S. Small Business Administration. “ Pick Your Business Location .”

U.S. Small Business Administration. “ Choose a Business Structure .”

Internal Revenue Service. “ Do You Need an EIN? ”

U.S. Small Business Administration. “ Get Federal and State Tax ID Numbers .”

U.S. Small Business Administration. “ Register Your Business .”

U.S. Small Business Administration. “ Apply for Licenses and Permits .”

U.S. Small Business Administration. “ Marketing and Sales .”

• Terms of Service
• Editorial Policy
• Privacy Policy

How To Start A Business In 11 Steps (2024 Guide)

Updated: Jul 29, 2024, 8:15pm

Table of Contents

Before you begin: get in the right mindset, 1. determine your business concept, 2. research your competitors and market, 3. create your business plan, 4. choose your business structure, 5. register your business and get licenses, 6. get your finances in order, 7. fund your business, 8. apply for business insurance, 9. get the right business tools, 10. market your business, 11. scale your business, what are the best states to start a business, bottom line, frequently asked questions (faqs).

Starting a business is one of the most exciting and rewarding experiences you can have. But where do you begin? There are several ways to approach creating a business, along with many important considerations. To help take the guesswork out of the process and improve your chances of success, follow our comprehensive guide on how to start a business. We’ll walk you through each step of the process, from defining your business idea to registering, launching and growing your business .

Featured Partners

ZenBusiness

$0 + State Fees

Varies By State & Package

On ZenBusiness' Website

On LegalZoom's Website

Northwest Registered Agent

$39 + State Fees

On Northwest Registered Agent's Website

$0 + State Fee

On Formations' Website

The public often hears about overnight successes because they make for a great headline. However, it’s rarely that simple—they don’t see the years of dreaming, building and positioning before a big public launch. For this reason, remember to focus on your business journey and don’t measure your success against someone else’s.

Consistency Is Key

New business owners tend to feed off their motivation initially but get frustrated when that motivation wanes. This is why it’s essential to create habits and follow routines that power you through when motivation goes away.

Take the Next Step

Some business owners dive in headfirst without looking and make things up as they go along. Then, there are business owners who stay stuck in analysis paralysis and never start. Perhaps you’re a mixture of the two—and that’s right where you need to be. The best way to accomplish any business or personal goal is to write out every possible step it takes to achieve the goal. Then, order those steps by what needs to happen first. Some steps may take minutes while others take a long time. The point is to always take the next step.

Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Maybe you love making soap and want to open a soap shop in your small town that already has three close by—it won’t be easy to corner the market when you’re creating the same product as other nearby stores.

If you don’t have a firm idea of what your business will entail, ask yourself the following questions:

• What do you love to do?
• What do you hate to do?
• Can you think of something that would make those things easier?
• What are you good at?
• What do others come to you for advice about?
• If you were given ten minutes to give a five-minute speech on any topic, what would it be?
• What’s something you’ve always wanted to do, but lacked resources for?

These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.

Your business idea also doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it. You can also sell a digital product so there’s little overhead.

What Kind of Business Should You Start?

Before you choose the type of business to start, there are some key things to consider:

• What type of funding do you have?
• How much time do you have to invest in your business?
• Do you prefer to work from home or at an office or workshop?
• What interests and passions do you have?
• Can you sell information (such as a course), rather than a product?
• What skills or expertise do you have?
• How fast do you need to scale your business?
• What kind of support do you have to start your business?
• Are you partnering with someone else?
• Does the franchise model make more sense to you?

Consider Popular Business Ideas

Not sure what business to start? Consider one of these popular business ideas:

• Start a Franchise
• Start a Blog
• Start an Online Store
• Start a Dropshipping Business
• Start a Cleaning Business
• Start a Bookkeeping Business
• Start a Clothing Business
• Start a Landscaping Business
• Start a Consulting Business
• Start a Photography Business
• Start a Vending Machine Business

Most entrepreneurs spend more time on their products than they do getting to know the competition. If you ever apply for outside funding, the potential lender or partner wants to know: what sets you (or your business idea) apart? If market analysis indicates your product or service is saturated in your area, see if you can think of a different approach. Take housekeeping, for example—rather than general cleaning services, you might specialize in homes with pets or focus on garage cleanups.

Primary Research

The first stage of any competition study is primary research, which entails obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to learn what consumers want. Surveying friends and family isn’t recommended unless they’re your target market. People who say they’d buy something and people who do are very different. The last thing you want is to take so much stock in what they say, create the product and flop when you try to sell it because all of the people who said they’d buy it don’t because the product isn’t something they’d buy.

Secondary Research

Utilize existing sources of information, such as census data, to gather information when you do secondary research. The current data may be studied, compiled and analyzed in various ways that are appropriate for your needs but it may not be as detailed as primary research.

Conduct a SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to look at the facts about how your product or idea might perform if taken to market, and it can also help you make decisions about the direction of your idea. Your business idea might have some weaknesses that you hadn’t considered or there may be some opportunities to improve on a competitor’s product.

Asking pertinent questions during a SWOT analysis can help you identify and address weaknesses before they tank your new business.

A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. When writing a well-rounded business plan, include the following sections:

• Executive summary: The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
• Company description: The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
• Market analysis: This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
• Organization and structure: Write about the type of business organization you expect, what risk management strategies you propose and who will staff the management team. What are their qualifications? Will your business be a single-member limited liability company (LLC) or a corporation ?
• Mission and goals: This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
• Products or services: This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your products cost, who will be responsible for creating the products, how you’ll source materials and how much they cost to make.
• Background summary: This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
• Marketing plan: The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
• Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.

Learn more: Download our free simple business plan template .

Come Up With an Exit Strategy

An exit strategy is important for any business that is seeking funding because it outlines how you’ll sell the company or transfer ownership if you decide to retire or move on to other projects. An exit strategy also allows you to get the most value out of your business when it’s time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.

The most common exit strategies are:

• Selling the business to another party
• Passing the business down to family members
• Liquidating the business assets
• Closing the doors and walking away

Develop a Scalable Business Model

As your small business grows, it’s important to have a scalable business model so that you can accommodate additional customers without incurring additional costs. A scalable business model is one that can be replicated easily to serve more customers without a significant increase in expenses.

Some common scalable business models are:

• Subscription-based businesses
• Businesses that sell digital products
• Franchise businesses
• Network marketing businesses

Start Planning for Taxes

One of the most important things to do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be liable for, including income tax, self-employment tax, sales tax and property tax. Depending on the type of business you’re operating, you may also be required to pay other taxes, such as payroll tax or unemployment tax.

Start A Limited Liability Company Online Today with ZenBusiness

Click to get started.

When structuring your business, it’s essential to consider how each structure impacts the amount of taxes you owe, daily operations and whether your personal assets are at risk.

An LLC limits your personal liability for business debts. LLCs can be owned by one or more people or companies and must include a registered agent . These owners are referred to as members.

• LLCs offer liability protection for the owners
• They’re one of the easiest business entities to set up
• You can have a single-member LLC
• You may be required to file additional paperwork with your state on a regular basis
• LLCs can’t issue stock
• You’ll need to pay annual filing fees to your state

Limited Liability Partnership (LLP)

An LLP is similar to an LLC but is typically used for licensed business professionals such as an attorney or accountant. These arrangements require a partnership agreement.

• Partners have limited liability for the debts and actions of the LLP
• LLPs are easy to form and don’t require much paperwork
• There’s no limit to the number of partners in an LLP
• Partners are required to actively take part in the business
• LLPs can’t issue stock
• All partners are personally liable for any malpractice claims against the business

Sole Proprietorship

If you start a solo business, you might consider a sole proprietorship . The company and the owner, for legal and tax purposes, are considered the same. The business owner assumes liability for the business. So, if the business fails, the owner is personally and financially responsible for all business debts.

• Sole proprietorships are easy to form
• There’s no need to file additional paperwork with your state
• You’re in complete control of the business
• You’re personally liable for all business debts
• It can be difficult to raise money for a sole proprietorship
• The business may have a limited lifespan

Corporation

A corporation limits your personal liability for business debts just as an LLC does. A corporation can be taxed as a C corporation (C-corp) or an S corporation (S-corp). S-corp status offers pass-through taxation to small corporations that meet certain IRS requirements. Larger companies and startups hoping to attract venture capital are usually taxed as C-corps.

• Corporations offer liability protection for the owners
• The life span of a corporation is not limited
• A corporation can have an unlimited number of shareholders
• Corporations are subject to double taxation
• They’re more expensive and complicated to set up than other business structures
• The shareholders may have limited liability

Before you decide on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each business type has different tax treatments that could affect your bottom line.

Helpful Resources

• How To Set Up an LLC in 7 Steps
• How To Start a Sole Proprietorship
• How To Start a Corporation
• How To Start a Nonprofit
• How To Start a 501(c)(3)

There are several legal issues to address when starting a business after choosing the business structure. The following is a good checklist of items to consider when establishing your business:

Choose Your Business Name

Make it memorable but not too difficult. Choose the same domain name, if available, to establish your internet presence. A business name cannot be the same as another registered company in your state, nor can it infringe on another trademark or service mark that is already registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

There are business names, and then there are fictitious business names known as “Doing Business As” or DBA. You may need to file a DBA if you’re operating under a name that’s different from the legal name of your business. For example, “Mike’s Bike Shop” is doing business as “Mike’s Bikes.” The legal name of the business is “Mike’s Bike Shop,” and “Mike’s Bikes” is the DBA.

You may need to file a DBA with your state, county or city government offices. The benefits of a DBA include:

• It can help you open a business bank account under your business name
• A DBA can be used as a “trade name” to brand your products or services
• A DBA can be used to get a business license

Register Your Business and Obtain an EIN

You’ll officially create a corporation, LLC or other business entity by filing forms with your state’s business agency―usually the Secretary of State. As part of this process, you’ll need to choose a registered agent to accept legal documents on behalf of your business. You’ll also pay a filing fee. The state will send you a certificate that you can use to apply for licenses, a tax identification number (TIN) and business bank accounts.

Next, apply for an employer identification number (EIN) . All businesses, other than sole proprietorships with no employees, must have a federal employer identification number. Submit your application to the IRS and you’ll typically receive your number in minutes.

Get Appropriate Licenses and Permits

Legal requirements are determined by your industry and jurisdiction. Most businesses need a mixture of local, state and federal licenses to operate. Check with your local government office (and even an attorney) for licensing information tailored to your area.

• Best LLC Services
• How To Register a Business Name
• How To Register a DBA
• How To Get an EIN for an LLC
• How To Get a Business License

Start an LLC Online Today With ZenBusiness

Click on the state below to get started.

Open a Business Bank Account

Keep your business and personal finances separate. Here’s how to choose a business checking account —and why separate business accounts are essential. When you open a business bank account, you’ll need to provide your business name and your business tax identification number (EIN). This business bank account can be used for your business transactions, such as paying suppliers or invoicing customers. Most times, a bank will require a separate business bank account to issue a business loan or line of credit.

Hire a Bookkeeper or Get Accounting Software

If you sell a product, you need an inventory function in your accounting software to manage and track inventory. The software should have ledger and journal entries and the ability to generate financial statements.

Some software programs double as bookkeeping tools. These often include features such as check writing and managing receivables and payables. You can also use this software to track your income and expenses, generate invoices, run reports and calculate taxes.

There are many bookkeeping services available that can do all of this for you, and more. These services can be accessed online from any computer or mobile device and often include features such as bank reconciliation and invoicing. Check out the best accounting software for small business, or see if you want to handle the bookkeeping yourself.

Determine Your Break-Even Point

Before you fund your business, you must get an idea of your startup costs. To determine these, make a list of all the physical supplies you need, estimate the cost of any professional services you will require, determine the price of any licenses or permits required to operate and calculate the cost of office space or other real estate. Add in the costs of payroll and benefits, if applicable.

Businesses can take years to turn a profit, so it’s better to overestimate the startup costs and have too much money than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.

When you know how much you need to get started with your business, you need to know the point at which your business makes money. This figure is your break-even point.

In contrast, the contribution margin = total sales revenue – cost to make product

For example, let’s say you’re starting a small business that sells miniature birdhouses for fairy gardens. You have determined that it will cost you $500 in startup costs. Your variable costs are 40 cents per birdhouse produced, and you sell them for $1.50 each.

Let’s write these out so it’s easy to follow:

This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in your first month, you will make a profit.

• The Best Business Checking Accounts
• The Best Accounting Software for Small Business
• How To Open a Bank Account

There are many different ways to fund your business—some require considerable effort, while others are easier to obtain. Two categories of funding exist: internal and external.

Internal funding includes:

• Personal savings
• Credit cards
• Funds from friends and family

If you finance the business with your own funds or with credit cards, you have to pay the debt on the credit cards and you’ve lost a chunk of your wealth if the business fails. By allowing your family members or friends to invest in your business, you are risking hard feelings and strained relationships if the company goes under. Business owners who want to minimize these risks may consider external funding.

External funding includes:

• Small business loans
• Small business grants
• Angel investors
• Venture capital
• Crowdfunding

Small businesses may have to use a combination of several sources of capital. Consider how much money is needed, how long it will take before the company can repay it and how risk-tolerant you are. No matter which source you use, plan for profit. It’s far better to take home six figures than make seven figures and only keep $80,000 of it.

Funding ideas include:

• Invoice factoring: With invoice factoring , you can sell your unpaid invoices to a third party at a discount.
• Business lines of credit: Apply for a business line of credit , which is similar to a personal line of credit. The credit limit and interest rate will be based on your business’s revenue, credit score and financial history.
• Equipment financing: If you need to purchase expensive equipment for your business, you can finance it with a loan or lease.
• Small Business Administration (SBA) microloans: Microloans are up to $50,000 loans that can be used for working capital, inventory or supplies and machinery or equipment.
• Grants: The federal government offers grants for businesses that promote innovation, export growth or are located in historically disadvantaged areas. You can also find grants through local and regional organizations.
• Crowdfunding: With crowdfunding , you can raise money from a large group of people by soliciting donations or selling equity in your company.

Choose the right funding source for your business by considering the amount of money you need, the time frame for repayment and your tolerance for risk.

• Best Small Business Loans
• Best Startup Business Loans
• Best Business Loans for Bad Credit
• Business Loan Calculator
• Average Business Loan Rates
• How To Get a Business Loan

You need to have insurance for your business , even if it’s a home-based business or you don’t have any employees. The type of insurance you need depends on your business model and what risks you face. You might need more than one type of policy, and you might need additional coverage as your business grows. In most states, workers’ compensation insurance is required by law if you have employees.

Work With an Agent To Get Insured

An insurance agent can help determine what coverages are appropriate for your business and find policies from insurers that offer the best rates. An independent insurance agent represents several different insurers, so they can shop around for the best rates and coverage options.

Basic Types of Business Insurance Coverage

• Liability insurance protects your business against third-party claims of bodily injury, property damage and personal injury such as defamation or false advertising.
• Property insurance covers the physical assets of your business, including your office space, equipment and inventory.
• Business interruption insurance pays for the loss of income if your business is forced to close temporarily due to a covered event such as a natural disaster.
• Product liability insurance protects against claims that your products caused bodily injury or property damage.
• Employee practices liability insurance covers claims from employees alleging discrimination, sexual harassment or other wrongful termination.
• Workers’ compensation insurance covers medical expenses and income replacement for employees who are injured on the job.
• Best Small Business Insurance
• Best Commercial Auto Insurance
• How To Get Product Liability Insurance
• Your Guide to General Liability Insurance
• 13 Types of Small Business Insurance

Business tools can help make your life easier and make your business run more smoothly. The right tools can help you save time, automate tasks and make better decisions.

Consider the following tools in your arsenal:

• Accounting software : Track your business income and expenses, prepare financial statements and file taxes. Examples include QuickBooks and FreshBooks.
• Customer relationship management (CRM) software : This will help you manage your customer relationships, track sales and marketing data and automate tasks like customer service and follow-ups. Examples include Zoho CRM and monday.com.
• Project management software : Plan, execute and track projects. It can also be used to manage employee tasks and allocate resources. Examples include Airtable and ClickUp.
• Credit card processor : This will allow you to accept credit card payments from customers. Examples include Stripe and PayPal.
• Point of sale (POS) : A system that allows you to process customer payments. Some accounting software and CRM software have POS features built-in. Examples include Clover and Lightspeed.
• Virtual private network (VPN) : Provides a secure, private connection between your computer and the internet. This is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
• Merchant services : When customers make a purchase, the money is deposited into your business account. You can also use merchant services to set up recurring billing or subscription payments. Examples include Square and Stripe.
• Email hosting : This allows you to create a professional email address with your own domain name. Examples include G Suite and Microsoft Office 365.

Many business owners spend so much money creating their products that there isn’t a marketing budget by the time they’ve launched. Alternatively, they’ve spent so much time developing the product that marketing is an afterthought.

Create a Website

Even if you’re a brick-and-mortar business, a web presence is essential. Creating a website doesn’t take long, either—you can have one done in as little as a weekend. You can make a standard informational website or an e-commerce site where you sell products online. If you sell products or services offline, include a page on your site where customers can find your locations and hours. Other pages to add include an “About Us” page, product or service pages, frequently asked questions (FAQs), a blog and contact information.

Optimize Your Site for SEO

After getting a website or e-commerce store, focus on optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords for your products, the search engine can point them to your site. SEO is a long-term strategy, so don’t expect a ton of traffic from search engines initially—even if you’re using all the right keywords.

Create Relevant Content

Provide quality digital content on your site that makes it easy for customers to find the correct answers to their questions. Content marketing ideas include videos, customer testimonials, blog posts and demos. Consider content marketing one of the most critical tasks on your daily to-do list. This is used in conjunction with posting on social media.

Get Listed in Online Directories

Customers use online directories like Yelp, Google My Business and Facebook to find local businesses. Some city halls and chambers of commerce have business directories too. Include your business in as many relevant directories as possible. You can also create listings for your business on specific directories that focus on your industry.

Develop a Social Media Strategy

Your potential customers are using social media every day—you need to be there too. Post content that’s interesting and relevant to your audience. Use social media to drive traffic back to your website where customers can learn more about what you do and buy your products or services.

You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram because they offer e-commerce features that allow you to sell directly from your social media accounts. Both of these platforms have free ad training to help you market your business.

• Best Website Builders
• How To Make a Website for Your Business
• The Best E-Commerce Platforms
• Best Blogging Platforms
• Best Web Hosting Services

To scale your business, you need to grow your customer base and revenue. This can be done by expanding your marketing efforts, improving your product or service, collaborating with other creators or adding new products or services that complement what you already offer.

Think about ways you can automate or outsource certain tasks so you can focus on scaling the business. For example, if social media marketing is taking up too much of your time, consider using a platform such as Hootsuite to help you manage your accounts more efficiently. You can also consider outsourcing the time-consumer completely.

You can also use technology to automate certain business processes, including accounting, email marketing and lead generation. Doing this will give you more time to focus on other aspects of your business.

When scaling your business, it’s important to keep an eye on your finances and make sure you’re still profitable. If you’re not making enough money to cover your costs, you need to either reduce your expenses or find ways to increase your revenue.

Build a Team

As your business grows, you’ll need to delegate tasks and put together a team of people who can help you run the day-to-day operations. This might include hiring additional staff, contractors or freelancers.

Resources for building a team include:

• Hiring platforms: To find the right candidates, hiring platforms, such as Indeed and Glassdoor, can help you post job descriptions, screen résumés and conduct video interviews.
• Job boards: Job boards such as Craigslist and Indeed allow you to post open positions for free.
• Social media: You can also use social media platforms such as LinkedIn and Facebook to find potential employees.
• Freelance platforms: Using Upwork, Freelancer and Fiverr can help you find talented freelancers for one-time or short-term projects. You can also outsource certain tasks, such as customer service, social media marketing or bookkeeping.

You might also consider partnering with other businesses in your industry. For example, if you’re a wedding planner, you could partner with a florist, photographer, catering company or venue. This way, you can offer your customers a one-stop shop for all their wedding needs. Another example is an e-commerce store that partners with a fulfillment center. This type of partnership can help you save money on shipping and storage costs, and it can also help you get your products to your customers faster.

To find potential partnerships, search for businesses in your industry that complement what you do. For example, if you’re a web designer, you could partner with a digital marketing agency.

You can also search for businesses that serve the same target market as you but offer different products or services. For example, if you sell women’s clothing, you could partner with a jewelry store or a hair salon.

• Best Recruiting Software
• How To Hire Employees
• Where To Post Jobs
• Best Applicant Tracking Systems

To rank the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state. Check out the full report .

Starting a small business takes time, effort and perseverance. But if you’re willing to put in the work, it can be a great way to achieve your dreams and goals. Be sure to do your research, create a solid business plan and pivot along the way. Once you’re operational, don’t forget to stay focused and organized so you can continue to grow your business.

How do I start a small business with no money?

There are several funding sources for brand-new businesses and most require a business plan to secure it. These include the SBA , private grants, angel investors, crowdfunding and venture capital.

What is the best business structure?

The best business structure for your business will depend entirely on what kind of company you form, your industry and what you want to accomplish. But any successful business structure will be one that will help your company set realistic goals and follow through on set tasks.

Do I need a business credit card?

You don’t need one, but a business credit card can be helpful for new small businesses. It allows you to start building business credit, which can help you down the road when you need to take out a loan or line of credit. Additionally, business credit cards often come with rewards and perks that can save you money on business expenses.

Do I need a special license or permit to start a small business?

The answer to this question will depend on the type of business you want to start and where you’re located. Some businesses, such as restaurants, will require a special permit or license to operate. Others, such as home daycare providers, may need to register with the state.

How much does it cost to create a business?

The cost of starting a business will vary depending on the size and type of company you want to create. For example, a home-based business will be less expensive to start than a brick-and-mortar store. Additionally, the cost of starting a business will increase if you need to rent or buy commercial space, hire employees or purchase inventory. You could potentially get started for free by dropshipping or selling digital goods.

How do I get a loan for a new business?

The best way to get a loan for a new business is to approach banks or other financial institutions and provide them with a business plan and your financial history. You can also look into government-backed loans, such as those offered by the SBA. Startups may also be able to get loans from alternative lenders, including online platforms such as Kiva.

Do I need a business degree to start a business?

No, you don’t need a business degree to start a business. However, acquiring a degree in business or a related field can provide you with the understanding and ability to run an effective company. Additionally, you may want to consider taking some business courses if you don’t have a degree to learn more about starting and running a business. You can find these online and at your local Small Business Administration office.

What are some easy businesses to start?

One of the easiest businesses to start also has the lowest overhead: selling digital goods. This can include items such as e-books, online courses, audio files or software. If you have expertise in a particular area or niche, this is a great option for you. Dropshipping is also a great option because you don’t have to keep inventory. You could also buy wholesale products or create your own. Once you create your product, you can sell it through your own website or third-party platforms such as Amazon or Etsy.

What is the most profitable type of business?

There is no one answer to this question because the most profitable type of business will vary depending on a number of factors, such as your industry, location, target market and business model. However, some businesses tend to be more profitable than others, such as luxury goods, high-end services, business-to-business companies and subscription-based businesses. If you’re not sure what type of business to start, consider your strengths and interests, as well as the needs of your target market, to help you choose a profitable business idea.

• Best Registered Agent Services
• Best Trademark Registration Services
• Top LegalZoom Competitors
• Best Business Loans
• Best Business Plan Software
• ZenBusiness Review
• LegalZoom LLC Review
• Northwest Registered Agent Review
• Rocket Lawyer Review
• Inc. Authority Review
• Rocket Lawyer vs. LegalZoom
• Bizee Review (Formerly Incfile)
• Swyft Filings Review
• Harbor Compliance Review
• Sole Proprietorship vs. LLC
• LLC vs. Corporation
• LLC vs. S Corp
• LLP vs. LLC
• DBA vs. LLC
• LegalZoom vs. Incfile
• LegalZoom vs. ZenBusiness
• LegalZoom vs. Rocket Lawyer
• ZenBusiness vs. Incfile
• How to Set Up an LLC
• How to Get a Business License
• LLC Operating Agreement Template
• 501(c)(3) Application Guide
• What is a Business License?
• What is an LLC?
• What is an S Corp?
• What is a C Corp?
• What is a DBA?
• What is a Sole Proprietorship?
• What is a Registered Agent?
• How to Dissolve an LLC
• How to File a DBA
• What Are Articles Of Incorporation?
• Types Of Business Ownership

Next Up In Business

• Best Online Legal Services
• How To Write A Business Plan
• How To Start A Candle Business
• Starting An S-Corp
• LLC Vs. C-Corp
• How Much Does It Cost To Start An LLC?
• How To Start An Online Boutique
• Most Recession-Proof Businesses In 2024

What Is SNMP? Simple Network Management Protocol Explained

What Is A Single-Member LLC? Definition, Pros And Cons

What Is Penetration Testing? Definition & Best Practices

What Is Network Access Control (NAC)?

What Is Network Segmentation?

How To Start A Business In Louisiana (2024 Guide)

Katherine Haan is a small business owner with nearly two decades of experience helping other business owners increase their incomes.

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/entrepreneurship/pages/1-introduction

• Authors: Michael Laverty, Chris Littel
• Publisher/website: OpenStax
• Book title: Entrepreneurship
• Publication date: Jan 16, 2020
• Location: Houston, Texas
• Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
• Section URL: https://openstax.org/books/entrepreneurship/pages/11-4-the-business-plan

© Jun 26, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

• Skip to main content
• Skip to primary sidebar
• Skip to footer

Additional menu

6 business analysis techniques to use in your strategic plans

August 10, 2021 by MindManager Blog

By: Emily Finlay

For businesses, efficiency and effectiveness are key. Whether you’re executing a major project or determining the best ways to train new employees, it’s important to use best practices to achieve exceptional results.

Business analysis uncovers the strategies and processes that can help your business improve. You can find the flaws in your operations while determining what you need to change to fix them. Auditing and refining your business also offers the insights you and your leadership need to make informed decisions that will benefit your work moving forward.

Like any method, however, the power of business analysis depends on the methods used to execute it. In this guide, we’ll walk you through the top business analysis techniques. You’ll learn what each option offers and how you can use them to analyze your own processes.

What are business analysis techniques?

Business analysis techniques are the specific processes used to audit and improve business operations. These step-by-step procedures help analysts stay organized and make strategic decisions during the analysis.

What are the different types of business analysis techniques?

The most common types of business analysis include BPM, SWOT, MOST, CATWOE, PESTLE, and Six Hats Thinking. These planning methods can be used in a variety of industries and projects. From streamlining your operations to aligning your company’s purpose, these tactics can maintain your organization’s long-term success.

Business Process Modeling (BPM)

This technique, also known as business process mapping , creates a visual representation of the procedures a company uses. By visualizing the processes, teams and analysts can identify any problems. They can also see where efficiency is lost.

As you develop strategies to address these shortcomings, you can apply them to the model to see how they will affect the targeted process. This will also highlight any potential problems that these changes might create in other areas.

Business analysis steps: BPM

According to the International Institute of Business Analysis , here are the steps you should follow:

• Strategic planning – Start by researching and understanding the processes and problems you’re going to solve. Discover everything involved before creating your model.
• Business Model Analysis – Develop a model (such as mind mapping , flow charting, or diagramming) of the business processes with the information gained in step one. Analyze this visual and use it to guide your strategies.
• Define and design the process – Create the solutions you need and apply them to the model.
• Technical Analysis for complex business solutions – Use your visualization to analyze and improve the solutions.

Business analysis example: BPM

If a company is changing the way they produce a specific product, this technique can help them understand how adjusting that element will impact others. Rather than theorizing, they can use a visual flow to pinpoint obstacles and areas of improvement.

Strength, Weakness, Opportunities, Threats (SWOT)

These four elements define this technique, identifying internal (Strengths and Weaknesses) and external (Threats and Opportunities) factors. The most popular type of business analysis, SWOT drives informed decision making in nearly every area of business.

Business analysis steps: SWOT

Create a map with four quadrants, as outlined below, and use it guide your solutions and decisions:

• Strengths – What processes, resources, and other factors give us an advantage over competitors?
• Weaknesses – What holds us back from doing better and growing?
• Opportunities – What is happening outside the business that we can use to our advantage?
• Threats – What external factors can limit or hurt our success?

Business analysis example: SWOT

You can apply this technique to performance reviews, using the information you gain to help employees make improvements and celebrate strengths.

Mission, Objectives, Strategies, and Tactics (MOST)

If you want to make sure your company is maintaining its main goals through every decision and transition, MOST is the best tactic to use. By analyzing your business based on the following elements, you can turn big-picture objectives into achievable actions.

• Mission – Your overarching purpose that defines everything you do.
• Objectives – The goals necessary to accomplish your mission.
• Strategies – What you need to do to reach your objectives.
• Tactics – How everyone in the organization can execute your strategies.

Business analysis steps: MOST

Starting from the top down, define these four elements for your business. Then, use them to create processes that prioritize your main goals throughout the organization.

Business analysis examples: MOST

When rebranding a company, the MOST technique helps you discover and refine the heart of your organization. You can realign your processes, products, and marketing efforts to reflect your goals more accurately. If your company has strayed from these primary values or shifted to new ones, MOST will help you clearly define your views and objectives.

Customers, Actors, Transformation, Worldview, Owner, Environmental constraints (CATWOE)

Your individual stakeholders’ viewpoints affect your goals and processes. Every change also affects all of your stakeholders. With CATWOE, you can understand how any action impacts your organization, customers, leadership, and more.

Business analysis steps: CATWOE

This technique should be used at the start of the project or strategizing process. Begin by defining these parties and asking these questions:

• Customers – Who benefits from your work and products? How does this issue or the proposed solution affect them?
• Actors – Who is directly involved in this process? How will they affect it?
• Transformation – What are the ultimate changes that will occur by implementing this solution or new procedures?
• Worldview – How will this change affect the organization’s mission and big picture?
• Owner – Who is responsible for the affected system and how are they related to it?
• Environmental constraints – On every level, what are the limitations that affect the solution?

Once you have these answers, use them to guide your strategies and final solutions.

Business analysis examples: CATWOE

If a development company wanted to build a new shopping center, they could use this technique to understand the impact it would have on the company, their future customers, and the people living in the surrounding community.

Political, Economic, Social, Technological, Legal, Environmental (PESTLE)

Decisions and changes aren’t made in a vacuum. PESTLE identifies outside factors that will affect the decisions made within an organization, as well as how the company’s changes will impact other factors. This technique allows businesses to plan for any potential threats that might develop and strategize for seizing new opportunities.

Business analysis steps: PESTLE

Walk through the following list to determine the forces that can impact your organization.

• Political – How do government policies, initiatives, and financial support affect your business and your proposed solution?
• Economical – What is the economic climate and how does it affect you?
• Social – How do trends and attitudes concerning population, media, culture, lifestyle, and education affect the business?
• Technology – What is the rate of technological development, particularly for information and communication, and how does it impact your changes?
• Legal – Do local and national regulations and employment standards affect your work? How?
• Environmental – Are weather, pollution, waste, and recycling factors a concern for your organization? What is their impact?

Use this information to prepare for threats and opportunities that might affect your business’ ongoing performance.

Business analysis examples: PESTLE

When using the SWOT technique to evaluate your company’s direction and future, you can use PESTLE to develop and analyze each element of the process. This will help you create a more detailed understanding of your business, particularly concerning threats and opportunities.

Six Thinking Hats

Often, teams lack enough diverse viewpoints to find and understand the issues that are keeping them from full success. With the Six Thinking Hats technique , you can use different ways of thinking to uncover new perspectives. Using these new insights during brainstorming sessions can hone your team’s ideas for better results.

Business analysis steps: Six Thinking Hats

In your meetings, consider the problem and possible solutions with the type of thinking dictated by each “hat” and step.

• Start with the White Hat, which focuses on hard data and logic. What information do you know or need?
• Move to the Yellow Hat, which stands for brightness and positivity. Look for the possible values and benefits through optimistic thinking
• Now play devil’s advocate with the Black Hat of judgment. Find potential problems, obstacles, and threats.
• The Red Hat focuses on intuition. Share your feelings, fears, hunches, and emotions associated with the solution or process.
• Use the Green Hat of creativity to consider possibilities, thoughts, and ideas. Try to think outside the box.
• With the Blue Hat, you will bring your brainstorming back to earth. Consider the big picture of the project or changes. Ensure your ideas fit your operations and procedures.
• Use this process to hone your solutions and approach to problems.

Business analysis example: Six Thinking Hats

The next time you think your project needs fresh eyes, gather your team for a Six Thinking Hats brainstorming session. You will be able to view your work in a new light and uncover ways to improve.

There isn’t a “right” technique for business analysis. Instead, use these tactics as they best fit your objectives. And don’t be afraid to combine these techniques for a single problem. As you analyze your business through different lenses, you can find the solutions that will offer the greatest benefits.

Ready to take the next step?

MindManager helps boost collaboration and productivity among remote and hybrid teams to achieve better results, faster.

Why choose MindManager?

MindManager® helps individuals, teams, and enterprises bring greater clarity and structure to plans, projects, and processes. It provides visual productivity tools and mind mapping software to help take you and your organization to where you want to be.

Explore MindManager

• Integrations
• Learning Center

MoSCoW Prioritization

What is moscow prioritization.

MoSCoW prioritization, also known as the MoSCoW method or MoSCoW analysis, is a popular prioritization technique for managing requirements. 

  The acronym MoSCoW represents four categories of initiatives: must-have, should-have, could-have, and won’t-have, or will not have right now. Some companies also use the “W” in MoSCoW to mean “wish.”

What is the History of the MoSCoW Method?

Software development expert Dai Clegg created the MoSCoW method while working at Oracle. He designed the framework to help his team prioritize tasks during development work on product releases.

You can find a detailed account of using MoSCoW prioritization in the Dynamic System Development Method (DSDM) handbook . But because MoSCoW can prioritize tasks within any time-boxed project, teams have adapted the method for a broad range of uses.

How Does MoSCoW Prioritization Work?

Before running a MoSCoW analysis, a few things need to happen. First, key stakeholders and the product team need to get aligned on objectives and prioritization factors. Then, all participants must agree on which initiatives to prioritize.

At this point, your team should also discuss how they will settle any disagreements in prioritization. If you can establish how to resolve disputes before they come up, you can help prevent those disagreements from holding up progress.

Finally, you’ll also want to reach a consensus on what percentage of resources you’d like to allocate to each category.

With the groundwork complete, you may begin determining which category is most appropriate for each initiative. But, first, let’s further break down each category in the MoSCoW method.

Start prioritizing your roadmap

Moscow prioritization categories.

1. Must-have initiatives

As the name suggests, this category consists of initiatives that are “musts” for your team. They represent non-negotiable needs for the project, product, or release in question. For example, if you’re releasing a healthcare application, a must-have initiative may be security functionalities that help maintain compliance.

The “must-have” category requires the team to complete a mandatory task. If you’re unsure about whether something belongs in this category, ask yourself the following.

If the product won’t work without an initiative, or the release becomes useless without it, the initiative is most likely a “must-have.”

2. Should-have initiatives

Should-have initiatives are just a step below must-haves. They are essential to the product, project, or release, but they are not vital. If left out, the product or project still functions. However, the initiatives may add significant value.

“Should-have” initiatives are different from “must-have” initiatives in that they can get scheduled for a future release without impacting the current one. For example, performance improvements, minor bug fixes, or new functionality may be “should-have” initiatives. Without them, the product still works.

3. Could-have initiatives

Another way of describing “could-have” initiatives is nice-to-haves. “Could-have” initiatives are not necessary to the core function of the product. However, compared with “should-have” initiatives, they have a much smaller impact on the outcome if left out.

So, initiatives placed in the “could-have” category are often the first to be deprioritized if a project in the “should-have” or “must-have” category ends up larger than expected.

4. Will not have (this time)

One benefit of the MoSCoW method is that it places several initiatives in the “will-not-have” category. The category can manage expectations about what the team will not include in a specific release (or another timeframe you’re prioritizing).

Placing initiatives in the “will-not-have” category is one way to help prevent scope creep . If initiatives are in this category, the team knows they are not a priority for this specific time frame. 

Some initiatives in the “will-not-have” group will be prioritized in the future, while others are not likely to happen. Some teams decide to differentiate between those by creating a subcategory within this group.

How Can Development Teams Use MoSCoW?

  Although Dai Clegg developed the approach to help prioritize tasks around his team’s limited time, the MoSCoW method also works when a development team faces limitations other than time. For example: 

Prioritize based on budgetary constraints.

What if a development team’s limiting factor is not a deadline but a tight budget imposed by the company? Working with the product managers, the team can use MoSCoW first to decide on the initiatives that represent must-haves and the should-haves. Then, using the development department’s budget as the guide, the team can figure out which items they can complete. 

Prioritize based on the team’s skillsets.

A cross-functional product team might also find itself constrained by the experience and expertise of its developers. If the product roadmap calls for functionality the team does not have the skills to build, this limiting factor will play into scoring those items in their MoSCoW analysis.

Prioritize based on competing needs at the company.

Cross-functional teams can also find themselves constrained by other company priorities. The team wants to make progress on a new product release, but the executive staff has created tight deadlines for further releases in the same timeframe. In this case, the team can use MoSCoW to determine which aspects of their desired release represent must-haves and temporarily backlog everything else.

What Are the Drawbacks of MoSCoW Prioritization?

  Although many product and development teams have prioritized MoSCoW, the approach has potential pitfalls. Here are a few examples.

1. An inconsistent scoring process can lead to tasks placed in the wrong categories.

  One common criticism against MoSCoW is that it does not include an objective methodology for ranking initiatives against each other. Your team will need to bring this methodology to your analysis. The MoSCoW approach works only to ensure that your team applies a consistent scoring system for all initiatives.

Pro tip: One proven method is weighted scoring, where your team measures each initiative on your backlog against a standard set of cost and benefit criteria. You can use the weighted scoring approach in ProductPlan’s roadmap app .

2. Not including all relevant stakeholders can lead to items placed in the wrong categories.

To know which of your team’s initiatives represent must-haves for your product and which are merely should-haves, you will need as much context as possible.

For example, you might need someone from your sales team to let you know how important (or unimportant) prospective buyers view a proposed new feature.

One pitfall of the MoSCoW method is that you could make poor decisions about where to slot each initiative unless your team receives input from all relevant stakeholders. 

3. Team bias for (or against) initiatives can undermine MoSCoW’s effectiveness.

Because MoSCoW does not include an objective scoring method, your team members can fall victim to their own opinions about certain initiatives. 

One risk of using MoSCoW prioritization is that a team can mistakenly think MoSCoW itself represents an objective way of measuring the items on their list. They discuss an initiative, agree that it is a “should have,” and move on to the next.

But your team will also need an objective and consistent framework for ranking all initiatives. That is the only way to minimize your team’s biases in favor of items or against them.

When Do You Use the MoSCoW Method for Prioritization?

MoSCoW prioritization is effective for teams that want to include representatives from the whole organization in their process. You can capture a broader perspective by involving participants from various functional departments.

Another reason you may want to use MoSCoW prioritization is it allows your team to determine how much effort goes into each category. Therefore, you can ensure you’re delivering a good variety of initiatives in each release.

What Are Best Practices for Using MoSCoW Prioritization?

If you’re considering giving MoSCoW prioritization a try, here are a few steps to keep in mind. Incorporating these into your process will help your team gain more value from the MoSCoW method.

1. Choose an objective ranking or scoring system.

Remember, MoSCoW helps your team group items into the appropriate buckets—from must-have items down to your longer-term wish list. But MoSCoW itself doesn’t help you determine which item belongs in which category.

You will need a separate ranking methodology. You can choose from many, such as:

• Weighted scoring
• Value vs. complexity
• Buy-a-feature
• Opportunity scoring

For help finding the best scoring methodology for your team, check out ProductPlan’s article: 7 strategies to choose the best features for your product .

2. Seek input from all key stakeholders.

To make sure you’re placing each initiative into the right bucket—must-have, should-have, could-have, or won’t-have—your team needs context. 

At the beginning of your MoSCoW method, your team should consider which stakeholders can provide valuable context and insights. Sales? Customer success? The executive staff? Product managers in another area of your business? Include them in your initiative scoring process if you think they can help you see opportunities or threats your team might miss. 

3. Share your MoSCoW process across your organization.

MoSCoW gives your team a tangible way to show your organization prioritizing initiatives for your products or projects. 

The method can help you build company-wide consensus for your work, or at least help you show stakeholders why you made the decisions you did.

Communicating your team’s prioritization strategy also helps you set expectations across the business. When they see your methodology for choosing one initiative over another, stakeholders in other departments will understand that your team has thought through and weighed all decisions you’ve made. 

If any stakeholders have an issue with one of your decisions, they will understand that they can’t simply complain—they’ll need to present you with evidence to alter your course of action.  

Related Terms

2×2 prioritization matrix / Eisenhower matrix / DACI decision-making framework / ICE scoring model / RICE scoring model

Prioritizing your roadmap using our guide

Talk to an expert.

Schedule a few minutes with us to share more about your product roadmapping goals and we'll tailor a demo to show you how easy it is to build strategic roadmaps, align behind customer needs, prioritize, and measure success.

Share on Mastodon

Estate Planning for International Clients

Estate planning for international clients necessitates a nuanced understanding of disparate legal and tax regimes, cultural nuances, and jurisdictional complexities to facilitate seamless asset distribution and minimize potential conflicts. Holding assets across multiple jurisdictions creates complex estate planning challenges, including forced heirship, varying treatment of trusts and foundations, and tax-efficient structuring. Effective estate planning requires careful consideration of cultural subtleties, language and translation issues, and the interplay between different legal systems. By grasping these intricate issues, international clients can guarantee their global assets are distributed according to their wishes, and uncover additional strategies to protect their legacy.

Table of Contents

Understanding International Estate Laws

In an increasingly globalized world, approximately 65% of high-net-worth individuals hold assets in multiple jurisdictions, underscoring the critical importance of understanding international estate laws to facilitate seamless wealth transfer across borders. Effective estate planning in a cross-border context requires a deep understanding of the cultural nuances that shape the legal framework of various jurisdictions. For instance, the concept of forced heirship, prevalent in many civil law jurisdictions, can substantially impact the distribution of assets. Similarly, the treatment of trusts and foundations varies widely across common law and civil law systems.

To navigate these complexities, it is vital to have a thorough grasp of the legal framework governing estate planning in each relevant jurisdiction. This includes familiarity with applicable tax laws, inheritance rules, and probate procedures. A skilled estate planning professional must be able to advise clients on the most tax-efficient structures, guarantee compliance with regulatory requirements, and mitigate potential risks. By doing so, they can help high-net-worth individuals achieve their wealth transfer objectives while minimizing the risk of disputes and facilitating the smooth handover of assets to future generations.

Assets in Multiple Jurisdictions

Holding assets across multiple jurisdictions can create complex estate planning challenges, particularly when traversing disparate legal and tax regimes. International clients with foreign investments and a borderless living lifestyle often face unique difficulties in managing their global assets. The distribution of assets across various countries can lead to conflicts between jurisdictions, making it vital to establish a clear estate plan that addresses the specific laws and regulations of each territory.

A thorough estate plan must consider the specific legal and cultural nuances of each jurisdiction, safeguarding that the client's wishes are respected and carried out according to their intent. This may involve creating multiple wills, trusts, or other legal structures to accommodate the varying laws and regulations of each country. Effective estate planning for international clients requires a deep understanding of the complex interplay between different legal systems and a tailored approach to address the unique challenges of holding assets in multiple jurisdictions. By doing so, clients can secure a seamless transfer of their assets, minimizing potential conflicts and protecting their legacy.

Cross-Border Tax Implications

Tax complexity escalates when assets span international borders, as disparate tax regimes and regulations converge to create a labyrinthine landscape of compliance obligations and potential liabilities. International clients must navigate a intricate web of tax laws, treaties, and regulations to avoid Double Taxation and comply with tax authorities worldwide.

• Unintended tax consequences can arise from seemingly innocuous transactions, such as inheriting foreign assets or relocating to a new country.
• Tax Havens, once attractive for their secrecy and low tax rates, now pose significant risks due to increased global transparency and cooperation.
• Failure to disclose foreign assets or report income can lead to severe penalties, fines, and even criminal prosecution.
• The complexities of cross-border taxation demand specialized guidance to confirm that clients' global assets are structured and managed in a tax-efficient manner.

Effective estate planning for international clients requires a deep understanding of the complex tax landscape and the ability to navigate it successfully. By working with a knowledgeable advisor, clients can minimize tax liabilities, comply, and optimize the value of their global assets.

Wills and Testamentary Documents

A thorough estate plan for international clients must include carefully crafted wills and last will documents that account for the nuances of multiple jurisdictions, certifying that their global assets are distributed according to their wishes. These documents must be tailored to address the specific laws and regulations of each country where assets are held, verifying that the client's intent is respected. The use of digital signatures and virtual witnesses can facilitate the execution of wills, particularly for clients with assets in multiple jurisdictions. This approach enables the client to sign the document remotely, while virtual witnesses attest to the signature, streamlining the process and reducing logistical complexities. Last will documents should also address issues such as language and translation, to confirm that the client's wishes are accurately conveyed across linguistic and cultural divides. By carefully crafting these documents, international clients can confirm that their global assets are distributed according to their wishes, without unnecessary delay or complication.

Choosing the Right Executor

When selecting an executor, it is essential to evaluate their legal proficiency in estate planning and administration, as well as their language fluency to effectively communicate with beneficiaries and stakeholders. Additionally, in today's globalized world, an executor with cross-border experience can navigate complex international estate issues with ease. By assessing these key factors, individuals can appoint a capable and effective executor to manage their estate according to their wishes.

Executor's Legal Expertise

Selecting an executor with sufficient legal proficiency is imperative to securing that the administration of an estate unfolds efficiently and in accordance with the testator's wishes. The executor's legal expertise plays a pivotal part in steering the complexities of estate administration, respecting the testator's wishes, and minimizing the risk of disputes.

When considering an executor's legal expertise, it is indispensable to evaluate their ability to:

• Understand the legal framework governing estate administration in the relevant jurisdictions
• Manage Executor's Liability and secure adequate Executor's Insurance coverage
• Interpret the will and other estate planning documents accurately
• Identify and address potential legal issues that may arise during the administration process

Executor's Language Proficiency

In addition to possessing sufficient legal expertise, an executor's language proficiency is another vital consideration, as effective communication with beneficiaries, institutions, and authorities may necessitate fluency in multiple languages. This is particularly important when dealing with international clients who may not speak the dominant language of the jurisdiction. Cultural barriers can lead to misunderstandings, miscommunications, and delays, ultimately affecting the administration of the estate.

An executor who is proficient in multiple languages can facilitate seamless communication, ensuring that all parties involved are well-informed and aligned. Furthermore, language proficiency can also be a critical factor in navigating complex legal and financial documents, which may be written in different languages. Professional certifications, such as language proficiency certifications, can provide assurance that the executor possesses the necessary language skills to effectively manage the estate. By selecting an executor with strong language proficiency, international clients can ensure that their estate is administered efficiently and effectively, minimizing the risk of cultural barriers and language-related complications.

Executor's Cross-Border Experience

An executor with extensive cross-border experience is vital for handling the complexities of international estates, as they possess a deep understanding of the diverse legal, tax, and cultural subtleties that can impact estate administration. This experience enables them to skillfully manage the intricacies of international estates, guaranteeing that the testator's wishes are respected and carried out efficiently.

When choosing an executor with cross-border experience, consider the following key factors:

• Cultural sensitivity : The ability to appreciate cultural subtleties and family dynamics that may impact estate administration, guaranteeing that the executor can effectively communicate with beneficiaries and stakeholders from diverse backgrounds.
• Global network : A strong network of international contacts and partners, enabling the executor to access proficiency and resources in multiple jurisdictions.
• Language proficiency : The ability to communicate effectively in multiple languages, guaranteeing that all parties involved in the estate administration process are informed and engaged.
• Familiarity with international tax laws : In-depth knowledge of international tax laws and regulations, guaranteeing that the executor can minimize tax liabilities and optimize the estate's value.

Managing Foreign Assets and Heirs

Individuals with international connections, whether through citizenship, residency, or asset ownership, must navigate the complexities of managing foreign assets and heirs to facilitate seamless wealth transfer and minimize potential legal and tax implications. Effective management requires considering cultural nuances and family dynamics that may impact inheritance decisions. For instance, in certain cultures, family wealth is often tied to ancestral properties or business interests, making it vital to understand the emotional and historical significance of these assets. Family dynamics, such as blended families or distant relatives, can also lead to conflicts and disputes if not addressed proactively. It is imperative to establish clear communication channels and define inheritance strategies that respect the cultural and familial context. By doing so, individuals can confirm that their global assets are distributed according to their wishes, while minimizing potential conflicts and legal disputes. A well-structured estate plan that accounts for foreign assets and heirs can provide peace of mind and protect the family's legacy for generations to come.

Minimizing Cross-Border Disputes

When traversing the complexities of international estate planning, minimizing cross-border disputes is vital to facilitating the smooth distribution of assets. Effective strategies for protecting assets across jurisdictions, resolving conflicts between competing legal systems, and establishing the validity of international wills can mitigate the risk of costly and time-consuming disputes. By addressing these key considerations, individuals can proactively safeguard their legacy and guarantee that their wishes are respected across borders.

Cross-Border Asset Protection

Cross-border asset protection necessitates a thorough understanding of the complex legal and regulatory frameworks governing international wealth management to minimize the risk of disputes and facilitate seamless asset transfer across jurisdictions. In this context, cultural differences and family dynamics play a significant role in shaping the asset protection strategy.

Effective cross-border asset protection requires consideration of the following critical factors:

• Cultural nuances : Understanding the cultural context of the family's wealth and the implications of asset transfer on family relationships and dynamics.
• Family dynamics : Identifying potential conflicts of interest and power struggles within the family that could impact asset protection and transfer.
• Jurisdictional complexities : Navigating the intricate web of international laws, treaties, and regulations governing asset transfer and protection.
• Succession planning : Ensuring a clear and comprehensive succession plan that addresses the unique needs and goals of the family across multiple jurisdictions.

Jurisdictional Conflict Resolution

Effective cross-border asset protection strategies must also account for the potential risks of jurisdictional conflicts, which can arise when assets are held across multiple legal systems with differing laws and regulations governing their distribution. These conflicts can lead to costly and time-consuming disputes, undermining the overall estate plan. To mitigate this risk, it is essential to conduct a thorough conflict analysis, identifying potential areas of dispute and assessing the likelihood of conflicting claims.

Forum shopping, where claimants seek to litigate in the most favorable jurisdiction, can further exacerbate jurisdictional conflicts. To avoid this, estate planners must consider the laws and regulations of each relevant jurisdiction, as well as the potential for conflicting decisions. By anticipating and addressing these potential conflicts, estate planners can develop strategies to minimize the risk of cross-border disputes. This may involve structuring assets to minimize jurisdictional overlap, designating a primary jurisdiction for dispute resolution, or incorporating arbitration clauses into estate planning documents. By taking a proactive and informed approach, estate planners can help international clients navigate the complex landscape of cross-border estate planning and ensure a smooth transfer of assets.

International Will Validity

Five key factors must be taken into account to validate an international will, thereby minimizing the risk of cross-border disputes. These factors are vital in respecting the testator's wishes and distributing their assets according to their intentions.

When drafting an international will, it is vital to bear in mind the following:

• Will Revocation : Verify that the will is not revoked by the laws of another jurisdiction, which could lead to confusion and disputes among beneficiaries.
• Will Authentication : Confirm that the will is authenticated and recognized by the relevant authorities in each jurisdiction where assets are held.
• Jurisdictional Conflicts : Avoid conflicts between jurisdictions by clearly specifying the applicable law and forum for resolving disputes.
• Language and Cultural Barriers : Take into account the language and cultural nuances of each jurisdiction to avoid misinterpretation and confirm that the will is understood as intended.

Ensuring Business Continuity Abroad

In the context of international business operations, maintaining uninterrupted continuity abroad requires careful consideration of jurisdictional and regulatory complexities that may impact the succession of ownership, management, and control. This is particularly key for family-owned businesses or multinational corporations with operations spanning across diverse cultural and legal landscapes.

Cultural nuances play a significant part in shaping business succession planning strategies. Family dynamics, cultural values, and national laws can influence the transfer of ownership and control, making it imperative to tailor succession plans to specific regional and cultural contexts. For instance, in some Asian cultures, family unity and consensus are paramount, whereas in Western cultures, individual autonomy may take precedence. Understanding these nuances is necessary to facilitating a seamless handover.

Effective succession planning involves identifying, developing, and empowering the next generation of leaders. This requires a thorough approach, incorporating training, mentorship, and strategic planning. By integrating cultural sensitivity with robust succession planning, international businesses can mitigate the risks associated with leadership handovers, guaranteeing uninterrupted continuity and long-term success.

Frequently Asked Questions

How do i ensure my non-resident beneficiaries receive their inheritance efficiently?.

To facilitate efficient inheritance distribution to non-resident beneficiaries, consider structuring estate assets to minimize foreign taxes and mitigate inheritance delays, employing strategies such as tax-efficient trusts, withholding tax exemptions, and expedited probate procedures.

Can I Use a Single Will for All My International Assets and Properties?

Using a single will for global assets may not be advisable, as different legal jurisdictions have varying laws and tax implications, potentially leading to conflicts and inefficiencies in the administration of your estate.

Are Digital Assets, Like Cryptocurrency, Considered Part of My Estate?

In the digital era, cryptocurrency and other digital assets are indeed part of one's estate, necessitating a thorough digital inheritance strategy to safeguard a seamless virtual legacy, as these intangible assets require expert handling and distribution.

How Do I Protect My Estate From Forced Heirship Laws in Certain Countries?

To shield assets from forced heirship laws, consider country-specific exemptions, such as those offered in the UK or US, and avoid asset concealment, instead, opting for transparent, legally recognized structures like trusts or foundations to safeguard your estate.

Can I Appoint a Non-Family Member or Friend as an Executor Abroad?

Appointing a non-family member or friend as an executor abroad requires careful consideration of cultural differences and executor qualifications, as some jurisdictions may have specific requirements or restrictions on non-family or non-resident executors.

UNLOCK YOUR COPY