Flash Sale Savings ⚡
up to 60% off LivePlan Premium. Save Now
0 results have been found for “”
Return to blog home
15 Reasons Why You Need a Business Plan in 2024
Posted august 5, 2024 by noah parsons.
Imagine you’re going on a road trip. You know your final destination, but you haven’t figured out how to get there.
While it might be fun to start driving and figure things out as you go, your trip will likely take longer than expected and end up costing more. But, if you take the time to look at a map and chart the best way to get to your destination—you’ll arrive on time and on budget.
Planning for your business isn’t much different, which is why a business plan is so important to your continued success.
What is the purpose of a business plan?
The primary purpose of a business plan is to help you figure out where you want to go with your business and how you will get there. Writing a business plan helps you set your direction and determine a winning strategy. A solid business plan will set your business up for success and help you build an unbeatable company.
If you start off without a plan, you may go down some interesting detours, but you’re unlikely to grow quickly or stick to your budget.
15 reasons why you need a business plan
“Creating a road map for my business is all well and good, but do I really need a business plan? I’d rather just get started.”
If you’re still thinking like this and decide to skip writing a business plan, you’re making a big mistake and setting yourself up to fail. Even if your business survives, without a plan, you’ll miss valuable growth opportunities and never truly be in control.
Still not convinced? Here are the critical reasons why a business plan is important for small businesses.
1. You’re more likely to start
Documenting your business idea makes it more official. It takes rough ideas and turns them into the making of a real business.
According to a study by the Harvard Business Review , entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don’t.
Even if it’s just notes about your potential business, writing things down will make you more likely to proceed with your business. Without a plan, you can’t prove to yourself, partners, mentors, or investors that you’re serious about starting.
Create a professional business plan
Using ai and step-by-step instructions.
Secure funding
Validate ideas
Build a strategy
2. Reduce potential risks
Writing a business plan takes some of the risk out of starting a business. It helps you think through every facet of your business to determine if it can truly be viable.
- Does your solution fit the market? Are your startup or operational costs manageable?
- Will your proposed business model actually generate sales?
- What sort of milestones would you need to hit to achieve profitability?
Your business plan can answer these startup questions .
For those already running a business, writing a plan can help you better manage ongoing risk.
- Should you bring on a new employee?
- What does cash flow look like for your next month, quarter, or even year?
- Will you meet your milestones or do you need to change your focus?
Keep your plan up to date, review it regularly and you can easily answer these growth questions and mitigate risk.
3. Test a new business idea and prove it’s viable
When you have a new business idea, it helps to spend time thinking through all the details.
A business plan will help you think about your:
- Target market
- How much money you’ll need to launch
- How your idea will actually work before you spend any real money
A business plan will also help you easily share your idea with other people to get input and feedback before you get started.
There’s no need to create a detailed business plan either.
Instead, I recommend using a one-page business plan to quickly test your ideas and determine if you have a viable business.
4. Understand your market and build a marketing plan
No matter how good your idea is, you have to figure out who your ideal customers are and how you will get the word out to them.
That’s where a marketing plan comes in. It can be an indispensable tool to figure out how you get your first customers as well as your thousandth customer. It can start as a simple bulleted list of potential marketing channels that expands in detail as you need it.
5. Build a better budget and a financial forecast
Without a business plan, it’s impossible to know how much money it will cost to start and run a business. You don’t just need money for your initial purchases; you need enough cash in the bank to maintain your cash runway and keep your business afloat while you get fully up and running.
When you plan, you’ll need to create your expense budget , set sales goals, and identify how much cash is needed to keep your doors open, purchase inventory, and more.
The beauty of incorporating forecasts into your business plan is that you don’t need exact numbers to start. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business.
As you operate and collect financial data, you can revisit your business plan and update your forecasts to generate a more accurate picture of your business’s future.
6. Attract investors and get funding
Sharing your business idea with investors requires a business plan.
Investors may never actually ask for your full business plan, but they will certainly ask you questions that you’ll only be able to answer if you’ve taken the time to write a plan.
At the very least, they’ll want to see your financial forecasts, so you should be prepared for this. If you pitch your business to investors, having a business plan makes it much easier to translate the right information into a pitch deck.
In short, you’ll have all of the right information ready and available to show why your business is worth investing in.
7. Plan for different scenarios
Things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive.
Having a plan allows you to experiment with different scenarios to see how changes to your business will impact your forecasts, budgets, profitability, and cash flow.
Without a business plan, you’ll be reacting blindly with no way to track if your decisions are making a real impact.
8. Attract employees
Especially if you’re a young startup company, attracting employees can be hard. Without a proven track record, why should someone take a risk to work for you?
Having a business plan can help solve that problem. Your plan can help prospective employees understand your business strategy and growth plans so that they can feel confident joining your team. It’s also incredibly useful in determining when and if it’s feasible for you to hire more employees .
9. Get your team on the same page
A great business strategy can only be successful if your team understands it. By documenting your strategy with a business plan, you can easily get everyone on the same page and working towards the same goals.
It’s even better if you regularly review your plan with members of your team. Have everyone revisit your core strategy, analyze it, and explore how it impacts individual and team goals .
10. Manage your business better
A business plan is all about setting goals for your company — both financial goals and milestones you hope to accomplish.
When you use your business plan to manage your business, you’ll see which parts of your strategy are working and which aren’t.
For example, you may have invested in new marketing efforts to sell one of your products, but that strategy just isn’t working out. With a business plan in hand, you’ll be able to see what’s going to plan and where you need to adjust your strategy, pivoting to new opportunities that will drive profitability.
Regular business plan reviews , ideally monthly, will help you build a strong, resilient business.
11. Effectively navigate a crisis
Having a business plan not only helps you create a roadmap for your business but also helps you navigate unforeseen events. Large-scale economic downturns, supply shortages, payment delays, cash flow problems, and any number of other issues are bound to pop up. But by leveraging your business plan, you can be prepared to face each crisis head-on.
A plan helps you assess your current situation, determine how the crisis will alter your plan, and explore what it will take to recover.
With a little planning, you can even prepare your business for future downturns with this same process. Having the right plan and processes in place will make crisis planning easier and, ideally, recession-proof your business .
12. You’ll be ready to sell
You might decide to sell your business or position yourself for acquisition down the road. Having a solid business plan helps make the case for a higher valuation.
Your business is likely worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale.
Remember, if you were buying a business , you’d likely want to see their business plan and any previous documentation. So, the more organized and professional your plan is, the easier it will be for a buyer to say yes.
13. It’s easier than you think
You may be procrastinating in writing a business plan because it sounds like a lot of work. The truth is that planning is much less complicated than you think.
Start small by writing a simple business plan you can complete in about half an hour. With the emergence of AI business plan generators , getting stuck with a blank page is a thing of the past. Just be sure that you don’t just let AI write your plan for you and keep yourself involved in the planning process.
From there, refine your plan until your idea is solid. At that point, you can invest more time in a more detailed business plan. Just start with the basics and expand from there.
14. You’ll sleep better at night
When you have a plan for your business, you have peace of mind. You know that you’ve invested the time to figure out a business model that works, and you’ve considered different financial scenarios so you can handle the unexpected.
Plus, you have a management tool to run your business better than your competitors.
15. Research shows that business plans work
A Journal of Management Studies study found that businesses that take the time to plan grow 30% faster than those that don’t.
Our own 2021 small business research study found that 58% of small business owners who have or are working on a plan feel confident in their business, even amidst a crisis.
A study in Small Business Economics found that entrepreneurs who write business plans for their ideas are 152% more likely to actually start their businesses.
There’s plenty of additional research linking business planning with success, so it’s a proven fact that you won’t waste time when you write your plan.
Why is a business plan important? Because it sets you up for success
There are plenty of reasons to write a business plan, but they all relate to one thing—increasing the likelihood of success for you and your business.
Taking the time to plan is an investment in yourself and your business that will pay dividends, whether you’re starting a new business or taking your existing business to the next level.
If you’ve been putting off writing a business plan, now is the time to do it. Start by downloading one of the many free business plan templates out there, or for additional guidance, invest in an online business plan builder .
No matter what business planning tool you choose, just deciding to write a business plan will set you up to build, run, and grow your business. So, don’t wait—start planning today.
What is a business plan?
A business plan is a structured document that outlines the goals, strategies, target market, and financial forecasts of a business. It serves as a roadmap for the business, detailing the steps necessary to achieve success.
Why is planning necessary?
Business planning is essential because it helps businesses set clear goals, allocate resources efficiently, identify potential challenges, and develop strategies to overcome them. It also provides a framework for decision-making and helps attract investors by demonstrating the viability of the business.
What happens if a business doesn’t plan?
Without planning, a business may lack direction and clarity, leading to inefficient use of resources, missed opportunities, and an inability to respond effectively to market changes. This can result in financial difficulties, operational challenges, and ultimately, business failure.
Like this post? Share with a friend!
Noah Parsons
Posted in business plan writing, join over 1 million entrepreneurs who found success with liveplan, like this content sign up to receive more.
Subscribe for tips and guidance to help you grow a better, smarter business.
You're all set!
Exciting business insights and growth strategies will be coming your way each month.
We care about your privacy. See our privacy policy .
20 Reasons Why You Need a Business Plan in 2024
Written by Dave Lavinsky
What is a Business Plan?
A business plan is a document that details your business concept and strategy for growth. It provides details about your company, a competitive analysis, a market analysis, a marketing strategy to reach potential customers, and a financial plan so that you make the best possible decisions to start or grow your company. A good business plan will help you take your business idea and turn it into a tangible action plan for success.
What is the Purpose of a Business Plan?
A business plan serves as an essential tool for guiding a company’s direction and decision-making processes. Its core purpose is to provide a detailed roadmap that communicates the company’s mission and vision, long-term objectives, and tailored strategies intended to steer the business towards success. This living document plays a pivotal role in streamlining operations, achieving goals, and setting a foundation for sustained growth. The purposes of a business plan include:
- Creating an Effective Growth Strategy : It outlines a comprehensive plan that identifies clear steps and strategies for expanding the market presence and ideal customer base for the business.
- Determining Future Financial Needs : By creating financial projections, a business plan helps in understanding the capital requirements to fuel growth initiatives and sustain operations.
- Attracting Investors and Lenders : A well-crafted business plan is instrumental in drawing attention from potential investors, including angel investors and venture capitalists, by showcasing the growth potential and profitability prospects of the business.
By leveraging a business plan template , entrepreneurs can significantly enhance their ability to communicate their vision, attract necessary funding, and ensure that all stakeholders are aligned with the company’s strategic direction.
20 Reasons Why You Need a Business Plan
There are countless reasons why having a well-crafted business plan is essential to the success of any company. Here are top 20 reasons why a business plan is important:
1. To Prove That You’re Serious About Your Business
A formal business plan is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business. Creating your plan forces you to think through and select the strategies that will propel your growth.
2. To Establish Business Milestones
The business plan should clearly lay out the long-term milestones that are most important to the success of your business. To paraphrase Guy Kawasaki, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death). Would you tell your spouse that you tweaked the company brochure? Probably not. But you’d certainly share the news that you launched your new website or reached $1M in annual revenues.
3. To Better Understand Your Competition
Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages or unique value proposition. And if you don’t currently have competitive advantages, to figure out what you must do to gain them.
Finish Your Business Plan Today!
Quickly & easily complete your business plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.
4. To Better Understand Your Customer
Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to a great business plan and to a successful business. Understanding your customers will not only allow you to create better products and services for them, but will allow you to more cost-effectively reach them via advertising and promotions.
5. To Enunciate Previously Unstated Assumptions
The process of actually writing a business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity. For example, you might have assumed that local retailers would carry your product; in your business plan, you could assess the results of the scenario in which this didn’t occur.
6. To Assess the Feasibility of Your Venture
How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. In some cases, the result of your business planning will be to table the venture. And it might be to go forward with a different venture that may have a better chance of long-term success.
7. To Document Your Revenue Model
How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model. And upon reading your plan, others may suggest additional revenue streams to consider.
8. To Determine Your Financial Needs
Does your business need to raise funds? How much? One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital. It will also enable you to plan ahead, particularly if you need to raise additional funding in the future.
9. To Attract Investors
A formal business plan is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service? What are the financial projections? What is the company’s exit strategy? While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your business plan.
10. To Reduce the Risk of Pursuing the Wrong Opportunity
The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.
11. To Force You to Conduct Market Research and Really Know Your Market
What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target audience for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. And it will allow you to use this knowledge to make decisions to improve your company’s success.
12. To Attract Employees and a Management Team
To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that your great idea is sound and that the business is poised to achieve its strategic goals. Importantly, as you grow your company, your employees and not you will do most of the work. So getting them aligned and motivated will be key to your success.
13. To Plot Your Course and Focus Your Efforts
The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones. You wouldn’t go on a long driving trip without a map; think of your business plan as your map.
14. To Attract Partners
Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed information about your company.
15. To Position Your Brand
Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.
16. To Judge the Success of Your Business
A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not).
17. To Reposition Your Business to Deal with Changing Conditions
For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new business ideas and strategies.
18. To Document Your Marketing Plan
How are you going to reach your customers? How will you retain them? What is your advertising budget? What price will you charge? A well-documented marketing plan is essential to the growth of a business. And the marketing strategies and tactics you use will evolve each year, so revisiting your marketing plan at least annually is critical.
19. To Understand and Forecast Your Company’s Staffing Needs
After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a roadmap for your staffing needs, and thus helps to ensure smoother expansion. Importantly your plan can not only help you understand your staffing needs, but ensure your timing is right as it is time consuming to recruit and train great employees.
20. To Uncover New Opportunities
Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.
Make Your Business Planning Count
One of the most common reasons businesses fail is the lack of a clear, strategic plan that addresses key components of running a business. Business plans help in identifying and navigating the challenges that can derail a business’s success, including poor market analysis, inadequate financial planning, and an unclear business model. By taking the time to write a business plan, entrepreneurs can clarify their business strategy, identify potential obstacles before they arise, and establish company goals that will set you up for success.
About Growthink Since 1999, Growthink’s business plan experts have assisted thousands of clients in launching and growing their businesses, and raising more than $2.5 billion in growth financing.
Need help with your business plan?
- Speak with a professional business plan consultant from our team.
- Use our simple business plan template .
- Check out our business plan examples .
- Or, if you’re creating your own PPM, you can save time and money with Growthink’s private placement memorandum template .
- Learn more about us via our Growthink Business Plan Review page
The World’s #1 Business Plan Template
Would you like to know the quickest and easiest way to create a winning business plan?
And how to use it to raise funding, improve your strategy, or both?
Well, we’ve developed the ultimate business plan template to help you do this. Simply click below to learn more.
Other Helpful Business Plan Articles & Templates
Please turn on JavaScript in your browser
It appears your web browser is not using JavaScript. Without it, some pages won't work properly. Please adjust the settings in your browser to make sure JavaScript is turned on.
Nine reasons why you need a business plan
Building a great business plan helps you plan, strategize and succeed. Presented by Chase for Business .
Making the decision to create a new business is an exciting yet stressful experience. Starting a business involves many tasks and obstacles, so it’s important to focus before you take action. A solid business plan can provide direction, help you attract investors and ensure you maintain momentum.
No matter what industry you plan on going into, a business plan is the first step for any successful enterprise. Building your business plan helps you figure out where you want your business to go and identify the necessary steps to get you there. This is a key document for your company to both guide your actions and track your progress.
What is the purpose of a business plan?
Think of a business plan like a roadmap. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis and logistics and operations plans.
It can also help you organize your thoughts and goals, as well as give you a better idea of how your company will work. Good planning is often the difference between success and failure.
Here are nine reasons your company needs a business plan.
1. Prove your idea is viable
Through the process of writing a business plan, you can assess whether your company will be successful. Understanding market dynamics, as well as competitors, will help determine if your idea is viable.
This is also the time to develop financial projections for your business plan, like estimated startup costs, a profit and loss forecast, a break-even analysis and a cash flow statement . By taking time to investigate the viability of your idea, you can build goals and strategies to support your path to success.
A proper business plan proves to all interested parties—including potential investors, customers, employees, partners and most importantly yourself — that you are serious about your business.
2. Set important goals
As a business owner, the bulk of your time will mostly likely be spent managing day-to-day tasks. As a result, it might be hard to find time after you launch your business to set goals and milestones. Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals.
3. Reduce potential risks
Prevent your business from falling victim to unexpected dangers by researching before you break ground. A business plan opens your eyes to potential risks that your business could face. Don’t be afraid to ask yourself the hard questions that may need research and analysis to answer. This is also good practice in how your business would actually manage issues when they arise. Incorporate a contingency plan that identifies risks and how you would respond to them effectively.
The most common reasons businesses fail include:
- Lack of capital
- Lack of market impact or need
- Unresearched pricing (too high or low)
- Explosive growth that drains all your capital
- Stiff competition
Lack of capital is the most prevalent reason why businesses fail. To best alleviate this problem, take time to determine how your business will generate revenue. Build a comprehensive model to help mitigate future risks and long-term pain points. This can be turned into a tool to manage growth and expansion.
4. Secure investments
Whether you’re planning to apply for an SBA loan , build a relationship with angel investors or seek venture capital funding, you need more than just an elevator pitch to get funding. All credible investors will want to review your business plan. Although investors will focus on the financial aspects of the plan, they will also want to see if you’ve spent time researching your industry, developed a viable product or service and created a strong marketing strategy.
While building your business plan, think about how much raised capital you need to get your idea off the ground. Determine exactly how much funding you’ll need and what you will use it for. This is essential for raising and employing capital.
5. Allot resources and plan purchases
You will have many investments to make at the launch of your business, such as product and services development, new technology, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. It gives you an idea of how much you’ll need to spend on resources and it ensures your business will manage those resources effectively.
A business plan provides clarity about necessary assets and investment for each item. A good business plan can also determine when it is feasible to expand to a larger store or workspace.
In your plan, include research on new products and services, where you can buy reliable equipment and what technologies you may need. Allocate capital and plan how you’ll fund major purchases, such as with a Chase small business checking account or business credit card .
6. Build your team
From seasoned executives to skilled labor, a compelling business plan can help you attract top-tier talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your executive team as well as the different roles you need filled immediately and further down the line.
Small businesses often employ specialized consultants, contractors and freelancers for individual tasks such as marketing, accounting and legal assistance. Sharing a business plan helps the larger team work collectively in the same direction.
This will also come into play when you begin working with any new partners. As a new business, a potential partner may ask to see your business plan. Building partnerships takes time and money, and with a solid business plan you have the opportunity to attract and work with the type of partners your new business needs.
7. Share your vision
When you start a business, it's easy to assume you'll be available to guide your team. A business plan helps your team and investors understand your vision for the company. Your plan will outline your goals and can help your team make decisions or take action on your behalf. Share your business plan with employees to align your full staff toward a collective goal or objective for the company. Consider employee and stakeholder ownership as a compelling and motivating force.
8. Develop a marketing strategy
A marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.
Important questions to consider as you build your marketing strategy include:
- What industry segments are we pursuing?
- What is the value proposition of the products or services we plan to offer?
- Who are our customers?
- How will we retain our customers and keep them engaged with our products or services and marketing?
- What is our advertising budget?
- What price will we charge?
- What is the overall look and feel of our brand? What are our brand guidelines?
- Will we need to hire marketing experts to help us create our brand?
- Who are our competitors? What marketing strategies have worked (or not worked) for them?
With a thoughtful marketing strategy integrated into your business plan, your company goals are significantly more in reach.
9. Focus your energy
Your business plan determines which areas of your business to focus on while also avoiding possible distractions. It provides a roadmap for critical tradeoffs and resource allocation.
As a business owner, you will feel the urge to solve all of your internal and customers’ problems, but it is important to maintain focus. Keep your priorities at the top of your mind as you set off to build your company.
As a small business owner, writing a business plan should be one of your first priorities. Read our checklist for starting a business, and learn how to take your business from a plan to reality. When you’re ready to get started, talk with a Chase business banker to open a Chase business checking or savings account today.
For Informational/Educational Purposes Only: The views expressed in this article may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.
JPMorgan Chase Bank, N.A. Member FDIC. Equal Opportunity Lender, ©2023 JPMorgan Chase & Co
What to read next
Manage your business how to help protect your business from check fraud.
Think writing checks is a safe way to pay vendors? Think again. Learn about five common scams and how to help prevent them.
START YOUR BUSINESS 10 tips before starting your new businesses
Thinking about starting a business? Check these 10 items off your list.
MANAGE YOUR BUSINESS Inventory management can help maintain cash flow
Inventory can eat up a lot of cash. Here are a few ways to manage inventory with cash flow in mind.
MANAGE YOUR BUSINESS Banking tips for cash businesses
Learn how to keep your cash business safe, secure and compliant.
6 Reasons You Really Need to Write A Business Plan
Published: October 14, 2020
Starting a busine ss can be a daunting task, especially if you’re starting from square one.
It’s easy to feel stuck in the whirlwind of things you’ll need to do, like registering your company, building a team, advertising, the list goes on. Not to mention, a business idea with no foundation can make the process seem incredibly intimidating.
Thankfully, business plans are an antidote for the new business woes that many entrepreneurs feel. Some may shy away from the idea, as they are lengthy documents that require a significant amount of attention and care.
However, there’s a reason why those who take the time to write out a business plan are 16% more likely to be successful than those who don’t. In other words, business plans work.
What is a business plan, and why does it matter?
In brief, a business plan is a roadmap to success. It's a blueprint for entrepreneurs to follow that helps them outline, understand, and cohesively achieve their goals.
Writing a business plan involves defining critical aspects of your business, like brand messaging, conducting market research, and creating pricing strategies — all before starting the company.
A business plan can also increase your confidence. You’ll get a holistic view of your idea and understand whether it's worth pursuing.
So, why not take the time to create a blueprint that will make your job easier? Let’s take a look at six reasons why you should write a business plan before doing anything else.
Six Reasons You Really Need To Write a Business Plan
- Legitimize your business idea.
- Give your business a foundation for success.
- Obtain funding and investments.
- Hire the right people.
- Communicate your needs.
- It makes it easier to sell your business.
1. Legitimize your business idea.
Pursuing business ideas that stem from passions you’ve had for years can be exciting, but that doesn’t necessarily mean it’s a sound venture.
One of the first things a business plan requires you to do is research your target market. You’ll gain a nuanced understanding of industry trends and what your competitors have done, or not, to succeed. You may find that the idea you have when you start is not likely to be successful.
That may feel disheartening, but you can always modify your original idea to better fit market needs. The more you understand about the industry, your future competitors, and your prospective customers, the greater the likelihood of success. If you identify issues early on, you can develop strategies to deal with them rather than troubleshooting as they happen.
It’s better to know sooner rather than later if your business will be successful before investing time and money.
2. Give your business a foundation for success.
Let's say you’re looking to start a clean beauty company. There are thousands of directions you can go in, so just saying, “I’m starting a clean beauty company!” isn’t enough.
You need to know what specific products you want to make, and why you’re deciding to create them. The Pricing and Product Line style="color: #33475b;"> section of a business plan requires you to identify these elements, making it easier to plan for other components of your business strategy.
You’ll also use your initial market research to outline financial projections, goals, objectives, and operational needs. Identifying these factors ahead of time creates a strong foundation, as you’ll be making critical business decisions early on.
You can refer back to the goals you’ve set within your business plan to track your progress over time and prioritize areas that need extra attention.
All in all, every section of your business plan requires you to go in-depth into your future business strategy before even acting on any of those plans. Having a plan at the ready gives your business a solid foundation for growth.
When you start your company, and your product reaches the market, you’ll spend less time troubleshooting and more time focusing on your target audiences and generating revenue.
3. Obtain funding and investments.
Every new business needs capital to get off the ground. Although it would be nice, banks won’t finance loans just because you request one. They want to know what the money is for, where it’s going, and if you’ll eventually be able to pay it back.
If you want investors to be part of your financing plan, they’ll have questions about your business’ pricing strategies and revenue models. Investors can also back out if they feel like their money isn’t put to fair use. They’ll want something to refer back to track your progress over time and understand if you’re meeting the goals you told them you’d meet. They want to know if their investment was worthwhile.
The Financial Considerations section of a business plan will prompt you to estimate costs ahead of time and establish revenue objectives before applying for loans or speaking to investors.
You’ll secure and finalize your strategy in advance to avoid showing up unprepared for meetings with potential investors.
4. Hire the right people.
After you’ve completed your business plan and you have a clear view of your strategies, goals, and financial needs, there may be milestones you need to meet that require skills you don’t yet have. You may need to hire new people to fill in the gaps.
Having a strategic plan to share with prospective partners and employees can prove that they aren’t signing on to a sinking ship.
If your plans are summarized and feasible, they’ll understand why you want them on your team, and why they should agree to work with you.
5. Communicate your needs.
If you don’t understand how your business will run, it’ll be hard to communicate your business’s legitimacy to all involved parties.
Your plan will give you a well-rounded view of how your business will work, and make it easier for you to communicate this to others.
You may have already secured financing from banks and made deals with investors, but a business’ needs are always changing. While your business grows, you’ll likely need more financial support, more partners, or just expand your services and product offers. Using your business plan as a measure of how you’ve met your goals can make it easier to bring people onto your team at all stages of the process.
6. It makes it easier to sell your business.
A buyer won’t want to purchase a business that will run into the ground after signing the papers. They want a successful, established company.
A business plan that details milestones you can prove you’ve already met can be used to show prospective buyers how you’ve generated success within your market. You can use your accomplishments to negotiate higher price points aligned with your business’ value.
A Business Plan Is Essential
Ultimately, having a business plan can increase your confidence in your new venture. You’ll understand what your business needs to succeed, and outline the tactics you’ll use to achieve those goals.
Some people have a lifetime goal of turning their passions into successful business ventures, and a well-crafted business plan can make those dreams come true.
Don't forget to share this post!
Related articles.
18 of My Favorite Sample Business Plans & Examples For Your Inspiration
23 of My Favorite Free Marketing Newsletters
The 8 Best Free Flowchart Templates [+ Examples]
What is a Business Plan? Definition, Tips, and Templates
7 Gantt Chart Examples You'll Want to Copy [+ 5 Steps to Make One]
How to Write an Executive Summary Execs Can't Ignore [+ 5 Top Examples]
20 Free & Paid Small Business Tools for Any Budget
Maximizing Your Social Media Strategy: The Top Aggregator Tools to Use
The Content Aggregator Guide for 2024
2 Essential Templates For Starting Your Business
Marketing software that helps you drive revenue, save time and resources, and measure and optimize your investments — all on one easy-to-use platform
AI ASSISTANTS
Upmetrics AI Your go-to AI-powered business assistant
AI Writing Assist Write, translate, and refine your text with AI
AI Financial Assist Automated forecasts and AI recommendations
TOP FEATURES
AI Business Plan Generator Create business plans faster with AI
Financial Forecasting Make accurate financial forecasts faster
INTEGRATIONS
QuickBooks Sync and compare with your QuickBooks data
Strategic Planning Develop actionable strategic plans on-the-go
AI Pitch Deck Generator Use AI to generate your investor deck
Xero Sync and compare with your Xero data
See how easy it is to plan your business with Upmetrics: Take a Tour →
AI-powered business planning software
Very useful business plan software connected to AI. Saved a lot of time, money and energy. Their team is highly skilled and always here to help.
- Julien López
BY USE CASE
Secure Funding, Loans, Grants Create plans that get you funded
Starting & Launching a Business Plan your business for launch and success
Validate Your Business Idea Discover the potential of your business idea
E2 Visa Business Plan Create a business plan to support your E2 - Visa
Business Consultant & Advisors Plan with your team members and clients
Incubators & Accelerators Empowering startups for growth
Business Schools & Educators Simplify business plan education for students
Students & Learners Your e-tutor for business planning
- Sample Plans
WHY UPMETRICS?
Reviews See why customers love Upmetrics
Customer Success Stories Read our customer success stories
Blogs Latest business planning tips and strategies
Strategic Planning Templates Ready-to-use strategic plan templates
Business Plan Course A step-by-step business planning course
Help Center Help & guides to plan your business
Ebooks & Guides A free resource hub on business planning
Business Tools Free business tools to help you grow
20 Essential Reasons Why You Need a Business Plan?
Free Business Planning E-Book
- December 18, 2023
11 Min Read
When Meta was initially planning to go mass scale, founder Zuckerberg had a plan for the next three, five, and ten years.
As reported by Business Insider , they knew their expenses would increase by a whopping 70%, but they were confident because they had a foolproof business plan at their disposal.
Fast forward to today, we all know where they stand—neither Facebook nor Mark needs an introduction.
Well, if that is not a compelling reason as to why you need a business plan , we have 20 straightforward reasons to convince you.
But before we get there, let’s have a quick rundown of the benefits of having a business plan.
Key benefits of having a business plan
A meticulously crafted business plan holds significant value, offering operational, financial, as well as strategic benefits to emerging as well as existing businesses.
A quick rundown of these key benefits will help you get a more enhanced understanding.
- Helps evaluate the feasibility and viability of your business idea.
- Identifies potential business challenges and creates strategies to mitigate them efficiently.
- Offers a strategic and operational roadmap to attain your business goals.
- Develop strategies to attract your target audience and retain your existing customers.
- Attract investors to raise funding.
- Define resources and SOPs to operate the business efficiently.
That being the benefits, a well-drafted business plan is indeed an asset for your business.
20 Reasons Why You Need a Business Plan
- To test the viability of your business idea
- To reduce potential risks
- To determine your funding needs
- To outline a perfect marketing strategy
- To better understand your competition
- To help you grow 30% faster
- To secure funding
- To attract investors
- To set goals for everyone
- To make sound decisions
- Catch critical cash-flow problems early
- To position your brand in the market
- To better understand your customer
- To build the team
- Future-proof your business
- Tracks Your Progress
- To sell your business
- To allot resources
- To increase the odds of succeeding
- To make An exit plan
Let us now understand the sure-shot reasons why you need a business plan.
1. To test the viability of your business idea
Think about this—you have a couple of business ideas. However, can you start working on both of them at once? Of course not. You need to see which idea can gain you profitability and which needs to be chucked off permanently.
A business plan forces you to think of everything about your business as:
- What is the market demand?
- Which market segment will you cater to?
- What is the expected profitability of a particular business idea in the local market?
- Who are the competitors and what is your competitive advantage?
- What entry barriers do you have to go through?
- How much capital will you require to start a particular business?
- What is the financial forecasting of the business?
This way you will get a chance to question everything that takes to start a successful business, which will ultimately help you decide the viability of your business idea.
Say goodbye to boring templates
Build your business plan faster and easier with AI
Plans starting from $7/month
2. To reduce potential risks
Every business contains risks, and a solid plan is like taking some of that risk out of the business.
It not only helps you to know the viability of your business but also other aspects like:
- Are your operational costs manageable?
- Will your proposed model generate sales or do you need to switch to another?
- What will be the break-even point and when will your business achieve it according to the financial projections?
- How will you manage if the demand for your product or service decreases?
- What will be your exit strategy?
These are all risk-related questions you will get answers to while creating a business plan.
For those who already have a business and are working on expanding it, a business plan will help you understand the associated potential risks and challenges and strategies to mitigate them.
Hence, knowing potential risks beforehand will help you solve them smoothly without a big fuss.
3. To determine your funding needs
A business plan helps evaluate the funding essential for your business. It tells you exactly how much money you need to raise and what funding sources you should opt for.
A business plan includes detailed financial projections and a plan explaining how the funding will be utilized in different business ventures. This makes it easier for you to make realistic funding demands essential to grow your business.
4. To outline a perfect marketing strategy
When you sit to write a business plan , you will be required to dive deep into the study of the target market and competitors.
Such a nuanced understanding of your customers, strengths, and business environment will help you create a marketing plan that’s in line with your objectives and reality.
A solid plan outlines your marketing objectives, brand position, and marketing budget, and describes the marketing strategies to attain your desired market position.
Not only is this plan essential from an investor’s point of view. But it will also serve as a guide for your marketing team to streamline the marketing activities.
5. To better understand your competition
You have to first understand and describe who are your competitors, what is their price point, what is their USP, what is their market positioning, and what products or services they provide.
This stage helps you know the competitors , their working styles, target customers, and everything about them. It forces you to do 360° research about your competitors to know the exact brand positioning of your business.
6. To help you grow 30% faster
Creating a plan goes beyond trying to foresee the future of your company. The significance lies in the process itself. The business plan is a living document; you can revisit your plan and alter it according to the market situation to reach your goals and ensure success.
Studies confirm that companies engaging in regular planning experience a 30% faster growth rate.
It’s proven that businesses that plan are less prone to facing unfortunate failure or cash flow crisis that could jeopardize their existence.
7. To secure funding
Traditional banks and investors ask for a well-detailed business plan to consider your funding request. While their focus would be on the financial aspects of the plan, they would also like to understand your industry and market before making any decision.
A well-detailed plan wins the trust of potential investors in your business idea and your ability to turn it successful by helping you secure essential funds.
8. To attract investors
A business plan is the basis for investors ’ decisions. It demonstrates your market understanding, offers a realistic sense of finances, and answers important questions an investor might have.
This may include questions like,
- Is there any market demand for your products and services?
- What are the financial forecasts?
- When will the company turn profitable?
- What is the company’s exit strategy?
An investor will analyze and evaluate your business on all fronts before entertaining the idea of investing in your business.
9. To set goals for everyone
Setting goals and deadlines for everyone from the management team to other employees will make everyone’s task clear. This way everyone can make their mini-plan and organize things according to the priority.
Business planning makes everything clear in your head before you communicate it with your team and makes sure that you all are on the same page.
10. To make sound decisions
A well-detailed plan acts as a reference point for any kind of decision-making. Think of it as your business guide, which will eventually bring everything into place.
11. Catch critical cash-flow problems early
Smooth cash flow is one of the main bricks of any business. It is one of the key financial statements your investors will review.
A part of preparing a business plan includes creating detailed cash-flow projections for the next 3-5 years. With projections at hand, it gets easier to track your performance and take timely action to avoid extreme cash-flow disturbance.
In short, having a financial plan will ensure that there aren’t any cash-related crises where you can’t pay your bills timely.
12. To position your brand in the market
Writing a business plan helps you to thoroughly understand the industry, competitive, and customer landscape of your business. It defines your company’s role in the marketplace and thereby helps you position your brand in the right place.
13. To better understand your customer
Preparing a business plan helps you understand your target audience and their behavior patterns in great detail. It offers insight into the pain points, needs, wants, and purchasing patterns of your potential customers and shows the best possible way to reach them.
Such an in-depth understanding of customers helps you to optimize your product offerings and marketing strategies.
14. To build the team
One of the main overlooked sides of a business plan is the success metric it provides. An integral part of creating a plan involves mentioning all your goals and predictions.
By regularly reviewing that, you will be able to know which business milestones you have reached and what is the next one. Furthermore, you can even know about the setbacks of your business and then re-edit your business plan according to the market analysis and situation.
15. Future-proof your business
Whether yours is a new business or an existing one—the readers will be interested in getting a future overview of your business.
While writing a business plan , you work on practical assumptions and test various unlikely scenarios to understand the position of your business under different circumstances.
By preparing for different challenging situations, a business plan equips you to promptly face any expected challenges that may arise in the future.
16. Track your progress
17. to sell your business.
Down the road, if you ever decide to merge your business with someone else or want to sell it, a business plan will be an asset that will support you in selling your business.
It will help protect your brand and financial position from any third party. From portraying your brand’s milestones to business experience— one can get all the essential business information from your business plan.
18. To allot resources
As a business owner, you know there are many investments and expenses you need to make before & after starting a business. Thus, allocating those resources to different segments of the business is necessary.
A business plan provides an exact idea of your investments and resources needed in each segment of the business.
19. To increase the odds of succeeding
A well-written business plan increases your chance of building a successful business.
According to research, entrepreneurs with a written plan are 16% more likely to attain business viability than those who don’t.
A business plan helps anticipate the challenges, prepares you to face them strategically, and increases your odds of succeeding in the competitive environment.
20. To sell your business
Beyond guiding day-to-day operations, your business plan is a valuable tool for planning your exit strategy . While many entrepreneurs focus extensively on launching their businesses, not as many plan for the eventual need to liquidate or transfer ownership.
Your chosen exit strategy could be driven by various factors, such as achieving your business goals and shifting focus or selling to an acquirer. Therefore, even for partnership or dissolvation, an exit strategy is necessary.
Start Writing your Business Plan with Upmetrics
Told you, there are various reasons why you should not skip writing a business plan. Besides, why should you, especially when you have resourceful business plan software like Upmetrics to help you out?
It offers an extensive collection of highly customizable business plan examples along with step-by-step instructions to help you write a detailed and actionable plan for your business.
Simply choose a sample relevant to your business and get started.
Build your Business Plan Faster
with step-by-step Guidance & AI Assistance.
Frequently Asked Questions
What is the purpose of a business plan.
There are three main purposes of a business plan:
- Secure funding
- Guiding operations
- Evaluating the progress of your business
How long should a business plan be?
Generally, the length of a business plan depends on the niche of the business and the purpose of the business plan. Ideally, a business plan should be 15-35 pages.
What resources are available to help write a business plan?
To secure funding and impress potential investors, an engaging business plan is necessary. Here are some resources from where you can find business plans:
- Business plan Samples from SBA , Upmetrics , SCORE
- AI business plan generator
- Business plan writer
Should you write a business plan even if you don't need funding?
A business plan will help you detect the problems beforehand. It also helps you in creating marketing & operational strategy. A business plan also guides you as a roadmap. Thus, even if you don’t need funding for your small business, a business plan is necessary.
When should you write a business plan—before or after starting a business?
If you need funding, you have to write a business plan before you start any business. But if you are expanding an existing business or writing a business plan as a guide for your new business, then anytime is okay. Note: Sooner is always better in this case.
About the Author
Upmetrics Team
Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more
Reach Your Goals with Accurate Planning
Sign up for our newsletter for product updates, new blog posts, and the chance to be featured in our Small Business Spotlight!
The importance of a business plan
Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.
Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.
What is a business plan?
A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.
Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success.
Why is a business plan important?
A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.
Business plans typically include detailed information that can help improve your business’s chances of success, like:
- A market analysis : gathering information about factors and conditions that affect your industry
- Competitive analysis : evaluating the strengths and weaknesses of your competitors
- Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
- Marketing: using your research to advertise your business
- Logistics and operations plans : planning and executing the most efficient production process
- Cash flow projection : being prepared for how much money is going into and out of your business
- An overall path to long-term growth
What is the purpose of a business plan?
A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.
10 reasons why you need a business plan
I know what you’re thinking: “Do I really need a business plan? It sounds like a lot of work, plus I heard they’re outdated and I like figuring things out as I go...”.
The answer is: yes, you really do need a business plan! As entrepreneur Kevin J. Donaldson said, “Going into business without a business plan is like going on a mountain trek without a map or GPS support—you’ll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for success.
To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business.
1. To help you with critical decisions
The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that small businesses can’t always afford. That’s where a business plan comes in.
Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time.
Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.
Send invoices, estimates, and other docs:
- via links or PDFs
- automatically, via Wave
*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for the first 10 transactions of each month of your subscription, then 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions for the US and Canada . See Wave’s Terms of Service for more information.
Send invoices, get paid, track expenses, pay your team, and balance your books with our financial management software.
2. To iron out the kinks
Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.
3. To avoid the big mistakes
Only about half of small businesses are still around to celebrate their fifth birthday . While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.
According to data from CB Insights , some of the most common reasons businesses fail include:
- No market need : No one wants what you’re selling.
- Lack of capital : Cash flow issues or businesses simply run out of money.
- Inadequate team : This underscores the importance of hiring the right people to help you run your business.
- Stiff competition : It’s tough to generate a steady profit when you have a lot of competitors in your space.
- Pricing : Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.
The exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis , every piece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don’t be afraid to scrap an idea you really loved if it turns out there’s no market need. Be honest with yourself!
Get a jumpstart on your business plan by creating your own cash flow projection .
4. To prove the viability of the business
Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point.
Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.
A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.
Want to prove there’s a market gap? Here’s how you can get started with market research.
5. To set better objectives and benchmarks
Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.
6. To communicate objectives and benchmarks
Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions any time there’s an absence. Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly.
Sharing your business plan with team members also helps ensure that all members are aligned with what you’re doing, why, and share the same understanding of long-term objectives.
7. To provide a guide for service providers
Small businesses typically employ contractors , freelancers, and other professionals to help them with tasks like accounting , marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.
8. To secure financing
Did you know you’re 2.5x more likely to get funded if you have a business plan?If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run. Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.
Learn what you need to get a small business loan.
9. To better understand the broader landscape
No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well. Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.
10. To reduce risk
Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.
Business plan FAQs
How does having a business plan help small business owners make better decisions.
Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.
What industry-specific issues can business plans help tackle?
Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.
How can small business owners use their business plans to pitch investors or apply for loans?
In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.
Understanding the importance of a business plan
Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.
Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.
Related Posts
Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.
What is a Business Plan? Definition and Resources
9 min. read
Updated July 29, 2024
If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan — or at least the very basic components of one.
The origin of formal business plans is murky. But they certainly go back centuries. And when you consider that 20% of new businesses fail in year 1 , and half fail within 5 years, the importance of thorough planning and research should be clear.
But just what is a business plan? And what’s required to move from a series of ideas to a formal plan? Here we’ll answer that question and explain why you need one to be a successful business owner.
- What is a business plan?
A business plan lays out a strategic roadmap for any new or growing business.
Any entrepreneur with a great idea for a business needs to conduct market research , analyze their competitors , validate their idea by talking to potential customers, and define their unique value proposition .
The business plan captures that opportunity you see for your company: it describes your product or service and business model , and the target market you’ll serve.
It also includes details on how you’ll execute your plan: how you’ll price and market your solution and your financial projections .
Reasons for writing a business plan
If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact:
Companies that commit to planning grow 30% faster than those that don’t.
Creating a business plan is crucial for businesses of any size or stage. It helps you develop a working business and avoid consequences that could stop you before you ever start.
If you plan to raise funds for your business through a traditional bank loan or SBA loan , none of them will want to move forward without seeing your business plan. Venture capital firms may or may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes them want to invest.
But it’s more than just a means of getting your business funded . The plan is also your roadmap to identify and address potential risks.
It’s not a one-time document. Your business plan is a living guide to ensure your business stays on course.
Related: 14 of the top reasons why you need a 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 research shows about business plans
Numerous studies have established that planning improves business performance:
- 71% of fast-growing companies have business plans that include budgets, sales goals, and marketing and sales strategies.
- Companies that clearly define their value proposition are more successful than those that can’t.
- Companies or startups with a business plan are more likely to get funding than those without one.
- Starting the business planning process before investing in marketing reduces the likelihood of business failure.
The planning process significantly impacts business growth for existing companies and startups alike.
Read More: Research-backed reasons why writing a business plan matters
When should you write a business plan?
No two business plans are alike.
Yet there are similar questions for anyone considering writing a plan to answer. One basic but important question is when to start writing it.
A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business.
But the reality can be more nuanced – it depends on the stage a business is in, or the type of business plan being written.
Ideal times to write a business plan include:
- When you have an idea for a business
- When you’re starting a business
- When you’re preparing to buy (or sell)
- When you’re trying to get funding
- When business conditions change
- When you’re growing or scaling your business
Read More: The best times to write or update your business plan
How often should you update your business plan?
As is often the case, how often a business plan should be updated depends on your circumstances.
A business plan isn’t a homework assignment to complete and forget about. At the same time, no one wants to get so bogged down in the details that they lose sight of day-to-day goals.
But it should cover new opportunities and threats that a business owner surfaces, and incorporate feedback they get from customers. So it can’t be a static document.
Related Reading: 5 fundamental principles of business planning
For an entrepreneur at the ideation stage, writing and checking back on their business plan will help them determine if they can turn that idea into a profitable business .
And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them respond to market shifts they wouldn’t be prepared for otherwise.
It also lets them compare their forecasts and budgets to actual financial results. This invaluable process surfaces where a business might be out-performing expectations and where weak performance may require a prompt strategy change.
The planning process is what uncovers those insights.
Related Reading: 10 prompts to help you write a business plan with AI
- How long should your business plan be?
Thinking about a business plan strictly in terms of page length can risk overlooking more important factors, like the level of detail or clarity in the plan.
Not all of the plan consists of writing – there are also financial tables, graphs, and product illustrations to include.
But there are a few general rules to consider about a plan’s length:
- Your business plan shouldn’t take more than 15 minutes to skim.
- Business plans for internal use (not for a bank loan or outside investment) can be as short as 5 to 10 pages.
A good practice is to write your business plan to match the expectations of your audience.
If you’re walking into a bank looking for a loan, your plan should match the formal, professional style that a loan officer would expect . But if you’re writing it for stakeholders on your own team—shorter and less formal (even just a few pages) could be the better way to go.
The length of your plan may also depend on the stage your business is in.
For instance, a startup plan won’t have nearly as much financial information to include as a plan written for an established company will.
Read More: How long should your business plan be?
What information is included in a business plan?
The contents of a plan business plan will vary depending on the industry the business is in.
After all, someone opening a new restaurant will have different customers, inventory needs, and marketing tactics to consider than someone bringing a new medical device to the market.
But there are some common elements that most business plans include:
- Executive summary: An overview of the business operation, strategy, and goals. The executive summary should be written last, despite being the first thing anyone will read.
- Products and services: A description of the solution that a business is bringing to the market, emphasizing how it solves the problem customers are facing.
- Market analysis: An examination of the demographic and psychographic attributes of likely customers, resulting in the profile of an ideal customer for the business.
- Competitive analysis: Documenting the competitors a business will face in the market, and their strengths and weaknesses relative to those competitors.
- Marketing and sales plan: Summarizing a business’s tactics to position their product or service favorably in the market, attract customers, and generate revenue.
- Operational plan: Detailing the requirements to run the business day-to-day, including staffing, equipment, inventory, and facility needs.
- Organization and management structure: A listing of the departments and position breakdown of the business, as well as descriptions of the backgrounds and qualifications of the leadership team.
- Key milestones: Laying out the key dates that a business is projected to reach certain milestones , such as revenue, break-even, or customer acquisition goals.
- Financial plan: Balance sheets, cash flow forecast , and sales and expense forecasts with forward-looking financial projections, listing assumptions and potential risks that could affect the accuracy of the plan.
- Appendix: All of the supporting information that doesn’t fit into specific sections of the business plan, such as data and charts.
Read More: Use this business plan outline to organize your plan
- Different types of business plans
A business plan isn’t a one-size-fits-all document. There are numerous ways to create an effective business plan that fits entrepreneurs’ or established business owners’ needs.
Here are a few of the most common types of business plans for small businesses:
- One-page plan : Outlining all of the most important information about a business into an adaptable one-page plan.
- Growth plan : An ongoing business management plan that ensures business tactics and strategies are aligned as a business scales up.
- Internal plan : A shorter version of a full business plan to be shared with internal stakeholders – ideal for established companies considering strategic shifts.
Business plan vs. operational plan vs. strategic plan
- What questions are you trying to answer?
- Are you trying to lay out a plan for the actual running of your business?
- Is your focus on how you will meet short or long-term goals?
Since your objective will ultimately inform your plan, you need to know what you’re trying to accomplish before you start writing.
While a business plan provides the foundation for a business, other types of plans support this guiding document.
An operational plan sets short-term goals for the business by laying out where it plans to focus energy and investments and when it plans to hit key milestones.
Then there is the strategic plan , which examines longer-range opportunities for the business, and how to meet those larger goals over time.
Read More: How to use a business plan for strategic development and operations
- Business plan vs. business model
If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the business model represents how they will make money.
The difference may seem subtle, but it’s important.
Think of a business plan as the roadmap for how to exploit market opportunities and reach a state of sustainable growth. By contrast, the business model lays out how a business will operate and what it will look like once it has reached that growth phase.
Learn More: The differences between a business model and business plan
- Moving from idea to business plan
Now that you understand what a business plan is, the next step is to start writing your business plan .
The best way to start is by reviewing examples and downloading a business plan template . These resources will provide you with guidance and inspiration to help you write a plan.
We recommend starting with a simple one-page plan ; it streamlines the planning process and helps you organize your ideas. However, if one page doesn’t fit your needs, there are plenty of other great templates available that will put you well on your way to writing a useful business plan.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
Table of Contents
- Reasons to write a business plan
- Business planning research
- When to write a business plan
- When to update a business plan
- Information to include
- Business vs. operational vs. strategic plans
Related Articles
6 Min. Read
Business Plan vs Business Model Canvas Explained
7 Min. Read
8 Business Plan Templates You Can Get for Free
5 Min. Read
How to Write a Business Plan in Under an Hour
How to Write Your Business Plan Cover Page + Template
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
- Search Search Please fill out this field.
What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
- How to Start a Business: A Comprehensive Guide and Essential Steps
- 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 CURRENT ARTICLE
- 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
A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.
Key Takeaways
- A business plan is a document detailing a company's business activities and strategies for achieving its goals.
- Startup companies use business plans to launch their venture and to attract outside investors.
- For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
- There's no single required format for a business plan, but certain key elements are essential for most companies.
Investopedia / Ryan Oakley
Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.
Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.
A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.
While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.
A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.
Common elements in many business plans include:
- Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
- Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
- Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
- Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.
Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.
2 Types of Business Plans
Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
- Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.
Why Do Business Plans Fail?
A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.
How Often Should a Business Plan Be Updated?
How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.
A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.
As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.
University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.
Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
Harvard Business Review. " How to Write a Winning Business Plan ."
U.S. Small Business Administration. " Write Your Business Plan ."
SCORE. " When and Why Should You Review Your Business Plan? "
- Terms of Service
- Editorial Policy
- Privacy Policy
Wow clients with professional invoices that take seconds to create
Quick and easy online, recurring, and invoice-free payment options
Automated, to accurately track time and easily log billable hours
Reports and tools to track money in and out, so you know where you stand
Easily log expenses and receipts to ensure your books are always tax-time ready
Tax time and business health reports keep you informed and tax-time ready
Automatically track your mileage and never miss a mileage deduction again
Time-saving all-in-one bookkeeping that your business can count on
Track project status and collaborate with clients and team members
Organized and professional, helping you stand out and win new clients
Set clear expectations with clients and organize your plans for each project
Client management made easy, with client info all in one place
Pay your employees and keep accurate books with Payroll software integrations
- Team Management
FreshBooks integrates with over 100 partners to help you simplify your workflows
Send invoices, track time, manage payments, and more…from anywhere.
- Freelancers
- Self-Employed Professionals
- Businesses With Employees
- Businesses With Contractors
- Marketing & Agencies
- Construction & Trades
- IT & Technology
- Business & Prof. Services
- Accounting Partner Program
- Collaborative Accounting™
- Accountant Hub
- Reports Library
- FreshBooks vs QuickBooks
- FreshBooks vs HoneyBook
- FreshBooks vs Harvest
- FreshBooks vs Wave
- FreshBooks vs Xero
- Partners Hub
- Help Center
- 1-888-674-3175
- All Articles
- Productivity
- Project Management
- Bookkeeping
Resources for Your Growing Business
The importance of business plan: 5 key reasons.
A key part of any business is its business plan. They can help define the goals of your business and help it reach success. A good business plan can also help you develop an adequate marketing strategy. There are a number of reasons all business owners need business plans, keep reading to learn more!
Here’s What We’ll Cover:
What Is a Business Plan?
5 reasons you need a well-written business plan, how do i make a business plan, key takeaways.
A business plan contains detailed information that can help determine its success. Some of this information can include the following:
- Market analysis
- Cash flow projection
- Competitive analysis
- Financial statements and financial projections
- An operating plan
A solid business plan is a good way to attract potential investors. It can also help you display to business partners that you have a successful business growing. In a competitive landscape, a formal business plan is your key to success.
Check out all of the biggest reasons you need a good business plan below.
1. To Secure Funding
Whether you’re seeking funding from a venture capitalist or a bank, you’ll need a business plan. Business plans are the foundation of a business. They tell the parties that you’re seeking funding from whether or not you’re worth investing in. If you need any sort of outside financing, you’ll need a good business plan to secure it.
2. Set and Communicate Goals
A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you’re more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike.
3. Prove Viability in the Market
While many businesses are born from passion, not many will last without an effective business plan. While a business concept may seem sound, things may change once the specifics are written down. Often, people who attempt to start a business without a plan will fail. This is because they don’t take into account all of the planning and funds needed to get a business off of the ground.
Market research is a large part of the business planning process. It lets you review your potential customers, as well as the competition, in your field. By understanding both you can set price points for products or services. Sometimes, it may not make sense to start a business based on the existing competition. Other times, market research can guide you to effective marketing strategies that others lack. To have a successful business, it has to be viable. A business plan will help you determine that.
4. They Help Owners Avoid Failure
Far too often, small businesses fail. Many times, this is due to the lack of a strong business plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. Some of them are listed below, which can be avoided by having a business plan:
- The market doesn’t need the business’s product or service
- The business didn’t take into account the amount of capital needed
- The market is oversaturated
- The prices set by the business are too high, pushing potential customers away
Any good business plan includes information to help business owners avoid these issues.
5. Business Plans Reduce Risk
Related to the last reason, business plans help reduce risk. A well-thought-out business plan helps reduce risky decisions. They help business owners make informed decisions based on the research they conduct. Any business owner can tell you that the most important part of their job is making critical decisions. A business plan that factors in all possible situations helps make those decisions.
Luckily, there are plenty of tools available to help you create a business plan. A simple search can lead you to helpful tools, like a business plan template . These are helpful, as they let you fill in the information as you go. Many of them provide basic instructions on how to create the business plan, as well.
If you plan on starting a business, you’ll need a business plan. They’re good for a vast number of things. Business plans help owners make informed decisions, as well as set goals and secure funding. Don’t put off putting together your business plan!
If you’re in the planning stages of your business, be sure to check out our resource hub . We have plenty of valuable resources and articles for you when you’re just getting started. Check it out today!
RELATED ARTICLES
Save Time Billing and Get Paid 2x Faster With FreshBooks
Want More Helpful Articles About Running a Business?
Get more great content in your Inbox.
By subscribing, you agree to receive communications from FreshBooks and acknowledge and agree to FreshBook’s Privacy Policy . You can unsubscribe at any time by contacting us at [email protected].
- 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
How to Write a Business Plan in 9 Steps (+ Template and Examples)
Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.
If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.
Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.
You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.
Let’s get started.
What Do You Need A Business Plan For?
Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.
1. Secure Funds
One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.
For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.
A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.
Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.
2. Monitor Business Growth
A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:
- The business goals
- Methods to achieve the goals
- Time-frame for attaining those goals
A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.
You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.
3. Measure Business Success
A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.
Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.
You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.
4. Document Your Marketing Strategies
You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.
Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.
In your business plan, your marketing strategy must answer the questions:
- How do you want to reach your target audience?
- How do you plan to retain your customers?
- What is/are your pricing plans?
- What is your budget for marketing?
How to Write a Business Plan Step-by-Step
1. create your executive summary.
The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.
Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.
A good executive summary should do the following:
- A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
- Contain your Mission Statement which explains what the main objective or focus of your business is.
- Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
- The Team. Basic information about your company’s leadership team and employees
- Business Concept. A solid description of what your business does.
- Target Market. The customers you plan to sell to.
- Marketing Strategy. Your plans on reaching and selling to your customers
- Current Financial State. Brief information about what revenue your business currently generates.
- Projected Financial State. Brief information about what you foresee your business revenue to be in the future.
The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.
Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.
View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:
- Who is your target audience?
- What sector or industry are you in?
- What are your products and services?
- What is the future of your industry?
- Is your company scaleable?
- Who are the owners and leaders of your company? What are their backgrounds and experience levels?
- What is the motivation for starting your company?
- What are the next steps?
Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.
The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.
If you are writing your business plan for your planning purposes, you do not need to write the executive summary.
2. Add Your Company Overview
The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.
Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.
Your company overview should contain the following:
- What products and services you will provide
- Geographical markets and locations your company have a presence
- What you need to run your business
- Who your target audience or customers are
- Who will service your customers
- Your company’s purpose, mission, and vision
- Information about your company’s founders
- Who the founders are
- Notable achievements of your company so far
When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.
If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.
- Who are you targeting? (The answer is not everyone)
- What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
- How does your product or service overcome that pain point?
- Where is the location of your business?
- What products, equipment, and services do you need to run your business?
- How is your company’s product or service different from your competition in the eyes of your customers?
- How many employees do you need and what skills do you require them to have?
After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.
The company description or overview section contains three elements: mission statement, history, and objectives.
- Mission Statement
The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.
Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”
When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:
- Founding Date
- Major Milestones
- Location(s)
- Flagship Products or Services
- Number of Employees
- Executive Leadership Roles
When you fill in this information, you use it to write one or two paragraphs about your company’s history.
Business Objectives
Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.
3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity
The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.
Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.
This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.
Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?
You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.
Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?
Illustrate the competitive landscape as well. What are your competitors doing well and not so well?
Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.
Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.
Market Analysis
Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.
The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.
A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.
- Market Research
To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.
- Your target market’s needs or pain points
- The existing solutions for their pain points
- Geographic Location
- Demographics
The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.
Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.
You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.
How to Quantify Your Target Market
One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:
- Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
- Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
- Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
- Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.
What Does a Good Market Analysis Entail?
Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.
You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:
- Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
- Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
- Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
- Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
- Market Share Potential: Does your business stand a good chance of taking a good share of the market?
- Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
- Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
- Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.
The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.
Here are some questions you can answer that can help you position your product or service in a positive light to your readers.
- Is your product or service of superior quality?
- What additional features do you offer that your competitors do not offer?
- Are you targeting a ‘new’ market?
Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.
Competitive Analysis
In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.
Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.
Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.
The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.
Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.
When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.
Find answers to the following questions after you have identified who your competitors are.
- What are your successful competitors doing?
- Why is what they are doing working?
- Can your business do it better?
- What are the weaknesses of your successful competitors?
- What are they not doing well?
- Can your business turn its weaknesses into strengths?
- How good is your competitors’ customer service?
- Where do your competitors invest in advertising?
- What sales and pricing strategies are they using?
- What marketing strategies are they using?
- What kind of press coverage do they get?
- What are their customers saying about your competitors (both the positive and negative)?
If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.
If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.
Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.
The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.
Direct vs Indirect Competition
You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.
There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.
If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.
In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.
For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.
There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.
Factors that Differentiate Your Business from the Competition
There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.
1. Cost Leadership
A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.
A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.
2. Product Differentiation
Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.
Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.
3. Market Segmentation
As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.
If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.
4. Define Your Business and Management Structure
The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.
Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.
If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.
Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.
The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.
Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.
Management Team
The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.
Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.
A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.
Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.
Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.
If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.
Key Questions to Answer When Structuring Your Management Team
- Who are the key leaders?
- What experiences, skills, and educational backgrounds do you expect your key leaders to have?
- Do your key leaders have industry experience?
- What positions will they fill and what duties will they perform in those positions?
- What level of authority do the key leaders have and what are their responsibilities?
- What is the salary for the various management positions that will attract the ideal candidates?
Additional Tips for Writing the Management Structure Section
1. Avoid Adding ‘Ghost’ Names to Your Management Team
There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.
Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.
2. Focus on Credentials But Pay Extra Attention to the Roles
Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.
While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.
Organizational Chart
Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.
If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.
An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.
You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.
5. Describe Your Product and Service Offering
In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.
Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.
The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.
If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”
Your product and service section in your business plan should include the following:
- A detailed explanation that clearly shows how your product or service works.
- The pricing model for your product or service.
- Your business’ sales and distribution strategy.
- The ideal customers that want your product or service.
- The benefits of your products and services.
- Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
- Plans for filling the orders you receive
- If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.
What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services
In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.
When describing the benefits of your products or services, here are some key factors to focus on.
- Unique features
- Translating the unique features into benefits
- The emotional, psychological, and practical payoffs to attract customers
- Intellectual property rights or any patents
When describing the product life cycle of your products or services, here are some key factors to focus on.
- Upsells, cross-sells, and down-sells
- Time between purchases
- Plans for research and development.
When describing the production process for your products or services, you need to think about the following:
- The creation of new or existing products and services.
- The sources for the raw materials or components you need for production.
- Assembling the products
- Maintaining quality control
- Supply-chain logistics (receiving the raw materials and delivering the finished products)
- The day-to-day management of the production processes, bookkeeping, and inventory.
Tips for Writing the Products or Services Section of Your Business Plan
1. Avoid Technical Descriptions and Industry Buzzwords
The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.
A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.
2. Describe How Your Products or Services Differ from Your Competitors
When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.
If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.
For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.
3. Long or Short Products or Services Section
Should your products or services section be short? Does the long products or services section attract more investors?
There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.
If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.
Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.
The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.
If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.
A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.
4. Describe Your Relationships with Vendors or Suppliers
Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.
Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.
5. Your Primary Goal Is to Convince Your Readers
The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.
When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.
While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.
Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.
Key Questions to Answer When Writing your Products and Services Section
Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.
- Are your products existing on the market or are they still in the development stage?
- What is your timeline for adding new products and services to the market?
- What are the positives that make your products and services different from your competitors?
- Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
- Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
- How much does it cost to produce your products or services? How much do you plan to sell it for?
- What is the price for your products and services compared to your competitors? Is pricing an issue?
- What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
- What is your plan for acquiring your products? Are you involved in the production of your products or services?
- Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
- Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
- How do you plan to distribute your products or services to the market?
You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.
6. Show and Explain Your Marketing and Sales Plan
Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.
The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.
There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.
In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.
Outline Your Business’ Unique Selling Proposition (USP)
The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).
Target Market and Target Audience
Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.
Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.
Creating a Smart Marketing and Sales Plan
Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.
Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.
Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.
Your Positioning Statement
Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.
Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?
Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market
- What are the unique features or benefits that you offer that your competitors lack?
- What are your customers’ primary needs and wants?
- Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
- How does your company’s solution compare with other solutions in the market?
After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.
All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.
Here is a simple template you can use to develop a positioning statement.
For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].
For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.
“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”
You can edit this positioning statement sample and fill it with your business details.
After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.
Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.
You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.
Basic Rules to Follow When Pricing Your Offering
Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.
- Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
- Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
- Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.
Pricing Strategy
Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.
- Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
- Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
- Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.
After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.
As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.
There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.
Advertising
Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.
Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.
Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.
A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.
Public Relations
A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.
Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.
Content Marketing
Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,
Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.
Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.
If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.
Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.
When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.
- Is your choice of packaging consistent with your positioning strategy?
- What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
- How does your packaging compare to that of your competitors?
Social Media
Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.
You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.
Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.
Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.
You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.
Strategic Alliances
If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.
Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.
The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.
Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.
Steps Involved in Creating a Marketing and Sales Plan
1. Focus on Your Target Market
Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.
2. Evaluate Your Competition
One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.
You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.
These questions can help you know your competition.
- What makes your competition successful?
- What are their weaknesses?
- What are customers saying about your competition?
3. Consider Your Brand
Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.
4. Focus on Benefits
The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.
Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.
5. Focus on Differentiation
Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.
Key Questions to Answer When Writing Your Marketing and Sales Plan
- What is your company’s budget for sales and marketing campaigns?
- What key metrics will you use to determine if your marketing plans are successful?
- What are your alternatives if your initial marketing efforts do not succeed?
- Who are the sales representatives you need to promote your products or services?
- What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
- Where will you sell your products?
You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.
The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.
7. Clearly Show Your Funding Request
If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’
A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.
Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.
In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.
Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.
If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.
Funding Request: Debt or Equity?
When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.
Case for Equity
If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.
Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.
Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.
Case for Debt
You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.
When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.
Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.
Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.
You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.
Additional Tips for Writing the Funding Request Section of your Business Plan
The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.
If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.
You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.
If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .
Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.
8. Detail Your Financial Plan, Metrics, and Projections
If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.
The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.
If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.
Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.
If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.
When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.
The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.
Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.
Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.
Use Graphs and Charts
The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.
Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.
Address the Risk Factors and Show Realistic Financial Projections
Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.
You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.
What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan
The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.
A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.
Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.
1. Sales Forecast
Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.
One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.
For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.
Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.
Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.
For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.
2. Personnel Plan
The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.
However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.
The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.
3. Income Statement
The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.
Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.
The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.
- Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
- Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
- Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
- Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
- Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
- Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
- Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
- Net profit shows whether your business has made a profit or taken a loss during a given timeframe.
4. Cash Flow Statement
The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.
5. Balance Sheet
The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.
You can get the net worth of your company by subtracting your company’s liabilities from its assets.
6. Exit Strategy
The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.
You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.
Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.
Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.
Key Questions to Answer with Your Financial Plan, Metrics, and Projection
Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.
You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.
Here are some key questions to answer to help you develop this section.
- What is your sales forecast for the next year?
- When will your company achieve a positive cash flow?
- What are the core expenses you need to operate?
- How much money do you need upfront to operate or grow your company?
- How will you use the loans or investments?
9. Add an Appendix to Your Business Plan
Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.
The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.
When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.
Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.
You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.
If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.
A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.
The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.
People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.
Common Items to Include in the Appendix Section of Your Business Plan
The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:
- Additional data about the process of manufacturing or creation
- Additional description of products or services such as product schematics
- Additional financial documents or projections
- Articles of incorporation and status
- Backup for market research or competitive analysis
- Bank statements
- Business registries
- Client testimonials (if your business is already running)
- Copies of insurances
- Credit histories (personal or/and business)
- Deeds and permits
- Equipment leases
- Examples of marketing and advertising collateral
- Industry associations and memberships
- Images of product
- Intellectual property
- Key customer contracts
- Legal documents and other contracts
- Letters of reference
- Links to references
- Market research data
- Organizational charts
- Photographs of potential facilities
- Professional licenses pertaining to your legal structure or type of business
- Purchase orders
- Resumes of the founder(s) and key managers
- State and federal identification numbers or codes
- Trademarks or patents’ registrations
Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.
Tips and Strategies for Writing a Convincing Business Plan
To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.
1. Know Your Audience
When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.
The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.
Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.
- A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
- A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
- A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.
2. Get Inspiration from People
Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.
To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.
When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.
3. Avoid Being Over Optimistic
Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.
The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.
In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.
The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.
To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.
4. Keep it Simple and Short
When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.
One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.
Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.
You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.
To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.
5. Make an Outline and Follow Through
A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.
For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.
To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.
This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:
- Table of contents
- Introduction
- Product or service description
- Target audience
- Market size
- Competition analysis
- Financial projections
Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.
6. Ask a Professional to Proofread
When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.
You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.
In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.
Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.
Business Plan Examples and Templates That’ll Save You Tons of Time
1. hubspot's one-page business plan.
The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.
Hubspot’s one-page business plan template is divided into nine fields:
- Business opportunity
- Company description
- Industry analysis
- Target market
- Implementation timeline
- Marketing plan
- Financial summary
- Funding required
2. Bplan’s Free Business Plan Template
Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.
The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.
3. HubSpot's Downloadable Business Plan Template
HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.
The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.
There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.
4. Business Plan by My Own Business Institute
My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.
The comprehensive template consists of a whopping 15 sections.
- The Business Profile
- The Vision and the People
- Home-Based Business and Freelance Business Opportunities
- Organization
- Licenses and Permits
- Business Insurance
- Communication Tools
- Acquisitions
- Location and Leasing
- Accounting and Cash Flow
- Opening and Marketing
- Managing Employees
- Expanding and Handling Problems
There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.
5. Score's Business Plan Template for Startups
Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.
The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.
There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.
The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.
6. Minimalist Architecture Business Plan Template by Venngage
The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .
There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.
7. Small Business Administration Free Business Plan Template
The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.
There are five sections in the two SBA’s free business plan templates.
- Executive Summary
- Company Description
- Service Line
- Marketing and Sales
8. The $100 Startup's One-Page Business Plan
The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.
There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.
9. PandaDoc’s Free Business Plan Template
The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.
There are 11 sections in PandaDoc’s free business plan template.
- Executive summary
- Business description
- Products and services
- Operations plan
- Management organization
- Financial plan
- Conclusion / Call to action
- Confidentiality statement
You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)
PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.
10. Invoiceberry Templates for Word, Open Office, Excel, or PPT
InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.
Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.
Alternatives to the Traditional Business Plan
A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.
Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.
Business Model Canvas (BMC)
The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.
The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.
Segments of the Business Model Canvas
The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.
- Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
- Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
- The Product’s Value Propositions: What does your product do? How will it be different from other products?
- Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
- Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
- Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
- Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
- Cost Structure: What is the estimated cost of production? How much will distribution cost?
- Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?
Lean Canvas
The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.
Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:
- Problem: Simple and straightforward number of problems you have identified, ideally three.
- Solution: The solutions to each problem.
- Unfair Advantage: Something you possess that can't be easily bought or replicated.
- Key Metrics: Important numbers that will tell how your business is doing.
Startup Pitch Deck
While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.
Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.
Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.
Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.
Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.
- Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
- Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
- Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
- Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
- Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
- Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
- Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
- Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
- Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
- Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
- Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
- Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.
It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.
Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.
Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan
- Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
- Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
- Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
- Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.
Business Plan FAQ
Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time. They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.
Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans. A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.
A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs. Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.
The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.
A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.
Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.
Exlore Further
- 12 Key Elements of a Business Plan (Top Components Explained)
- 13 Sources of Business Finance For Companies & Sole Traders
- 5 Common Types of Business Structures (+ Pros & Cons)
- How to Buy a Business in 8 Steps (+ Due Diligence Checklist)
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.
Home > Business > Business Startup
How To Write a Business Plan
We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure .
Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .
Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.
Table of contents
- Write your executive summary
- Do your market research homework
- Set your business goals and objectives
- Plan your business strategy
- Describe your product or service
- Crunch the numbers
- Finalize your business plan
By signing up I agree to the Terms of Use and Privacy Policy .
Step 1: Write your executive summary
Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.
An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.
You’ll cover other things too, but answer these basic questions in your executive summary:
- Idea: What’s your business concept? What problem does your business solve? What are your business goals?
- Product: What’s your product/service and how is it different?
- Market: Who’s your audience? How will you reach customers?
- Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?
Step 2: Do your market research homework
The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.
This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.
Step 3: Set your business goals and objectives
Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?
Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.
Step 4: Plan your business strategy
Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.
Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.
Step 5: Describe your product or service
In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.
Step 6: Crunch the numbers
Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .
These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.
You may want to work with a financial professional to ensure your financial projections are realistic and accurate.
Step 7: Finalize your business plan
Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.
You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.
Compare the Top Small-Business Banks
$0.00 | ||||||
$0.00 | ||||||
$0.00 | ||||||
$10.00 (waivable) | ||||||
$0.00 |
Data effective 1/10/23. At publishing time, rates, fees, and requirements are current but are subject to change. Offers may not be available in all areas.
The takeaway
Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.
Related content
- 5 Best Business Plan Software and Tools in 2023 for Your Small Business
- How to Get a Business License: What You Need to Know
- What Is a Cash Flow Statement?
Best Small Business Loans
5202 W Douglas Corrigan Way Salt Lake City, UT 84116
Accounting & Payroll
Point of Sale
Payment Processing
Inventory Management
Human Resources
Other Services
Best Inventory Management Software
Best Small Business Accounting Software
Best Payroll Software
Best Mobile Credit Card Readers
Best POS Systems
Best Tax Software
Stay updated on the latest products and services anytime anywhere.
By signing up, you agree to our Terms of Use and Privacy Policy .
Disclaimer: The information featured in this article is based on our best estimates of pricing, package details, contract stipulations, and service available at the time of writing. All information is subject to change. Pricing will vary based on various factors, including, but not limited to, the customer’s location, package chosen, added features and equipment, the purchaser’s credit score, etc. For the most accurate information, please ask your customer service representative. Clarify all fees and contract details before signing a contract or finalizing your purchase.
Our mission is to help consumers make informed purchase decisions. While we strive to keep our reviews as unbiased as possible, we do receive affiliate compensation through some of our links. This can affect which services appear on our site and where we rank them. Our affiliate compensation allows us to maintain an ad-free website and provide a free service to our readers. For more information, please see our Privacy Policy Page . |
© Business.org 2024 All Rights Reserved.
How to make a business plan
Table of Contents
How to make a good business plan: step-by-step guide.
A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.
A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.
But where do you start? How do you create a business plan that sets you up for success?
This article will explore the step-by-step process of creating a comprehensive business plan.
What is a business plan?
A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:
Products or services
Target market
Competitors
Marketing and sales strategies
Financial plan
Management team
A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.
As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.
Business plan vs. business model canvas
A business plan may seem similar to a business model canvas, but each document serves a different purpose.
A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:
Key partnerships
Key activities
Key propositions
Customer relationships
Customer segments
Key resources
Cost structure
Revenue streams
On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.
A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.
A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.
Why is a business plan important?
A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.
Here are some of the many benefits of having a thorough business plan.
Helps to define the business goals and objectives
A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.
A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.
Guides decision-making
A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.
With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.
Attracts investors and secures funding
Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.
A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.
Identifies potential challenges and risks
A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:
Is there enough demand for my product or service?
Will I have enough capital to start my business?
Is the market oversaturated with too many competitors?
What will happen if my marketing strategy is ineffective?
By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.
Provides a basis for measuring success
A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:
Are we where we want to be at this point?
Did we achieve our goals?
If not, why not, and what do we need to do?
After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.
How to make a business plan step by step
The steps below will guide you through the process of creating a business plan and what key components you need to include.
1. Create an executive summary
Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.
Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.
2. Write your company description
Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.
Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.
3. Conduct a market analysis
Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.
Use the Competitive Analysis Template to brainstorm answers to simple questions like:
What does the current market look like?
Who are your competitors?
What are they offering?
What will give you a competitive advantage?
Who is your target market?
What are they looking for and why?
How will your product or service satisfy a need?
These questions should give you valuable insights into the current market and where your business stands.
4. Describe your products and services
Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.
Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.
5. Design a marketing and sales strategy
Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:
Pricing strategy
Advertising and promotional tactics
Sales channels
The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.
6. Determine budget and financial projections
Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.
Some details to include in this section are:
Startup costs
Revenue projections
Profit and loss statement
Funding you have received or plan to receive
Strategy for raising funds
7. Set the organization and management structure
Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.
As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.
8. Make an action plan
At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.
Types of business plans
Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.
Startup business plan
A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.
Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.
Strategic business plan
A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.
The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.
Operational business plan
An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:
Organizational structure
Staffing plan
Production plan
Quality control
Inventory management
Supply chain
The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.
Growth-business plan
A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.
The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).
One-page business plan
A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.
A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.
Best practices for how to make a good business plan
Here are some additional tips for creating a business plan:
Use a template
A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.
Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.
Be practical
Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.
Be specific
Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.
Be thorough with your research
Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.
Get input from others
It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.
Review and revise regularly
A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.
Create a winning business plan to chart your path to success
Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.
The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.
Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.
Get on board in seconds
Join thousands of teams using Miro to do their best work yet.
- Search Search Please fill out this field.
- Building Your Business
- Becoming an Owner
- Business Plans
Why You Should Write a Business Plan
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
To Test the Feasibility of Your Business Idea
To give your new business the best chance of success, to secure funding, to make business planning manageable and effective, to attract investors, frequently asked questions (faqs).
The Balance / Getty Images
A business plan is the blueprint for your business. Starting a business without a business plan is like building a house without a blueprint. Yet, unlike a house, a business isn't static. We often make the mistake of thinking of a business plan as a single document that you put together once when you're starting out and never touch again. But as the business develops, so should its business plan. In fact, any particular business may have multiple business plans as its objectives change.
Writing a business plan is time-consuming, but it's essential if you want to have a successful business that's going to survive the startup phase.
Key Takeaways
- Writing a business plan reveals how tenable your idea is.
- Updating and amending a business plan as the business develops and its goals change is vital to your success.
- A good business plan helps you define your target market, competitive advantage, optimum pricing strategies, and better prepares the business for upcoming challenges.
- A business plan helps you secure funding and attract new investors.
Writing a business plan is the best way—other than going out and doing it—to test whether an idea for starting a business is feasible. In this sense, the business plan is your safety net. If working through a business plan reveals that your business idea is untenable, it will save you a great deal of time and money.
Often, an idea for starting a business is discarded at the marketing analysis or competitive analysis stage , freeing you to move on to a new (and better) idea.
Unfortunately, many prospective business owners are so convinced that their idea for a product or service is a can't-miss proposition, that they don't take the time to do the necessary research and work through a proper business plan. The more you know about your industry, your prospective customers, and the competition, the greater the likelihood that your business will succeed.
Writing a business plan will ensure that you pay attention to the broad operational and financial objectives of your new business and the small details, such as budgeting and market planning. The process will ultimately make for a smoother startup period and fewer unforeseen problems as your business gets up and running.
The exercise of budgeting and market planning will help you define your target market , your unique selling proposition, optimum pricing strategies, and outline how you intend to sell and deliver your products to customers. In addition, developing a budget for implementation will assist with determining your startup and operating capital requirements.
According to the Small Business Administration, one of the most-cited reasons why businesses fail is inadequate planning. By starting too soon and without a sufficient plan, your business is setting itself up for failure.
Most new businesses need startup and operating capital to get off the ground. Without a well-developed business plan, there is no chance of getting debt financing from established financial institutions such as banks or equity financing from angel investors.
Established businesses often need money, too, to buy new equipment or property, or because of market downturns. Having an up-to-date business plan gives you a much better chance of getting the money you need to keep operating or expand.
Even an angel investor will want to ensure their money is going to a business that knows what it's doing. The easiest way to prove this is via a well-developed business plan.
Investors and financiers are always looking at the risk of default, and word of mouth is no substitute for written facts and figures in a properly prepared business plan.
A business plan is essential if you're thinking of starting a business, but it's also an important tool for established businesses. Viable businesses are dynamic; they change and grow. Your company's original business plan needs to be revised as you set new goals .
Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company's growth should take.
Whether you want to shop your business to venture capitalists or attract angel investors , you need to have a solid business plan. A presentation may pique their interest, but they'll need a well-written document they can study before they'll be prepared to make any investment commitment.
Be prepared to have your business plan scrutinized. Both venture capitalists and angel investors will want to conduct extensive background checks and competitive analyses to be certain that what's written in your business plan is indeed the case.
What are the sections of a business plan?
A comprehensive business plan should include the following sections:
- Executive summary
- Company description
- Competitor analysis
- Industry analysis
- Product and services description
- Financial data
What is the purpose of a business plan?
A business plan has four main purposes:
- Tests the feasibility and model of your business idea
- Attracts investors
- Sets a plan for growth
- Identifies capital needs
Small Business Administration. " Selecting a Business That Fits ."
- 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
- South Africa
Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC
How to Prepare and Write the Perfect Business Plan for Your Company Here's how to write a business plan that will formalize your company's goals and optimize your organization.
By Matthew McCreary May 5, 2021
Are you preparing to start your own business but uncertain about how to get started? A business plan ought to be one of the first steps in your entrepreneurial journey because it will organize the ideas that have been spinning around in your brain and prepare you to seek funding, partners and more.
What is a business plan?
A business plan is a detailed document that outlines a company's goals and how the business, well, plans to achieve those goals over the next three or more years. It helps define expected profits and challenges, providing a road map that will help you avoid bumps in the road.
Stever Robbins writes in an Entrepreneur article titled, "Why You Must Have a Business Plan," that a business plan "is a tool for understanding how your business is put together…. Writing out your business plan forces you to review everything at once: your value proposition, marketing assumptions, operations plan, financial plan and staffing plan." But, a business plan is about more than just reviewing the past state of your business or even what your business looks like today.
Robbins writes that a well-written business plan will help you drive the future by "laying out targets in all major areas: sales, expense items, hiring positions and financing goals. Once laid out, the targets become performance goals."
The business plan can help your company attract talent and funding, because when prospects ask about your business, you already have an articulated overview to offer them. How they react can allow you to quickly understand how others see your business and pivot if necessary.
What should you do before you write your business plan?
It might sound redundant, but you actually need to plan your business plan. Business plans can be complicated, and you'll be held accountable for the goals you set. For example, if you plan to open five locations of your business within the first two years, your investors might get angry if you only manage to open two.
That's why it's essential that, before writing your business plan, you spend some time determining exactly which objectives are essential to your business. If you're struggling to come up with a list of goals on your own, Entrepreneur article "Plan Your Business Plan" offers some questions you can ask yourself to spark some inspiration.
How determined am I to see this venture succeed?
Am I willing to invest my own money and work long hours for no pay, sacrificing personal time and lifestyle, maybe for years?
What's going to happen to me if this venture doesn't work out?
If it does succeed, how many employees will this company eventually have?
What will be the business's annual revenue in a year? What about in five years?
What will be the company's market share in that amount of time?
Will the business have a niche market, or will it sell a broad spectrum of goods and services?
What are my plans for geographic expansion? Should it be local or national? Can it be global?
Am I going to be a hands-on manager, or will I delegate a large proportion of tasks to others?
If I delegate, what sorts of tasks will I share? Will it be sales, technical work or something else?
How comfortable am I taking direction from others? Can I work with partners or investors who demand input into the company's management?
Is the business going to remain independent and privately owned, or will it eventually be acquired or go public?
It's also essential to consider your financial goals. Your business might not require a massive financial commitment upfront, but it probably will if you're envisioning rapid growth. Unless you're making your product or service from scratch, you'll have to pay your suppliers before your customers can pay you, and as "Plan Your Business Plan" points out, "this cash flow conundrum is the reason so many fast-growing companies have to seek bank financing or equity sales to finance their growth. They are literally growing faster than they can afford."
How much financing will you need to start your business? What will you be willing to accept? If you're desperate for that first influx of cash, you might be tempted to accept any offer, but doing so might force you to either surrender too much control or ask investors for a number that's not quite right for either side.
These eight questions can help you determine a few financial aspects of your planning stages:
What initial investment will the business require?
How much control of the business are you willing to relinquish to investors?
When will the business turn a profit?
When can investors, including you, expect a return on investment?
What are the business's projected profits over time?
Will you be able to devote yourself full-time to the business?
What kind of salary or profit distribution can you expect to take home?
What are the chances the business will fail, and what will happen if it does?
You should also consider who, primarily, is going to be reading your business plan, and how you plan to use it. Is it a means of raising money or attracting employees? Will suppliers see it?
Lastly, you need to assess the likelihood of whether you actually have the time and resources to see your plan through. It might hurt to realize the assumptions you've made so far don't actually make a successful business, but it's best to know early on, before you make further commitments.
Related: Need a Business Plan Template? Here Is Apple's 1981 Plan for the Mac.
How to Write a Business Plan
Once you've worked out all the questions above and you know exactly what goals you have for your business plan, the next step is to actually write the darn thing. A typical business plan runs 15 to 20 pages but can be longer or shorter, depending on the complexity of the business and the needs of your venture. Regardless of whether you intend to use the business plan for self-evaluation or to seek a seven-figure investment, it should include nine key components, many of which are outlined in Entrepreneur 's introduction to business plans:
1. Title page and contents
Presentation is important, and a business plan should be presented in a binder with a cover that lists the business's name, the principals' names and other relevant information like a working address, phone number, email and web address and date. Write the information in a font that's easy to read and include it on the title page inside, too. Add in the company logo and a table of contents that follows the executive summary.
2. Executive summary
Think of the executive summary as the SparkNotes version of your business plan . It should tell the reader in as few words as possible what your business wants and why. The executive summary should address these nine things:
The business idea and why it is necessary. (What problem does it solve?)
How much will it cost, and how much financing are you seeking?
What will the return be to the investor? Over what length of time?
What is the perceived risk level?
Where does your idea fit into the marketplace?
What is the management team?
What are the product and competitive strategies?
What is your marketing plan?
What is your exit strategy?
When writing the executive summary, remember that it should be somewhere between one-half page to a full page. Anything longer, and you risk losing your reader's attention before they can dig into your business plan. Try to answer each of the questions above in two or three sentences, and you'll wind up with an executive summary that's about the right length.
Related: First Steps: Writing the Executive Summary of Your Business Plan
3. Business description
You can fill anywhere from a few paragraphs to a few pages when writing your business description, but try again to keep it short, with the understanding that more sections will follow. The business description typically starts with a short explanation of your chosen industry, including its present outlook and future possibilities. Use data and sources (with proper footnotes) to explain the markets the industry offers, along with the developments that will affect your business. That way, everyone who reads the business description, particularly investors, will see that they can trust the various information contained within your business plan.
When you pivot to speaking of your business, start with its structure. How does your business work? Is it retail, service-oriented or wholesale? Is the business new or established? Is the company a sole proprietorship, partnership or corporation? Who are the principals and who are your customers? What do the distribution channels look like, and how can you support sales?
Next, break down your business's offerings. Are you selling a physical product, SaaS or a service? Explain it in a way that a reader knows what you're planning to sell and how it differentiates itself from the competition (investors call this a Unique Selling Proposition, or USP, and it's important that you find yours). Whether it's a trade secret or a patent, you should be specific about your competitive advantage and why your business is going to be profitable. If you plan to use your business plan for fundraising, you can use the business description section to explain why new investments will help make the business even more profitable.
This, like everything else, can be brief, but you can tell the reader about your business's efficiency or workflow. You can write about other key people within the business or cite industry experts' support of your idea, as well as your base of operations and reasons for starting in the first place.
4. Market strategies
Paint a picture about your market by remembering the four Ps: product, price, place and promotion.
Start this section by defining the market's size, structure and sales potential. What are the market's growth prospects? What do the demographics and trends look like right now?
Next, outline the frequency at which your product or service will be purchased by the target market and the potential annual purchase. What market share can you possibly expect to win? Try to be realistic here, and keep in mind that even a number like 25% might be a dominant share.
Next, break down your business's plan for positioning, which relates to the market niche your product or service can fill. Who is your target market, how will you reach them and what are they buying from you? Who are your competitors, and what is your USP?
The positioning statement within your business plan should be short and to the point, but make sure you answer each of those questions before you move on to, perhaps, the most difficult and important aspect of your market strategy: pricing.
In fact, settling on a price for your product or service is one of the most important decisions you have to make in the entire business plan. Pricing will directly determine essential aspects of your business, like profit margin and sales volume. It will influence all sorts of areas, too, from marketing to target consumer.
There are two primary ways to determine your price: The first is to look inward, adding up the costs of offering your product or service, and then adding in a profit margin to find your number. The second is called competitive pricing, and it involves research into how your competitors will either price their products or services now or in the future. The difficult aspect of this second pricing method is that it often sets a ceiling on pricing, which, in turn, could force you to adjust your costs.
Then, pivot the market strategies section toward your distribution process and how it relates to your competitors' channels. How, exactly, are you going to get your offerings from one place to the next? Walk the reader step by step through your process. Do you want to use the same strategy or something else that might give you an advantage?
Last, explain your promotion strategy. How are you going to communicate with your potential customers? This part should talk about not only marketing or advertising, but also packaging, public relations and sales promotions.
Related: Creating a Winning Startup Business Plan
5. Competitive analysis
The next section in your business plan should be the competitive analysis, which helps explain the differences between you and your competitors … and how you can keep it that way. If you can start with an honest evaluation of your competitors' strengths and weaknesses within the marketplace, you can also provide the reader with clear analysis about your advantage and the barriers that either already exist or can be developed to keep your business ahead of the pack. Are there weaknesses within the marketplace, and if so, how can you exploit them?
Remember to consider both your direct competition and your indirect competition, with both a short-term and long-term view.
6. Design and development plan
If you plan to sell a product, it's smart to add a design and development section to your business plan. This part should help your readers understand the background of that product. How have the production, marketing and company developed over time? What is your developmental budget?
For the sake of organization, consider these three aspects of the design and development plan:
Product development
Market development
Organizational development
Start by establishing your development goals, which should logically follow your evaluation of the market and your competition. Make these goals feasible and quantifiable, and be sure to establish timelines that allow your readers to see your vision. The goals should address both technical and marketing aspects.
Once the reader has a clear idea of your development goals, explain the procedures you'll develop to reach them. How will you allocate your resources, and who is in charge of accomplishing each goal?
The Entrepreneur guide to design and development plans offers this example on the steps of producing a recipe for a premium lager beer:
Gather ingredients.
Determine optimum malting process.
Gauge mashing temperature.
Boil wort and evaluate which hops provide the best flavor.
Determine yeast amounts and fermentation period.
Determine aging period.
Carbonate the beer.
Decide whether or not to pasteurize the beer.
Make sure to also talk about scheduling. What checkpoints will the product need to pass to reach a customer? Establish timeframes for each step of the process. Create a chart with a column for each task, how long that task will take and when the task will start and end.
Next, consider the costs of developing your product, breaking down the costs of these aspects:
General and administrative (G&A) costs
Marketing and sales
Professional services, like lawyers or accountants
Miscellaneous costs
Necessary equipment
The next section should be about the personnel you either have or plan to hire for that development. If you already have the right person in place, this part should be easy. If not, then this part of the business plan can help you create a detailed description of exactly what you need. This process can also help you formalize the hierarchy of your team's positions so that everyone knows their roles and responsibilities.
Finish the development and design section of your business plan by addressing the risks in developing the product and how you're going to address those risks. Could there be technical difficulties? Are you having trouble finding the right person to lead the development? Does your financial situation limit your ability to develop the product? Being honest about your problems and solutions can help answer some of your readers' questions before they ask them.
Related: The Essential Guide to Writing a Business Plan
7. Operations and management plan
Want to learn everything you'll ever need to know about the operations and management section of your business plan, and read a real, actual web article from 1997? Check out our guide titled, "Writing A Business Plan: Operations And Management."
Here, we'll more briefly summarize the two areas that need to be covered within your operations and management plan: the organizational structure is first, and the capital requirement for the operation are second.
The organizational structure detailed within your business plan will establish the basis for your operating expenses, which will provide essential information for the next part of the business plan: your financial statements. Investors will look closely at the financial statements, so it's important to start with a solid foundation and a realistic framework. You can start by dividing your organizational structure into these four sections:
Marketing and sales (including customer relations and service)
Production (including quality assurance)
Research and development
Administration
After you've broken down the organization's operations within your business plan, you can look at the expenses, or overhead. Divide them into fixed expenses, which typically remain constant, and variable, which will change according to the volume of business. Here are some of the examples of overhead expenses:
Maintenance and repair
Equipment leases
Advertising and promotion
Packaging and shipping
Payroll taxes and benefits
Uncollectible receivables
Professional services
Loan payments
Depreciation
Having difficulty calculating what some of those expenses might be for your business? Try using the simple formulas in "Writing A Business Plan: Operations And Management."
8. Financial factors
The last piece of the business plan that you definitely need to have covers the business's finances. Specifically, three financial statements will form the backbone of your business plan: the income statement, the cash-flow statement and balance sheet . Let's go through them one by one.
The income statement explains how the business can make money in a simple way. It draws on financial models already developed and discussed throughout the business plan (revenue, expenses, capital and cost of goods) and combines those numbers with when sales are made and when expenses are incurred. When the reader finishes going through your income statement, they should understand how much money your company makes or loses by subtracting your costs from your revenue, showing either a loss or a profit. If you like, you or a CPA can add a very short analysis at the end to emphasize some important aspects of the statement.
Second is the cash-flow statement, which explains how much cash your business needs to meet its obligations, as well as when you're going to need it and how you're going to get it. This section shows a profit or loss at the end of each month or year that rolls over to the next time period, which can create a cycle. If your business plan shows that you're consistently operating at a loss that gets bigger as time goes on, this can be a major red flag for both you and potential investors. This part of the business plan should be prepared monthly during your first year in business, quarterly in your second year and annually after that.
Our guide on cash-flow statements includes 17 items you'll need to add to your cash-flow statement.
Cash. Cash on hand in the business.
Cash sales . Income from sales paid for by cash.
Receivables. Income from collecting money owed to the business due to sales.
Other income. The liquidation of assets, interest on extended loans or income from investments are examples.
Total income. The sum of the four items above (total cash, cash sales, receivables, other income).
Material/merchandise . This will depend on the structure of your business. If you're manufacturing, this will include your raw materials. If you're in retail, count your inventory of merchandise. If you offer a service, consider which supplies are necessary.
Direct labor . What sort of labor do you need to make your product or complete your service?
Overhead . This includes both the variable expenses and fixed expenses for business operations.
Marketing/sales . All salaries, commissions and other direct costs associated with the marketing and sales departments.
Research and development . Specifically, the labor expenses required for research and development.
General and administrative expenses. Like the research and development costs, this centers on the labor for G&A functions of the business.
Taxes . This excludes payroll taxes but includes everything else.
Capital. Required capital for necessary equipment.
Loan payments. The total of all payments made to reduce any long-term debts.
Total expenses. The sum of items six through 14 (material/merchandise, direct labor, overhead, marketing/sales, research and development, general and administrative expenses, taxes, capital and loan payments).
Cash flow. Subtract total expenses from total income. This is how much cash will roll over to the next period.
Cumulative cash flow . Subtract the previous period's cash flow from your current cash flow.
Just like with the income statement, it's a good idea to briefly summarize the figures at the end. Again, consulting with a CPA is probably a good idea.
The last financial statement is the balance sheet. A balance sheet is, as our encyclopedia says, "a financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business." If you've already started the business, use the balance sheet from your last reporting period. If the business plan you wrote is for a business you hope to start, do your best to project your assets and liabilities over time. If you want to earn investors, you'll also need to include a personal financial statement. Then, as with the other two sections, add a short analysis that hits the main points.
9. Supporting documents
If you have other documents that your readers need to see, like important contracts, letters of reference, a copy of your lease or legal documents, you should add them in this section.
Related: 7 Steps to a Perfectly Written Business Plan
What do I do with my business plan after I've written it?
The simplest reason to create a business plan is to help people unfamiliar with your business understand it quickly. While the most obvious use for a document like this is for financing purposes, a business plan can also help you attract talented employees — and, if you share the business plan internally, help your existing employees understand their roles.
But it's also important to do for your own edification, too. It's like the old saying goes, "The best way to learn something is to teach it." Writing down your plans, your goals and the state of your finances helps clarify the thoughts in your own mind. From there, you can more easily lead your business because you'll know whether the business is reaching the checkpoints you set out to begin with. You'll be able to foresee difficulties before they pop up and be able to pivot quickly.
That's why you should continue to update your business plan when the conditions change, either within your business (you might be entering a new period or undergoing a change in management) or within your market (like a new competitor popping up). The key is to keep your business plan ready so that you don't have to get it ready when opportunity strikes.
Entrepreneur Staff
Associate Editor, Contributed Content
Want to be an Entrepreneur Leadership Network contributor? Apply now to join.
Editor's Pick Red Arrow
- Lock This Learning Expert Developed a Hack to Get Honest Answers Out of People — 'I Was Shocked. Had I Not Asked He Never Would've Told Me.'
- The Largest Franchise Operator in the U.S. Owns 2,800 Locations — And He Just Added 83 Wendy's to His Portfolio
- She Batched a Beloved Product at Home , Inspired By a Black-Owned Business From the 1960s. Then It Became a Multimillion-Dollar Brand : 'We'd Never Intended This.'
- Lock I Was a Highly-Paid Executive In Customer Experience . Then I Started Working Minimum Wage Jobs, And Realized Everything I'd Gotten Wrong .
- 'Human-Capable' AI Agents Will Change the Workforce Within 3 Years , According to a CEO Currently Creating the 'Perfect' AI Employee
- Lock This CEO Might Have an Unconventional Morning Routine — But It's Her Secret for Leading the Multimillion-Dollar Company Behind Your Social Media
Most Popular Red Arrow
She started a 'fun' side hustle — then it earned $100,000 and became a multimillion-dollar business: 'beyond what i could ever have expected'.
Melissa Tavss, founder and CEO of boozy ice cream company Tipsy Scoop, was burnt out from her corporate job — so she revived a family tradition.
AI Startups Raised $50 Billion Last Year, But Some Investors Are Starting to Pass — Here's Why
AI can take more than $100 million to develop.
Infographic: The 20 Most Common Reasons Startups Fail and How to Avoid Them
These do's and don'ts can make or break your startup.
ChatGPT Finally Gives Businesses What They've Been Asking For
A new feature personalizes ChatGPT for every business client.
Amazon Cloud CEO Predicts a Future Where Most Software Engineers Don't Code — and AI Does It Instead
In a leaked chat, Garman told Amazon employees that in about two years, "it's possible that most developers are not coding."
U.S. Added 818,000 Fewer Jobs Than Reported. Here's What That Could Mean for the Fed's Plan to Cut Interest Rates.
Job growth figures across multiple sectors saw significant downward revisions.
Successfully copied link
Business Agility Pty Ltd
Your partners in business and leadership success.
Call: +61 448 101 507
- Oct 24, 2020
The Top 5 Benefits of Having a Business Plan
Whether you’re starting a small business or exploring ways to expand an existing business, a Business Plan is an important tool to help guide your decisions. An effective Business Plan is a roadmap to success, providing clarity on all aspects of your business, from marketing and finance, through to operations, products, services, people and how you will be better than your competitors.
The purpose of a business plan is to help articulate a strategy for starting or changing your business. It defines how you will achieve your most important business objectives. A good Business Plan should help you to sleep at night if you are a business owner.
For existing businesses, a business plan should be updated annually as a way to guide growth and navigate expansion into new markets. Your plan should include explicit objectives for hiring new employees, what structure you will have, what products and services your business will provide, how you will promote them and how you will finance business operations.
If you are considering starting a business, a Business Plan can help you to check the viability of a business before investing too much time or money in it. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.
The Benefits of Having a Business Plan:
1. Increased Clarity
A business plan can bring clarity to the decision-making process regarding key aspects of the business such as capital investments, leases, resourcing, etc. You can't do everything. A good Business Plan will help you identify business critical priorities and milestones to focus on.
2. Creation of a Marketing Roadmap
Marketing is an important aspect of a business plan. It helps to define your target market(s), target customers and how you will promote and place your product / service to these markets / customers.
3. Support for Funding
Whether you’re seeking credit from a bank or capital from investors, a business plan that answers questions about profitability and revenue generation is often required.
4. Helps to Secure Talent
For a business to succeed, attracting talented workers and partners is vital. Part of a business plan’s purpose is to help bring in the right talent, at the right time. Staff want to understand the vision, how the business will achieve its goals, and how they can contribute to this in their own roles.
5. Provides Structure
A business plan provides structure and defines business management objectives. It becomes a reference tool to keep the business on track with sales targets and operational milestones. When used properly and consulted regularly, it can help measure and manage your priority areas of focus.
Download your Business Plan template for $49.99 + GST here.
Many people engage us as business coaches to take a weekly / fortnightly step-by-step approach to the development of their own Business Plans, with the added benefit of our expertise and guidance throughout the process. In this way, you learn the essential aspects of running a successful business, while crafting your very own business plan over 8-12 weeks.
If you would like more information about how to create an effective Business Plan for your business, with our guidance, then please don't hesitate to contact Business Agility. We are business coaches who are former CEOs and MDs. We know what it takes to be successful in business.
Recent Posts
Round 2 of the Boosting Female Founders Initiative is Now Open
The Top 5 Benefits of Having a Marketing Plan
Lottery West COVID-19 Relief Fund: 'Strengthening & Adapting Organisations' Grant Now Open!
More From Forbes
Four reasons why your company must have a strong business plan at any phase.
- Share to Facebook
- Share to Twitter
- Share to Linkedin
Shutterstock
Having a business plan is like having a blueprint or a solid foundation for your company. Entrepreneurs and leaders know that, like the weather, business isn't static. It changes over time with your business' development. It's also not just a single document that you write at the beginning and then toss aside. Very often, a company will end up with multiple business plans as its vision, objectives, products or services change.
No matter what phase your business is in, drafting a strong business plan and understanding what's essential to it will ensure your success. Some of the must-have sections of a well-written business plan include:
1. An executive summary
2. A mission statement
3. A background of your company
4. A background of your industry
5. A description of your product/service
6. A competitor analysis
7. A marketing plan
8. A financial plan
9. A management plan
10. An operating plan
11. A timeline
Whether you're just starting a new venture, looking to test the feasibility of a new business project, or looking into getting external capital and investors, there are many reasons you should have a business plan at your disposal:
1. To Forecast Your Step-By-Step Strategy To Success
Having a solid strategy is crucial at any phase of your business, whether you’re just starting up or growing an existing venture. Like weather conditions, the needs and challenges of your business change. A business plan will help you understand your challenges better and outline specific goals and courses of action that are needed to improve.
In a way, a business plan is like your car’s GPS. It gives you direction and focus and speeds up your journey through all the necessary steps. After writing business plans with my clients, it becomes easy for us to track their progress, review what goals have already been accomplished and what's still lying on the back burner, identify what changes should be made, and discuss what direction the business should be heading.
2. To Secure Funding For Expansion
When you own a company, you always face investment decisions to support your company's growth. You may learn that your cash flow alone won't be sufficient, so you have to seek external funding. But investors and lenders expect a big ROI, besides just the business’ income, profit and loss statements, right?
Whether my clients are aiming to grab attention from a venture capitalist or angel investors, we spend time preparing a great presentation that piques their interest. The most crucial winning component is a well-written and up-to-date business plan. It serves as concrete proof that investors feel confident in my client's ability to generate sufficient cash flow and fulfill debt obligations.
3. To Manage Your Cash Flow
It’s no secret that healthy profit and cash flow management are key. Clients that come to me often already have five- to six- figure revenues per month, but due to their equally high expenses, it’s a wash. The main reason why many businesses struggle and ultimately fail is not because of a lack of profit or clients, but because they break even.
A well-written business plan will help you keep track of money coming in and out, prepare cash flow projections that can alert you to trouble before it strikes, and improve receivables and payables. You know when to delay outlays of cash while encouraging these who owe you money to pay it as fast as possible. You're also able to invest in necessities for your business, like marketing to make more money or tools that are crucial for your company's growth.
As we know, when you need external funding, banks are wary of those who have to have the money today. Thanks to business plans, my clients are able to receive financial services from businesses that could pay them today and give them more time.
4. To Plan A Strategic Exit
At some point, you might decide to exit your business venture. A solid business plan outlines the most efficient routes to liquidate your investment and make a substantial profit.
When I was an attorney and practicing family law, we aways said: "Plan your divorce while you are still in love." The same rule applies in business. Many of my clients have co-founders, and some are actually married to their business partners as well. Of course, you never want to assume that a partnership will fail, but life happens, right? When planned ahead of time, a dissolution can save a lot of emotional and financial pain in the process and during the proceedings.
Writing a solid business plan can be time-consuming, but it's essential if you want your company to not only survive, but thrive, and bring consistent profit and ROI.
- Editorial Standards
- Reprints & Permissions
IMAGES
COMMENTS
Build a strategy. 4. Crafts a roadmap to achieve important milestones. A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. For your plan to function in this way, your business plan should first outline your company's short- and long-term goals.
3. Test a new business idea and prove it's viable. When you have a new business idea, it helps to spend time thinking through all the details. A business plan will help you think about your: Target market. Budget. How much money you'll need to launch. How your idea will actually work before you spend any real money.
10. To Reduce the Risk of Pursuing the Wrong Opportunity. The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.
Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals. 3. Reduce potential risks. Prevent your business from falling victim to unexpected dangers by researching before you break ground.
Six Reasons You Really Need To Write a Business Plan. Legitimize your business idea. Give your business a foundation for success. Obtain funding and investments. Hire the right people. Communicate your needs. It makes it easier to sell your business. 1. Legitimize your business idea.
1. It will help you steer your business as you start and grow. Think of a business plan as a GPS to get your business going. A good business plan guides you through each stage of starting and managing your business. You'll use your business plan like a GPS for how to structure, run, and grow your new business.
20 Reasons Why You Need a Business Plan. To test the viability of your business idea. To reduce potential risks. To determine your funding needs. To outline a perfect marketing strategy. To better understand your competition. To help you grow 30% faster. To secure funding. To attract investors.
Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...
To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business. 1. To help you with critical decisions. The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and ...
The business plan captures that opportunity you see for your company: it describes your product or service and business model, and the target market you'll serve. It also includes details on how you'll execute your plan: how you'll price and market your solution and your financial projections. Reasons for writing a business plan
Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...
A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you're more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike. 3.
There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business. 1. A plan helps you set specific objectives for managers. Good ...
1. Create Your Executive Summary. The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans. Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.
Step 2: Do your market research homework. The next step in writing a business plan is to conduct market research. This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to ...
10. Have all the information in your plan when you're ready to sell. Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and ...
The steps below will guide you through the process of creating a business plan and what key components you need to include. 1. Create an executive summary. Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.
Starting a business without a business plan is like building a house without a blueprint. Yet, unlike a house, a business isn't static. We often make the mistake of thinking of a business plan as a single document that you put together once when you're starting out and never touch again. But as the business develops, so should its business plan.
And How to Create One. 1. Executive summary. This is a short section that introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, your goals for developing it, and why it will be successful.
13. To share your business plans with coworkers and family. When you open a business, you will likely get a lot of questions about what you do from previous coworkers and family members. Drafting a business plan can help you answer these questions, sharing your goals and plans with them.
Add in the company logo and a table of contents that follows the executive summary. 2. Executive summary. Think of the executive summary as the SparkNotes version of your business plan. It should ...
The Benefits of Having a Business Plan: . 1. Increased Clarity. A business plan can bring clarity to the decision-making process regarding key aspects of the business such as capital investments, leases, resourcing, etc. You can't do everything. A good Business Plan will help you identify business critical priorities and milestones to focus on. 2.
Some of the must-have sections of a well-written business plan include: 1. An executive summary. 2. A mission statement. 3. A background of your company. 4. A background of your industry.