why businesses need business plan

Limited Time Offer:

Save Up to 25% on LivePlan today

0 results have been found for “”

 Return to blog home

15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

As a small business owner or aspiring entrepreneur, a business plan can seem more like a hurdle you have to overcome than a useful tool. It’s a barrier that’s keeping you from moving forward with your business. Maybe the bank won’t review your loan application without a business plan or a potential investor has asked to see your business plan before they will meet with you. 

But, writing a business plan doesn’t have to feel like a homework assignment. Instead, think of writing a business plan as an investment in your business. It’s a tool to figure out a strong and financially viable strategy for growth. And, it’s even been scientifically proven that planning will increase your chances of success and help you grow faster. 

Still not convinced? Read on for our definitive list of reasons why you should write a plan for your business.

What is the key purpose of a business plan? 

Imagine you’re setting out on a journey. You know what your final destination is, but you haven’t figured out how to get there. While it might be fun to just start driving and figure things out as you go, your trip will most likely take longer than you anticipated and cost you more. If you instead take a 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 that much different. 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you’re going to get there. It 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.

Why do you need to write a business plan?

Establishing a strategic roadmap for your business is the primary benefit of writing a business plan. But what does that really look like for you and your business? Here are our top 15 reasons why you should write a business plan.

1. Reduce your risk

Writing a business plan takes some of the risk out of starting a business. It ensures that you’re thinking 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? These are all questions associated with business risk that you can answer with your plan.

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? Are you on track to 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 questions and mitigate risk.

2. Uncover your business’s potential

Writing a business plan helps you think about the customers you are serving and what their needs are. Exploring those customer needs will help you uncover new opportunities for your business to serve them and potentially expose new products and services that you could offer. When you use your business plan to manage your business, you’ll be able to see the parts of your strategy that are working and those that 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 make adjustments to your strategy, pivoting to new opportunities that will drive profitability.

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

3. Test a new business idea

When you have a new business idea, it really helps to spend a little time thinking through all the details. A business plan will help you think about your target market, your budget, how much money you’ll need to launch, and 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. 

We recommend using a one-page business plan to test ideas quickly and easily. 

4. Attract investors and get funding to start and grow your business

Sharing your business idea with investors requires a business plan. Now, you probably won’t share a long, detailed business plan to get investors interested, but you probably will share your executive summary — which is an overview of your 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 end up pitching your business to investors, whether in-person or remotely , having a business plan written 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.

5. Plan for different scenarios

Even if you have a plan in place, things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive on the scene. 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. 

6. Research shows that business plans definitely 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 that have or are working on a plan feel confident in their business, even amidst a crisis. And a study in Small Business Economics found that entrepreneurs that write business plans for their ideas are 152% more likely to actually start their businesses. There’s plenty of additional research that links planning with success, so it’s a proven fact that you won’t be wasting your time when you write your plan.

7. Build a better budget and a financial forecast

A core component of any business plan is a financial forecast. When you take the time to plan, you’ll have to think through your expense budget, your sales goals, and the cash that it’s going to take to keep your doors open, purchase inventory, and more. 

The beauty of incorporating forecasts into your business plan is that you don’t need to have the 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 then begin to update your forecasts to generate a more accurate view of how your business will operate.

8. Determine your financial needs

Without a business plan, it’s impossible to really know how much money it’s going to take to start and run your business. You don’t just need money for your initial purchases. You need to have enough cash in the bank to keep your business afloat while you get fully up and running. A plan will help you determine exactly how much money you’ll need and help you keep track of your cash flow and runway .

9. 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 a prospective employee understand your business strategy and plans for growth 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 bring on more employees . 

10. Get your team all on the same page

A great strategy for your business 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, working towards the same goals. It’s even better if you regularly review your plan with members of your team. This ensures that everyone is consistently going back to the core strategy documentation, analyzing it, and exploring how it impacts individual and team goals .

11. 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 plan to regularly check in on your business to see how you’re doing and what your progress is, you’re managing your business. Regular review , ideally monthly, will help you build a strong, resilient business.

12. 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’re going to get the word out to them. That’s where a marketing plan comes in. It can be an indispensable tool for figuring out how you get your first customers as well as your thousandth customer. 

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 with a one-page business plan that you complete in half an hour . From there, refine your plan until your idea is solid. At that point, you can invest a little 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 actually works and you’ve considered different financial scenarios so you can handle the unexpected. And, you’ve got a management tool to run your business better than your competitors. 

15. 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, you can be prepared to face each crisis head-on by leveraging your business plan.

A plan helps you assess your current situation, determine how the crisis will alter your plan, and begin to explore what it will take to recover. With a little planning, you can even prepare your business for future downturns with this same process. It’ll make crisis planning easier and ideally recession-proof your business by having the right plan and processes in place.

Don’t wait, start writing your business plan today

There are plenty of reasons to write a business plan, but the real reason is about finding 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. 

You can jump-start your business plan writing process with our article covering how to write a business plan in as little as 30-minutes .

If you’re looking for a tool to help you get more from your business plan, we recommend trying out LivePlan . Our business planning and management tool will guide you through the entire process, including all of your financial forecasts, without ever requiring that you open a spreadsheet.

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

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.

• 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

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

Noah Parsons

24 min. read

Updated May 7, 2024

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

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

• The basics of business planning

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

You understand that planning helps you: 

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

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

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

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

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

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

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

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

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

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

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• What to include in your business plan

Executive summary

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

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

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

Your executive summary should include:

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

Dig Deeper: How to write an effective executive summary

Products and services description

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

This is usually called a problem and solution statement .

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

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

Market analysis

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

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

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

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

Related: Target market examples

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

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

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

Dig Deeper: Learn how to write a market analysis

Competitive analysis

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

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

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

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

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

Marketing and sales plan

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

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

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

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

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

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

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

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

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

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

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

Business operations

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

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

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

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

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

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

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

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

Key milestones and metrics

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

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

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

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

Possible milestones might be:

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

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

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

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

Dig Deeper: How to use milestones in your business plan

Organization and management team

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

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

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

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

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

• Sole proprietor
• Partnership

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

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

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

Financial plan

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

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

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

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

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

Dig Deeper: How to create financial forecasts and budgets

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

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

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

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

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

Your cover page should be simple and include:

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

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

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

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

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

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

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

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

• Writing tips and strategies

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

Determine why you are writing a business plan

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

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

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

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

Keep things concise

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

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

Have someone review your business plan

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

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

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

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

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

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

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

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

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

Common pitfalls and how to avoid them

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

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

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

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

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

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

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

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

Use your business plan to manage your business

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

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

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

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

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

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

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

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

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

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

Download a free SBA-approved business plan template built for small businesses and startups.

Download Template

One-page plan template

Download a free one-page plan template to write a useful business plan in as little as 30-minutes.

Sample business plan library

Explore over 500 real-world business plan examples from a wide variety of industries.

View Sample Plans

How to write a business plan FAQ

What is a business plan?

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

What are the benefits of a business plan?

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

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

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

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

What are the 5 most common business plan mistakes?

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

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

What questions should be answered in a business plan?

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

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

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

How long should a business plan be?

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

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

What are the different types of business plans?

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

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

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

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

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

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

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

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

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

Table of Contents

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

Related Articles

7 Min. Read

How to Write a Bakery Business Plan + Sample

3 Min. Read

What to Include in Your Business Plan Appendix

5 Min. Read

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

1 Min. Read

How to Calculate Return on Investment (ROI)

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our 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

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 (Coming soon...) 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

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.

More From Forbes

Why you need a written business plan.

• Share to Facebook
• Share to Twitter
• Share to Linkedin

CFP®, CEPA®, CVGA®, at Heritage Investors, LLC, is a financial educator, wealth manager, author, and speaker. More at  FinanciallySimple.com.

Imagine setting out on a road trip without knowing where you wanted to go. There are immediate and inherent problems with this idea. First, without knowing where you’re going, you can’t possibly chart a course to arrive there. Likewise, without defining a clear destination, you would have no idea of how long your trip will be, how much fuel is required, or even what your necessary budget for food and lodging should be. With so many problems being raised by failing to clearly define your destination, why would you ever take such a trip? You wouldn’t. Yet, an alarming number of small-business owners are doing just that.

Many entrepreneurs are operating businesses with no formal business plan in place. Although you may know how to “run” a business, a fully developed and well-written business plan is an absolute necessity. But why? I mean, couldn’t the time spent developing a business plan be used to grow your business? Technically, yes. However, there are many reasons why taking the time to flesh out one of your organization’s most salient documents is helpful.

At some point, you’re probably going to need funding for your business. Whether this comes in the form of investors or securing a business loan from your bank, you likely won’t see a penny without showing a well-thought-out business plan. Bankers and investors alike need answers to questions surrounding profitability and revenue generation. But even before requesting funds from lenders and investors, a carefully crafted business plan will inform you of just how much capital you’ll need to raise for long-term viability.

Additionally, your business plan can assist with making sound business decisions. Ideally, you will have thought of every aspect of your business — including growth and upgrade scenarios — when writing out your business plan. If you did, your business plan can provide a step-by-step approach to all your major business decisions. However, even if you didn’t think of everything, you still have a basic guide to help you determine if and when you should expand to a new location or upgrade processes, systems and software, and whether it makes more sense to buy or lease. This also applies to handling management issues, human resources and creating value for your clients.

3 Essential Public Speaking Skills Every Leader Needs

How to be seen as an emerging leader by your boss, shrm’s problematic dei pivot: a step backwards for workers’ rights.

Next, working through the process of drafting a fully developed business plan forces you to take an objective look at your business. As business owners, we’re often too emotionally invested in our businesses to truly see them as they are. Your business is your baby, and your baby is often ugly. As you write your business plan, you’ll begin to notice all of the weaknesses that exist in your company. I even encourage my clients to let others look at their business plans just so they can poke holes in them. The more clearly you see your business, the better equipped you are to improve it.

Finally, a written business plan is an excellent communication device. With this one document, you can effectively communicate exactly what your business is and how it functions to anyone. As I mentioned earlier, your plan tells financiers how much capital you need and how it can be repaid. But your business plan can also help you acquire new talent, gain inroads with vendors and suppliers, and even attract potential clients. 

Whether you’re just starting your business or if you’ve been operating for years, a business plan is your road map. A written business plan takes your vision and creates a clear path for making it a reality. If you’re thinking, “Well, I’ve made it this long without it,” you may be surprised to learn that a meta-analysis of studies on the growth of more than 11,000 companies found that planning actually improved company performance. In fact, it benefited businesses that were already on their feet even more so than it did startups.

One likely reason for this finding is that established companies have the benefit of knowing exactly who their customers are and what they need or want. On the other hand, startups are often making educated guesses. This is also the reason that business owners need to review and update their business plans from time to time.

If you don’t have a written business plan, now is the time to remedy that. Consider who will read your business plan and how you want them to respond, and write your plan accordingly. Let trusted friends and family review your plan throughout the process, looking for areas that can be improved upon. Once you’re able to effectively answer all questions about your business, then your business plan should be ready.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

• Editorial Standards
• Reprints & Permissions

• 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

15 Reasons You Need a Business Plan Whether you're just starting out, growing your business or seeking outside help, a well-thought-out business plan is the vehicle you need to get you there.

By Tim Berry Edited by Dan Bova Mar 13, 2006

Opinions expressed by Entrepreneur contributors are their own.

Why do you want a business plan? You already know the obvious reasons, but there are so many other good reasons to create a business plan that many business owners don't know about. So, just for a change, let's take a look at the less obvious reasons first and finish with the ones you probably already know about. Think of this as a late-show top 10, with us building up to the most important reasons you need a business plan.

15. Set specific objectives for managers. Good management requires setting specific objectives and then tracking and following up. I'm surprised how many existing businesses manage without a plan. How do they establish what's supposed to happen? In truth, you're really just taking a short cut and planning in your head--and good for you if you can do it--but as your business grows you want to organize and plan better, and communicate the priorities better. Be strategic. Develop a plan; don't just wing it.

14. Share your strategy, priorities and specific action points with your spouse, partner or significant other. Your business life goes by so quickly: a rush of answering phone calls, putting out fires, etc. Don't the other people in your business life need to know what's supposed to be happening? Don't you want them to know?

13. Deal with displacement. Displacement is probably by far the most important practical business concept you've never heard of. It goes like this: "Whatever you do is something else you don't do." Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.

12. Decide whether or not to rent new space. Rent is a new obligation, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn't that be in your business plan?

11. Hire new people. This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.

10. Decide whether you need new assets, how many, and whether to buy or lease them. Use your business plan to help decide what's going to happen in the long term, which should be an important input to the classic make vs. buy. How long will this important purchase last in your plan?

9. Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

8. Develop new business alliances. Use your plan to set targets for new alliances, and selected portions of your plan to communicate with those alliances.

7. Deal with professionals. Share selected highlights or your plans with your attorneys and accountants, and, if this is relevant to you, consultants.

6. Sell your business. Usually the business plan is a very important part of selling the business. Help buyers understand what you have, what it's worth and why they want it.

5. Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues. Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, why and how much that will cost and how much it will produce.

4. Create a new business. Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.

3. Seek investment for a business, whether it's a startup or not. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

2. Back up a business loan application. Like investors, lenders want to see the plan and will expect the plan to cover the main points.

1. Grow your existing business. Establish strategy and allocate resources according to strategic priority. You can find more information about growing your business with a business plan by reading " Existing Companies Need Planning, Too ."

Entrepreneur, Business Planner and Angel Investor

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick Red Arrow

• You Might Unknowingly Rely on This 100-Year-Old Business . Its Third-Generation Leader Reveals the 'Secret Sauce' for Lasting Success — and $850 Million in Annual Revenue .
• Lock This Brilliant 'Cohort' Trick Can Help You Come Up With a Business Idea Worth Millions
• How to Maximize Every Hour of Your Day for Unstoppable Productivity
• Lock Billionaires Warren Buffett, Bill Gates, Jeff Bezos and Mark Zuckerberg Have 3 Habits for Success in Common — But Very Different Routines. Which One Resembles Yours?
• Here's How to Save on Fast Food This Summer — And Even Score Some for Free
• Lock This Flexible, AI-Powered Side Hustle Lets a Dad of Four Make $32 an Hour , Plus Tips: 'You Can Make a Substantial Amount of Money'

Most Popular Red Arrow

Target will stop accepting this classic payment method next week.

The once popular way to pay will not be accepted after July 15.

Apple Is Reportedly Saving the Most Anticipated Siri AI Upgrades For Next Year

AI is still due to debut on iPhones later this year, but it will be a longer wait for some other highly-anticipated features.

ChatGPT's Owner Asks For Proof That 'New York Times' Articles Are Original. Here's the Media Company's Response.

The "Times" called OpenAI's request "harassment and retaliation."

Disney World Guest Services Is Going Viral For a 'Touchingly Human' Approach

Balloons aren't permitted inside Disney World's Animal Kingdom. But try taking one away from a toddler.

Sam's Club Is Removing a Beloved Free Perk and Members Are Not Happy: 'No Benefits for the Cost'

Disgruntled Sam's Club members are complaining on social media about the new change, effective August 19.

Nvidia CEO Jensen Huang Turned Down a Merger Offer in the Company's Early Days, According to Insiders. Here's Why.

It has to do with an "Apple strategy."

Successfully copied link

• E-invoicing
• Running a business
• Starting a business

10 reasons why you need a business plan

A business plan is more than a document. It's the GPS for your entrepreneurial journey. In Australia, where the landscape of business is vast and diverse, a solid business plan is your roadmap to success. Let's explore why planning is critical and uncover some top reasons why you need a business plan.

A business plan is more than a document. It’s the GPS for your entrepreneurial journey. In Australia, where the landscape of business is vast and diverse, a solid business plan is your roadmap to success. Let’s explore why planning is critical and uncover some top reasons why you need a business plan.

What is a business plan?

A business plan is the foundational narrative of your company, setting out your vision and the strategic steps needed to reach your goals. Think of it as the blueprint for your enterprise’s journey from concept to market presence, detailing operations, marketing, and day-to-day processes.

Effective communication underpins success, and a business plan operates as the central channel through which the mission and strategies are related to stakeholders, aligning the entire team.

Financial health is pivotal, and your business plan acts as a fiscal guide, forecasting and managing your economy. This forward-thinking document offers investors and financial institutions a clear view of your business’s potential, thereby aiding in securing funding.

Additionally, a business plan assesses your idea’s feasibility, providing a clear-headed view of your business’s place in the market and its chances for success, while clearly defined milestones within the plan help track progress and facilitate necessary adjustments.

Read also: A step-by-step guide to creating a business model

Adaptability remains key within the ever-shifting business landscape, and your plan must evolve accordingly. As a risk mitigation tool, it allows for strategic buffers against potential challenges, ensuring your business stays resilient in the face of change.

Ultimately, a business plan is more than just a document; it’s the roadmap that directs your company from its aspirational state to a thriving, adaptive, and strategic organisation.

A comprehensive business plan thus sits at the heart of any business, providing the necessary guidance and structure to navigate the complex and ever-changing landscape of commerce. Whether you are just starting out or have engaged in commerce for years, revisiting and refining your business plan should be a priority to stay competitive and achieve long-term success.

Why planning is important in business 

Planning is essential for any successful business. It sets clear goals, creating a unified vision that everyone can work towards. Effective use of limited resources is a critical part of planning, ensuring financial and human assets are used where they will have the most impact.

Risk management is also a key benefit of planning, preparing businesses to deal with potential challenges proactively. It shapes a competitive strategy, enabling a business to stand out in the market and quickly respond to changing trends.

Operational efficiency stems from good planning, streamlining processes to ensure optimal outcomes. This guides decision-making and supports financial health with robust forecasting.

Planning is inseparable from growth, providing a roadmap for expansion. It unites teams behind common objectives and establishes benchmarks to measure progress.

Ultimately, planning prepares a business for the future, turning long-term vision into actionable reality. It’s the cornerstone of a resilient, thriving business.

Why is planning important for a business?

Embarking on a business adventure without a plan is like setting sail without a map. A business plan isn’t merely a formality; it’s the compass that guides your journey to success. Here are 10 reasons why taking the time to develop a solid business plan is a critical step for any Australian companies poised for success:

1. Roadmap for growth

Embarking on business growth without a strategy is like setting out on an Australian outback adventure without a map – you might enjoy some random sights, but you’ll unlikely hit your intended landmarks. A business plan is that strategic map that will guide you through various terrains of the business world, laying out each milestone you want to reach along the way.

2. Securing Funding

Just as a well-crafted presentation can capture an audience, a thorough and insightful business plan can captivate investors or lenders. This document not only showcases your business’s potential but demonstrates your dedication and the serious thought you’ve invested in ensuring its success, thereby increasing your chances of getting the financial backing you need.

3. Understanding Your Market

Understanding your market is about knowing the tastes and preferences of your customers. A business plan involves conducting market research, understanding customer demographics, and analysing competitor strategies – all of which are essential ingredients in developing a product or service that meets the market’s demands.

4. Risk management

In business, you may experience some unexpected risks. Your business plan provides a framework for identifying these potential risks early on, from market shifts to operational hiccups, allowing you to develop risk management strategies that could save time, money, and maybe even your company.

5. Clarifying direction

It’s essential for every member of the team to pull in the same direction, knowing what the common objectives are. A defined business plan offers clarity, ensuring that the team’s efforts are coordinated and that every action contributes to the collective goals, embodying true teamwork spirit.

6. Setting priorities

Businesses often face the dilemma of choosing where to focus their efforts. A well-prioritized plan lays out not just what to tackle immediately, but also what can wait. This allows for a more productive allocation of time and resources, ensuring you address the things that’ll propel your business forward first and foremost.

7. Decision-making

The fewer uncertainties you have when making business decisions, the better. With a solid plan in place, decision-making is less about gut feeling and more about strategic choice. This can make the decision process far quicker and more effective, with reference points and insights directly from your business plan.

8. Attracting talent

Ambitious and skilled individuals are drawn to organisations with a clear vision and robust plan. A detailed business plan does not only impress potential investors but can also entice top talent to your team, those who are eager to participate in a visionary venture.

9. Measuring performance

A business plan sets out the key performance indicators that help you monitor your business’s health, gauge success, and pinpoint areas for improvement.

10. Adaptability

A static plan is of little use in a dynamic business environment. As such, a good business plan is designed to be revisited and revised. It allows you to pivot your strategies in response to market changes or internal business shifts, keeping your business agile and responsive to the ever-evolving demands of commerce.

In the end, your business plan is a statement of intent and a detailed guide for turning aspirations into reality. It’s more than a document; it’s the strategic backbone of your business, supporting every step you take towards achieving your goals. Whether you’re refreshing an existing company or starting from scratch, remember that a sturdy plan today lays the groundwork for tomorrow’s triumphs. So, grab your pen, chart your course, and let’s see your South African business not just meet the challenges ahead, but thrive amidst them. Happy planning!

Read also: How to start a business in South Africa

Create free invoices with Conta Say goodbye to the hassle of creating invoices!

Conta streamlines the process, allowing you to breeze through it in under 2 minutes. Just input customer details, along with product and price information, and send your professional invoice swiftly.

Related Articles

How to start a business in South Africa: A simple guide

Hobby or business? Understanding the difference

How to Write a Business Plan: Your Step-by-Step Guide

So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.

Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.

Build your dream business with the help of a high-paying job—browse open jobs on The Muse »

What is a business plan, and when do you need one?

According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.

“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”

Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.

Different types of business plans

The four main types of business plans are:

Startup Business Plans

Internal business plans, strategic business plans, one-page business plans.

Let's break down each one:

If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.

Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.

Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.

Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.

As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .

Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.

Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).

A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.

How to create a business plan in 7 steps

Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:

1. Conduct your research

Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?

2. Define your purpose for the business plan

The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.

3. Write your company description

Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.

4. Explain and show how the company will make money

A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.

For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.

5. Outline your marketing strategy

How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.

6. Explain how you’ll spend your funding

What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.

7. Include supporting documents

Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”

A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.

“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

5 Reasons You Need a Business Plan for Long-Term Success

Do You Really Need a Business Plan?

Alyssa Gregory is an entrepreneur, writer, and marketer with 20 years of experience in the business world. She is the founder of the Small Business Bonfire, a community for entrepreneurs, and has authored more than 2,500 articles for The Balance and other popular small business websites.

Entrepreneurs who are starting a new business often wonder, "Do I really need a business plan? Is writing a business plan really the best use of my time?" The answer to these questions is almost always, "Yes." A business plan is an integral part of starting a new business.

In reality, business plans can take a long time to write, require that you have a tremendous amount of data at your fingertips, depend in part on projections and often are responsible for creating a long list of research you still need to conduct and other work you need to complete.

Plus, not everyone is sold on the usefulness of a business plan. Consider the study of 116 new businesses conducted by Babson College. The study found that the presence of a formal business plan before starting a small business made no difference in the ultimate success of the business, assuming it was one that was not seeking outside funding.

Some also argue that taking the time required to create a business plan can stifle the startup process and cost precious opportunities for a small business.

On the other hand,  one study  found that entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. Other  studies  have shown that while completing a business plan is not a guarantee of success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.

So why not arm yourself with one of the best tools a small business owner can have? If you're still on the fence, consider these five reasons you should write a business plan before doing anything else in your small business.

1. A Business Plan Is Simply a Must-Have for Some Businesses

If you plan to approach a financial institution for a loan, apply for a small business grant , pitch your business idea to investors, or enlist the support of a business partner, a business plan is required.

Potential investors and supporters want to see the true potential of your business idea clearly laid out in hard facts and numbers. A business plan is the best, and generally, the only acceptable way to provide this information.

2. A Business Plan Helps You Make Decisions

There are some sections in a traditional business plan that you simply cannot complete if you are on the fence, undecided, or not fully committed to a certain point. Business plans help you eliminate the gray area because you have to write specific information down in black and white. Making tough decisions is often one of the hardest and most useful parts of writing a business plan.

For example, if you have not decided on exactly what products you will sell at what price points, it will be very difficult for you to complete the Products and Services Section of your business plan. Identifying this and other vital information is a valuable end product of the business planning process.

3. A Business Plan Can Be a Reality Check

Writing a business plan is often the first real struggle for the small business owner who wants to launch a new venture, but doesn't want to consider that his or her business idea may be a bit flawed or is not yet fully developed.

While this is an unwelcome and terrifying thought for an impassioned entrepreneur, identifying gaps early on in the process gives business owners a chance to shore up their research, test their ideas and take steps to make the business stronger and more viable. This may initially be a step back, but any and all further work can bolster the entrepreneur's chance of success before he or she invests time and money in a business that is likely to fail.

4. A Business Plan Can Give You New Ideas

Discovering new ideas, different approaches and fresh perspectives are some of the best things that can happen from the depths of the business planning process. Despite the sometimes negative reputation, a business plan isn't just a long, stiff and structured document.

In fact, an effective business plan is the opposite; it's a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges. This is especially true when you consider the Marketing Strategy Section . Here, as you create a blueprint for your marketing activities, creativity and fresh ideas are invaluable.

5. A Business Plan Creates an Action Plan

A business plan is a useful document for any small business owner. But when you use your business plan as a tool to help you outline action items, next steps, and future activities, you are creating a living, breathing document that not only outlines where you are and where you want to be but also gives you the directions you need to get there.

Going back to the original question of whether or not you really need a business plan, you may still be able to build a successful business without a plan, but it is most certainly easier to do with a well-constructed business plan in your hands.

Keep in mind that if you are using your plan as a true business planning tool, you don't have to wait until you have all of the answers to get started. You can create an outline of your plan now, filling in all of the information you have at this point, and then work on the blanks as you learn more about the market. This type of fluid and flexible document can be invaluable to a new business.

For more on business plans, review this business plan outline . Then, for a quick and painless start to the business planning process, try this simple business plan template.

Do You Really Need a Business Plan?

The art of storytelling, from net margin to sales.

Why is a business plan important?

• Who will the reader be?
• What do you want their response to be?

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

More by this contributor:

• Challenges Become Opportunities
• Discontinuing Healthy Workplace Consultancy
• Financial Planning for the Pandemic

Comments (0)

You may like.

How to Write a Business Plan for Your Small Business

July 4th Sale: Save now on Inc. Premium!

• Newsletters
• Best Industries
• Business Plans
• Home-Based Business
• The UPS Store
• Customer Service
• Black in Business
• Your Next Move
• Female Founders
• Best Workplaces
• Company Culture
• Public Speaking
• HR/Benefits
• Productivity
• All the Hats
• Digital Transformation
• Artificial Intelligence
• Bringing Innovation to Market
• Cloud Computing
• Social Media
• Data Detectives
• Exit Interview
• Bootstrapping
• Crowdfunding
• Venture Capital
• Business Models
• Personal Finance
• Founder-Friendly Investors
• Upcoming Events
• Inc. 5000 Vision Conference
• Become a Sponsor
• Cox Business
• Verizon Business
• Branded Content
• Apply Inc. 5000 US

Inc. Premium

5 Reasons Why You Need a Business Plan

Starting a business you should write a business plan--even if you're not raising money any time soon..

Writing a business plan  doesn't mean you have to hole away in a library for months compiling 40-plus pages of text. You can create a plan in under a month, working part time. Use a presentation format like PowerPoint or Keynote to save time, and make it easier to share your plan.

Not all founders or start-ups are the same, of course. You'll want to plan in more detail if you're raising capital or taking on a lot of risk—like investing your savings, leaving a job, or supporting a family. Less detail is fine if you aren't raising money or taking on much risk. For example, if you are writing code in your dorm room, you can experiment to find out what consumers will latch onto before thinking about implementation or financing. 

But either way, you need a plan, and here's why: 1. To avoid big mistakes: The last thing you want to do is work on your start-up for a year, only to realize you were doomed to fail from the start. Many founders learn the hard way that they didn't set aside enough capital to reach their goals, took on partners with the wrong skills and resources, or don't have a viable way to make money. Developing and sharing a business plan can help ensure that you're sprinting down the right path. 2. To counterbalance your emotions: At times during your start-up experience, you'll be manic—so passionate about your ideas you lose sight of reality. At other times, you'll be overwhelmed by doubt, fear, or exhaustion. When your emotions get the best of you, having a business plan lets you step back, and take an objective look at what you are doing and why, what you know for a fact and what you are trying to figure out. 3. To make sure everyone's on the same page: Chances are, you are not building a company by yourself. Ideally, you'll have partners, so you can launch faster, smarter, and with less need to pay employees or suppliers. Even if you don't have partners, you'll have family, friends, and advisers involved. A business plan helps get everyone involved in your start-up heading in the same direction. 4. To develop a game plan: At a start-up, execution is everything. That means you have to set priorities, establish goals, and measure performance.  You also need to identify the key questions to answer, like "What features do customers really want?," "Will customers buy our product and how much will they pay?," and "How can we attract customers in a way that's cost effective and scalable?"  These are all things you'll address during the business planning process. 5. To raise capital.  If you raise or borrow money—even from friends and family—you'll need to communicate your vision in a clear, compelling way. A good business plan will help you do just that. An October 2007 study by  Babson College  found that start-ups with a business plan raised twice as much capital as those without a business plan within the first 12 months.

A refreshed look at leadership from the desk of CEO and chief content officer Stephanie Mehta

Privacy Policy

Original text

QUESTION:   All the self-help books encourage me to develop a business plan. I believe I know how to run my business, so why should I go to the time and trouble of writing it down?

ANSWER:  Reflecting on my own experiences in growing my business I, too, felt I knew the steps necessary to ensure success. Organizations like SCORE, that offers free business counseling to aspiring entrepreneurs, did not exist at the time. I had my share of successes and failures learned in the school of “hard knocks.”

Suffice to say, I would have had fewer failures had I taken the time to develop a strategic business and marketing plan in the beginning stages.

In addition to providing a roadmap to follow, the business plan is also a valuable document that potential investors and bankers want to see in considering your requests for funding. It’s not enough that you think you know how to run your business, they want to see your thoughts in a concise, well written form.

There are a number of outlines available for a nominal fee. SCORE provides a free one you can access at  https://www.score.org/resource/template/business-plan-template-a-startup-business .

Lenders and investors are not inclined to read a lengthy and often repetitious document. Ideally, your business plan should not be more than 10 pages, including financial projections. Below are some key questions to answer when creating your plan:

• If you are a startup, do you have the necessary funds to cover your startup costs and monthly operating expenses until you reach the point where income matches or exceeds outgo?
• Who are your target customers and what value do you deliver to them? What customer needs or wants will you be satisfying?
• How will you reach your customers? What is your marketing strategy?
• How much are your customers willing to pay for the value you offer? What are they currently paying? What are your pricing tactics?
• What resources are needed to produce your product or service, deliver it to market and make a profit? What kind of infrastructure will it take?
• What is your e-commerce strategy and what role will it play in your business?
• Who is your competition? How will you compete and what are your competitive advantages?
• Do you have a team in place to include an attorney, accountant, insurance agent, etc.? You need to have professionals as part of your team.

                                                             __________________________________________________

Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE.  Find your mentor now  or  Take a workshop.

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

Why is a business plan important and what should it include?

Posted: Tue 12th Mar 2019

How do you go from a bright idea to a successful business? Planning. It's easy to imagine successful entrepreneurs played it by ear and got lucky. People often change direction but planning's a crucial part of testing a start-up idea and building a business.

This guide examines why you should write a business plan, what it needs to include and how to use it. We've also highlighted additional resources that can help you go through the process.

Why write a business plan?

Business plans provide accountability. They allow business owners to sense-check what they're doing and why. They provide an opportunity to get ideas out of your head and start working on them.

"Not having to report to anyone is attractive when you start up. As you grow it can be tricky not to have a sounding board. A business plan can be useful for that," said Jonathan Bareham , co-founder of accountancy firm Raeden.

He highlights the role of goal setting in the planning process. Why are you starting a business? Is it because you want a good work-life balance? Do you want to make an environmental impact? It's likely a combination of factors. Writing down your motivation provides a reference for big decisions and makes sure you don't lose focus.

Business plans help explain what you're doing to other people. The process of writing everything down makes sure you can answer key questions about what you're doing.

Hiring people, opening a premise or buying equipment requires significant investment. Planning and justifying what you're going to spend is important. Sharing them externally helps reassure partners, whether you're looking to borrow money or win over a mentor.

What basic things should a business plan include?

Whatever format and length you decide on there are several common topics to cover in a business plan. Bareham outlines five points to include:

A summary of what you're going to do

Details of the market you're going into

What you have that other businesses don't (your unfair advantage)

A cash-flow forecast

Personnel needed

Business owners need to think about the strengths and weaknesses they have, he added. Be honest and make sure you identify where you will need help.

Your cash-flow forecast is crucial. It shows the money coming into your business from customers and what you're spending. This includes costs like buying raw materials, office space, marketing and paying employees. This plan will evolve into a document you look at regularly when the business is up and running.

Enterprise Nation founder Emma Jones compares having a business plan to a route map and uses the acronym 'I'm off' as a memory aid on what to include:

Operations: What kit do you need?

Friends: A support network

You can tailor your business plans to specific audiences and we'll go into the main formats in the next section.

Watch this detailed video with Enterprise Nation adviser and accountant Jonathan Bareham sharing tips on business plans, cash flow, accounts and more.

What business plan format should I use?

There are several formats you can use to create a business plan. It's important to pick the one that's right for your situation. The key considerations are what you know so far and how you're going to use the plan.

You'll generally cover the sections we outlined in the section above but the amount of detail can vary.

If the plan's for the benefit of the business owner you need to think about how much you can know at this point. There are lots of assumptions around sales and costs that you won't know until they're tested. This will limit the level of detail you can include.

The audience is important too. You could write a five-page summary if the business plans just for you. If the business plan's for raising investment or applying for a loan it's going to require more detail and might be 15-20 pages long.

Organisations like the Prince's Trust and Start Up Loans , which offer start-up funding, have templates that they prefer or require applicants to fill out.

David Abrahamovitch, founder and CEO of London café-bar and restaurant company GRIND, told Enterprise Nation  that his founding team didn't create a business plan until they needed to borrow money. He believes a formal business plan doesn't provide much value at the concept stage.

"Business plans absolutely have their place but I see people who are spending months writing a business plan. They're worried about who's going to copy their idea about trademarks. All of these things are important, but at the moment you don't have a business. You don't have a brand to protect. You're worried about the wrong things. "You have to get to the minimum viable form of that business as quickly as possible and just test it."

Abrahamovitch added that things like pop-up stores and online tools mean the barriers to entry are lower than ever, reducing the risk of testing an idea.

What a traditional business plan looks like

What we're calling 'traditional business plans' are A4 documents that cover the key elements of your business. These include five main elements:

The executive summary: Summarise the main points of your business plan. Showcase what you're doing and sell your vision to the reader.

Opportunity analysis: Describe the business opportunity. Look at the size of the market, customer segments, competitors and the key trends.

Marketing: Highlight the key messages you want to communicate to customers and detail the channels you will use to reach them (telemarketing, social media etc.). Provide an idea of cost for this activity and, if possible, the level of business you expect to generate.

Logistics: Plan where and how you are going to operate your business. Include plans for manufacturing, transportation, office costs, staff needed etc.

Finance: Make sure that you detail all your associated costs - both your estimated start-up costs as well as your running costs. Include a cash-flow forecast that shows how your business will become sustainable.

Additional information like the founders' CVs can be included in your appendix. This often depends on what evidence your audience requires and may not be relevant for a document that's used internally.

Presentation is important because it provides credibility. Think about adding company logos, a cover page and other touches that make the document look professional.

Abrahamovitch said writing a business plan is useful to examine what's working, how much energy things take up and the margin of different products when you've tested ideas.

"Distill that down into its simplest form and put that in a business plan," he said. "Talk about how you're going to scale it. That's where it really adds value."

The lean canvas model

The length of traditional business plans can be intimidating. You may also lack the information to complete the document if you haven't started trading yet.

Lean canvas and business model canvas allow you to create a business plan on a single page. The structure examines whether a business idea is viable. The nine boxes capture entrepreneurs' key assumptions, covering topics like metrics and marketing channels.

Lean canvas is designed to provide a snapshot of your idea and challenge the assumptions you've made. It's not meant to be perfect. The inventor of lean canvas model suggests taking 20 minutes to fill everything out.

Test your assumptions through research

Launching and growing a small business is really exciting because you don't know what's going to happen. However, writing a business plan can be daunting as there are so many things you don't know yet.

Make phone calls and search the internet to strengthen your assumptions. It's possible to find information on standard services like accountants, renting desks or buying raw materials.

There are other aspects that are more difficult to predict. Projecting sales, for example, is one of the trickiest parts of forecasting. You love your product but will customers flock to the business?

One opportunity to solve this problem is to do a small amount of test trading. Paying for a market stall may cost you a thousand pounds after you pay for the stock and a location. But the investment may pay dividends if it gives you a reality check on what customers are willing to pay and how popular your offering is. What's the least you can spend to learn the most?

Research competitors offerings too. What are people paying for related products?

Service-based business can have the opportunity to trial their offering part-time. Perhaps you can take on a client while still working your day job.

Make sure you justify any forecasts in your business plan and provide a logical explanation of how you came to your conclusions.

Will a business plan guarantee success?

No. But business plans will help crystallise your goals and test your assumptions. The framework is really useful to develop ideas, particularly if they've been rattling around in your head for some time.

Make sure you return to your business plan regularly. Reinforcing your original goals will help keep you on track. Forecasting is a skill. Check your projections against performance and try to figure out what assumptions were correct and where there were issues.

The way you use business plans will evolve over time. Filling in a lean canvas might work if you have an idea and haven't started working on it yet. Eventually, you might need to create a business plan to land investment or it can provide an opportunity to reassess what you do.

Access support to start your business

Visit the StartUp UK hub for resources that give you the education and inspiration to get started on your entrepreneurial journey.

You might also like…

Get business support right to your inbox

Subscribe to our newsletter to receive business tips, learn about new funding programmes, join upcoming events, take e-learning courses, and more.

Hello. It looks like you’re using an ad blocker that may prevent our website from working properly. To receive the best experience possible, please make sure any blockers are switched off and refresh the page.

If you have any questions or need help you can email us

Why Small Businesses Need This 2017 Tax Cut to Continue

Small businesses are about to face a tax hike that will hurt workers and weaken communities if Congress does not take action.

Jul. 12, 2024

By Nathan Garden, The Charlotte Observer (TNS)

It says a lot about our politics that very few of our leaders are talking about one of the most important issues.

The small businesses that anchor our economy are about to face a devastating tax hike that will hurt workers and weaken communities. As the owner of one of those job creators—a third-generation family-owned manufacturing company in Cuba, Missouri—I’m calling on Washington, D.C., to wake up and protect the tax cut that small businesses desperately need.

The tax cut in question is the small business deduction, also known as  Section 199A  or the qualified business income deduction. It’s part of the centerpiece of the 2017 federal tax reform, and while that law passed on a partisan basis, the small business deduction has  bipartisan support . Basically, this tax cut lets small businesses like mine deduct 20% of our income. Without this relief, the 2017 tax cuts would have almost entirely benefited Wall Street corporations. The small business deduction was designed to help Main Street continue to compete.

But there’s a problem. The law’s corporate tax cuts are permanent, while the relief for small businesses is temporary. The deduction expires next year, and if it disappears, job creators like me will find it much harder to hire and grow and stay competitive. We won’t be able to do all the good things that the small business deduction has made possible.

I remember when I realized how transformative this tax cut is. We didn’t fully understand it when the 2017 law passed, but when we filed our business taxes the next year, we discovered that we’d been given a tremendous gift. Within days, we began reinvesting that money right back into the business.

The first thing we did was expand our factory and warehouse space to give us room to keep growing in the years ahead. We also began to upgrade our equipment, to keep us on the cutting edge. But the biggest and best benefits have flowed to our employees.

The tax cut has helped us boost starting wages, which are now about 50% higher than they were in 2018. Our annual wage hikes are also 50% higher. We’ve also covered more of our team members’ health insurance costs, while expanding coverage for their families. And since 2018, we’ve been able to offer bigger bonuses than ever before. At first, we doubled them, but since 2022, we’ve tripled our annual bonuses. Without the tax cut, our 100-plus employees wouldn’t be doing nearly as well.

Actions like ours are exactly why Congress created the small business deduction—to kick-start a new era of wage growth, job growth, and business growth. Yet that growth will begin to fade if the deduction expires next year. That’s basic math: When your taxes rise overnight by 25%, you have to cut back.

For my small business, the first step we’d have to take would be a hiring freeze. We’re currently looking for five full-time employees, but I’m not sure we could hire any of them. We’d probably also institute a wage freeze, since we wouldn’t have the money to keep giving raises. The same goes for new equipment and more manufacturing space. We wouldn’t have to put everything on pause indefinitely, but we’d have to do a lot less. That doesn’t benefit anyone who works for us or the community in which we live.

Washington can’t let this happen. Our leaders must save the small business deduction before it expires next year. I realize that politicians like to wait until the last minute, but their failure to act immediately is already hurting small businesses. We have to plan years ahead, and right now, we don’t have the certainty and confidence to make big investments. I simply don’t know if the small business deduction will continue to exist. Until I have that clarity, I can’t do all the things I want to do for my team and my hometown.

Our leaders—Republicans and Democrats alike—need to make the small business deduction permanent, and they need to do it as soon as possible. That means this year, or failing that, first thing next year. My small business and our workers are counting on it. So are millions of job creators in Missouri and across America. We can’t afford for our leaders to keep ignoring this critical issue. The longer they delay, the more damage they’ll do.

ABOUT THE AUTHOR:

Nathan Garden owns Versa Tags, a manufacturing small business in Cuba, Missouri. He’s a member of the National Federation of Independent Business.

©2024 The Charlotte Observer. Visit  charlotteobserver.com . Distributed by Tribune Content Agency LLC.

• Legislation
• Small Business

ABOUT CPA PRACTICE ADVISOR

• Cookie Policy
• Terms & Conditions

Magazines & Newsletters

• Magazine Archive
• Newsletters

CPA Practice Advisor is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors.

© 2024 Firmworks, LLC. All rights reserved

• Get Started

Home >> #realtalk Blog >> Manage a business >> How to start a busin…

How to start a business in Florida: Everything you need to know

By Christine Umayam

With a booming population and many popular tourist destinations, Florida can be a great location for starting a small business . After all, it’s the fourth largest economy in the country and it leads the nation in number of new businesses started , according to the Florida Chamber of Commerce. 

Florida is also an incredibly business-friendly state, with the nation’s 3rd highest workforce and tax policies that favor business growth . But as with any business, you need to obtain the necessary business licenses and permits from state agencies, navigate regulations and tax requirements, and follow laws around worker compensation and business structure.

Learning how to start a business in Florida comes with its fair share of unique considerations, so here’s our guide on how to start a business in the sunshine state!

Get your team in sync with our easy-to-use, all-in-one employee app.

6 steps for starting a business in Florida:

Every business starts with a dream, but how do you transform your bright idea into a working, thriving business? To set your small business in Florida up for success, consider these important steps:

Step 1: Clarify your business idea.

Before you get the ball rolling, it’s important to have direction. Know what your business will be and who your business will serve so that you’ll have answers prepared at every turn when starting a small business. The ideal business concept should align with your passions, address a market need, and have the potential to be profitable. 

For instance, if you have a passion for books but lack writing skills, a writing business may not be for you. Instead, you might consider opening a bookstore in a location where there is a demand. If you’re uncertain about the type of small business to start, think about your interests, skills, and passions. Reflect on what you enjoy doing, what you’re good at, and what you’re passionate about. 

The responses to these questions can guide your business focus and help refine an existing business idea.

Step 2: Conduct market research.

Market research is a critical step for starting any business. You need insights into the viability and potential profitability of your business idea, and research can help you succeed when you launch and beyond. 

Market research comprises two types of data: primary and secondary. Primary data is gathered directly from consumers through methods such as focus groups, surveys, and interviews. Secondary data, on the other hand, is collected from external sources like government census data, research reports, and studies conducted by other businesses in your industry.

Market research may seem time-consuming and potentially expensive, but your effort will pay off. Research can validate your business idea in terms of market demand and profitability. It can also help you understand your potential customers better, making it easier to market and sell to them. 

Lastly, it should guide your marketing strategies by understanding your customers’ preferences and whether they are more inclined to be influenced by social media, traditional media, billboards, email, or other marketing channels. 

When you’re considering starting a business in Florida, you want to make sure your market research applies to your audience. If you have an eye on a specific city, narrow your focus on that location. If you’re looking at the state, compare and contrast research results across the state. 

With a strong research base, your future decisions will be that much easier to make.

Step 3: Write a business plan.

After validating your business idea through market research, the next step is to consolidate your findings into a business plan. 

A business plan is a comprehensive document that outlines your business strategy, future objectives, and the roadmap to achieve these goals. Contrary to popular belief, a business plan is not just for those looking for funding; it can benefit all businesses by helping to refine the business idea, identify potential challenges, and offer a clear understanding of how you will acquire customers and become profitable.

A robust business plan includes several key sections: 

• An executive summary that encapsulates the entire plan. 
• A company description that answers key questions about your business. 
• A market analysis section that leverages your market research.
• A section on mission, goals, and objectives. 
• A description of your products or services.
• A marketing plan detailing your unique value proposition and promotional strategies. 
• A financial plan that includes a proposed budget, projected financial statements for five years, and outlines any funding requests. 

When you create a business plan to start a business in Florida, be sure to note how your market research has reflected your chosen location and audience. 

Step 4: Finance your business.

With a plan in hand, it’s time to think about execution. And making your small business a reality means finding a way to  finance it. 

The initial investment can range from a few thousand to a few hundred thousand dollars, with the average cost for a small business to start and operate for the first year being around $40,000.

But don’t let the projected start-up costs deter you! There are many funding options available to small businesses. Self-funding or bootstrapping, which involves using personal funds, is one route. However, this method can carry significant financial risk if your needs are high.

Consider applying for small business loans or lines of credit, but remember you’ll often need your business plan and personal financial statements when applying. Although competitive, small business grants  provide funding that doesn’t need to be repaid, so you can get farther with less. 

And be sure to look into Small Business Administration (SBA) loan programs, which offer lower interest rates and longer terms compared to conventional loans.

Step 5: Conduct a Florida business entity search.

 Your business name is often the first impression you share with the world. But before you pick the one that draws the most crowds, you’ll need to conduct a business entity search. That’s how you’ll learn if a business with the same name already exists. Make sure you choose a business name that complies with state regulations to ensure legal protection and public transparency.

Next, consider using a trade name, which is like a short pseudonym for your business. For example, you might incorporate your business under the name XYZ Designs, Inc., but your trade name is just XYZ Designs. To put your best foot forward, you want your business to be named something short and memorable—and a trade name lets you do that.

Step 6: Register your business.

You’ve got a name—now your business is taking shape. Choose a business structure that accurately captures your preferred tax obligations, daily operations, personal risk, and legal obligations. Here’s a list of common business structures to jumpstart your search:

• Sole Proprietorship : A sole proprietorship merges the identity of the owner and the business. This makes the owner personally liable for business debts, so be cautious.
• Partnerships : Suitable for businesses with multiple owners, these require a partnership agreement and offer limited liability for the debts of the LLP. 
• LLCs : Owned by one or more entities, these limit personal liability for business debts and are relatively easy to establish.
• Cooperatives : Cooperatives operate to benefit their users and span various industries such as healthcare, retail, restaurants, and agriculture. 
• Corporations : Common in larger companies due to their legal and tax complexities, but these can also be utilized by small businesses. 
• S Corporations : These function like a corporation, but the flow-through of income and losses is sent through to shareholders to help you avoid double taxation on corporate income.

Learning how to start a LLC business in Florida can be useful, since many small business owners in Florida favor S corporations and LLCs. That’s because they are exempt from state income taxes !  

Do your research into each type of business so that you register the best fit for your small business. Consider in particular the taxes you may pay and the legal risks you wish to avoid. 

Regardless of structure, businesses in Florida are required to collect sales tax if applicable, with the sales tax rate and oversight of sales and use taxes managed by the Florida Department of Revenue .

Just remember to talk with a lawyer or accountant to ensure the chosen business structure is the best fit for your business.

How to incorporate in Florida.

Business registration and licensing requirements can vary across states, and Florida involves several unique steps. You might need to apply for a trade name and file Articles of Incorporation with the state, depending on your business structure.

Here are the main steps for incorporating a business in Florida:

• Check business license requirements. Knowing how to get a business license in Florida comes down to verifying all registration and licensing requirements with the Florida Division of Corporations . Connect with relevant local government bodies and industry associations for more specific information and guidance. Businesses, including corporations, must also file and pay Florida’s corporate income tax.
• Register your business with the Florida Division of Corporations by completing the required paperwork and settling any fees associated with your business category.
• Get an Employer Identification Number (EIN) from the IRS . This number is essential for federal tax purposes and is typically required to open a business bank account. You’ll also need to register your business with the Florida Department of Revenue to obtain any necessary tax IDs.
• Obtain relevant licenses and permits . Depending on your business sector, you may need to get specific licenses and permits from both state and local governments. For instance, businesses involved in the sale of food, alcohol, or tobacco must acquire particular licenses from the Florida Department of Business and Professional Regulation . Businesses, including sole proprietorships, must also register for sales tax in Florida.
• Secure the appropriate insurance . Florida law mandates the purchase of workers’ compensation insurance if you intend to hire employees. You should also consider other types of insurance, such as general liability insurance. If you’re uncertain about your insurance needs, we advise you to consult with a legal expert.

How Homebase can help you start a small business in Florida.

Every business needs the right tools at its disposal to be successful. When starting a new business, it’s a smart investment to find software that can accommodate your business growth both today and in the future. 

That’s why Homebase offers a comprehensive set of tools designed to support your business at every stage. As your team expands, enjoy the convenience of effortless scheduling and time tracking . When it’s time to pay your team, Homebase handles payroll seamlessly. And you can always stay connected with your remote workforce through efficient team communication . 

Homebase provides everything a new small business needs, eliminating the need to switch platforms as your business scales up.

Give Homebase a try for free!  

Remember:  This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.

Related posts

July 11, 2024

Payroll Manager Job Description: What They Do and Why You Need One

Fast and accurate payroll processing is an integral part of any growing business. Employees want to get paid on time, and…

Homebase Software Integrations to Make Small Business Easier

As a small business owner, you likely have multiple software tools and platforms that you have to juggle on a…

California Minimum Wage: Latest Updates for 2024

Feeling overwhelmed by California’s new minimum wage changes for 2024? You’re not alone. Whether you’re a small business owner calculating…

Gross Earnings vs. Net Earnings: Key Differences Explained

You might have heard the terms “gross income” and “net income” thrown around, but what do they actually mean? Understanding…

2024 Denver Per Diem Rates and Allowances

You’re planning a work trip to Denver and you’re wondering how to manage your expenses. You’ve heard about per diem…

July 10, 2024

What To Include in a Shift Report Template

Ever wondered how healthcare, hospitality, transportation, and other industries that depend on shift workers seamlessly run around the clock? The…

Subscribe to our newsletter

Looking for ways to stay up to date on employment laws and small business news?

Homebase makes managing hourly work easier for over 100,000 local businesses. With free employee scheduling , time tracking , and team communication , managers and employees can spend less time on paperwork and more time on growing their business.

• Hiring & onboarding
• Team communication
• Employee happiness
• HR & compliance
• Integrations
• Food & beverage
• Beauty & wellness
• Medical & veterinary
• Home & repair
• Hospitality & leisure
• Education & caregiving
• Contact sales
• Become a Partner
• Careers – We’re hiring!
• #realtalk Blog