importance of small business planning

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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.

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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.

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The importance of business plan: 5 key reasons.

A key part of any business is its business plan. They can help define the goals of your business and help it reach success. A good business plan can also help you develop an adequate marketing strategy. There are a number of reasons all business owners need business plans, keep reading to learn more!

Here’s What We’ll Cover:

What Is a Business Plan?

5 reasons you need a well-written business plan, how do i make a business plan, key takeaways.

A business plan contains detailed information that can help determine its success. Some of this information can include the following:

• Market analysis
• Cash flow projection
• Competitive analysis
• Financial statements and financial projections
• An operating plan

A solid business plan is a good way to attract potential investors. It can also help you display to business partners that you have a successful business growing. In a competitive landscape, a formal business plan is your key to success.

Check out all of the biggest reasons you need a good business plan below.

1. To Secure Funding

Whether you’re seeking funding from a venture capitalist or a bank, you’ll need a business plan. Business plans are the foundation of a business. They tell the parties that you’re seeking funding from whether or not you’re worth investing in. If you need any sort of outside financing, you’ll need a good business plan to secure it.

2. Set and Communicate Goals

A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you’re more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike.

3. Prove Viability in the Market

While many businesses are born from passion, not many will last without an effective business plan. While a business concept may seem sound, things may change once the specifics are written down. Often, people who attempt to start a business without a plan will fail. This is because they don’t take into account all of the planning and funds needed to get a business off of the ground.

Market research is a large part of the business planning process. It lets you review your potential customers, as well as the competition, in your field. By understanding both you can set price points for products or services. Sometimes, it may not make sense to start a business based on the existing competition. Other times, market research can guide you to effective marketing strategies that others lack. To have a successful business, it has to be viable. A business plan will help you determine that.

4. They Help Owners Avoid Failure

Far too often, small businesses fail. Many times, this is due to the lack of a strong business plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. Some of them are listed below, which can be avoided by having a business plan:

• The market doesn’t need the business’s product or service
• The business didn’t take into account the amount of capital needed
• The market is oversaturated
• The prices set by the business are too high, pushing potential customers away

Any good business plan includes information to help business owners avoid these issues.

5. Business Plans Reduce Risk

Related to the last reason, business plans help reduce risk. A well-thought-out business plan helps reduce risky decisions. They help business owners make informed decisions based on the research they conduct. Any business owner can tell you that the most important part of their job is making critical decisions. A business plan that factors in all possible situations helps make those decisions.

Luckily, there are plenty of tools available to help you create a business plan. A simple search can lead you to helpful tools, like a business plan template . These are helpful, as they let you fill in the information as you go. Many of them provide basic instructions on how to create the business plan, as well.

If you plan on starting a business, you’ll need a business plan. They’re good for a vast number of things. Business plans help owners make informed decisions, as well as set goals and secure funding. Don’t put off putting together your business plan!

If you’re in the planning stages of your business, be sure to check out our resource hub . We have plenty of valuable resources and articles for you when you’re just getting started. Check it out today!

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6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

Starting a busine ss can be a daunting task, especially if you’re starting from square one.

It’s easy to feel stuck in the whirlwind of things you’ll need to do, like registering your company, building a team, advertising, the list goes on. Not to mention, a business idea with no foundation can make the process seem incredibly intimidating.

Thankfully, business plans are an antidote for the new business woes that many entrepreneurs feel. Some may shy away from the idea, as they are lengthy documents that require a significant amount of attention and care.

However, there’s a reason why those who take the time to write out a business plan are 16% more likely to be successful than those who don’t. In other words, business plans work.

What is a business plan, and why does it matter?

In brief, a business plan is a roadmap to success. It's a blueprint for entrepreneurs to follow that helps them outline, understand, and cohesively achieve their goals.

Writing a business plan involves defining critical aspects of your business, like brand messaging, conducting market research, and creating pricing strategies — all before starting the company.

A business plan can also increase your confidence. You’ll get a holistic view of your idea and understand whether it's worth pursuing.

So, why not take the time to create a blueprint that will make your job easier? Let’s take a look at six reasons why you should write a business plan before doing anything else.

Six Reasons You Really Need To Write a Business Plan

• Legitimize your business idea.
• Give your business a foundation for success.
• Obtain funding and investments.
• Hire the right people.
• Communicate your needs.
• It makes it easier to sell your business.

1. Legitimize your business idea.

Pursuing business ideas that stem from passions you’ve had for years can be exciting, but that doesn’t necessarily mean it’s a sound venture.

One of the first things a business plan requires you to do is research your target market. You’ll gain a nuanced understanding of industry trends and what your competitors have done, or not, to succeed. You may find that the idea you have when you start is not likely to be successful.

That may feel disheartening, but you can always modify your original idea to better fit market needs. The more you understand about the industry, your future competitors, and your prospective customers, the greater the likelihood of success. If you identify issues early on, you can develop strategies to deal with them rather than troubleshooting as they happen.

It’s better to know sooner rather than later if your business will be successful before investing time and money.

2. Give your business a foundation for success.

Let's say you’re looking to start a clean beauty company. There are thousands of directions you can go in, so just saying, “I’m starting a clean beauty company!” isn’t enough.

You need to know what specific products you want to make, and why you’re deciding to create them. The Pricing and Product Line style="color: #33475b;"> section of a business plan requires you to identify these elements, making it easier to plan for other components of your business strategy.

You’ll also use your initial market research to outline financial projections, goals, objectives, and operational needs. Identifying these factors ahead of time creates a strong foundation, as you’ll be making critical business decisions early on.

You can refer back to the goals you’ve set within your business plan to track your progress over time and prioritize areas that need extra attention.

All in all, every section of your business plan requires you to go in-depth into your future business strategy before even acting on any of those plans. Having a plan at the ready gives your business a solid foundation for growth.

When you start your company, and your product reaches the market, you’ll spend less time troubleshooting and more time focusing on your target audiences and generating revenue.

3. Obtain funding and investments.

Every new business needs capital to get off the ground. Although it would be nice, banks won’t finance loans just because you request one. They want to know what the money is for, where it’s going, and if you’ll eventually be able to pay it back.

If you want investors to be part of your financing plan, they’ll have questions about your business’ pricing strategies and revenue models. Investors can also back out if they feel like their money isn’t put to fair use. They’ll want something to refer back to track your progress over time and understand if you’re meeting the goals you told them you’d meet. They want to know if their investment was worthwhile.

The Financial Considerations section of a business plan will prompt you to estimate costs ahead of time and establish revenue objectives before applying for loans or speaking to investors.

You’ll secure and finalize your strategy in advance to avoid showing up unprepared for meetings with potential investors.

4. Hire the right people.

After you’ve completed your business plan and you have a clear view of your strategies, goals, and financial needs, there may be milestones you need to meet that require skills you don’t yet have. You may need to hire new people to fill in the gaps.

Having a strategic plan to share with prospective partners and employees can prove that they aren’t signing on to a sinking ship.

If your plans are summarized and feasible, they’ll understand why you want them on your team, and why they should agree to work with you.

5. Communicate your needs.

If you don’t understand how your business will run, it’ll be hard to communicate your business’s legitimacy to all involved parties.

Your plan will give you a well-rounded view of how your business will work, and make it easier for you to communicate this to others.

You may have already secured financing from banks and made deals with investors, but a business’ needs are always changing. While your business grows, you’ll likely need more financial support, more partners, or just expand your services and product offers. Using your business plan as a measure of how you’ve met your goals can make it easier to bring people onto your team at all stages of the process.

6. It makes it easier to sell your business.

A buyer won’t want to purchase a business that will run into the ground after signing the papers. They want a successful, established company.

A business plan that details milestones you can prove you’ve already met can be used to show prospective buyers how you’ve generated success within your market. You can use your accomplishments to negotiate higher price points aligned with your business’ value.

A Business Plan Is Essential

Ultimately, having a business plan can increase your confidence in your new venture. You’ll understand what your business needs to succeed, and outline the tactics you’ll use to achieve those goals.

Some people have a lifetime goal of turning their passions into successful business ventures, and a well-crafted business plan can make those dreams come true.

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What is a Business Plan? Definition and Resources

9 min. read

Updated May 10, 2024

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan — or at least the very basic components of one.

The origin of formal business plans is murky. But they certainly go back centuries. And when you consider that 20% of new businesses fail in year 1 , and half fail within 5 years, the importance of thorough planning and research should be clear.

But just what is a business plan? And what’s required to move from a series of ideas to a formal plan? Here we’ll answer that question and explain why you need one to be a successful business owner.

• What is a business plan?

A business plan lays out a strategic roadmap for any new or growing business.

Any entrepreneur with a great idea for a business needs to conduct market research , analyze their competitors , validate their idea by talking to potential customers, and define their unique value proposition .

The business plan captures that opportunity you see for your company: it describes your product or service and business model , and the target market you’ll serve. 

It also includes details on how you’ll execute your plan: how you’ll price and market your solution and your financial projections .

Reasons for writing a business plan

If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact: 

Companies that commit to planning grow 30% faster than those that don’t.

Creating a business plan is crucial for businesses of any size or stage. It helps you develop a working business and avoid consequences that could stop you before you ever start.

If you plan to raise funds for your business through a traditional bank loan or SBA loan , none of them will want to move forward without seeing your business plan. Venture capital firms may or may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes them want to invest.

But it’s more than just a means of getting your business funded . The plan is also your roadmap to identify and address potential risks. 

It’s not a one-time document. Your business plan is a living guide to ensure your business stays on course.

Related: 14 of the top reasons why you need a business plan

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What research shows about business plans

Numerous studies have established that planning improves business performance:

• 71% of fast-growing companies have business plans that include budgets, sales goals, and marketing and sales strategies.
• Companies that clearly define their value proposition are more successful than those that can’t.
• Companies or startups with a business plan are more likely to get funding than those without one.
• Starting the business planning process before investing in marketing reduces the likelihood of business failure.

The planning process significantly impacts business growth for existing companies and startups alike.

Read More: Research-backed reasons why writing a business plan matters

When should you write a business plan?

No two business plans are alike. 

Yet there are similar questions for anyone considering writing a plan to answer. One basic but important question is when to start writing it.

A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. 

But the reality can be more nuanced – it depends on the stage a business is in, or the type of business plan being written.

Ideal times to write a business plan include:

• When you have an idea for a business
• When you’re starting a business
• When you’re preparing to buy (or sell)
• When you’re trying to get funding
• When business conditions change
• When you’re growing or scaling your business

Read More: The best times to write or update your business plan

How often should you update your business plan?

As is often the case, how often a business plan should be updated depends on your circumstances.

A business plan isn’t a homework assignment to complete and forget about. At the same time, no one wants to get so bogged down in the details that they lose sight of day-to-day goals. 

But it should cover new opportunities and threats that a business owner surfaces, and incorporate feedback they get from customers. So it can’t be a static document.

Related Reading: 5 fundamental principles of business planning

For an entrepreneur at the ideation stage, writing and checking back on their business plan will help them determine if they can turn that idea into a profitable business .

And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them respond to market shifts they wouldn’t be prepared for otherwise. 

It also lets them compare their forecasts and budgets to actual financial results. This invaluable process surfaces where a business might be out-performing expectations and where weak performance may require a prompt strategy change. 

The planning process is what uncovers those insights.

Related Reading: 10 prompts to help you write a business plan with AI

• How long should your business plan be?

Thinking about a business plan strictly in terms of page length can risk overlooking more important factors, like the level of detail or clarity in the plan. 

Not all of the plan consists of writing – there are also financial tables, graphs, and product illustrations to include.

But there are a few general rules to consider about a plan’s length:

• Your business plan shouldn’t take more than 15 minutes to skim.
• Business plans for internal use (not for a bank loan or outside investment) can be as short as 5 to 10 pages.

A good practice is to write your business plan to match the expectations of your audience. 

If you’re walking into a bank looking for a loan, your plan should match the formal, professional style that a loan officer would expect . But if you’re writing it for stakeholders on your own team—shorter and less formal (even just a few pages) could be the better way to go.

The length of your plan may also depend on the stage your business is in. 

For instance, a startup plan won’t have nearly as much financial information to include as a plan written for an established company will.

Read More: How long should your business plan be?  

What information is included in a business plan?

The contents of a plan business plan will vary depending on the industry the business is in. 

After all, someone opening a new restaurant will have different customers, inventory needs, and marketing tactics to consider than someone bringing a new medical device to the market. 

But there are some common elements that most business plans include:

• Executive summary: An overview of the business operation, strategy, and goals. The executive summary should be written last, despite being the first thing anyone will read.
• Products and services: A description of the solution that a business is bringing to the market, emphasizing how it solves the problem customers are facing.
• Market analysis: An examination of the demographic and psychographic attributes of likely customers, resulting in the profile of an ideal customer for the business.
• Competitive analysis: Documenting the competitors a business will face in the market, and their strengths and weaknesses relative to those competitors.
• Marketing and sales plan: Summarizing a business’s tactics to position their product or service favorably in the market, attract customers, and generate revenue.
• Operational plan: Detailing the requirements to run the business day-to-day, including staffing, equipment, inventory, and facility needs.
• Organization and management structure: A listing of the departments and position breakdown of the business, as well as descriptions of the backgrounds and qualifications of the leadership team.
• Key milestones: Laying out the key dates that a business is projected to reach certain milestones , such as revenue, break-even, or customer acquisition goals.
• Financial plan: Balance sheets, cash flow forecast , and sales and expense forecasts with forward-looking financial projections, listing assumptions and potential risks that could affect the accuracy of the plan.
• Appendix: All of the supporting information that doesn’t fit into specific sections of the business plan, such as data and charts.

Read More: Use this business plan outline to organize your plan

• Different types of business plans

A business plan isn’t a one-size-fits-all document. There are numerous ways to create an effective business plan that fits entrepreneurs’ or established business owners’ needs. 

Here are a few of the most common types of business plans for small businesses:

• One-page plan : Outlining all of the most important information about a business into an adaptable one-page plan.
• Growth plan : An ongoing business management plan that ensures business tactics and strategies are aligned as a business scales up.
• Internal plan : A shorter version of a full business plan to be shared with internal stakeholders – ideal for established companies considering strategic shifts.

Business plan vs. operational plan vs. strategic plan

• What questions are you trying to answer? 
• Are you trying to lay out a plan for the actual running of your business?
• Is your focus on how you will meet short or long-term goals? 

Since your objective will ultimately inform your plan, you need to know what you’re trying to accomplish before you start writing.

While a business plan provides the foundation for a business, other types of plans support this guiding document.

An operational plan sets short-term goals for the business by laying out where it plans to focus energy and investments and when it plans to hit key milestones.

Then there is the strategic plan , which examines longer-range opportunities for the business, and how to meet those larger goals over time.

Read More: How to use a business plan for strategic development and operations

• Business plan vs. business model

If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the business model represents how they will make money. 

The difference may seem subtle, but it’s important. 

Think of a business plan as the roadmap for how to exploit market opportunities and reach a state of sustainable growth. By contrast, the business model lays out how a business will operate and what it will look like once it has reached that growth phase.

Learn More: The differences between a business model and business plan

• Moving from idea to business plan

Now that you understand what a business plan is, the next step is to start writing your business plan . 

The best way to start is by reviewing examples and downloading a business plan template. These resources will provide you with guidance and inspiration to help you write a plan.

We recommend starting with a simple one-page plan ; it streamlines the planning process and helps you organize your ideas. However, if one page doesn’t fit your needs, there are plenty of other great templates available that will put you well on your way to writing a useful business plan.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• Reasons to write a business plan
• Business planning research
• When to write a business plan
• When to update a business plan
• Information to include
• Business vs. operational vs. strategic plans

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How to Write a Business Plan, Step by Step

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What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

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A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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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.

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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? "

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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.

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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.

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What is a Business Plan and Why is it Important?

What is a business plan.

Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.

While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

In fact, businesses that plan grow 30% faster than those that don’t. 1

For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.

Studies show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans. 2

Your plan should include explicit objectives for hiring new employees , market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.

Building an asset management business plan

Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on additional office, retail or work space.

Creating a marketing strategy

Marketing and market potential are important aspects of a plan for aspiring small businesses.

Getting your business in front of customers on a consistent basis is one of the keys to ensuring your business not only stays afloat but also thrives.

Marketing strategies can be simple, but before you decide on how you will get the word out, getting clear on your target audience and why your business solves their problem can make sticking to your marketing plan easier.

Knowing your unique market positioning can help you determine your messaging. Your marketing strategy should include who your target audience is, the platforms or methods you will connect with them on, and a measurement framework to determine if your efforts are working.

Take entrepreneur Scott Sultzer, who opened Sandwich Joint restaurant in downtown Los Angeles in 2009. “I included the potential marketing demographic of all those who lived in a certain area of the city,” he said of his marketing strategy. “My goal was to capture a certain percentage of all those people who lived and worked nearby.” 4

Created primarily as a marketing tool, Sulzer’s 10-page plan included such topics as target market breakdown, marketing strategy and market penetration. “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?” 4

Depending on your business, it’s important to have both brick-and-mortar marketing strategies as well as a plan for marketing your business online .

Seeking investment for your business

In addition to providing a roadmap for progress and a marketing plan , your business plan could also be important in securing funding .

Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether someone decides to invest – or how much they might choose to invest.

In fact, a study showed that businesses with a plan were more likely to receive formal financial support, such as funding, than businesses without one. 3

Hiring the right talent

A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. Sulzer used his business plan to secure a lease.

“I had to have a viable document that they could trust,” said Sulzer, who leased from one of the largest landowners in downtown Los Angeles. 4

“With a corporate landlord, they wouldn’t deal with me unless I had a business plan. I had to submit all my information and a plan that presented what I wanted to do, with financial breakdowns and percentages, demographics, and how I was going to get customers.” 4

For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan for hiring employees is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.

Setting business plan objectives for management

Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.

Ready to take the next step? Learn how to write a business plan .

Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going.

Find out how small business insurance from Nationwide can help you build and protect your business whether you are just starting up or already established.

1 https://www.effectuation.org/wp-content/uploads/2017/06/The-Multiple-Effects-of-Business-Planning-onNew-Venture-Performance-1.pdf , Accessed October 2021. 2 https://onlinelibrary.wiley.com/doi/abs/10.1111/0447-2778.00006 , Accessed October 2021. 3 https://www.tandfonline.com/doi/abs/10.1080/13504851.2014.967377 , Accessed October 2021. 4 Nationwide Interview with Scott Sultzer, 2016.

Disclaimer: The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide, Nationwide is on your side, and the Nationwide N and Eagle are services marks of Nationwide Mutual Insurance Company. © 2021 Nationwide.

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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.”

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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

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Table of Contents

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Every year, thousands of new businesses see the light of the day. One look at the  World Bank's Entrepreneurship Survey and database  shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.   

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several  other statistics  expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all. 

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%)  don't have a formal business plan in place. 

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.  

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.  

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.  

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained. 

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes. 

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

• Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals. 
• Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
• Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
• Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
• Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
• Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest. 

Now let's look at the various types involved in business planning.

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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.  

Here’s an overview of a few fundamental types of business plans. 

• Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
• Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments. 
• Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
• Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
• Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them. 

Here are the key elements of a good business plan:

• Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.  
• Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
• Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
• Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time. 
• Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

• Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

• Create a business plan to determine your company's direction, obtain financing, and attract investors.
• Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
• Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
• You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success. 

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.   

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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12 Reasons You Need a Business Plan In the new book "Write Your Own Business Plan," business expert Eric Butow breaks down how a solid business plan can save your startup during those tough early days.

By Entrepreneur Staff Sep 19, 2023

Running a business can be unpredictable, which is why having a solid business plan as a foundation is vital to surviving and thriving in the early days of your startup. Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to write the second edition of our best-selling book Write Your Business Plan , providing you with a roadmap for success.

In the following excerpt, Butow explains how a well-thought-out plan can power your startup and help your vision come to life.

Business plans could be considered cheap insurance. Just as many people don't buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas, intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.

1. A plan helps you set specific objectives for managers.

Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.

2. You can share your strategy, priorities, and plans with your spouse or partner.

People in your personal life intersect with your business life, so shouldn't they know what's supposed to be happening?

Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium

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3. Use the plan to explain your displacement.

A short definition of displacement is, "Whatever you do is something else you don't do." Your plan will explain why you're doing what you've decided to do in your business.

4. A plan helps you figure out whether or not to rent or buy new space.

Do your growth prospects and plans justify taking on an increased fixed cost of new space?

5. You can explain your strategy for hiring new people.

How will new people help your business grow and prosper? What exactly are they going to do?

6. A plan helps you decide whether or not to bring on new assets.

How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what's going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.

7. Share your plan with your team.

Explain the business objectives in your plan with your leadership team, employees, and new hires. What's more, make selected portions of your plan part of your new employee training.

8. Share parts of your plan with new allies to bring them aboard.

Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.

9. Use your plan when you deal with professionals.

Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.

Write Your Own Business Plan is available now at Entrepreneur Bookstore | Barnes & Noble | Amazon

10. Have all the information in your plan when you're ready to sell.

Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and why they want it.

11. A plan helps you set the valuation of the business.

Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. 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 it's doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.

12. You can use information in the plan when you need cash.

Seek investment for a business no matter what stage of growth the business finds itself in. 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.

To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.

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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.

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The Importance of A Business Plan for Startups - Explained

A business plan is a crucial blueprint for a business idea, outlining its goals, strategies, and potential challenges. It serves as a roadmap, guiding startups towards success while attracting investors. The purpose of a business plan is to ensures clarity, focus, and a solid foundation for both short-term actions and long-term vision.

What is A Business Plan?

A business plan actively charts a company's future, setting clear objectives and mapping out strategies to achieve them.

Think of it as the strategic playbook for a business, covering vital areas like marketing, operations, finance, and leadership.

At its essence, a business plan isn't just a document; it's a hands-on tool that helps small businesses and their business owner navigate the journey, by securing funding and reassuring stakeholders.

Whether you're kickstarting a new venture or steering an existing one, a robust business planning process remains a cornerstone of sustainable success.

Why is A Business Plan Important for Your Startup?

1. Roadmap for Success

Think of launching a startup as embarking on a journey. You wouldn't set out without a map, right? That's what a business plan is for startups - a clear, detailed map. It lays out every step, sets checkpoints, and even warns about potential roadblocks. By dividing the journey into manageable tasks, startups find it easier to focus and act.

You need a business plan because it's not just about dodging pitfalls; this roadmap ensures every move you make drives the business closer to its goals.

2. Attracting Investors

In the cut-throat world of business, winning an investor's trust is a big deal. They're not just looking for a spark of an idea but solid evidence that it'll catch fire. Enter the business plan.

It showcases your grasp of the market, the challenges ahead, and your strategies to overcome them. By laying out the potential ROI with data to back it, you're essentially telling investors, "Your money's safe with us, and here's the proof."

3. Resource Allocation

Every startup feels the pinch - be it funds, time, or talent. So, how do you ensure you're putting your resources in the right place?

The business plan comes to the rescue again. It's like a compass, pointing out where to invest resources for the best outcomes.

It highlights what needs your immediate attention and what can simmer on the back burner. By channeling resources smartly, startups can strike a balance between today's needs and tomorrow's goals, ensuring both efficiency and growth.

4. Setting Clear Objectives

Imagine you're leading a team into a vast forest. Without a map or direction, chances are, you'll get lost. That's where writing a business plan really steps in.

It lets you carve out tangible goals, making sure everyone on your team knows where they're going and what they're aiming for. It's not just about setting targets; it's about keeping everyone on the same page, driven, and laser-focused.

5. Risk Management

Let's face it; the business world is unpredictable. But instead of being caught off-guard, having a business plan means you see those curveballs coming.

It's your playbook, helping you map out potential challenges, whip up a Plan B on the fly, and tackle surprises head-on. This isn't just a good strategy; it's showing stakeholders you're prepared for anything.

6. Growth Strategy

Think of your startup as a plant. You want it to grow, right? A good business plan is your growth formula with extremely specific business milestones. It spells out whether you're branching out to new territories, unveiling fresh products, or amplifying your operations.

With this strategy in hand, you're not just shooting in the dark; you're charting a course to scale smartly and sustainably.

7. Securing Loans

Let's get real. Walk into a bank without a solid business plan, and chances are, you'll walk out empty-handed. Banks need to know they're making a smart bet.

Presenting a detailed business plan tells them you've got skin in the game. It screams stability and showcases your vision, making them more likely to back you up.

8. Performance Measurement

Steering a startup without benchmarks is like sailing without stars to guide you. A business plan helps set those stars for you. It gives you clear markers to gauge how well you're doing.

If things seem off, you check your plan, adjust your course, and keep pushing forward.

9. Clarity and Focus

Ever had a whirlwind of ideas that seemed too scattered? Jotting them down in a business plan is like tidying up a messy room.

It forces you to sift through the clutter, zoom in on what matters, and sharpen your marketing strategy. The result? A crystal-clear path forward.

10. Stakeholder Communication

Think of your business plan as your startup's spokesperson. It tells your story to partners, employees, and potential investors. But it's more than just words on paper.

It aligns everyone, ensuring you're all singing from the same hymn sheet, driving home your business idea's vision and direction.

The Critical Components of an Ideal Business Plan

1. Executive Summary

Think of this as your handshake. In a few sentences, introduce your new business name, share your mission, and give a sneak peek of your game plan.

2. Business Description

Get down to brass tacks. Spell out what your small business really does, the problems you tackle, and the needs you meet in the market.

3. Market Analysis

With a marketing plan, show that you've rolled up your sleeves. Break down your industry insights, pinpoint your target audience, and size up the competition. Highlight where the market's heading and how you fit in. Creating the business plan forces you to analyze the competition.

4. Organization and Management

Who's in your corner? Sketch out your business structure, spotlight your team, and detail their roles. Share who calls the shots, who manages the show, and who advises from the boardroom.

5. Service or Product Line

What's on the shelf? A well-written business plan dives into what you're offering. Talk about its benefits, how it stands out, and the brains and brawn behind its development.

6. Marketing and Sales Strategy

How do you make the cash register ring? Share your marketing plan for getting the word out and closing the deal.

7. Funding Request

Need some financial muscle? If you're reaching out for funds, lay out how much you need now, what you'll need down the road, and the terms that would work for you.

8. Financial Projections

Got a crystal ball? Maybe not, but you can predict your financial future. Share your numbers game for the next five years, from profits to cash flow.

9. Implementation Plan

How do you roll? Detail the steps you'll take, the time you'll need, and the resources you'll tap into to kick things off and keep them running.

10. Appendix

Got some extras? Tuck them here. Whether it's research, permits, or any other paperwork, if it backs up your plan, it goes in.

A Template for Your Startup's Business Plan

Here's a template for a startup business plan:

Startup Business Plan Template

1. cover page.

• Business Name: [Your Startup's Name]
• Logo: [Your Startup's Logo]
• Contact Information: Address, Phone Number, Email, Website

2. Executive Summary

• Mission Statement : What's your core purpose?
• Objective : What do you aim to achieve in the short and long term?
• Brief Overview: A snapshot of your business concept and plan.

3. Business Description

• Nature of Business: What exactly does your startup do?
• Vision: Where do you see your business in the future?
• Value Proposition: Why should customers choose you?

4. Market Analysis

• Industry Overview: Current trends and future growth.
• Target Market: Who are your customers? Demographics, behaviors, needs.
• Competitor Analysis: Who are your main competitors? Strengths, weaknesses, opportunities.

5. Product/Service Line

• Description: What are you offering?
• Benefits to Customers: Why it's valuable.
• Development Stage: Is it an idea, prototype, or in production?

6. Marketing & Sales Strategy

• Positioning : How will you place your product in the market?
• Promotion: Advertising, PR, content marketing plans.
• Sales Tactics : Online sales, direct sales, retailers.

7. Organization & Management

• Business Structure: Sole proprietorship, partnership, LLC, corporation?
• Key Personnel: Brief profiles of your team members and their roles.
• Advisory Board: If you have one, who's on it?
• Startup Costs: Initial expenses before you start selling.
• Break-Even Analysis: When will you start making a profit?
• Projected Profit and Loss: Forecast for the next 3-5 years.
• Cash Flow Statement: Monthly cash flow projections for at least one year.

9. Funding Request

• Amount Requested: How much money do you need?
• Use of Funds : How will you use the invested money?

10. Implementation Plan

• Milestones : Key actions and dates from launch to operations.
• Risks: Potential challenges and your strategies to mitigate them.

11. Appendix

• Supporting Documents : Resumes, patents, licenses, contracts, and other relevant documents.

Final Thoughts

A successful business plan is the backbone of any startup, providing direction, attracting support, and mitigating risks. Beyond mere documentation, it embodies the vision and strategy of an entrepreneur .

In the ever-evolving business landscape, having a structured plan ensures resilience, adaptability, and a clear path to success.

FAQs: Importance of Business Plan

What is a business plan in your own words.

A business plan is a strategic blueprint that outlines a company's goals, the strategies to achieve them, and the resources required. It serves as both a roadmap and a communication tool for stakeholders.

What are the 3 main purposes of a business plan?

The three main purposes are:

a) To provide a strategic guide for the business's direction and growth.

b) To attract potential investors and secure funding.

c) To identify challenges ahead and devise solutions in advance.

What are 5 reasons for a business plan?

The five reasons are:

a) To set clear objectives and milestones.

b) To secure funding from existing businesses, investors or loans.

c) To understand the market and competition better.

d) To allocate resources effectively.

e) To onboard stakeholders and align the team's efforts with business plans.

What is the most important thing in a business plan?

The most important thing is the clarity of vision and feasibility of the plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. It should be realistic, backed by the market research, and adaptable to changing circumstances.

Is it really necessary to have a business plan?

Yes, it's necessary. A formal business plan provides direction, helps in securing funding, and ensures that all stakeholders are aligned towards the same goals.

What are the benefits of having a business plan?

The benefits of having a viable business plan includes, a clear direction and marketing strategies for growth, increased chances of securing funding, better understanding of the market and competition, effective resource allocation, and risk mitigation.

What are the 3 major components of a business plan?

The three major components are:

a) Executive Summary: An overview of the business, its mission, and objectives.

b) Market Analysis: A deep dive into the industry, target audience, and competitors.

c) Financial Projections: Predictions about revenue, costs, and profitability over a specified period.

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• Creating a Small Business Financial Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 02, 2023

Are You Retirement Ready?

Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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A Way Forward for Small Businesses

• Alexander W. Bartik,
• Marianne Bertrand,
• Zoë B. Cullen,
• Edward L. Glaeser,
• Michael Luca,
• Christopher Stanton

In the face of existential uncertainty, you must balance urgency with prudence.

Small businesses with fewer than 500 employees account for 48% of American jobs and 43.5% of GDP, and they are facing an existential threat in the wake of the coronavirus crisis.  To understand the economic impacts on small business, the authors surveyed roughly 5,800 companies nationwide. They found these companies to be cash-strapped, with many having shut down or laid off workers, and uncertain about whether federal assistance will work for them. They offer five recommendations for small businesses navigating an uncertain future: 1) Don’t rush decisions, but do make plans; 2) Get in line for the Paycheck Protection Program now; 3) Understand how your customers’ needs have changed; 4) Do some realistic accounting; and 5) Keep your best employees loyal.

In these difficult times, we’ve made a number of our coronavirus articles free for all readers. To get all of HBR’s content delivered to your inbox, sign up for the Daily Alert newsletter.

It will be years before we fully understand the economic impact of the coronavirus, but one thing is painfully clear right now: Small businesses across the country are facing an existential threat. Businesses with fewer than 500 employees account for 48% of American jobs and 43.5% of GDP . Yet while these smaller firms are an essential part of the U.S. economy, they’re often financially fragile, with little cash on hand or resources to buffer even a minor financial shock. In the throes of the sweeping disruptions caused by the coronavirus, businesses around the country have closed temporarily. Many have ongoing expenses and little or no revenue and face the prospect that they may never reopen.

• Alexander W. Bartik is an assistant professor of economics at the University of Illinois at Urbana Champaign.
• Marianne Bertrand is the Chris P. Dialynas Distinguished Service Professor of Economics at the University of Chicago Booth School of Business, where she is the faculty director of the Rustandy Center for Social Sector Innovation.
• Zoë B. Cullen is an assistant professor of economics at Harvard University, in the Entrepreneurial Management Unit of Harvard Business School.
• Edward L. Glaeser is the Fred and Eleanor Glimp Professor of Economics at Harvard.
• Michael Luca is the Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School and a coauthor (with Max H. Bazerman) of The Power of Experiments: Decision Making in a Data-Driven World (forthcoming from MIT Press).
• CS Christopher Stanton is the Marvin Bower Associate Professor of Business Administration at Harvard Business School.

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The Importance of Financial Planning for Small Businesses

A financial plan is the most important thing a small business needs. It’s a road map, a guideline, a reminder of what your goals are–what you are trying to achieve in the short-term and the long-term. It lays out what your possible costs are, and it seeks out to address avenues for how to manage these costs. It is so important that investors, bankers, and creditors won’t even set up a meeting with you if you don’t have a financial plan for your small business.

Your financial plan helps you manage your cash flow. Most businesses have income that varies from season to season. A good financial plan takes these vicissitudes into account so that there aren’t shortages in the long term. Having a cash cushion helps ensure that your business can take a poor season and still come out on top. Planning your taxes, prudishly spending your cash flow, and budgeting carefully can result from careful financial planning. When someone is in the thick of running his/her business, he /she can lose sight of the long term goals that ensure proper growth of your small business. A solid financial plan can be a reminder of all the necessary expenditures to keep your small business growing so as to stay ahead of the competitors in your market. The decisions of the small business owner takes can have positive or negative consequences. A good financial plan can spot positive and negative trends where they may have become lost in a sea of numbers. This will help you better allocate funds to the areas that are making your business money, and avoid expenditures that didn’t yield enough results. Financial planning can also help you prioritize expenditures. In small businesses, conserving financial resources is a must. A well thought out financial plan can help you prioritize what areas need to be funded immediately, and where your expenses can wait until you have a better season. Even the world’s largest corporations go through a process of prioritization of expenditures resulting from careful cost/benefit analysis.

Overall, the financial plan is there to help you measure your progress. How did your season go? What steps have been made in achieving your goals? When a small business owner is knee-deep in the day-to-day operations of running their business, they can often lose sight of what strides they have made to grow their small business. The financial plan helps the small business owner see precisely what is occurring through reviewing and analyzing the hard data. In short, every small business owner must have a methodical business plan that is updated regularly if they want to operate successfully for years to come.

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Jake Johnson, Jennifer Leslie

Updated: Jun 08, 2023  ·  10 min read

Toolkit for download in this article

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If you’re looking to save time and get more done in a day, this article is for you. Productivity is a big deal. A Google search for the word yields 196,000,000 results (in 0.49 seconds, no less!). And getting productive starts with organizing your business.

Agree? You’re not alone.

Check out these stats from smallbusiness.com , based on an Office Depot survey of 1,290 small business owners:

• 83 percent of small business owners believe having an organized office is a vital part of their business.
• 63 percent of small business owners believe office organization correlates to their business’ profitability

Being disorganized makes everything harder. It diminishes your focus and zaps your strength.

Here are nine small business organization tools that will help you get more done in less time.

1. How to organize your business for success

Doesn’t it feel great to look at your workspace and see everything organized, neat and ready to go? If you can’t remember the last time you felt that way, it’s time to do a little clean-up.

One’s working environment has been shown to directly impact productivity. Researchers from Princeton University Neuroscience Institute found that chaos can infringe upon the ability to focus on a job at hand. On the flip side, 71 percent of respondents to an OfficeMax Workspace Organization Study said they felt more accomplished when they organized their workspace.

Here's how to organize a business with these simple steps:

• Declutter your computer desktop. A streamlined and clean computer screen can help you feel motivated and creative. Take a few moments every few days to delete unneeded files, and put new ones into relevant folders.
• Say goodbye to paper and nix your overflowing filing cabinets by scanning your documents by smartphone with Genius Scan (which integrates with notebook tools like Evernote ). Or, you can outsource your scanning with Shoeboxed. Simply collect everything you want to be scanned, send it to Shoeboxed, and they do all the work for you. It also syncs with many popular online tools to import your scanned data.
• Set up a catch-all space. Designate a space in your office where all incoming items for your business should go. For example, if you receive important paper documents regularly like invoices or bills, consider a desktop file organizer. These usually have anywhere from three to five trays you can use to prioritize or organize files into.
• Manage your cables. Cables can quickly turn a desktop into Medusa’s head, but you can easily manage cable mess with some simple zip ties, and—if need be—get even more elaborate with under-desk cable trays.
• Tidy up your physical desktop. Put a “price tag” on everything you keep on your desk, but instead of setting a financial cost for each, determine what their value is to your workday and time. Does it take away or add time to your day? If it’s the former, eliminate it from your workspace.

You should also set aside 10 minutes per week, maybe at the end of the day on Friday, to tidy up your desk. Put your documents in their designated area, throw away any unnecessary scratch paper or trash, take your dirty dishes to the kitchen, and so on. This way, you can start fresh and feel organized the next time you come into your office.

2. Write a to-do list for the next day (and actually use it)

To-do listing is the universal language in the world of business organization. The problem is that few people ever actually follow-up with their lists. What’s the point of writing to-do lists if you don’t use it as a reference for your work priorities? Here are a few tips that will encourage you to keep up with your to-do list:

• Jot down everything you need to get done (it doesn’t have to be in any particular order, just dig into your stream of consciousness and write down the tasks as they come to mind).
• Group related tasks that could be completed together or in the same block of time.
• Number your list according to priority level and rearrange as needed. Hint: people often mistake quantity-heavy tasks as being more important than quality-heavy tasks. Nothing could be further from the truth. Priority should be based on a combined system of time-sensitivity, productivity, and correspondence. For example, if I complete task A, I will be able to complete task B and C in less time and with less effort, so task A should be the first order of business.
• Create smaller to-do lists under larger to-do bullets. This will help you coordinate the completion of a specific project and encourage you to continue working towards your larger goal.
• Mark things off as they are completed. You will feel a sense of ease and accomplishment when you visually see a list of tasks with check marks.

While good ol’ paper and pen work fine for simple to-do lists, we recommend using a cloud-based app like Todoist to manage your tasks, even when you’re on the go.

3. Respond to emails as soon as you open them

Email is by far the most dreaded part of the workday. It’s notoriously known for keeping you scatterbrained, especially if you’re constantly checking messages.

Rather than periodically checking your inbox, opening emails, and then pushing responses aside for a later time, try this: Designate one to two blocks of time every day (in the morning and in the afternoon) where you place your full attention on checking and responding to emails. Doing this will keep emails from interrupting your work, and will ensure organizational bliss in your inbox.

4. Hire a virtual assistant

Mundane, repetitive tasks can suck the energy right out of you. Yet, they have to be done to keep your business running. If you’ve ever wished you had an assistant but weren’t in a place to hire one yet, a virtual assistant (VA) is what you’ve been waiting for.

VAs are self-employed workers who remotely offer affordable, on-demand administrative services. Need someone to create SlideShare presentations? There’s an assistant for that. What about someone to schedule appointments? Yep, they can do that too.

A VA can do just about anything you need, from communicating with your clients to helping you with strategic decisions. Head to sites like Upwork , Zirtual , and Fancy Hands to find specialized freelancers and virtual assistants who are guaranteed to make your life 100 times more productive. How? You have more time to focus on what’s important—growing your business.

5. Virtualize your customer service

In our post, How AI is Helping Small Businesses Beat the Competition , we delved into the use of chatbots for customer service. If you’re a solo business owner on a shoestring budget, a chatbot may seem like an unobtainable asset, but don’t let that intimidate you. Services like Chatfuel , Botsify , and Sequel help you build your own chatbot (using the Facebook Messenger platform) without needing to know an ounce of code.

Once deployed, chatbots can help eliminate some of the more mundane customer interactions on your end. They can answer frequently asked questions and other customer inquiries, accept payment and provide a non-intimidating place for customers to give feedback 24/7, letting you get some rest, or at least set your focus elsewhere.

Check out Keap's Lifecycle Automation Assessment to determine where your business stands among the industry's top performers.

6. Integrate the cloud into all your tools

Ever had a computer die and lost important files? Ever needed a document, presentation, or spreadsheet while on the road or in a meeting? Want your files to be perfectly synced across all your devices, from your laptop to your smartphone?

Getting your files in the cloud keeps them safe and accessible, anytime and anywhere. Join the 82 percent of businesses that have a cloud strategy with tools like Dropbox and Google Drive all have free versions and will work on your computer and mobile devices.

So, no matter where you are or what device you’re using, you can access the files you need.

7. Upgrade to online accounting software

For a lot of years, I used a desktop version of QuickBooks. It was helpful, but I rarely took the time I needed to actually sit down and reconcile my accounts. So, when I finally did, it was a long, arduous process. That all changed when I switched to an online accounting tool.

Cloud-based bookkeeping tools can work wonders to get your books organized and keep them that way. They integrate right into your bank account, pull transactions, and match them up with your entries. And perhaps the best feature of all is that through the mobile apps, you can reconcile your accounts anywhere and anytime—like when you’re waiting for your oil to be changed, for instance.

Our favorites? QuickBooks Online and Xero .

8. Own your time

A lot of people struggle with time management, but once mastered, it can help you find space in your day you never thought you had. It also returns the power of deciding how your time is spent into your own hands.

You can start improving your time management skills by following these practices:

• Take care of mundane tasks during your morning commute. If you take public transit, you can tackle a lot of work before you even get to the office, like deleting any unnecessary emails in your inbox, or conducting research for the project you’re working on. Even if you don’t use public transit and drive to work, use a Bluetooth connection to catch up on calls.
• Take productivity breaks every two to three hours. Dozens of studies show that taking “microbreaks”—which can last anywhere from five to fifteen minutes—can improve your mental acuity and ability to focus throughout the day. Take a quick walk around the building, grab a snack, or play a game online. Staring at a screen for too long or sitting for hours at a time can also cause physical discomfort, leading to frustration and inability to focus on the task at hand. When you can’t concentrate on an assignment, you tend to move on to another task and leave the prior assignment unfinished. This cyclical effect leads to multiple unfinished projects at a time, leaving you feeling unproductive, disorganized and unfulfilled.
• If you need to track time for your business, a solution like Harvest makes it a breeze. You can use it on your computer and your mobile devices and it all syncs up. You can also send invoices and track expenses against a budget.
• Automate administrative tasks. Apps like Calendly can automate meeting scheduling without the appointment back-and-forth, and platforms like Buffer , HootSuite , and Sprout Social automatically send out social media updates in advance—saving you valuable time throughout the week or month. These days, almost any administrative or operational task can be automated in some regard.

9. Improve your contact management

Managing customers, leads, payments, and other key information is an ongoing challenge—one that can cost you sales. Today’s successful, modern small businesses use customer relationship management (CRM) apps like Keap to get organized—and stay that way—by connecting to your business apps and helping you follow up where you need it most: overdue invoices, quotes, customer questions, and more. No more losing track of important emails; the software remembers for you.

Create an organizational system that works for you

Rather than forcing yourself to adopt a completely new workflow or set of organizational habits, consider experimenting with different tools and then try to integrate them with your existing habits. There is no single right way to keep your small business organized, but there are plenty of tips and tricks you can incorporate into your workflow to optimize productivity and keep you organized.

Contributing authors: Jake Johnson - Director of Content & Creative, KeapJennifer Leslie - Content Creator, KeapCurtis Miller - Quality Engineer, KeapClaudia Amand - Claudia is the marketing manager at Shoeboxed, a receipt scanning and document management company based out of Durham, North Carolina.

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More From Forbes

7 chatgpt prompts to start a business.

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No one would say that starting a business is a safe career path. By some estimates , 90% of startups fail. The cards are stacked against you. But as Adam Grant once wrote , “[G]reat entrepreneurs have a different response to the fear of failure. Yes, they’re afraid of failing, but they’re even more afraid of failing to try.”

Just because many businesses fail doesn’t mean that you shouldn’t try—especially if you have a great idea. What’s more, AI tools like ChatGPT are making it easier and less expensive than ever to start a business—even if you want to kick things off as a side hustle, as I did with my company nearly two decades ago. Had ChatGPT been around then, I probably would have quit my day job sooner.

If you’re considering launching a startup, here are seven ChatGPT prompts to help you each step of the way.

Generate Startup Ideas

In the business world, there’s a trope about founders following their dreams and chasing their passions. I’m sure that happens sometimes—an entrepreneur launches a business related to their passion, which translates to a successful innovation. But I think a more surefire way to build a successful startup is identifying a problem and figuring out how to solve it.

ChatGPT can be a second brain at the idea generation stage. Even if you reject all of the LLM’s ideas, you’ll have a wider pool to choose from.

Here is one prompt to get the ball rolling at this preliminary stage:

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“What are common issues faced by [target market] regarding [context]?”

For example: “What are common issues faced by journalists regarding recording interviews?”

(The results ranged from technical problems and ethical concerns to interviewee comfort and data management — so many angles to consider!)

Once you identify your target market’s issues and needs, you can ask ChatGPT to help brainstorm innovative solutions. Try the following prompt:

“Can you suggest innovative ways to [describe the issue and include the target market]? Please provide a list of 5 potential solutions."

Remember: the more context you provide, the more refined your answers will be. If, for example, you’re targeting a certain geographic area or age range, let ChatGPT know.

Validate Your Business Idea

So, you’ve come up with what sounds like a strong idea for a startup. A second opinion is essential. When I was starting out, I discussed my idea for an online form company at length with my mentor. I suggest doing the same. But if a second opinion is helpful, a third (or fourth) opinion is even better. ChatGPT can offer guidance on confirming the validity of your idea and strategies for ensuring financial feasibility—in other words, that your idea will be profitable.

One of the first things to check is the current landscape of the market. To help with your competitor research, you can ask ChatGPT:

“I am starting a business to [describe product or service]. Can you list the main competitors in the [industry] market?”

For a more fleshed-out reply, you can pinpoint additional information. For example: “Describe their strengths and weaknesses,” or “Who are their current customers?”

I’ve written before about how crucial it is to listen to users. They are an entrepreneur’s most important stakeholders. It doesn’t matter how brilliant your business idea is—if it’s not serving your users’ needs or solving their problems, it won’t succeed.

The listening process begins even before you launch your business. ChatGPT can help you tap into insight from potential customers. You can use this prompt:

"I am launching a business to [describe product or service]. What are some methods for collecting and analyzing potential customer feedback? Provide a list of 5 methods.”

You can then use these methods to ensure your business idea has traction. And if it doesn’t, you can use customer feedback to figure out how to tweak and refine it.

Craft Your Business Plan

Writing a business plan is a necessary but sometimes harrowing step in launching a startup. It’s no surprise that grad school programs dedicate semester-long courses to it. But you don’t need an MBA in order to lay out your business’s proposition. ChatGPT can help you to identify the most important elements (executive summary, market analysis, and financial projections) and build out each.

Even if you’re not seeking VC funding and instead are taking the bootstrapping route , mapping out your business plan is an important exercise for laying out your goals, figuring out how to get there, and staying on track.

Here’s a prompt you can use to get started:

"Can you help me draft an executive summary for my business plan? Please use the following details. The business name is [business name]. It is a [industry] business that [description and unique selling proposition]. The target market is [description of your target market]. My business aims to [needs/problems your business addresses]. It is different from competitors because [how your business stands out]. In the next [X] years, we aim to [revenue projections]. We also hope to [describe any other key metrics/KPIs]. Using this information, can you help me draft an executive summary?"

Next is the market analysis section. This part provides an overview of the current size of the market you want to serve, what your potential users are willing to pay, and revenue projections. ChatGPT can help you draft your market analysis with the following prompt:

"I am creating a business plan and need help drafting the market analysis section. My company is a [industry] business. The target market is [target market description — include as many details as possible]. My company will [description of the problem your company will solve]. Here is some information on the market size and growth potential: [any available date]. The main competitors are [competitors]. Can you draft a market analysis based on this information?”

Finally, as I’ve written before, a laser-focus on profitability is the only way to ensure that your startup will succeed, especially if you are a bootstrapper like me. Every business plan needs solid financial projections to assure your key stakeholders—and most importantly, yourself—that the business will be profitable.

Here is a prompt you can use to draft your business plan’s financial projections:

"I need help drafting the financial projections section for my business plan. Here is the key information. For funding, the company will require [amount needed, either VC funding or self funding]. In the next [X] year[s], I project revenue to be [amount]. I anticipate the company will be profitable in [timeline]. The most significant costs will be [costs]. Here are the key financial metrics: [e.g., gross margin, net income]. Can you use this information to draft financial projections for my company?”

Of course, financial projections are just projections. With so many factors constantly in flux, no one can predict a business’s profitability. But this will help you generate a basic financial picture of your fledgling company.

Final thoughts

If you’re in the early stages of starting a business, remember that all founders battle through a whirlwind of emotions. The struggle—and the fear—is real.

“What we regret is not failure, but the failure to act,” wrote Adam Grant . Hopefully, using the above prompts and ChatGPT, you’ll never regret not launching your business.

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Simple Business Plan Bootcamp August 2024 - Loudoun, VA

Date and time.

Thursday, August 15, 2024 9:00 a.m. - 1:00 p.m. EDT

Purcellville Train Station, North 21st Street and W&OD Bike Trail Purcellville , VA 20132

Coordination Team [email protected] 703-261-4105

Host organization

Loudoun SBDC

Type of event

Resource Partner event

Event description

Simple Business Plan Bootcamp is an  interactive, in-person class which deals with creating a business plan. One that is easy to understand and works for any small business.

You will learn an approach planning that is less confusing, shows you how to figure out what information you really need to research, and gives you the ability to make important decisions. SBDC Manager Eric Byrd will walk you through building your own simple business plan using tested tools and best practices so you can easily chart a course for success.

First you will identify the 5 Elements of Your Plan and begin answering important questions about your customers, their needs/wants, your solution and what resources you'll need to begin (or to grow if you're already in business). This becomes the foundation of your plan. It's critical information so you can make the best decisions and take productive actions once you launch.

You will discover a process to identify your core Customer(s) and what Value makes them want to buy what you offer.

Next you will incorporate that information and begin defining the business model for your company. This will help you understand what will be involved in operating your business successfully.

You will learn important financial terminology and explore the three key financial reports all business owners need to know to help you manage revenue, expenses and focus on profit in your business.

Throughout the process you will be able to ask questions and identify the specific information you need to have to create the right plan for your specific business.

The Daily Iowan

How Tax consultants help small businesses grow and develop

As you know, small businesses are always particularly vulnerable to financial difficulties and it is extremely important to optimize these finances in such a way that they save this money and not lose it. Of course, saving does not always mean spending less, often for a business it just means spending more at the moment and less later, because the money saved is just as important as the money earned.

Tax assistance has a particularly important function in all financial processes related to small businesses. Successful businessmen understand that through business tax consultation they will save lots of funds when starting a business.

Moreover, tax assistance helps a lot in the early stages of business creation, as it supports entrepreneurs in their economic development and allows them to direct their efforts to other stages of business formation.

Saves your time and your potential

It is also no secret that time is the most valuable resource for all people, especially businessmen. As we know, taxes take up a huge amount of time, taking away the opportunity to spend it on other important processes, so everything can start to collapse even before it is finally built. Therefore, freeing yourself from these responsibilities, you can devote your mental potential, for example, to business promotion or creative companies to advertise it, it depends on what you are specifically good at, and it is better to delegate the rest.

Who is a tax consultant?

Tax consulting is carried out by a huge number of companies, but since this is an extremely serious matter, it is especially important not to get caught by scammers. As a rule, it is carried out by a person assigned to you and helps you properly manage your personal finances or the finances of your business. He knows how to legally reduce your taxes, optimize the transfer of assets, and will also help you in case of a tax audit. That is why it is important to check that such a person has the appropriate education, as well as the necessary licenses from his office.

Two types of tax consultants

While looking for such an assistant, pay attention to the fact that there are two types of tax consulting. There are corporate tax consultants, and there are tax consultants for individuals. Although the second of them may also be well versed in corporate consulting, but it is still better to choose the one with more experience specifically in the area you need so that he can protect you from all the slightest flaws related to the specifics of the functioning of your business.

Questions that a financial advisor will help you solve

When you are just starting your business, it can be especially difficult to decide on such a service, because you are still only learning all the fundamental issues and do not quite understand why you need this kind of help and why you will not be able to do it yourself. That’s what this specialist will help you with:

If you want to know your tax opportunities and assess the risks of a particular transaction

If you are preparing to make a major transaction, for example, to invest or sell an asset of your business or even a merger of companies, it is very important to seek tax advice first.

In fact, the consultant will tell you about the various tax options available to you and the most beneficial solution in your situation. The consultant will also tell you about the tax risks and how to secure your transactions. In this case, the role of tax consulting is focused on optimizing costs and avoiding tax risks.

If you want to reduce taxes or plan to transfer your assets

The problem with most businessmen who do everything on their own is that they leave significant amounts to the tax authorities every year, although they could rationalize these costs. So if you have significant assets, such as a business or a building, that you would like to transfer to your heirs, then the consultant will help you do this without having to resell or pay inheritance tax.

On the one hand, you will receive a number of solutions for tax exemption and income tax reduction. On the other hand, it will help you plan the transfer of your assets so that they can be kept in the family.

In such situations, tax advice will help you develop optimization strategies based on your personal goals.

If you need help with your tax returns

When you regulate a huge number of processes within your business and constantly perform new actions, the number of papers that you have to keep track of increases many times, and therefore the need to file more tax returns. Well, if you make a mistake, the consequences will be serious and may even lead to a tax adjustment.

Fortunately, to help you with this difficult task, you can contact a tax consultant who has experience in such administrative subtleties. Especially considering that the tax service sometimes makes mistakes in calculations. The good news is that your consultant will be able to check tax notices, especially if you have made exceptional transactions.

If you want to be informed about the new rules.

Indeed, tax legislation develops every year, and the legislator regularly likes to review what has been achieved. Especially with regard to, for example, cryptocurrency.

Therefore, only a good tax consultant will inform you about the changes and explain the tax structure of the activity. You also need to be aware of the new rules in order to be able to make appropriate decisions on the management of your assets and do everything in accordance with the law.

As you can see, tax consulting is literally a lifeline for businesses that can help you avoid unforeseen situations, as well as not break the law. Well, if this is still not convincing enough and you want to do everything yourself, then think about whether you will be comfortable only with your knowledge if a tax audit comes. In such a situation, a professional nearby would still be especially valuable, right?

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Conservative-backed group is creating a list of federal workers it suspects could resist Trump plans

Tom Jones, a political activist and former Capitol Hill aide to Republican senators, is pictured in Bardstown, Ky., Tuesday, June 18, 2024. (AP Photo/Timothy D. Easley)

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WASHINGTON (AP) — From his home office in small-town Kentucky, a seasoned political operative is quietly investigating scores of federal employees suspected of being hostile to the policies of Republican Donald Trump , a highly unusual and potentially chilling effort that dovetails with broader conservative preparations for a new White House.

Tom Jones and his American Accountability Foundation are digging into the backgrounds, social media posts and commentary of key high-ranking government employees, starting with the Department of Homeland Security . They’re relying in part on tips from his network of conservative contacts, including workers. In a move that alarms some, they’re preparing to publish the findings online.

With a $100,000 grant from the Heritage Foundation , the goal is to post 100 names of government workers to a website this summer to show a potential new administration who might be standing in the way of a second-term Trump agenda — and ripe for scrutiny, reclassifications, reassignments or firings .

“We need to understand who these people are and what they do,” said Jones, a former Capitol Hill aide to Republican senators.

The concept of compiling and publicizing a list of government employees shows the lengths Trump’s allies are willing to go to ensure nothing or no one will block his plans in a potential second term. Jones’ Project Sovereignty 2025 comes as Heritage’s Project 2025 lays the groundwork, with policies, proposals and personnel ready for a possible new White House.

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The effort, focused on top career government officials who aren’t appointees within the political structure, has stunned democracy experts and shocked the civil service community in what they compare with the red scare of McCarthyism.

Jacqueline Simon, policy director at the American Federation of Government Employees, said the language being used — the Heritage Foundation’s announcement praised the group for ferreting out “anti-American bad actors” — is “shocking.”

Civil servants are often ex-military personnel and are required to take an oath to the Constitution to work for the federal government, not a loyalty test to a president, she and others said.

“It just seems as though their goal is to try to menace federal employees and sow fear,” said Simon, whose union backs President Joe Biden , a Democrat, for reelection .

As Trump, who has been convicted of felony charges in a hush money case and is under a four-count federal indictment accusing him of working to overturn his 2020 election loss , faces a likely rematch with Biden this fall, far-right conservatives have vowed to take a wrecking ball to what they call the deep-state bureaucracy.

The Trump campaign has said outside groups don’t speak for the ex-president, who alone sets his policy priorities .

Conservatives view the federal workforce as overstepping its role to become a power center that can drive or thwart a president’s agenda. Particularly during the Trump administration, government officials came under attack from the White House and Republicans on Capitol Hill, as his own Cabinet often raised objections to some of his more singular or even unlawful proposals.

While Jones’ group won’t necessarily be recommending whether to fire or reassign the federal workers it lists, the work aligns with Heritage’s far-reaching Project 2025 blueprint for a conservative administration.

Heritage’s Project 2025 proposes reviving the Trump Schedule F policy that would try to reclassify tens of thousands of federal workers as political appointees, which could enable mass dismissals — although a Biden administration rule seeks to make that more difficult. The Heritage project is working to recruit and train a new generation to travel to Washington to fill government jobs.

In announcing the $100,000 Innovation Award last month, Heritage said it’d support American Accountability Foundation’s “investigative researchers, in-depth reports, and educational efforts to alert Congress, a conservative administration, and the American people to the presence of anti-American bad actors burrowed into the administrative state and ensure appropriate action is taken.”

Heritage President Kevin Roberts said the “weaponization of the federal government” has been possible only because of the “deep state of entrenched Leftist bureaucrats.” He said he was proud to support the work of American Accountability Foundation workers “in their fight to hold our government accountable and drain it of bad actors.”

The federal government employs about 2.2 million people, including those in the Washington, D.C., area and workers who the unions say many Americans know as friends or neighbors in communities across the country.

About 4,000 positions in the government are considered political appointees who routinely change from one presidential administration to the next, but most are career professionals — from landscapers at Veterans Administration cemeteries to economists at the Bureau of Labor Statistics.

The public list-making conjures for some the era of Joseph McCarthy, the senator who conducted grueling hearings into suspected communist sympathizers during the Cold War. The hearings were orchestrated by a top staffer, Roy Cohn, who became a confidant of a younger Trump.

Skye Perryman, CEO of the advocacy group Democracy Forward, said it’s deeply disturbing and reminiscent of “the darker parts of American history.”

Publicly naming government workers is an “intimidation tactic to try to chill the work of these civil servants,” she said, and part of a broader “retribution agenda” underway this election.

“They’re seeking to undermine our democracy,” she said. “They’re seeking to undermine the way that our government works for people.”

Jones, from his desk overlooking rickhouses storing barrels in the Bourbon Capitol of Bardstown, scoffed at comparisons to McCarthyism as “nonsense.”

He’s a former staffer to then-Sen. Jim DeMint, the South Carolina conservative Republican who later led Heritage and now helms the Conservative Policy Institute, where American Accountability Foundation has a mailing address. Jones also worked for Sen. Ron Johnson, R-Wisconsin, and provided opposition research for Texas GOP Sen. Ted Cruz’s 2016 presidential bid.

With six researchers, Jones’ team operates remotely across the country, poring over the information about federal workers within Homeland Security, the State Department and other agencies that deal with immigration and border issues.

Their focus is on the highest ranks of the civil servants — GS-13, GS-14 and GS-15 employees and those in senior executive positions who could put up roadblocks to Trump’s plans for tighter borders and more deportations.

“I think it’s important to the next administration to understand who those people are,” Jones said.

He dismissed the risks that could be involved in publicly posting the names, salary information and other details of federal workers who have some level of privacy or the idea his group’s work could put employees’ livelihoods in jeopardy.

“You don’t get to make policy and then say, ‘Hey, don’t scrutinize me,”’ he said.

He acknowledges some of the work is often a “gut check” or “instinct” about which federal employees would be suspected of trying to block a conservative agenda.

“We’re looking at, ‘Are there wrong people on the bus right now that are, you know, openly hostile to efforts to secure the southern border?’” he said.

His own group came under scrutiny as it first probed Biden nominees.

Biden had repealed Trump’s Schedule F executive order in January 2021, but a Government Accountability Office report in 2022 found that agencies believed it could be reinstated by a future administration.

Since then, the Biden administration issued a rule that would make it harder to fire workers. A new administration could direct the Office of Personnel Management to undo the regulation, but the process would take time and be open to legal challenges.