What Is a Business Plan?
This article is part of our “ Business Planning Guide “ —a curated list of our articles that will help you with the planning process!
What is a business plan? In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve those goals.
In this article, I’ll explore the sections of a business plan, as well as:
- Who needs a business plan
- How to choose the right kind of business plan
- The key components that every business plan should include
- How to use your plan to achieve faster growth than your competition
To start, don’t swallow the obsolete idea that the business plan must be a long, formal document as if it were some term paper you have to write. That’s not true anymore. While every business has huge benefits to gain from going through the business planning process , only a small subset needs the formal business plan document required for seeking investors or supporting a commercial loan.
Most of us need just a Lean Business Plan, for internal use, with just bullet point lists and important projections. Good businesses always keep their Lean Plan up to date.
The lean business plan is great news because it makes the planning process much less daunting. You start simple and grow it organically. You don’t do anything that doesn’t have a business purpose, so you don’t describe your management team (to name one example) unless you need that section for outsiders. More on that in the section on the Lean Plan.
And furthermore, even for those of you who do need to produce a business plan document, the task of writing a formal business plan today is much less daunting than it used to be. These days, business plans are simpler, shorter, and easier to produce than they have ever been. Gone are the days of 30- and 40-page business plans—modern business plans are shorter, easier to write, and—thankfully—easier to read (and you could always have our MBA business plan consulting experts write a business plan for you if you so choose).
Let’s start with the basics.
What is a business plan?
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. At its heart, a business plan is just a plan for how your business is going to work, and how you’re going to make it succeed.
How long should your plan be?
Typically, a business plan is longer than a list on a napkin (although, as you’ll see below, it is possible—and sometimes ideal—to write your entire business plan on one page ). For me in practice, and for most real businesses, it can be as simple as the Lean Plan that has a few bullet points to focus strategy, tactics, milestones to track tasks and responsibilities, and the basic financial projections you need to plan: cash flow , budget, expenses.
How should you present your business plan?
A note on format: business plans should only become printed documents on select occasions, like when you need to share information with outsiders or team members. Otherwise, they should be dynamic documents that you maintain on your computer.
The plan goes on forever, meaning that you’re constantly tweaking it, because you’re regularly evaluating your business health, so the printed version is like a snapshot of what the plan was on the day that it was printed.
What does a formal plan include?
If you do need a formal business plan document, then that includes elements like:
- An executive summary
- A company overview
- Some information about your products and/or services
- Your marketing plan
- A list of major company milestones
- Some information about each member of the management team and their role in the company
- Details of your company’s financial plan
These are often called the “sections” or “chapters” of the business plan, and I’ll go into much greater depth about each of them below.
How often should you revise your business plan?
In all cases, the most important element of business planning is the review schedule —set specific times to review your progress toward your goals. That’s as simple as “the third Thursday of every month” to cite one obvious example.
Specifically, it’s the time to review your progress on milestones and to compare your actuals against your financial projections. A real business plan is always wrong—hence the regular review and revisions—and never done, because the process of review and revising is vital.
Who needs a business plan?
If you’re just planning on picking up some freelance work to supplement your income, you can skip the business plan. But, if you’re embarking on a more significant endeavor that’s likely to consume a significant amount of time, money, and resources, then you need a business plan.
If you’re serious about business, taking planning seriously is critical to your success.
Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But business plans are also vital for running a business— strategic planning —whether or not it needs new loans or new investments. Existing businesses should have business plans that they maintain and update as market conditions change and as new opportunities arise.
Every business has long-term and short-term goals, sales targets, and expense budgets—a business plan encompasses all of those things and is as useful to a startup trying to raise funds as it is to a 10-year-old business that’s looking to grow.
1. Startup businesses
The most classic business planning scenario is for a startup, for which the plan helps the founders break uncertainty down into meaningful pieces, like the sales projection, expense budget, milestones, and tasks.
The need becomes obvious as soon as you recognize that you don’t know how much money you need, and when you need it, without laying out projected sales , costs, expenses, and timing of payments. And that’s for all startups, whether or not they need to convince investors, banks, or friends and family to part with their money and fund the new venture .
In this case, the business plan is focused on explaining what the new company is going to do, how it is going to accomplish its goals, and—most importantly—why the founders are the right people to do the job. A startup business plan also details the amount of money needed to get the business off the ground , and through the initial growth phases that will lead (hopefully!) to profitability.
2. Existing businesses
Not all business plans are for startups that are launching the next big thing. Existing businesses use business plans to strategically manage and steer the business, not just to address changes in their markets and to take advantage of new opportunities. They use a plan to reinforce strategy, establish metrics , manage responsibilities and goals, track results, and manage and plan resources including critical cash flow . And of course, they use a plan to set the schedule for regular review and revision.
Business plans can be a critical driver of growth for existing businesses. Did you know that businesses that write plans and use them to manage their business grow 30 percent faster than businesses that take a “seat of the pants” approach? A study by Professor Andrew Burke, the founding Director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management, discovered exactly this.
For existing businesses, a robust business planning process can be a competitive advantage that drives faster growth and greater innovation. Instead of a static document, business plans in existing businesses become dynamic tools that are used to track growth and spot potential problems before they derail the business.
Choosing the right kind of business plan for your business
Considering that business plans serve many different purposes, it’s no surprise that they come in many different forms .
Before you even start writing your business plan, you need to think about who the audience is and what the goals of your plan are. While there are common components that are found in almost every business plan, such as sales forecasts and marketing strategy, business plan formats can be very different depending on the audience and the type of business.
For example, if you’re building a plan for a biotech firm, your plan will go into details about government approval processes. If you are writing a plan for a restaurant, details about location and renovations might be critical factors. And, the language you’d use in the biotech firm’s business plan would be much more technical than the language you’d use in the plan for the restaurant.
Plans can also differ greatly in length, detail, and presentation. Plans that never leave the office and are used exclusively for internal strategic planning and management might use more casual language and might not have much visual polish.
On the other end of the spectrum, a plan that is destined for the desk of a top venture capitalist will have a high degree of polish and will focus on the high-growth aspects of the business and the experienced team that is going to deliver stunning results.
Here is a quick overview of three common types of plans:
One-page business plan.
A one-page business plan is exactly what it sounds like: a quick summary of your business delivered on a single page. No, this doesn’t mean a very small font size and cramming tons of information onto a single page—it means that the business is described in very concise language that is direct and to-the-point.
A one-page business plan can serve two purposes. First, it can be a great tool to introduce the business to outsiders, such as potential investors. Since investors have very little time to read detailed business plans, a simple one-page plan is often a better approach to get that first meeting. Later in the process, a more detailed plan will be needed, but the one-page plan is great for getting in the door.
This simple plan format is also great for early-stage companies that just want to sketch out their idea in broad strokes. Think of the one-page business plan as an expanded version of jotting your idea down on a napkin. Keeping the business idea on one page makes it easy to see the entire concept at a glance and quickly refine concepts as new ideas come up. Learn more about how to create a one-page business plan .
The Lean Business Plan
A Lean Plan is more detailed than a one-page plan and includes more financial information, but it’s not as long as a traditional business plan. Lean Plans are more likely to be used internally as tools for strategic planning and growth.
The Lean Business Plan dispenses with the formalities that are needed when presenting a plan externally for a loan or investment and focuses almost exclusively on business strategy, tactics, milestones, metrics, budgets, and forecasts.
These lean business plans skip sections like company history and management team since everyone in the company almost certainly knows this information. You don’t do an exit strategy section of your business plan if you’re not writing for investors and therefore you aren’t concerned with an exit.
The simplest lean business plan uses bullet points to define strategy, tactics, concrete specific dates and tasks, and essential numbers including projected sales, spending, and cash flow. It’s just five to 10 pages when printed. And few Lean Plans need printing. Leave them on the computer. Review and revise them at least once a month. The first Lean Plan takes just a few hours to do (or less), and a monthly review and revision can take only an hour or two per month.
Lean business plans are management tools used to guide the growth of both startups and existing businesses. They help business owners think through strategic decisions and measure progress towards goals.
External business plan (a.k.a the standard business plan document)
External business plans , the formal business plan documents, are designed to be read by outsiders to provide information about a business. The most common use of a full business plan is to convince investors to fund a business, and the second most common is to support a loan application. Occasionally this type of business plan is also used to recruit or train or absorb key employees, but that is much less common.
A formal business plan document is an extension of the internal business plan or the Lean Plan. It’s mostly a snapshot of the internal plan as it existed at a certain time. But while an internal plan is short on polish and formality, a formal business plan document should be very well-presented, with more attention to detail in the language and format. See example business plans in our sample plan library to give you an idea of what the finished product might look like.
In addition, an external plan details how potential funds are going to be used. Investors don’t just hand over cash with no strings attached—they want to understand how their funds will be used and what the expected return on their investment is.
Finally, external plans put a strong emphasis on the team that is building the company . Investors invest in people rather than ideas, so it’s critical to include biographies of key team members and how their background and experience is going to help grow the company.
What to include in your formal business plan
While we just discussed several different types of business plans, there are key elements that appear in virtually all business plans. These components include the review schedule, strategy summary, milestones, responsibilities, metrics (numerical goals that can be tracked), and basic projections. The projections include sales, costs, expenses, and cash flow.
These core elements grow organically as needed by the business for the actual business purpose.
The order doesn’t matter a whole lot, so don’t sweat having the “right” outline as long as you have an outline that works. Here’s what they normally include:
Executive summary
Just like the old adage that you never get a second chance to make a first impression, the executive summary is your business’s calling card. It needs to be succinct and hit the key highlights of the plan. Many potential investors will never make it beyond the executive summary, so it needs to be compelling and intriguing.
The executive summary should provide a quick overview of the problem your business solves, your solution to the problem, the business’s target market, key financial highlights, and a summary of who does what on the management team.
While it’s difficult to convey everything you might want to convey in the executive summary, keeping it short is critical. If you hook your reader, they’ll find more detail in the body of the plan as they continue reading. You could consider using your one-page business plan as your executive summary. And LivePlan offers an excellent alternative with what it (as of August 2018) calls the Pitch page , a standard summary.
The opportunity
One often useful section of a formal plan describes the market, including market analysis, data, projections, descriptions, and competition.
Target market
As critical as it is that your company is solving a real-world problem that people or other businesses have, it’s equally important to detail who you are selling to. Understanding your target market is key to building marketing campaigns and sales processes that work. And, beyond marketing, your target market will define how your company grows.
Market trends
Describe the most important changes happening in your target market right now. Are the needs, demographics, or preferences of potential customers changing in a notable way? Ideally, explain how those trends will favor your products or services over those of your competitors.
For example, if people in your market are increasingly using their smartphones for tasks that they used to do on a computer, perhaps the mobile app you are developing is well-positioned to capture a bigger part of the market.
Market growth
Explain how your target market has been growing or shrinking in recent years. Research is key here, obviously. You can use Internet searches, trade associations, market research firms, journalists who cover your market, or other credible sources to gauge market growth. A growing market is encouraging since it suggests a stronger demand for your solution in the years to come. That said, you can still be successful in a weak or contracting market. It’s just important to acknowledge that you are swimming against the tide.
Competition
What other options do your customers have to address their needs, and what makes your solution better for them?
Products and services
The products and services section of your business plan delves into the core of what you are trying to achieve. In this section, you will detail the problem you are solving, how you are solving it, the competitive landscape , and your business’s competitive edge.
Depending on the type of company you are starting, this section may also detail the technologies you are using, intellectual property that you own, and other key factors about the products that you are building now and plan on building in the future.
Marketing and sales
The marketing and sales plan details the strategies that you will use to reach your target market. This portion of your business plan provides an overview of how you will position your company in the market, how you will price your products and services, how you will promote your offerings, and any sales processes you need to have in place.
Depending on the specifics of your business, include plans related to locations and facilities, technology, and regulatory issues.
Milestones and metrics
Plans are nothing without solid implementation. The milestones and metrics chapter of your business plan lays out concrete tasks that you plan to accomplish, complete with due dates, and the names of the people to be held responsible.
This chapter should also detail the key metrics that you plan to use to track the growth of your business. This could include the number of sales leads generated, the number of page views to your web site, or any other critical metric that helps determine the health of your business.
Company overview
For external plans, the company overview is a brief summary of the company’s legal structure , ownership, history, and location. It’s common to include a mission statement in the company overview, but that’s certainly not a critical component of all business plans.
The company overview is often omitted from internal plans.
The management team chapter of a business plan is critical for entrepreneurs seeking investment but can be omitted for virtually any other type of plan.
The management team section should include relevant team bios that explain why your management personnel is made up of the right people for the roles. After all, good ideas are a dime a dozen—it’s a talented entrepreneur who can take those ideas and turn them into thriving businesses.
Business plans should help identify not only the strengths of a business, but areas that need improvement and gaps that need to be filled. Identifying gaps in the management team shows knowledge and foresight, not a lack of ability to build the business.
Financial plan
The financial plan is a critical component of nearly all business plans. Running a successful business means paying close attention to how much money you are bringing in, and how much money you are spending. A good financial plan goes a long way to help determine when to hire new employees or buy a new piece of equipment.
If you are a startup and/or are seeking funding, a solid financial plan helps you figure out how much capital your business needs to get started or to grow, so you know how much money to ask for from the bank or from investors.
A typical financial plan includes:
- Sales forecast
- Personnel plan
- Profit and loss statement
- Cash flow statement
- Balance sheet
For more details on what to include in your business plan, check out our detailed business plan outline, download a business plan template in Word format, or read through our library of sample business plans so you can see how other businesses have structured their plans and how they describe their business strategy.
Using your business plan to get ahead
I mentioned earlier in this article that businesses that write business plans grow 30 percent faster than businesses that don’t plan. Taking the simple step forward to do any planning at all will certainly put your business at a significant advantage over businesses that just drive forward with no specific plans.
But just writing a business plan does not guarantee your success.
The best way to extract value from your business plan is to use it as an ongoing management tool. To do this, your business plan must be constantly revisited and revised to reflect current conditions and the new information that you’ve collected as you run your business.
When you’re running a business, you are learning new things every day: what your customers like, what they don’t like, which marketing tactics work, which ones don’t. Your business plan should be a reflection of those learnings to guide your future strategy.
This all sounds like a lot of work, but it doesn’t have to be.
Tips to extract the most value from your plan in the least amount of time
- Use your one-page business plan to quickly outline your strategy . Use this document to periodically review your high-level strategy. Are you still solving the same problem for your customers? Has your target market changed?
- Use a Lean Plan to document processes that work . Share this document with new employees to give them a clear picture of your overall strategy.
- Set milestones for what you plan to accomplish in the next 30 days. Assign these tasks to team members, set dates, and allocate part of your budget if necessary.
- Keep your sales forecast and expense budget current . As you learn more about customer buying patterns, revise your forecast.
- Compare your planned budgets and forecasts with your actual results at least monthly. Make adjustments to your plan based on the results.
- The final, most important aspect of leveraging your business plan as a growth engine is to schedule a monthly review . The review doesn’t have to take longer than an hour, but it needs to be a regular recurring meeting on your calendar. In your monthly review, go over your key numbers compared to your plan, review the milestones you planned to accomplish, set new milestones, and do a quick review of your overall strategy.
It’s easier than it sounds and can put you in that “30 percent growth” club faster than you think.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry .
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10 Items Your Business Plan May Be Missing
- Business Ideas & Tips
- Finance Your Business
- Market Your Business
- Keep Your Business Compliant
Business Know-How
You’re ready to go and get funding for your startup idea, but the obstacle of writing a detailed business plan is slowing down your progress. Don’t be the entrepreneur who forges ahead without a plan, leading to their startup company’s eventual demise.
A well-written business plan is often the difference between your entrepreneurial dream staying just an idea in your head and getting financed and making your startup business a success.
The value of a business plan isn’t solely for getting loans and pitching to investors. The plan’s vital role in your company’s success is the thought process you, the entrepreneur, go through as you compile the information and financial numbers. This is where you set your goals and crunch your numbers to determine if your business idea is profitable. Your research will uncover information that can help you modify your marketing plans to your benefit.
Our experts advise you to be sure to make your document is complete and not to forget these 10 critical components of a winning business plan:
10 Most Forgotten Items in Business Plans
Executive summary.
This critical and most-read section of your plan needs to be at the very front of your document. However, it should be the very last part that you write. It’s meant to contain and summarize the information in your complete business plan. Your readers should be able to quickly scan this summary and get a general understanding of your goals and why you will succeed. It should be no longer than one page, and preferably shorter.
Answer these questions for a powerful and compelling executive summary:
- Why will customers care about your business?
- What pain points will you solve for these customers?
- What sets your company apart in the industry?
- Why will your startup succeed?
Competitive Review
It’s surprising this is one of the most often missing components in submitted business plans. However, it’s probably the most important. You can’t succeed by not considering and strategically planning how to beat your competition. Your prospective customers will certainly consider all their buying options before making a purchase.
Your competitive review should answer these questions:
- Who are the companies currently in the marketplace?
- How do they sell their products?
- Why is your product needed and wanted in the industry?
- What is the value factor that makes your company different?
Originality and Innovation
Be sure to include the reasons why your company is unique. What is your point of difference? Today‘s highly competitive business environment demands that companies continually innovate to succeed. Decide how your firm will encourage creativity and improvement in all departments on an ongoing basis.
Cash Flow Analysis
The common mistake that beginning entrepreneurs make is being overly focused on profits and neglecting cash flow . Many businesses fail, while still technically profitable, by running out of money. Understanding, planning, and managing cash flow is critical. Include a detailed cash flow analysis report in your completed business plan.
Business Goals
Your goal should be simple, crystal-clear, and, most importantly, measurable. Instead of saying “I want the best salon in town,” which is not a measurable goal, instead phrase your goal like this: “My hair salon is the best in town with 200 regular customers in 2017.” Once you convert your goal into a measurable target, you’re more likely to hold yourself accountable and will be able to measure your progress against this specific number.
Emergency Plan
Plans are not reality. Be prepared for everything to go wrong. Remember Murphy’s Law. Detailing these plans will impress lenders and give you peace of mind to know what to do in the case of an emergency.
Here are some questions to answer:
- How will your company survive disasters — both natural and marketplace?
- How will you cope with a hurricane or flood?
- What will you do if you don’t achieve your sales goals?
- What if your expenses and cost of goods are higher than expected?
- What if you run into vendor delivery issues?
Growth Strategy
Fast company growth is stressful for the entrepreneur and the startup firm. Again, this type of “what if” long-range thinking will give both you and your investors confidence in your ability to manage a fast-growing company.
Answer these questions:
- What are your plans if you get more orders than anticipated?
- What if your website traffic increases 10X?
- How will you increase production, fund growing capital needs, and hire more staff?
Marketing Psychology
Most business plans include information about the target customer and their demographics, such as age, gender, income, and geographic location. Smart companies also write about their customers’ mindsets and the emotional needs and problems that their proposed product or service will solve.
Social Media Plan
Social media is a major part of all business promotion and needs to be addressed properly. A strategic and well-planned social media program of how to build audiences and engage with customers is crucial to business success. The time to develop this plan is at startup.
Exit Strategy
Having a well-researched exit plan will help you get venture capital investment. Venture capitalists want to know how they can cash out of your startup. Most venture capitalists want to see a growth of 10X of the initial investment. These profits are most often realized when companies are sold or go public.
Don’t depend on your computer’s spellcheck function to be sure that your document is free of typos. Instead, take the time to print your plan and read it very carefully backward. Brush up on your proofreading techniques.
This makes you more likely to find any mistakes in spelling, word usage, or incorrect data. It can also be helpful to have a friend or business associate proofread your business plan. Also, don’t forget to double-check all your charts and graphs for typos and mistakes. The smallest typo can create a negative impression in your lender’s mind about the professionalism of you and your startup idea.
Sadly, many a good business plan has been rejected due to grammatical errors that result in misunderstandings and negative impressions. Don’t let this happen to you. Instead, hire a professional proofreader to check your work. You will be confident knowing that your business plan is letter perfect.
Go out and pitch your business idea and get funded! Good luck.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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10 Common Business Plan Mistakes
There are many elements that make a good business plan, avoid these business plan mistakes and give your business idea the pitch it deserves. It often takes time, patience and many revisions before you get it right. Unfortunately when rushing to get your funding in place and launch your business, your plan can get neglected. Below we have highlighted a few of the very common business plan mistakes:
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1. Unrealistic Financial Projections
Most Canadians are familiar with the businesses on CBC’s Dragons’ Den who grossly overestimate the value of their company and are chastised and shot down by the dragons. It’s one of the most common business plan mistakes. Lenders and investors expect to be shown a realistic picture of where your business is now and where it hopes to be, therefore if the plan is overly optimistic with no explanation of the projections, it will ring warning bells and cause the plan to be rejected.
2. Not Defining the Target Audience
No business will appeal to everyone. You must define your specific target market, present how you have made these assumptions and outline how you will specifically target this market.
Need help defining your target market and learning about primary and secondary market research? Small Business BC offers seminars on market research and one-on-one consultations with an in-house market research expert. Looking in Vancouver? Use Bizmap , an amazing market research tool, to help find the best location for your audience.
3. Over-Hype
You may believe your business idea is the next big thing but you need to be able to back-up your claim. Over-hyping your business idea and littering your plan with superlatives like hottest and greatest does not substantiate your product or service. Wow them with you business idea, research and financial plan, not with the words you think they want to hear.
4. Bad Research
All research must be double checked and substantiated. By using incorrect or out of date information you will discredit your business idea and the remainder of the plan.
5. No Focus on your Competition
Even if you think you have a ‘unique’ business idea and are sure that no other business like yours exists, check and double check. There is no such thing as no competition. Even if your business is one of kind, it comes down to the dollar; if your business didn’t exist, but the customers’ need still existed, where would they spend their money?
Equally if you highlight your competition too much the investor will worry that the business will not survive. Focus on your niche, what differentiates you from the competition, how you plan to compete in the marketplace and paint accurate picture of what the industry is like now and where you see it going in the future.
6. Hiding Your Weaknesses
Do not hide your weaknesses but do not highlight them too much. Every business has its weaknesses but by hiding them or highlighting them too much you will put off the investor. The only way to address these weaknesses is to include a detailed strategy of how you plan address these problems.
7. Not Knowing your Distribution Channels
Have a secure plan how to provide your service or distribute your product. Including all possible channels in your plan without substantiating why these are the correct channels and how they will reach your target market will make the investor assume that you have just thought of the list off the top of your head. The ability to articulate your strategy about how your product or service will reach your client is vital.
8. Including Too Much Information
If you were an investor, would you want to read a 200 page business plan? Most investors have a mental checklist of 10 to 12 points that they are looking for in the plan, everything else just gets in the way. The purpose of your plan is not to demonstrate the depth of your knowledge but to focus on the key elements of your business. Clear and concise writing is always appreciated and if you have additional information which you would like to include in the document, create an appendix.
9. Being Inconsistent
Highlighting different target markets, quoting conflicting statistics or having competing strategies within a plan will make an investor challenge whether you know your business and its market well enough. Sections of plans are often written on different days or by different people and then pasted together into one document resulting in inconsistency. Take time to review each section of your business plan.
10. One Writer, One Reader
Make sure you ask several people to review your plan before submitting it. It is easy for you to glaze over spelling mistakes and grammatical errors because you know the information inside and out. Another set of eyes will help your plan to look more professional and ensure that it reads correctly.
Need Help Reviewing Your Business Plan?
Small Business BC’s business advisors can objectively review you business plan and provide feedback with resources of how to improve the plan through our Business Plan Review Advisory Service .
No matter what stage of business, or what problem you face, Small Business BC offers a range of webinars , our on-demand E-Learning education , and one-on-one advisory sessions to suit any business.
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Top 10 Business Plan Mistakes
When it comes to creating a business plan that attracts investors, these tips will help you get it right the first time.
Nov 28, 2005
Every business should have a business plan. Unfortunately, despite the fact that many of the underlying businesses are viable, the vast majority of plans are hardly worth the paper they're printed on. Most "bad" business plans share one or more of the following problems:
1. The plan is poorly written. Spelling, punctuation, grammar and style are all important when it comes to getting your business plan down on paper. Although investors don't expect to be investing in a company run by English majors, they are looking for clues about the underlying business and its leaders when they're perusing a plan. When they see one with spelling, punctuation and grammar errors, they immediately wonder what else is wrong with the business. But since there's no shortage of people looking for capital, they don't wonder for long--they just move on to the next plan.
Before you show your plan to a single investor or banker, go through every line of the plan with a fine-tooth comb. Run your spell check--which should catch spelling and punctuation errors, and have someone you know with strong "English teacher" skills review it for grammar problems.
Style is subtler, but it's equally important. Different entrepreneurs write in different styles. If your style is "confident," "crisp," "clean," "authoritative" or "formal," you'll rarely have problems. If, however, your style is "arrogant," "sloppy," "folksy," "turgid" or "smarmy," you may turn off potential investors, although it's a fact that different styles appeal to different investors. No matter what style you choose for your business plan, be sure it's consistent throughout the plan, and that it fits your intended audience and your business. For instance, I once met a conservative Midwest banker who funded an Indian-Japanese fusion restaurant partly because the plan was--like the restaurant concept--upbeat, trendy and unconventional.
2. The plan presentation is sloppy. Once your writing's perfect, the presentation has to match. Nothing peeves investors more than inconsistent margins, missing page numbers, charts without labels or with incorrect units, tables without headings, technical terminology without definitions or a missing table of contents. Have someone else proofread your plan before you show it to an investor, banker or venture capitalist. Remember that while you'll undoubtedly spend months working on your plan, most investors won't give it more than 10 minutes before they make an initial decision about it. So if they start paging through your plan and can't find the section on "Management," they may decide to move on to the next, more organized plan in the stack.
3. The plan is incomplete. Every business has customers, products and services, operations, marketing and sales, a management team, and competitors. At an absolute minimum, your plan must cover all these areas. A complete plan should also include a discussion of the industry, particularly industry trends, such as if the market is growing or shrinking. Finally, your plan should include detailed financial projections--monthly cash flow and income statements, as well as annual balance sheets--going out at least three years.
4. The plan is too vague. A business plan is not a novel, a poem or a cryptogram. If a reasonably intelligent person with a high school education can't understand your plan, then you need to rewrite it. If you're trying to keep the information vague because your business involves highly confidential material, processes or technologies, then show people your executive summary first (which should never contain any proprietary information). Then, if they're interested in learning more about the business, have them sign noncompete and nondisclosure agreements before showing them the entire plan. [Be forewarned, however: Many venture capitalists and investors will not sign these agreements since they want to minimize their legal fees and have no interest in competing with you in any case.]
5. The plan is too detailed. Do not get bogged down in technical details! This is especially common with technology-based startups. Keep the technical details to a minimum in the main plan--if you want to include them, do so elsewhere, say, in an appendix. One way to do this is to break your plan into three parts: a two- to three-page executive summary, a 10- to 20-page business plan and an appendix that includes as many pages as needed to make it clear that you know what you're doing. This way, anyone reading the plan can get the amount of detail he or she wants.
6. The plan makes unfounded or unrealistic assumptions. By their very nature, business plans are full of assumptions. The most important assumption, of course, is that your business will succeed! The best business plans highlight critical assumptions and provide some sort of rationalization for them. The worst business plans bury assumptions throughout the plan so no one can tell where the assumptions end and the facts begin. Market size, acceptable pricing, customer purchasing behavior, time to commercialization--these all involve assumptions. Wherever possible, make sure you check your assumptions against benchmarks from the same industry, a similar industry or some other acceptable standard. Tie your assumptions to facts.
A simple example of this would be the real estate section of your plan. Every company eventually needs some sort of real estate, whether it's office space, industrial space or retail space. You should research the locations and costs for real estate in your area, and make a careful estimate of how much space you'll actually need before presenting your plan to any investors or lenders.
7. The plan includes inadequate research. Just as it's important to tie your assumptions to facts, it's equally important to make sure your facts are, well, facts. Learn everything you can about your business and your industry--customer purchasing habits, motivations and fears; competitor positioning, size and market share; and overall market trends. You don't want to get bogged down by the facts, but you should have some numbers, charts and statistics to back up any assumptions or projections you make. Well-prepared investors will check your numbers against industry data or third party studies--if your numbers don't jibe with their numbers, your plan probably won't get funded.
8. You claim there's no risk involved in your new venture. Any sensible investor understands there's really no such thing as a "no risk" business. There are always risks. You must understand them before presenting your plan to investors or lenders. Since a business plan is more of a marketing tool than anything else, I'd recommend minimizing the discussion of risks in your plan. If you do mention any risks, be sure to emphasize how you'll minimize or mitigate them. And be well prepared for questions about risks in later discussions with investors.
9. You claim you have no competition. It's absolutely amazing how many potential business owners include this statement in their business plans: "We have no competition."
If that's what you think, you couldn't be further from the truth. Every successful business has competitors, both direct and indirect. You should plan for stiff competition from the beginning. If you can't find any direct competitors today, try to imagine how the marketplace might look once you're successful. Identify ways you can compete, and accentuate your competitive advantages in the business plan.
10. The business plan is really no plan at all. A good business plan presents an overview of the business--now, in the short term, and in the long term. However, it doesn't just describe what the business looks like at each of those stages; it also describes how you'll get from one stage to the next. In other words, the plan provides a "roadmap" for the business, a roadmap that should be as specific as possible. It should contain definite milestones--major targets that have real meaning for your business. For instance, reasonable milestones might be "signing the 100th client" or "producing 10,000 units of product." The business plan should also outline all the major steps you need to complete to reach each milestone.
Smoothing Out the Rough Spots Once you know what mistakes not to make, there are still a few steps you need to take to make your business plan "bulletproof." Be sure you . . .
- Think it through. You might have a great idea, but have you carefully mapped out all the steps you'll need to take to make the business a reality? Think about building your management team, hiring salespeople, setting up operations, getting your first customer, protecting yourself from lawsuits, outmaneuvering your competition, and so on. Think about cash flow and what measures you can take to minimize your expenses and maximize your revenue.
- Do your research. Investigate everything you can about your proposed business before you start writing your business plan--and long before you start the business. You'll also need to continue your research while you write the business plan, since inevitably, things will change as you uncover critical information. And while you're researching, be sure to consult multiple sources since many times the experts will disagree.
- Research your potential customers and competitors. Is your product or service something people really want or need, or is it just "cool"? Study your market. Is it growing or shrinking? Could some sort of disruptive technology or regulatory change alter the market in fundamental ways? Why do you think people will buy your product or service? If you don't have any customers or clients yet, you'll need to convince investors that you have something people really want or need, and more important, that they'll buy it at the price you expect.
- Get feedback. Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You'll quickly find that almost everyone thinks they're an expert and they all could do a better job than you. This may be annoying, but it's just part of the feedback process. You'll know when you're done when you've heard the same questions and criticisms again and again and have a good answer to almost everything anyone can throw at you.
- Hire professional help. Find a professional you trust to help guide you through the entire process, fill in knowledge gaps (for instance, if you know marketing but not finance, you should hire a finance expert), provide additional, unbiased feedback, and package your plan in an attractive, professional format.
Writing a business plan is hard work--many people spend a year or more writing their plan. In the early, drafting stages, business plan software can be very helpful. But the hard part is developing a coherent picture of the business that makes sense, is appealing to others and provides a reasonable road map for the future. Your products, services, business model, customers, marketing and sales plan, internal operations, management team and financial projections must all tie together seamlessly. If they don't, you may not ever get your business off the ground.
Andrew Clarke is the CEO of Ground Floor Partners , a business consulting firm that helps early-stage, small and middle-market businesses grow through design and execution of sound business strategies.
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6 Expensive Consequences of Skipping a Business Plan
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Of course, running a business without a strategic plan will also cost you frustration and stress and will inhibit you from reaching your fullest potential.
But, as a business coach I’ve spent time with all kinds of leaders and businesses, and know that some of the biggest consequences of forgoing a business plan are financial.
Lack of Direction with Resources
If you don’t have a solid business strategy, you don’t have an efficient plan for using your resources. You may spend money on things like software, office space, supplies and even employee salaries without a clear purpose, which often means those resources are wasted because you aren’t using them to their fullest potential.
What’s more is if you don’t have a plan, you won’t know what kinds of resources you need, causing you to throw money at business obstacles without finding a real solution.
Wasted Time Spent Drifting
Time is money. When you don’t have a plan your time isn’t as lucrative as it could be because you will spend much of it “drifting.” In other words, your team members won’t have clear direction, you won’t know which opportunities to spend your time on and your entire business will suffer because you efforts aren’t coordinated or purposeful.
One of the biggest reasons to create a business plan is to give yourself, and your team, direction. A good plan will have goals and step-by-step plans for achieving them.
Time Spent on the Wrong Path
I’ve worked with a lot of good leaders who know how to lead teams of people, but who have found themselves on the wrong path. Instead of drifting, they do the opposite. They pick a direction, without doing much research or without having a plan in place, and then spend too much time pursuing something that doesn’t bring a return.
Unfortunately, without a business plan it’s hard to know where your efforts should be spent. But with a plan, you’ve defined each person’s role in a way that will make the entire team successful.
Missed Opportunities for Growth
Without a plan, you will be so distracted trying to figure things out as they come that you won’t see valuable opportunities for growth. You won’t have the resources, time or focus to find ways your business can grow and become even more lucrative.
This can bring major financial consequences because you will spend time spinning your wheels and using resources inefficiently, trying to solve problems while never pulling ahead or reaching higher levels of success.
Inability to Cover Overhead Expenses
All businesses have overhead expenses. In some cases, these may be very minimal, if you’re starting a home-based business for example. But if you are running a small business or if your startup is growing and demanding more resources, you’ll find overhead expenses are a major part of your financial planning.
A good plan will help you prepare to cover these expenses by outlining exactly what resources you will need to be successful and how you will financially prepare to pay for them.
Failing to Turn a Profit
Finally, and perhaps most importantly, your chances of turning a profit are slim when you don’t have a business plan. Without clear direction, plans to overcome potential challenges, delegated tasks and a list of necessary resources and how they will be used, your business will lack organization, which translates into financial problems.
On the other hand, with a strong plan you will be prepared to steadily increase your profit, making your business more financially stable and paving the way for growth and more opportunities.
I help businesses in all kinds of industries create business plans that are designed to bring both organizational and financial success. If you would like some one-on-one help creating a business plan, or improving the one you already have, contact me .
About the author
Deborah MacDonald
As a social business entrepreneur, my passion is helping people build a business where profit and purpose come first. I teach people how to succeed online and enjoy the lifestyle of their dreams.
FREE E-Book 7 Secrets To Achieving Your Dream Lifestyle
What Are the Key Elements of a Business Plan?
- Small Business
- Business Planning & Strategy
- Elements of Business Plans
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Final Summary for a Marketing Plan
A financial plan vs. a pro-forma cash flow budget, what is the overall purpose of a business plan.
- What Are the Basic Components of a Business Plan?
- How to Compose a Small Business Plan
The key elements of a business plan are much the same, whether for a large business or a small business. This doesn't mean your business plan must be as thick as that of a Fortune 500 company, but it should include the same elements of a business plan found in business giants such as Amazon and Apple.
Executive Summary
An executive summary of your business plan provides the reader with a snapshot of your company profile and goals, according to the Small Business Administration . It's often the most neglected element of the business plan, but it may be the most important, because it tells investors why your business will be successful in very few words.
It should include a mission statement, a brief history of your business, and the highlights of your company's growth, your product or service and a summary of future plans. It also should explain why you are seeking financing and information about your banking and currency investors.
Product Description
The description of your product or service is one of the biggest components of a business plan. It begins with the way your product or service affects your customers. This description includes details concerning the product life cycle, any intellectual property issues, and any research and development activities planned. Include mention of any patents or proprietary components to your product (or service), as that is your moat.
Market Analysis
Market analysis describes your industry, gives information about the target market for your product or service and describes how your product or service will meet the needs of the target market. It discusses the size of the target market, the market share you hope to gain, the pricing of your product or service and your projected gross margin.
It discusses your competitors – who they are what part of the market they hold and their weaknesses and strengths. This section also discusses the barriers to your entry into the market and whether or not there are regulatory constraints that will impede your entry into the market.
Company Information
The section on your company should describe what you do and what needs your company can fulfill within the marketplace. This section also explains how your company's product or services specifically satisfy these needs. This section also should include a list of your customers and explain why your business will be a product or service will be successful.
Company Organization
The organization of your company is critical to investors who will want to know if they are lending to a corporation, a partnership or a sole proprietors. Regardless of your company's organization, lenders will want to know who is in charge what experience they have in this business, the extent of their ownership, and their record of accomplishment.
Each member of management should provide a resume, which may be included in an appendix to the business plan, that includes unique experience, past record of accomplishment, any industry recognition or community involvement, how long they have been involved with your company, and their salary. The names of the members of the Board of Directors along with their position on the board, the extent of their involvement with your company, their general background, and any contribution to the company's success should be discussed.
Marketing and Sales
The marketing and sales element of the business plan should discuss your business's marketing penetration strategy, a strategy for growing the business once market penetration has been achieved, the subsequent channels of distribution and a communications strategy suitable for reaching your customers. This also should include an overall sales strategy that outlines your selling activities.
Business Financials
You'll have to provide complete financial information as part of your business plan, says Entrepreneur . This is particularly important if you are making a request for funding. The financial data will include both historical information that is company income statements balance sheets and cash flows for the last three to five years. This section also will include financial projections on the impact of the new product the new service or the cash infusion.
Remember to format your business plan sections clearly and carefully. Presentation is important when showing your business plan to prospective business partners and investors.
- U.S. Small Business Administration: The Essential Elements of a Good Business Plan
- Entrepreneur: Elements of a Business Plan
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Jean Murray, MBA, Ph.D., is an experienced business writer and teacher. She has taught at business and professional schools for over 35 years.
Did you know that most small businesses don't have a business plan? Those owners who do create a plan often forget the most important section of the plan. We'll get to that in a minute, but first, why it's important to create a business plan for your new business startup.
Why Every Small Business Needs a Business Plan
A business plan is an essential tool when you are starting a business. Creating a business plan is a worthwhile activity for new business owners. A business plan:
- Can help you create the structure of your new business, so you know who is doing what and what you are producing and selling.
- Can give you a roadmap for the future of your business.
- Can also help you get a startup loan.
What's Missing from Many Business Plans
Many business plans forget one crucial factor:
How are you going to get the money to run your business?
Everything costs money. And don't forget time is money. When you forget the money part, you not only risk losing the interest of a potential lender, but you risk having your business fail.
This means creating a business budget, in the same way, you create a personal budget. You need the financial spreadsheets to show a lender how you will spend the money on sales, and, more important, how you will get the money. "Getting the money" means having enough cash (not profit) to pay back your lender. Let's look at the typical business plan.
What does a business plan include?
Every business plan should include several main sections:
- A description of the business. What will be produced and sold?
- A description of the owners and management. Who will be running the business? What expertise do they have?
- A marketing plan, showing how the products and/or services of the business will be marketed, and how the business will get customers.
- A financial plan, showing all the costs and expenses of the new business, including not only cost of goods sold and costs of products or services and paying employees, but also expenses for marketing and promotion activities.
This last part - the financial plan - is often missed or is very briefly explained. But this part is probably the most important because it gives the new business owner the information needed to set up and evaluate sales and marketing activities. Having a great financial plan, including costs of everything, also helps the business owner sell the business to lenders and funding sources.
What to Include in a Financial Plan
Several financial statementsshould be included in your business plan. Income Statement is a projected (future estimated) spreadsheet showing all the income and the expenses of the business over a period of time. This is also called a "P&L (profit and loss) statement. If you are applying for a loan, you will probably also need a "sources and uses of funds" statement that shows how much money you will need and where it will come from, including your own personal funds.
What Expenses to Include in Your Business Plan
To make sure your income statement is as realistic as possible, you should include all possible expenses. Some expenses business owners forget:
- Expenses for marketing and advertising events. If you are having an event, there is always an expense, even if it's just for food/catering or for rental of a facility.
- Expenses for small items like a coffee machine for the office or decorations. Even if you think you will not need these things, you'd be surprised at how often businesses break their budgets with small things.
- Bank charges, fees, and interest on loans. These add up quickly.
- Miscellaneous costs. Add in a generous amount of unforeseen and unexpected expenses.
:max_bytes(150000):strip_icc():format(webp)/GettyImages-735964243-5c2f781d46e0fb0001498b13.jpg "which part of the business plan may be omitted")
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Which part of the business plan may be omitted? what would be the consequences if this is omitted
The management team chapter of a business plan is critical for entrepreneurs seeking investment but can be omitted for virtually any other type of plan. The management team section should include relevant team bios that explain why your management personnel is made up of the right people for the roles.
note : i only answered the first question .
New questions in English
5 things that can make your business plan fail — and how to avoid them
Creating a business plan is an essential step in getting a new company off the ground. Writing this document helps founders not only evaluate their goals, but also communicate them to other people, especially investors. A good business plan can be the difference between funding your dreams on business credit cards and personal savings or getting support from a financial institute or business partner. Unfortunately, many business plans fail in this aim. Understanding common pitfalls and how to avoid them ensures you get the backing you need to develop your business idea.
Here are 5 things that can make your business plain fail — and how to avoid them.
1. Failing to define what your specialty is
Thousands of startups and small businesses pitch their business plans, and it’s important to stand out in the crowd to improve your chances of securing an investment. An effective way to do this is by clearly defining what makes your company unique, according to the U.S. Small Business Administration . This requires being clear about what your company offers in terms of products, services, unique skill sets, and experience. For example, if you’re starting a new restaurant, do you cater to specific types of clients, or do you have a renowned chef in the kitchen? When you can identify a niche in which you excel, you improve your chances of success.
2. Omitting vital information
Learn more: Best credit cards of 2023
The process of writing a business plan is as important as the plan itself, according to SCORE, a nonprofit association that works in partnership with the SBA to provide free services and advice for entrepreneurs. Writing the plan encourages you to think about your business in a systematic way. The SBA recommends covering the following areas:
- An executive summary to give an overview of your plan
- A company description, including what makes your business unique
- Market analysis to show you’ve researched the industry and your competitors
- Details of your business and management structure
- Details on what products and services you provide
- Marketing and sales strategies
- A funding request, with financial projections to support that request and an explanation of how these figures impact the business
3. Insufficient understanding of finances
Investors need to feel confident their money is in the hands of someone who understands the world of business and finance, and not just their particular line of work. If you don’t understand terms such as APR or lack a thorough grasp of sales figures, potential investors will balk no matter how good the business idea is. Solid business plans include significant research and budgeting and cover sales strategies, contingency plans for additional funding, and firm details on how much it costs to start the business and keep it running. Any funding requests need to be backed up with detailed financial projections to help investors understand the sources from which the return on investment will come, and a clear definition of how long that will take.
4. Failing to maintain a living document
A business plan projects three to five years ahead and acts like a roadmap that defines a company’s growth and development. Creating the document is an important first step for a startup, but once the business is established, the plan becomes no less important. The plan can help generate extra funding, develop new business arrangements with other companies, take on high-level employees, or identify and rectify inefficiencies in your company structure.
That’s why it’s necessary to make changes to the plan by creating new goals or correcting mistakes. A truly valuable plan evolves along with the company, according to Harvard Business Review. Making changes when necessary keeps the plan alive and helps to drive the business forward.
5. Lack of determination
If you want someone to invest in your idea, it’s important to invest in it, too. Giving up the first time a pitch falls on deaf ears doesn’t lead to new opportunities. If an investor refuses to get on board, it’s a good idea to ask them exactly why and then use that information to your advantage in a subsequent pitch. That kind of input can be invaluable to achieving your business goals.
Remember, most business credit cards require a personal guarantee, which can affect your personal credit. You can view two of your scores for free on Credit.com.
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This article originally appeared on Credit.com .
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How To Write the Perfect Business Plan in 9 Steps (2023)
- by Desirae Odjick
- Dec 3, 2022
- 25 minute read
A great business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need in the way of resources, and evaluate the viability of your idea or your growth plans before you start a business .
Not every successful business launches with a formal business plan, but many founders find value in taking time to step back, research their idea and the market they’re looking to enter, and understand the scope and the strategy behind their tactics. That’s where writing a business plan comes in.
Table of Contents
What is a business plan?
Why write a business plan, business plan formats, how to write a business plan in 9 steps, tips for creating a small business plan, common mistakes when writing a business plan, prepare your business plan today, business plan faq.
A business plan is a document describing a business, its products or services, how it earns (or will earn) money, its leadership and staffing, its financing, its operations model, and many other details essential to its success.
We had a marketing background but not much experience in the other functions needed to run a fashion ecommerce business, like operations, finance, production, and tech. Laying out a business plan helped us identify the “unknowns” and made it easier to spot the gaps where we’d need help or, at the very least, to skill up ourselves. Jordan Barnett, Kapow Meggings
Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans are commonly associated with getting a loan. But there are several compelling reasons to consider writing a business plan, even if you don’t need funding.
- Strategic planning: Writing out your plan is an invaluable exercise for clarifying your ideas and can help you understand the scope of your business, as well as the amount of time, money, and resources you’ll need to get started.
- Evaluating ideas: If you’ve got multiple ideas in mind, a rough business plan for each can help you focus your time and energy on the ones with the highest chance of success.
- Research: To write a business plan, you’ll need to research your ideal customer and your competitors—information that will help you make more strategic decisions.
- Recruiting: Your business plan is one of the easiest ways to communicate your vision to potential new hires and can help build their confidence in the venture, especially if you’re in the early stages of growth.
- Partnerships: If you plan to approach other companies to collaborate, having a clear overview of your vision, your audience, and your business strategy will make it much easier for them to identify whether your business is a good fit for theirs—especially if they’re further along than you in their growth trajectory.
- Competitions: There are many business plan competitions offering prizes such as mentorships, grants, or investment capital. To find relevant competitions in your industry and area, try Googling “business plan competition + [your location]” and “business plan competition + [your industry].”
If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, a business plan is an excellent starting point.
Free: Business Plan Template
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Business plans can span from one page to multiple pages with detailed graphs and reports. There’s no one way to create a business plan. The goal is to convey the most important information about your company for readers.
Common types of business plans we see include, but are not limited to, the following:
- Traditional. These are the most common business plans. Below, we’ll cover the standard elements of a business plan and go into detail for each section. Traditional business plans take longer to write and can be dozens of pages long. Venture capitalist firms and lenders ask for this plan.
- Lean. A lean business plan is a shorter version of a traditional business plan. It follows the same format, but only includes the most important information. Businesses use this plan to onboard new hires or modify existing plans for a specific target market.
- Nonprofit. A nonprofit business plan is for any entity that operates for public or social benefit. It covers everything you’ll find in a traditional business plan, plus a section describing the impact the company plans to make. For example, a speaker and headphone brand that aims to help people with hearing disabilities. Donors often request this plan.
Check out real-world examples of different business plans by reading The Road to Success: Business Plan Examples to Inspire Your Own .
- Draft an executive summary
- Describe your company
- Perform a market analysis
- Outline the management and organization
- List your products and services
- Perform customer segmentation
- Define a marketing plan
- Provide a logistics and operations plan
- Make a financial plan
Few things are more intimidating than a blank page. Starting your business plan with a structured outline and key elements for what you’ll include in each section is the best first step you can take.
Since an outline is such an important step in the process of writing a business plan, we’ve put together a high-level overview you can copy into your blank document to get you started (and avoid the terror of facing a blank page). You can also start with a free business plan template and use it to inform the structure of your plan.
Once you’ve got your business plan outline in place, it’s time to fill it in. We’ve broken it down by section to help you build your plan step by step.
1. Draft an executive summary
A good executive summary is one of the most crucial sections of your plan—it’s also the last section you should write.
The executive summary’s purpose is to distill everything that follows and give time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your business that persuades them to read further.
Again, it’s a summary, so highlight the key points you’ve uncovered while writing your plan. If you’re writing for your own planning purposes, you can skip the summary altogether—although you might want to give it a try anyway, just for practice.
An executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing in all of the salient information a bit stressful—but it’s not impossible. Here’s what your business plan’s executive summary should include:
- Business concept. What does your business do?
- Business goals and vision. What does your business want to do?
- Product description and differentiation. What do you sell, and why is it different?
- Target market. Who do you sell to?
- Marketing strategy. How do you plan on reaching your customers?
- Current financial state. What do you currently earn in revenue?
- Projected financial state. What do you foresee earning in revenue?
- The ask. How much money are you asking for?
- The team. strong> Who’s involved in the business?
2. Describe your company
This section of your business plan should answer two fundamental questions: who are you, and what do you plan to do? Answering these questions with a company description provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment bet. For example, clean makeup brand Saie shares a letter from its founder on the company’s mission and why it exists.
Clarifying these details is still a useful exercise, even if you’re the only person who’s going to see them. It’s an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies.
Here are some of the components you should include in your company description:
- Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or incorporated company?)
- Your business model
- Your industry
- Your business’s vision, mission, and value proposition
- Background information on your business or its history
- Business objectives, both short and long term
- Your team, including key personnel and their salaries
Some of these points are statements of fact, but others will require a bit more thought to define, especially when it comes to your business’s vision, mission, and values. This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
To define your values, think about all the people your company is accountable to, including owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge.
Once you know your values, you can write a mission statement . Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single sentence.
As an example, Shopify’s mission statement is “Making commerce better for everyone.” It’s the “why” behind everything we do and clear enough that it needs no further explanation.
What impact do you envision your business having on the world once you’ve achieved your vision?
Next, craft your vision statement: what impact do you envision your business having on the world once you’ve achieved your vision? Phrase this impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise.
Finally, your company description should include both short- and long-term goals. Short-term goals, generally, should be achievable within the next year, while one to five years is a good window for long-term goals. Make sure all your goals are SMART: specific, measurable, attainable, realistic, and time-bound.
3. Perform a market analysis
No matter what type of business you start, it’s no exaggeration to say your market can make or break it. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. If you choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale.
Market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it.
This is why market research and analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it. It should include an overview of how big you estimate the market is for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan.
How big is your potential market?
The potential market is an estimate of how many people need your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as possible to validate your estimated potential market.
Since this can be a daunting process, here are some general tips to help you begin your research:
- Understand your ideal customer profile . If you’re targeting millennial consumers in the US, you first can look for government data about the size of that group. You also could look at projected changes to the number of people in your target age range over the next few years.
- Research relevant industry trends and trajectory. If your product serves retirees, try to find data about how many people will be retiring in the next five years, as well as any information you can find about consumption patterns among that group. If you’re selling fitness equipment, you could look at trends in gym memberships and overall health and fitness among your target audience or the population at large. Finally, look for information on whether your general industry is projected to grow or decline over the next few years.
- Make informed guesses. You’ll never have perfect, complete information about the size of your total addressable market. Your goal is to base your estimates on as many verifiable data points as necessary for a confident guess.
Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry.
SWOT analysis
A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best things about your company? What are you not so good at? What market or industry shifts can you take advantage of and turn into opportunities? Are there external factors threatening your ability to succeed?
These breakdowns often are presented as a grid, with bullet points in each section breaking down the most relevant information—so you can probably skip writing full paragraphs here. Strengths and weaknesses—both internal company factors—are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market.
Here’s an example:
Free: SWOT Analysis Template
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Competitive analysis.
There are three overarching factors you can use to differentiate your business in the face of competition:
- Cost leadership. You have the capacity to maximize profits by offering lower prices than the majority of your competitors. Examples include companies like Mejuri and Endy .
- Differentiation. Your product or service offers something distinct from the current cost leaders in your industry and banks on standing out based on your uniqueness. Think of companies like Knix and Qalo .
- Segmentation. You focus on a very specific, or niche, target market, and aim to build traction with a smaller audience before moving on to a broader market. Companies like TomboyX and Heyday Footwear are great examples of this strategy.
To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape.
You’ll always have competition in the market, even with an innovative product, so it’s important to include a competitive overview in your business plan. If you’re entering an established market, include a list of a few companies you consider direct competitors and explain how you plan to differentiate your products and business from theirs.
You’ll always have competition in the market, even with an innovative product.
For example, if you’re selling jewelry, your competitive differentiation could be that, unlike many high-end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your customers.
If you’re entering a market where you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours. For example, if you’re selling an innovative new piece of kitchen equipment, it’s too easy to say that because your product is new, you have no competition. Consider what your potential customers are doing to solve the same problems your product solves.
4. Outline management and organization
The management and organization section of your business plan should tell readers about who’s running your company. Detail the legal structure of your business. Communicate whether you’ll incorporate your business as an S corporation or create a limited partnership or sole proprietorship.
If you have a management team, use an organizational chart to show your company’s internal structure, including the roles, responsibilities, and relationships between people in your chart. Communicate how each person will contribute to the success of your startup.
5. List your products and services
Your products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers.
If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide additional information on each. For example, bag shop BAGGU sells a large selection of different types of bags, in addition to home goods and other accessories. Its business plan would list out those bags and key details about each.
Describe new products you’ll launch in the near future and any intellectual property you own. Express how they’ll improve profitability.
It’s also important to note where products are coming from—handmade crafts are sourced differently than trending products for a dropshipping business, for instance.
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6. perform customer segmentation.
Your ideal customer, also known as your target market, is the foundation of your marketing plan , if not your business plan as a whole. You’ll want to keep this person in mind as you make strategic decisions, which is why an overview of who they are is important to understand and include in your plan.
To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes:
- Where they live
- Their age range
- Their level of education
- Some common behavior patterns
- How they spend their free time
- Where they work
- What technology they use
- How much they earn
- Where they’re commonly employed
- Their values, beliefs, or opinions
This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on who your customers are and what they value.
For example, a college student has different interests, shopping habits, and pricing sensitivity than a 50-year-old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer.
7. Define a marketing plan
Your marketing efforts are directly informed by your ideal customer. Your marketing plan should outline your current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal customer.
If you’re planning to invest heavily in > Instagram marketing , for example, it might make sense to include whether Instagram is a leading platform for your audience—if it’s not, that might be a sign to rethink your marketing plan.
Most marketing plans include information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience.
- Price. How much do your products cost, and why have you made that decision?
- Product. What are you selling and how do you differentiate it in the market?
- Promotion. How will you get your products in front of your ideal customer?
- Place. Where will you sell your products?
Promotion may be the bulk of your plan since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix.
8. Provide a logistics and operations plan
Logistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were seeking investment.
Cover all parts of your planned operations, including:
- Suppliers. Where do you get the raw materials you need for production, or where are your products produced?
- Production. Will you make, manufacture, wholesale , or dropship your products? How long does it take to produce your products and get them shipped to you? How will you handle a busy season or an unexpected spike in demand?
- Facilities. Where will you and any team members work? Do you plan to have a physical retail space? If yes, where?
- Equipment. What tools and technology do you require to be up and running? This includes everything from computers to lightbulbs and everything in between.
- Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you use a third-party fulfillment partner?
- Inventory. How much will you keep on hand, and where will it be stored? How will you ship it to partners if required, and how will you approach inventory management ?
This section should signal to your reader that you’ve got a solid understanding of your supply chain and strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you plan to break even on your initial spending.
9. Make a financial plan
No matter how great your idea is, and regardless of the effort, time, and money you invest, a business lives or dies based on its financial health. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future.
The level of detail required in your financial plan will depend on your audience and goals, but typically you’ll want to include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include financial data and projections.
Here’s a spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections if needed.
Income statement
Your income statement is designed to give readers a look at your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information.
Balance sheet
Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own), and on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity, which is calculated as:
Assets - Liabilities = Equity
Cash flow statement
Your cash flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid.
When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent .
It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required. Here’s a full guide to working through cash-flow projections for your business.
Download your copy of these templates to build out these financial statements for your business plan.
Know your audience
When you know who will be reading your plan—even if you’re just writing it for yourself to clarify your ideas—you can tailor the language and level of detail to them. This can also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as impactful.
Have a clear goal
You’ll need to put in more work and deliver a more thorough plan if your goal is to secure funding for your business versus working through a plan for yourself or even your team.
Invest time in research
Sections of your business plan will primarily be informed by your ideas and vision, but some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re selling to, whether there’s demand for your products, and who else is selling similar products or services.
Keep it short and to the point
No matter who you’re writing for, your business plan should be short and readable—generally no longer than 15 to 20 pages. If you do have additional documents you think may be valuable to your audience and your goals, consider adding them as appendices.
Keep the tone, style, and voice consistent
This is best managed by having a single person write the plan or by allowing time for the plan to be properly edited before distributing it.
Use a business plan software
Writing a business plan isn’t the easiest task for business owners. But it’s important for anyone starting or expanding a business. Fortunately, there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan software also have templates and tutorials to help you finish a comprehensive plan in hours, rather than days.
A few curated picks include:
- LivePlan : the most affordable option with samples and templates
- Bizplan : tailored for startups seeking investment
- GoSmallBiz : budget-friendly option with industry-specific templates
For a more in-depth look at the available options, read Get Guidance: 6 Business Plan Software to Help Write Your Future .
Other articles on business plans would never tell you what we’re about to tell you: your business plan can fail. The last thing you want is for time and effort to go down the drain. Avoid these common mistakes:
- Bad business idea. Not every idea is going to win. Sometimes your idea may be too risky and you won’t be able to get funding for it. Other times it’s too expensive or there’s no market. Aim for small business ideas that require little money and bypass traditional startup costs.
- No exit strategy. Investors reading your business plan want to know one thing: will your venture make them money? If you don’t show an exit strategy, or a plan for them to leave the business with maximum profits, you’ll have little luck finding capital.
- Unbalanced teams. A great product is the cost of entry to starting a business. But an incredible team will take it to the top. Unfortunately, many business owners overlook a balanced team. They assume readers want to see potential profits, without worrying about how you’ll get it done. If you’re pitching a new software idea, it makes sense to have at least one developer or IT specialist on your team.
- Missing financial projections. Your numbers are the most interesting part for readers. Don’t leave out your balance sheet, cash flow statements, P&L statements, and income statements. Include your break-even analysis and return-on-investment calculations to create a successful business plan.
- Spelling and grammar errors. Some businesses think hiring a professional editor is overkill. The reality is, all the best organizations have an editor review their documents. If someone spots typos while reading your business plan, how can they believe you’ll run a successful company?
Read through the following business plan example. You can download a copy in Microsoft Word or Google Docs and use it to inspire your own business planning.
Download sample business plan example (.doc)
A business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether you’ve written a business plan for a new online business idea , a retail storefront, growing your established business, or purchasing an existing business , you now have a comprehensive guide and the information you need to help you start working on the next phase of your own business.
Illustrations by Rachel Tunstall
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How do i write a business plan.
- Executive summary
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations
- Financial plan
What is a good business plan?
What are the 3 main purposes of a business plan, what are the different types of business plans, about the author.
Desirae Odjick
Desirae is a senior product marketing manager at Shopify, and has zero chill when it comes to helping entrepreneurs grow their businesses.
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The company overview is often omitted from internal plans. Team · The management team chapter of a business plan is critical for entrepreneurs seeking
10 Most Forgotten Items in Business Plans · Executive Summary · Competitive Review · Originality and Innovation · Cash Flow Analysis · Business Goals.
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plan can actually bring financial consequences. It can bring your business down and cost you resources, which will make it harder to succeed and forcing you to
It's often the most neglected element of the business plan, but it may be the most important, because it tells investors why your business will be
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The management team chapter of a business plan is critical for entrepreneurs seeking investment but can be omitted for virtually any other type of plan.
Solid business plans include significant research and budgeting and cover sales strategies, contingency plans for additional funding, and firm
Promotion may be the bulk of your plan since you can more readily dive into tactical details, but the other three areas should be covered at