advantages of preparing a business plan

Do you REALLY need a business plan?

The top three questions that I get asked most frequently as a professional business plan writer will probably not surprise you:

• What is the purpose of a business plan – why is it really required?
• How is it going to benefit my business if I write a business plan?
• Is a business plan really that important – how can I actually use it?

Keep reading to get my take on what the most essential advantages of preparing a business plan are—and why you may (not) need to prepare one.

The importance, purpose and benefit of a business plan is in that it enables you to validate a business idea, secure funding, set strategic goals – and then take organized action on those goals by making decisions, managing resources, risk and change, while effectively communicating with stakeholders.

Let’s take a closer look at how each of the important business planning benefits can catapult your business forward:

1. Validate Your Business Idea

The process of writing your business plan will force you to ask the difficult questions about the major components of your business, including:

• External: industry, target market of prospective customers, competitive landscape
• Internal: business model, unique selling proposition, operations, marketing, finance

Business planning connects the dots to draw a big picture of the entire business.

And imagine how much time and money you would save if working through a business plan revealed that your business idea is untenable. You would be surprised how often that happens – an idea that once sounded so very promising may easily fall apart after you actually write down all the facts, details and numbers.

While you may be tempted to jump directly into start-up mode, writing a business plan is an essential first step to check the feasibility of a business before investing too much time and money into it. Business plans help to confirm that the idea you are so passionate and convinced about is solid from business point of view.

Take the time to do the necessary research and work through a proper business plan. The more you know, the higher the likelihood that your business will succeed.

2. Set and Track Goals

Successful businesses are dynamic and continuously evolve. And so are good business plans that allow you to:

• Priorities: Regularly set goals, targets (e.g., sales revenues reached), milestones (e.g. number of employees hired), performance indicators and metrics for short, mid and long term
• Accountability: Track your progress toward goals and benchmarks
• Course-correction: make changes to your business as you learn more about your market and what works and what does not
• Mission: Refer to a clear set of values to help steer your business through any times of trouble

Essentially, business plan is a blueprint and an important strategic tool that keeps you focused, motivated and accountable to keep your business on track. When used properly and consulted regularly, it can help you measure and manage what you are working so hard to create – your long-term vision.

As humans, we work better when we have clear goals we can work towards. The everyday business hustle makes it challenging to keep an eye on the strategic priorities. The business planning process serves as a useful reminder.

3. Take Action

A business plan is also a plan of action . At its core, your plan identifies where you are now, where you want your business to go, and how you will get there.

Planning out exactly how you are going to turn your vision into a successful business is perhaps the most important step between an idea and reality. Success comes not only from having a vision but working towards that vision in a systematic and organized way.

A good business plan clearly outlines specific steps necessary to turn the business objectives into reality. Think of it as a roadmap to success. The strategy and tactics need to be in alignment to make sure that your day-to-day activities lead to the achievement of your business goals.

4. Manage Resources

A business plan also provides insight on how resources required for achieving your business goals will be structured and allocated according to their strategic priority. For example:

Large Spending Decisions

• Assets: When and in what amount will the business commit resources to buy/lease new assets, such as computers or vehicles.
• Human Resources: Objectives for hiring new employees, including not only their pay but how they will help the business grow and flourish.
• Business Space: Information on costs of renting/buying space for offices, retail, manufacturing or other operations, for example when expanding to a new location.

Cash Flow It is essential that a business carefully plans and manages cash flows to ensure that there are optimal levels of cash in the bank at all times and avoid situations where the business could run out of cash and could not afford to pay its bills.

Revenues v. Expenses In addition, your business plan will compare your revenue forecasts to the budgeted costs to make sure that your financials are healthy and the business is set up for success.

5. Make Decisions

Whether you are starting a small business or expanding an existing one, a business plan is an important tool to help guide your decisions:

Sound decisions Gathering information for the business plan boosts your knowledge across many important areas of the business:

• Industry, market, customers and competitors
• Financial projections (e.g., revenue, expenses, assets, cash flow)
• Operations, technology and logistics
• Human resources (management and staff)
• Creating value for your customer through products and services

Decision-making skills The business planning process involves thorough research and critical thinking about many intertwined and complex business issues. As a result, it solidifies the decision-making skills of the business owner and builds a solid foundation for strategic planning , prioritization and sound decision making in your business. The more you understand, the better your decisions will be.

Planning Thorough planning allows you to determine the answer to some of the most critical business decisions ahead of time , prepare for anticipate problems before they arise, and ensure that any tactical solutions are in line with the overall strategy and goals.

If you do not take time to plan, you risk becoming overwhelmed by countless options and conflicting directions because you are not unclear about the mission , vision and strategy for your business.

6. Manage Risk

Some level of uncertainty is inherent in every business, but there is a lot you can do to reduce and manage the risk, starting with a business plan to uncover your weak spots.

You will need to take a realistic and pragmatic look at the hard facts and identify:

• Major risks , challenges and obstacles that you can expect on the way – so you can prepare to deal with them.
• Weaknesses in your business idea, business model and strategy – so you can fix them.
• Critical mistakes before they arise – so you can avoid them.

Essentially, the business plan is your safety net . Naturally, business plan cannot entirely eliminate risk, but it can significantly reduce it and prepare you for any challenges you may encounter.

7. Communicate Internally

Attract talent For a business to succeed, attracting talented workers and partners is of vital importance.

A business plan can be used as a communication tool to attract the right talent at all levels, from skilled staff to executive management, to work for your business by explaining the direction and growth potential of the business in a presentable format.

Align performance Sharing your business plan with all team members helps to ensure that everyone is on the same page when it comes to the long-term vision and strategy.

You need their buy-in from the beginning, because aligning your team with your priorities will increase the efficiency of your business as everyone is working towards a common goal .

If everyone on your team understands that their piece of work matters and how it fits into the big picture, they are more invested in achieving the objectives of the business.

It also makes it easier to track and communicate on your progress.

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

8. Communicate Externally

Alliances If you are interested in partnerships or joint ventures, you may share selected sections of your plan with the potential business partners in order to develop new alliances.

Suppliers A business plan can play a part in attracting reliable suppliers and getting approved for business credit from suppliers. Suppliers who feel confident that your business will succeed (e.g., sales projections) will be much more likely to extend credit.

In addition, suppliers may want to ensure their products are being represented in the right way .

Professional Services Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, including attorneys, accountants, and other professional consultants as needed, to make sure that everyone is on the same page.

Advisors Share the plan with experts and professionals who are in a position to give you valuable advice.

Landlord Some landlords and property managers require businesses to submit a business plan to be considered for a lease to prove that your business will have sufficient cash flows to pay the rent.

Customers The business plan may also function as a prospectus for potential customers, especially when it comes to large corporate accounts and exclusive customer relationships.

9. Secure Funding

If you intend to seek outside financing for your business, you are likely going to need a business plan.

Whether you are seeking debt financing (e.g. loan or credit line) from a lender (e.g., bank or financial institution) or equity capital financing from investors (e.g., venture or angel capital), a business plan can make the difference between whether or not – and how much – someone decides to invest.

Investors and financiers are always looking at the risk of default and the earning potential based on facts and figures. Understandably, anyone who is interested in supporting your business will want to check that you know what you are doing, that their money is in good hands, and that the venture is viable in the long run.

Business plans tend to be the most effective ways of proving that. A presentation may pique their interest , but they will most probably request a well-written document they can study in detail before they will be prepared to make any financial commitment.

That is why a business plan can often be the single most important document you can present to potential investors/financiers that will provide the structure and confidence that they need to make decisions about funding and supporting your company.

Be prepared to have your business plan scrutinized . Investors and financiers will conduct extensive checks and analyses to be certain that what is written in your business plan faithful representation of the truth.

10. Grow and Change

It is a very common misconception that a business plan is a static document that a new business prepares once in the start-up phase and then happily forgets about.

But businesses are not static. And neither are business plans. The business plan for any business will change over time as the company evolves and expands .

In the growth phase, an updated business plan is particularly useful for:

Raising additional capital for expansion

• Seeking financing for new assets , such as equipment or property
• Securing financing to support steady cash flows (e.g., seasonality, market downturns, timing of sale/purchase invoices)
• Forecasting to allocate resources according to strategic priority and operational needs
• Valuation (e.g., mergers & acquisitions, tax issues, transactions related to divorce, inheritance, estate planning)

Keeping the business plan updated gives established businesses better chance of getting the money they need to grow or even keep operating.

Business plan is also an excellent tool for planning an exit as it would include the strategy and timelines for a transfer to new ownership or dissolution of the company.

Also, if you ever make the decision to sell your business or position yourself for a merger or an acquisition , a strong business plan in hand is going to help you to maximize the business valuation.

Valuation is the process of establishing the worth of a business by a valuation expert who will draw on professional experience as well as a business plan that will outline what you have, what it’s worth now and how much will it likely produce in the future.

Your business is likely to be worth more to a buyer if they clearly understand your business model, your market, your assets and your overall potential to grow and scale .

Related Questions

Business plan purpose: what is the purpose of a business plan.

The purpose of a business plan is to articulate a strategy for starting a new business or growing an existing one by identifying where the business is going and how it will get there to test the viability of a business idea and maximize the chances of securing funding and achieving business goals and success.

Business Plan Benefits: What are the benefits of a business plan?

A business plan benefits businesses by serving as a strategic tool outlining the steps and resources required to achieve goals and make business ideas succeed, as well as a communication tool allowing businesses to articulate their strategy to stakeholders that support the business.

Business Plan Importance: Why is business plan important?

The importance of a business plan lies in it being a roadmap that guides the decisions of a business on the road to success, providing clarity on all aspects of its operations. This blueprint outlines the goals of the business and what exactly is needed to achieve them through effective management.

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Difference Between Business Plan & Strategic Plan

What is a dehydrated business plan, what does a business plan consist of.

• How to Create a New Business Plan
• Examples of Liquor Store Business Plans

Running a business with detailed plans and clearly defined strategies will help you forecast your growth and deal with unforeseen business developments. A business plan is not just a document about your business; it is an effective business tool that comes with many benefits. Using any number of business plan templates or how-articles, like the ones provided by the U.S. Small Business Administration, will help you create a winning business plan.

Provides You With Direction

One of the main benefits of developing a business plan is that it provides your company with direction. The research and preparation that goes into developing the plan helps to broaden your understanding of your business, its operations and its industry. A business plan allows you to clearly compare the business’s expenses against its customer demand, available finances and competition. Understanding this information makes it easier for you to develop appropriate strategies to generate successful outcomes, making clarity an important benefit of your business plan.

Helps You Set Goals

Another advantage of business plan writing is that it helps you clearly identify the success and failure of your business strategies. The business plan provides a broad snapshot of the business’s details and often includes one- and five-year projections. By comparing your business's current figures, receipts and totals against those presented in the business plan, you can determine if your business has achieved or exceeded its goals.

Comparison of the business plan's current and previous marketing efforts can also help you to improve or refine your business’s best practices. This process of benchmarking is also quite beneficial because it allows you keep your business in line with the industry’s standards.

Helps You Secure Financing

Finding sources of funding is one of the most critical business plan topics in any plan. Along with savings and personal investments, business funding options can include loans, grants and lines of credit. When applying for outside funding, institutions and investors often require a business plan to accompany the loan application.

Even government grant and procurement opportunities require a business plan to be submitted with the application. In addition, a complete business plan includes an appendix which holds copies of supporting documents, such as tax returns, payroll information and bank statements. These addendum items are often the documents required by lending institutions during the lending process. The business plan provides a convenient and well-organized location for these supporting items

Help With Contracts

During your process of developing business relationships and completing contract negotiations, you may be required to show and prove your business ideas and forecasts to other businesses. Your business plan provides a clear display of your business’s missions, objectives and goals, both short- and long-term. The business plan can also assist you in placing executive positions within your business because it assists these individuals in ascertaining the viability and potential success of your business. Furthermore, the business plan helps you to clearly communicate your business’s missions and goals to your staff, as well as explain how those goals will be attained.

Basics of a Business Plan

In order for your business plan to be beneficial to your business, it must be thoroughly researched, thoughtfully written and well-organized. Additionally, the plan must be regularly updated. Entrepreneur magazine recommends that you analyze, review and update your business plan at least once each year. However, periodic monthly and quarterly reviews are just as effective.

• Entrepreneur: Updating Your Business Plan

Writing professionally since 2004, Charmayne Smith focuses on corporate materials such as training manuals, business plans, grant applications and technical manuals. Smith's articles have appeared in the "Houston Chronicle" and on various websites, drawing on her extensive experience in corporate management and property/casualty insurance.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

Kelly Main is a Marketing Editor and Writer specializing in digital marketing, online advertising and web design and development. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. Additionally, she is a Columnist at Inc. Magazine.

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15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

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

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

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

What is the key purpose of a business plan? 

Imagine you’re setting out on a journey. You know what your final destination is, but you haven’t figured out how to get there. While it might be fun to just start driving and figure things out as you go, your trip will most likely take longer than you anticipated and cost you more. If you instead take a look at a map and chart the best way to get to your destination, you’ll arrive on time and on budget. Planning for your business isn’t that much different. 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you’re going to get there. It helps you set your direction and determine a winning strategy. A solid business plan will set your business up for success and help you build an unbeatable company.

If you start off without a plan, you may go down some interesting detours, but you’re unlikely to grow quickly or stick to your budget.

Why do you need to write a business plan?

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

1. Reduce your risk

Writing a business plan takes some of the risk out of starting a business. It ensures that you’re thinking through every facet of your business to determine if it can truly be viable. 

Does your solution fit the market? Are your startup or operational costs manageable? Will your proposed business model actually generate sales? What sort of milestones would you need to hit to achieve profitability? These are all questions associated with business risk that you can answer with your plan.

For those already running a business, writing a plan can help you better manage ongoing risk. Should you bring on a new employee? What does cash flow look like for your next month, quarter, or even year? Are you on track to meet your milestones or do you need to change your focus? Keep your plan up to date, review it regularly and you can easily answer these questions and mitigate risk.

2. Uncover your business’s potential

Writing a business plan helps you think about the customers you are serving and what their needs are. Exploring those customer needs will help you uncover new opportunities for your business to serve them and potentially expose new products and services that you could offer. When you use your business plan to manage your business, you’ll be able to see the parts of your strategy that are working and those that aren’t. For example, you may have invested in new marketing efforts to sell one of your products, but that strategy just isn’t working out. With a business plan in hand, you’ll be able to see what’s going to plan and where you need to make adjustments to your strategy, pivoting to new opportunities that will drive profitability.

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3. Test a new business idea

When you have a new business idea, it really helps to spend a little time thinking through all the details. A business plan will help you think about your target market, your budget, how much money you’ll need to launch, and how your idea will actually work before you spend any real money. A business plan will also help you easily share your idea with other people to get input and feedback before you get started. 

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

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

Sharing your business idea with investors requires a business plan. Now, you probably won’t share a long, detailed business plan to get investors interested, but you probably will share your executive summary — which is an overview of your business plan. Investors may never actually ask for your full business plan, but they will certainly ask you questions that you’ll only be able to answer if you’ve taken the time to write a plan. 

At the very least, they’ll want to see your financial forecasts , so you should be prepared for this. If you end up pitching your business to investors, whether in-person or remotely , having a business plan written makes it much easier to translate the right information into a pitch deck. In short, you’ll have all of the right information ready and available to show why your business is worth investing in.

5. Plan for different scenarios

Even if you have a plan in place, things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive on the scene. Having a plan allows you to experiment with different scenarios to see how changes to your business will impact your forecasts, budgets, profitability, and cash flow. 

6. Research shows that business plans definitely work

A Journal of Management Studies study found that businesses that take the time to plan grow 30% faster than those that don’t. Our own 2021 small business research study found that 58% of small business owners that have or are working on a plan feel confident in their business, even amidst a crisis. And a study in Small Business Economics found that entrepreneurs that write business plans for their ideas are 152% more likely to actually start their businesses. There’s plenty of additional research that links planning with success, so it’s a proven fact that you won’t be wasting your time when you write your plan.

7. Build a better budget and a financial forecast

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

The beauty of incorporating forecasts into your business plan is that you don’t need to have the exact numbers to start. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business. As you operate and collect financial data you can then begin to update your forecasts to generate a more accurate view of how your business will operate.

8. Determine your financial needs

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

9. Attract employees

Especially if you’re a young startup company, attracting employees can be hard. Without a proven track record, why should someone take a risk to work for you? Having a business plan can help solve that problem. Your plan can help a prospective employee understand your business strategy and plans for growth so that they can feel confident joining your team. It’s also incredibly useful in determining when and if it’s feasible for you to bring on more employees . 

10. Get your team all on the same page

A great strategy for your business can only be successful if your team understands it. By documenting your strategy with a business plan, you can easily get everyone on the same page, working towards the same goals. It’s even better if you regularly review your plan with members of your team. This ensures that everyone is consistently going back to the core strategy documentation, analyzing it, and exploring how it impacts individual and team goals .

11. Manage your business better 

A business plan is all about setting goals for your company — both financial goals and milestones you hope to accomplish. When you use your plan to regularly check in on your business to see how you’re doing and what your progress is, you’re managing your business. Regular review , ideally monthly, will help you build a strong, resilient business.

12. Understand your market and build a marketing plan

No matter how good your idea is, you have to figure out who your ideal customers are and how you’re going to get the word out to them. That’s where a marketing plan comes in. It can be an indispensable tool for figuring out how you get your first customers as well as your thousandth customer. 

13. It’s easier than you think

You may be procrastinating in writing a business plan because it sounds like a lot of work. The truth is that planning is much less complicated than you think. Start small with a one-page business plan that you complete in half an hour . From there, refine your plan until your idea is solid. At that point, you can invest a little more time in a more detailed business plan. Just start with the basics and expand from there.

14. You’ll sleep better at night

When you have a plan for your business, you have peace of mind. You know that you’ve invested the time to figure out a business model that actually works and you’ve considered different financial scenarios so you can handle the unexpected. And, you’ve got a management tool to run your business better than your competitors. 

15. Effectively navigate a crisis

Having a business plan not only helps you create a roadmap for your business but also helps you navigate unforeseen events. Large-scale economic downturns, supply shortages, payment delays, cash flow problems, and any number of other issues are bound to pop up. But, you can be prepared to face each crisis head-on by leveraging your business plan.

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

Don’t wait, start writing your business plan today

There are plenty of reasons to write a business plan, but the real reason is about finding success for you and your business. Taking the time to plan is an investment in yourself and your business that will pay dividends, whether you’re starting a new business or taking your existing business to the next level. 

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

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

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The importance of a business plan

Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.

Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.

What is a business plan?

A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.

Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success. ‍

Why is a business plan important?

A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

• A market analysis : gathering information about factors and conditions that affect your industry
• Competitive analysis : evaluating the strengths and weaknesses of your competitors
• Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
• Marketing: using your research to advertise your business
• Logistics and operations plans : planning and executing the most efficient production process
• Cash flow projection : being prepared for how much money is going into and out of your business
• An overall path to long-term growth

What is the purpose of a business plan?

A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.

10 reasons why you need a business plan

I know what you’re thinking: “Do I really need a business plan? It sounds like a lot of work, plus I heard they’re outdated and I like figuring things out as I go...”.

The answer is: yes, you really do need a business plan! As entrepreneur Kevin J. Donaldson said, “Going into business without a business plan is like going on a mountain trek without a map or GPS support—you’ll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for success.

To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business.

1. To help you with critical decisions

The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that small businesses can’t always afford. That’s where a business plan comes in.

Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time.

Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.

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2. To iron out the kinks

Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.

3. To avoid the big mistakes

Only about half of small businesses are still around to celebrate their fifth birthday . While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.

According to data from CB Insights , some of the most common reasons businesses fail include:

• No market need : No one wants what you’re selling.
• Lack of capital : Cash flow issues or businesses simply run out of money.
• Inadequate team : This underscores the importance of hiring the right people to help you run your business.
• Stiff competition : It’s tough to generate a steady profit when you have a lot of competitors in your space.
• Pricing : Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.

The exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis , every piece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don’t be afraid to scrap an idea you really loved if it turns out there’s no market need. Be honest with yourself!

Get a jumpstart on your business plan by creating your own cash flow projection .

4. To prove the viability of the business

Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point.

Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.

A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.

Want to prove there’s a market gap? Here’s how you can get started with market research.

5. To set better objectives and benchmarks

Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.

6. To communicate objectives and benchmarks

Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions any time there’s an absence. Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly.

Sharing your business plan with team members also helps ensure that all members are aligned with what you’re doing, why, and share the same understanding of long-term objectives.

7. To provide a guide for service providers

Small businesses typically employ contractors , freelancers, and other professionals to help them with tasks like accounting , marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.

8. To secure financing

Did you know you’re 2.5x more likely to get funded if you have a business plan?If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run. Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.

Learn what you need to get a small business loan.

9. To better understand the broader landscape

No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well. Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.

10. To reduce risk

Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.

Business plan FAQs

How does having a business plan help small business owners make better decisions.

Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.

What industry-specific issues can business plans help tackle?

Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.

How can small business owners use their business plans to pitch investors or apply for loans?

In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.

Understanding the importance of a business plan

Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.

Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.

Related Posts

Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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

Noah Parsons

24 min. read

Updated May 7, 2024

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

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

• The basics of business planning

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

You understand that planning helps you: 

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

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

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

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

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

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

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

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

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

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

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• What to include in your business plan

Executive summary

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

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

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

Your executive summary should include:

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

Dig Deeper: How to write an effective executive summary

Products and services description

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

This is usually called a problem and solution statement .

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

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

Market analysis

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

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

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

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

Related: Target market examples

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

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

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

Dig Deeper: Learn how to write a market analysis

Competitive analysis

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

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

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

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

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

Marketing and sales plan

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

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

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

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

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

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

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

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

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

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

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

Business operations

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

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

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

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

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

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

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

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

Key milestones and metrics

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

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

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

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

Possible milestones might be:

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

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

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

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

Dig Deeper: How to use milestones in your business plan

Organization and management team

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

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

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

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

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

• Sole proprietor
• Partnership

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

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

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

Financial plan

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

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

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

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

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

Dig Deeper: How to create financial forecasts and budgets

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

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

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

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

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

Your cover page should be simple and include:

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

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

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

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

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

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

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

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

• Writing tips and strategies

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

Determine why you are writing a business plan

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

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

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

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

Keep things concise

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

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

Have someone review your business plan

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

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

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

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

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

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

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

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

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

Common pitfalls and how to avoid them

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

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

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

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

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

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

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

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

Use your business plan to manage your business

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

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

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

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

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

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

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

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

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

Learn More: How to run a regular plan review

Free business plan templates and examples

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How to write a business plan FAQ

What is a business plan?

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

What are the benefits of a business plan?

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

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

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

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

What are the 5 most common business plan mistakes?

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

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

What questions should be answered in a business plan?

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

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

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

How long should a business plan be?

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

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

What are the different types of business plans?

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

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

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

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

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

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

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

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

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

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• Templates and examples

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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20 Reasons Why You Need a Business Plan in 2024

Written by Dave Lavinsky

What is a Business Plan?

A business plan is a document that details your business concept and strategy for growth. It provides details about your company, a competitive analysis, a market analysis, a marketing strategy to reach potential customers, and a financial plan so that you make the best possible decisions to start or grow your company. A good business plan will help you take your business idea and turn it into a tangible action plan for success.

What is the Purpose of a Business Plan?

A business plan serves as an essential tool for guiding a company’s direction and decision-making processes. Its core purpose is to provide a detailed roadmap that communicates the company’s mission and vision, long-term objectives, and tailored strategies intended to steer the business towards success. This living document plays a pivotal role in streamlining operations, achieving goals, and setting a foundation for sustained growth. The purposes of a business plan include:

• Creating an Effective Growth Strategy : It outlines a comprehensive plan that identifies clear steps and strategies for expanding the market presence and ideal customer base for the business.
• Determining Future Financial Needs : By creating financial projections, a business plan helps in understanding the capital requirements to fuel growth initiatives and sustain operations.
• Attracting Investors and Lenders : A well-crafted business plan is instrumental in drawing attention from potential investors, including angel investors and venture capitalists, by showcasing the growth potential and profitability prospects of the business.

By leveraging a business plan template , entrepreneurs can significantly enhance their ability to communicate their vision, attract necessary funding, and ensure that all stakeholders are aligned with the company’s strategic direction.

20 Reasons Why You Need a Business Plan

There are countless reasons why having a well-crafted business plan is essential to the success of any company. Here are top 20 reasons why a business plan is important:

1. To Prove That You’re Serious About Your Business

A formal business plan is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business. Creating your plan forces you to think through and select the strategies that will propel your growth.

2. To Establish Business Milestones

The business plan should clearly lay out the long-term milestones that are most important to the success of your business. To paraphrase Guy Kawasaki, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death). Would you tell your spouse that you tweaked the company brochure? Probably not. But you’d certainly share the news that you launched your new website or reached $1M in annual revenues.

3. To Better Understand Your Competition

Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages or unique value proposition. And if you don’t currently have competitive advantages, to figure out what you must do to gain them.

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4. To Better Understand Your Customer

Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to a great business plan and to a successful business. Understanding your customers will not only allow you to create better products and services for them, but will allow you to more cost-effectively reach them via advertising and promotions.

5. To Enunciate Previously Unstated Assumptions

The process of actually writing a business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity. For example, you might have assumed that local retailers would carry your product; in your business plan, you could assess the results of the scenario in which this didn’t occur.

6. To Assess the Feasibility of Your Venture

How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. In some cases, the result of your business planning will be to table the venture. And it might be to go forward with a different venture that may have a better chance of long-term success.

7. To Document Your Revenue Model

How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model. And upon reading your plan, others may suggest additional revenue streams to consider.

8. To Determine Your Financial Needs

Does your business need to raise funds? How much? One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital. It will also enable you to plan ahead, particularly if you need to raise additional funding in the future.

9. To Attract Investors

A formal business plan is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service? What are the financial projections? What is the company’s exit strategy? While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your business plan.

10. To Reduce the Risk of Pursuing the Wrong Opportunity

The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.

11. To Force You to Conduct Market Research and Really Know Your Market

What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target audience for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. And it will allow you to use this knowledge to make decisions to improve your company’s success.

12. To Attract Employees and a Management Team

To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that your great idea is sound and that the business is poised to achieve its strategic goals. Importantly, as you grow your company, your employees and not you will do most of the work. So getting them aligned and motivated will be key to your success.

13. To Plot Your Course and Focus Your Efforts

The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones. You wouldn’t go on a long driving trip without a map; think of your business plan as your map.

14. To Attract Partners

Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed information about your company.

15. To Position Your Brand

Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.

16. To Judge the Success of Your Business

A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not).

17. To Reposition Your Business to Deal with Changing Conditions

For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new business ideas and strategies.

18. To Document Your Marketing Plan

How are you going to reach your customers? How will you retain them? What is your advertising budget? What price will you charge? A well-documented marketing plan is essential to the growth of a business. And the marketing strategies and tactics you use will evolve each year, so revisiting your marketing plan at least annually is critical.

19. To Understand and Forecast Your Company’s Staffing Needs

After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a roadmap for your staffing needs, and thus helps to ensure smoother expansion. Importantly your plan can not only help you understand your staffing needs, but ensure your timing is right as it is time consuming to recruit and train great employees.

20. To Uncover New Opportunities

Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.

Make Your Business Planning Count

One of the most common reasons businesses fail is the lack of a clear, strategic plan that addresses key components of running a business. Business plans help in identifying and navigating the challenges that can derail a business’s success, including poor market analysis, inadequate financial planning, and an unclear business model. By taking the time to write a business plan, entrepreneurs can clarify their business strategy, identify potential obstacles before they arise, and establish company goals that will set you up for success.

About Growthink Since 1999, Growthink’s business plan experts have assisted thousands of clients in launching and growing their businesses, and raising more than $2.5 billion in growth financing.

Need help with your business plan? 

• Speak with a professional business plan consultant from our team.
• Use our simple business plan template .
• Check out our business plan examples .
• Or, if you’re creating your own PPM, you can save time and money with Growthink’s private placement memorandum template .
• Learn more about us via our Growthink Business Plan Review page

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The importance of business plan: 5 key reasons.

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

Here’s What We’ll Cover:

What Is a Business Plan?

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

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

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

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

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

1. To Secure Funding

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

2. Set and Communicate Goals

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

3. Prove Viability in the Market

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

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

4. They Help Owners Avoid Failure

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

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

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

5. Business Plans Reduce Risk

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

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

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

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

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Nine reasons why you need a business plan

Building a great business plan helps you plan, strategize and succeed. Presented by Chase for Business .

Making the decision to create a new business is an exciting yet stressful experience. Starting a business involves many tasks and obstacles, so it’s important to focus before you take action. A solid business plan can provide direction, help you attract investors and ensure you maintain momentum.

No matter what industry you plan on going into, a business plan is the first step for any successful enterprise. Building your business plan helps you figure out where you want your business to go and identify the necessary steps to get you there. This is a key document for your company to both guide your actions and track your progress.

What is the purpose of a business plan?

Think of a business plan like a roadmap. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis and logistics and operations plans.

It can also help you organize your thoughts and goals, as well as give you a better idea of how your company will work. Good planning is often the difference between success and failure.

Here are nine reasons your company needs a business plan.

1. Prove your idea is viable

Through the process of writing a business plan, you can assess whether your company will be successful. Understanding market dynamics, as well as competitors, will help determine if your idea is viable.

This is also the time to develop financial projections for your business plan, like estimated startup costs, a profit and loss forecast, a break-even analysis and a cash flow statement . By taking time to investigate the viability of your idea, you can build goals and strategies to support your path to success.

A proper business plan proves to all interested parties—including potential investors, customers, employees, partners and most importantly yourself — that you are serious about your business.

2. Set important goals

As a business owner, the bulk of your time will mostly likely be spent managing day-to-day tasks. As a result, it might be hard to find time after you launch your business to set goals and milestones. Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals. 

3. Reduce potential risks

Prevent your business from falling victim to unexpected dangers by researching before you break ground. A business plan opens your eyes to potential risks that your business could face. Don’t be afraid to ask yourself the hard questions that may need research and analysis to answer. This is also good practice in how your business would actually manage issues when they arise. Incorporate a contingency plan that identifies risks and how you would respond to them effectively.

The most common reasons businesses fail include:

• Lack of capital
• Lack of market impact or need
• Unresearched pricing (too high or low)
• Explosive growth that drains all your capital
• Stiff competition

Lack of capital is the most prevalent reason why businesses fail. To best alleviate this problem, take time to determine how your business will generate revenue. Build a comprehensive model to help mitigate future risks and long-term pain points. This can be turned into a tool to manage growth and expansion.

4. Secure investments

Whether you’re planning to apply for an SBA loan , build a relationship with angel investors or seek venture capital funding, you need more than just an elevator pitch to get funding. All credible investors will want to review your business plan. Although investors will focus on the financial aspects of the plan, they will also want to see if you’ve spent time researching your industry, developed a viable product or service and created a strong marketing strategy.

While building your business plan, think about how much raised capital you need to get your idea off the ground. Determine exactly how much funding you’ll need and what you will use it for. This is essential for raising and employing capital.

5. Allot resources and plan purchases

You will have many investments to make at the launch of your business, such as product and services development, new technology, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. It gives you an idea of how much you’ll need to spend on resources and it ensures your business will manage those resources effectively.  

A business plan provides clarity about necessary assets and investment for each item. A good business plan can also determine when it is feasible to expand to a larger store or workspace.

In your plan, include research on new products and services, where you can buy reliable equipment and what technologies you may need. Allocate capital and plan how you’ll fund major purchases, such as with a Chase small business checking account or business credit card .

6. Build your team

From seasoned executives to skilled labor, a compelling business plan can help you attract top-tier talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your executive team as well as the different roles you need filled immediately and further down the line.

Small businesses often employ specialized consultants, contractors and freelancers for individual tasks such as marketing, accounting and legal assistance. Sharing a business plan helps the larger team work collectively in the same direction. 

This will also come into play when you begin working with any new partners. As a new business, a potential partner may ask to see your business plan. Building partnerships takes time and money, and with a solid business plan you have the opportunity to attract and work with the type of partners your new business needs.

7. Share your vision 

When you start a business, it's easy to assume you'll be available to guide your team. A business plan helps your team and investors understand your vision for the company. Your plan will outline your goals and can help your team make decisions or take action on your behalf. Share your business plan with employees to align your full staff toward a collective goal or objective for the company.  Consider employee and stakeholder ownership as a compelling and motivating force. 

8. Develop a marketing strategy

A marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.

Important questions to consider as you build your marketing strategy include:

• What industry segments are we pursuing?
• What is the value proposition of the products or services we plan to offer?
• Who are our customers?
• How will we retain our customers and keep them engaged with our products or services and marketing?
• What is our advertising budget?
• What price will we charge?
• What is the overall look and feel of our brand? What are our brand guidelines?
• Will we need to hire marketing experts to help us create our brand?
• Who are our competitors? What marketing strategies have worked (or not worked) for them?

With a thoughtful marketing strategy integrated into your business plan, your company goals are significantly more in reach.

9. Focus your energy

Your business plan determines which areas of your business to focus on while also avoiding possible distractions. It provides a roadmap for critical tradeoffs and resource allocation.

As a business owner, you will feel the urge to solve all of your internal and customers’ problems, but it is important to maintain focus. Keep your priorities at the top of your mind as you set off to build your company.

As a small business owner, writing a business plan should be one of your first priorities. Read our checklist for starting a business, and learn how to take your business from a plan to reality. When you’re ready to get started, talk with a Chase business banker to open a Chase business checking or savings account today.

For Informational/Educational Purposes Only: The views expressed in this article may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.

JPMorgan Chase Bank, N.A. Member FDIC. Equal Opportunity Lender, ©2023 JPMorgan Chase & Co

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• Oct 24, 2020

The Top 5 Benefits of Having a Business Plan

Whether you’re starting a small business or exploring ways to expand an existing business, a Business Plan is an important tool to help guide your decisions. An effective Business Plan is a roadmap to success, providing clarity on all aspects of your business, from marketing and finance, through to operations, products, services, people and how you will be better than your competitors.

The purpose of a business plan is to help articulate a strategy for starting or changing your business. It defines how you will achieve your most important business objectives. A good Business Plan should help you to sleep at night if you are a business owner.

For existing businesses, a business plan should be updated annually as a way to guide growth and navigate expansion into new markets. Your plan should include explicit objectives for hiring new employees, what structure you will have, what products and services your business will provide, how you will promote them and how you will finance business operations.

If you are considering starting a business, a Business Plan can help you to check the viability of a business before investing too much time or money in it. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

The Benefits of Having a Business Plan:​

1. Increased Clarity

A business plan can bring clarity to the decision-making process regarding key aspects of the business such as capital investments, leases, resourcing, etc. You can't do everything. A good Business Plan will help you identify business critical priorities and milestones to focus on.

2. Creation of a Marketing Roadmap

Marketing is an important aspect of a business plan. It helps to define your target market(s), target customers and how you will promote and place your product / service to these markets / customers.

3. Support for Funding

Whether you’re seeking credit from a bank or capital from investors, a business plan that answers questions about profitability and revenue generation is often required.

4. Helps to Secure Talent

For a business to succeed, attracting talented workers and partners is vital. Part of a business plan’s purpose is to help bring in the right talent, at the right time. Staff want to understand the vision, how the business will achieve its goals, and how they can contribute to this in their own roles.

5. Provides Structure

A business plan provides structure and defines business management objectives. It becomes a reference tool to keep the business on track with sales targets and operational milestones. When used properly and consulted regularly, it can help measure and manage your priority areas of focus.

Download your Business Plan template for $49.99 + GST here.

Many people engage us as business coaches to take a weekly / fortnightly step-by-step approach to the development of their own Business Plans, with the added benefit of our expertise and guidance throughout the process. In this way, you learn the essential aspects of running a successful business, while crafting your very own business plan over 8-12 weeks.

If you would like more information about how to create an effective Business Plan for your business, with our guidance, then please don't hesitate to contact Business Agility. We are business coaches who are former CEOs and MDs. We know what it takes to be successful in business.

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10 Business Plan Benefits You Might Be Forgetting If you think creating a business plan is not for you, think again. Here are ten ways your business plan can help you be a better entrepreneur.

By Tim Berry Edited by Dan Bova Sep 6, 2013

Opinions expressed by Entrepreneur contributors are their own.

Too many people don't bother to write a business plan because they think it's too hard or unnecessary unless you're looking for funding . That's a shame. These myths keep a lot of people from the benefits of planning.

If you're still skeptical, here are 10 benefits to business planning you shouldn't be overlooking:

• You'll stay on strategy. It's hard to stick to strategy through the daily routine and interruptions. Use a business plan to summarize the main points of your strategy and as a reminder of what it both includes and rules out.
• Business objectives will be clear. Use your plan to define and manage specific measurable objectives like web visitors, sales, margins or new product launches. Define success in objective terms.
• Your educated guesses will be better. Use your plan to refine your educated guesses about things like potential market, sales, costs of sales, sales drivers, lead processing and business processes.
• Priorities will make more sense. Aside from the strategy, there are also priorities for other factors of your business like growth, management and financial health. Use your plan to set a foundation for these, then to revise as the business evolves.
• You'll understand interdependencies. Use a plan to keep track of what needs to happen and in what order. For example, if you have to time a product release to match a testing schedule or marketing to match a release, your business plan can be invaluable in keeping you organized and on track.
• Milestones will keep you on track. Use a business plan to keep track of dates and deadlines in one place. This is valuable even for the one-person business and vital for teams.
• You'll be better at delegating. The business plan is an ideal place to clarify who is responsible for what. Every important task should have one person in charge. Your plan keeps track.
• Managing team members and tracking results will be easy. So many people acknowledge the need for regular team member reviews and just as many admit they hate the reviews. The plan is a great format for getting things in writing and following up on the difference between expectations and results with course corrections.
• You can better plan and manage cash flow. No business can afford to mismanage cash. And simple profits are rarely the same as cash. A cash flow plan is a great way to tie together educated guesses on sales, costs, expenses, assets you need to buy and debts you have to pay.
• Course corrections will keep your business from flopping. Having a business plan gives you a way to be proactive -- not reactive -- about business. Don't wait for things to happen. Plan them. Follow up by tracking the results and making course corrections. It's a myth that a business plan is supposed to predict the future. Instead, it sets expectations and establishes assumptions so you can manage the future with course corrections.

You don't need a big formal business plan to reap these benefits. Instead, think of your business plan as a collection of lists, bullet points and tables. Think of it as something that lives on the computer, not on paper. It's just big enough to do its job.

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How to Write a Business Plan (Plus Examples & Templates)

May 24, 2021

Have you ever wondered how to write a business plan step by step? Mike Andes, told us: 

This guide will help you write a business plan to impress investors.

Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses.  He knows a thing or two about writing  business plans!

We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!

What Is a Business Plan?

A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including: 

• Finding customers
• Plans for developing a team
•  Competition
• Legal structures
• Key milestones you are pursuing

If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .

Get a Business Idea

Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills. 

Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:

• What am I good at?
• What would I enjoy doing?
• What can I get paid for?”

If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it. 

As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”

If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video

Conduct Market Analysis

Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.

Product and Service Demand

A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.

With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services. 

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

 I ran a quick test of how many people between 18-65  you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

• Other Interests
• Marital Status
• Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,  

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan. 

Each of the following should be a section of your business plan:

• Business Plan Cover Page
• Table of Contents
• Executive Summary
• Company Description
• Description of Products and Services

SWOT Analysis

• Competitor Data
• Competitive Analysis
• Marketing Expenses Strategy 

Pricing Strategy

• Distribution Channel Assessment
• Operational Plan
• Management and Organizational Strategy
• Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go. 

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

• Professionally designed logo
• Company name
• Mission or Vision Statement
• Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a  table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

An executive summary is where your business plan should catch the readers interest.  It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches .  This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

• An introduction to you and your business.
• What your business is about.
• A call to action

Example of an informal executive summary 

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

• Introduction of yourself and company.
• An origin story (Recognition of a problem and how you came to solution)
• An introduction to your products or services.
• Your unique value proposition. Make sure to include intellectual property.
• Where you are in the business life cycle
• Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

• Marketing and sales processes
• Financial statements
• Organizational structure
• Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

• Mission statement
• Philosophy and vision
• Company goals

Target market

• Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements. 

Company Philosophy and Vision

The company philosophy is what drives your company. You’ll normally hear them called core values.  These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity. 

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

•  Prioritize communication.
•  Never stop learning.
•  Be transparent.
•  Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team  understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources. 

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

• What is the industry outlook long-term and short-term?
• How will your business take advantage of projected industry changes and trends?
• What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

• Trade Associations
• Federal Reserve
• Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

• Sole proprietorships
• Limited Liability Companies (LLC)

Partnerships

Corporations.

• Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a  Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

• Unique features that differentiate your business products from competitors
• Intellectual property
• Your supply chain
• Cost and pricing structure 

Questions to answer about your products and services

Mike gave us a list  of the most important questions to answer about your product and services:

• How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
• How do you let them know they need a product?
• How do you communicate the message?
• How will you do transactions?
• How much will you be selling it for?
• How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer.  It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

• Adding offerings that fit with your current small business
• Increase sales to current customers
• Reducing costs through bulk ordering
• Finding ways to reduce inventory
•  And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing. 

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market .  The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

• Online: Facebook and Google are the big names to work with here.
• Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
• Radio : iHeartMedia is one of the best ways to advertise on the radio
• Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
• Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

• Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
• Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
• Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
• Freemium services –  Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies  would need to cover aspects such as:

• Suppliers for lawn care equipment and tools
• Any chemicals or treatments needed
• Repair parts for sprinkler systems
• Vehicles to transport equipment and employees
• Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

• Raw materials
• Shipping of raw materials
• Converting of raw materials to thread
• Shipping thread to produce garments
• Garment producer
• Shipping to company
• Company storage
• Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers.  The business plan should provide an overview of  how the team will manage the following aspects:

Quality Control

• Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

• International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
• AICPA – Standard defined for accounting.
• The Joint Commission – Healthcare
• ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

• The size of your location
• The type of building (retail, industrial, commercial, etc.)
• Zoning restrictions – Urban Wire has a good map on how zoning works in each state
• Accessibility – Does it meet ADA requirements?
• Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
• Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

• Any licenses and/or permits that are needed and whether you’ve obtained them
• Any trademarks, copyrights, or patents that you have or are in the process of applying for
• The insurance coverage your business requires and how much it costs
• Any environmental, health, or workplace regulations affecting your business
• Any special regulations affecting your industry
• Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

• What is the current leadership structure and what will it look like in the future?
• What types of employees will you have? Are there any licensing or educational requirements?
• How many employees will you need?
• Will you ever hire freelancers or independent contractors?
• What is each position’s job description?
• What is the pay structure (hourly, salaried, base plus commission, etc.)?
• How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements 

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

• Higher Revenue if expanding business
• Lower Cost of Goods Sold if purchasing inventory with bulk discounts
• Adding interest if utilizing financing (not equity deal)
• Changes in expenses
• Addition of financing information to the cash flow statement
• Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data,  you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

• Bootstrapping – Using your savings without external funding.
• Taking out debt – loans, credit cards
• Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
• Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

• How much to get started?
• What is the minimum viable product and how soon can you make money?
• How will the money be spent?

Mike emphasized two aspects that should be included in every plan, 

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline. 

• Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

• Wise Plans –  Shares a lot of information on starting businesses and is a business plan writing company.
• Optimus Business Plans –  Another business plan writing company.
• Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

• The definition of a business plan
• Coming up with a business idea
• Performing market research
• The critical components of a business plan
• An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

80% of businesses fail... Learn how not to.

Learn from business failures and successes in 5 min or less. The stories, frameworks, and tactics that will make you a 10x better founder.

Brandon Boushy

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17 Boring Businesses That Make Big Money (2024)

Get ready for the most boring blog you’ve ever read! In just a few minutes’ time, you’ll know a lot more about 17 boring businesses that could bring in serious revenue.

In this post, we’ll discuss an array of boring business ideas and explain how to start or buy them. We’ll also provide some general tips on what to look for when investing in boring businesses.

By the time you finish reading, you’ll know which boring business is right for you, and how to make it profitable.

[su_note note_color="#dbeafc"] Click on any of the boring links below for more information on the “boring business” model, or just continue reading.

What are boring businesses?

Best boring businesses to buy, how to buy a boring business, property management businesses, more boring business ideas, ‘mirror, mirror on the wall, what’s the most boring business of them all’.

• Start your own business [/su_note]

The term “boring business” has become popular because of Codie Sanchez , the owner of the business education service Contrarian Thinking . A major part of her wealth-building strategy is buying boring businesses.

A boring business is defined by four characteristics. It is:

• Stale: There is little to no disruptive innovation opportunity in the business model, which means you can implement best practices and let the business run with minimal participation.
• Old: An old business is at least five years old. The older the small business is, the more likely it is to remain successful.
• Weak: Industries with less competition or lots of dissatisfied customers tend to find it easier to stand out from the pack by simply improving customer service.
• Simple: You want a small business model that is easy to understand, doesn’t require research and development costs, and has clear opportunities to improve service or technology to improve profit margins.

You might hear this boring business framework called SOWS for short.

The industries in this list aren’t the sexiest, but they offer essential services and make a steady income with recurring revenue. Steady income means there aren’t huge fluctuations in cash flow; recurring revenue is achieved by having customers return regularly.

Many have low startup costs and can serve as passive income streams.

The boring business ideas below can help you hit the ground running as a business owner.

• Laundromats
• Vending machines
• Rental properties
• Home maintenance
• Office supplies
• Bookkeeping
•  Storage units
•  Landscaping
•  Shipping centers
•  Ice vending
•  Renting your car
•  Pre-made meals
•  Petsitting
•  Waste removal

Keep reading to get the low-down on each boring business.

#1. Laundromats

• Average Annual Revenue: $311,220 • Average Profit Margins: 22.10% • Startup Cost: $100K-$3.5M • Time to Revenue: 6-18 months • Annual Market Growth Rate: -0.1% • Best For: Customer service pros with high attention to detail

Laundromats have recurring revenue and provide a valuable service for the 16% of American households that do not have washers and dryers in their homes.

These small businesses provide a steady income because Americans do an average of eight loads of laundry per week, and laundromats charge $2 to $4 per load .

Laundromats in zip codes below the poverty line will normally have the most profit potential. Cities like New York City, Chicago, and Los Angeles have higher percentages of people without laundry machines in their homes.

#2. Car washes

• Average Annual Revenue: $73,100 • Average Profit Margins: 16.10% • Startup Cost: $500+ • Time to Revenue: 3+ months • Annual Market Growth Rate: 1% • Best For: Car enthusiasts and detail-oriented entrepreneurs

A car wash is another boring business with heavy cash flow.

With a quick online search, you can find lots of car washes for sale. Sometimes, you can find them for as low as the cost of the land. From there, you can increase cash flow with simple fixes like adding automation, cashless payments, or even leasing extra space to other businesses.

You’ll also be able to use the land to secure capital through small business loans and grow your business empire faster.

#3. Vending machines

• Average Annual Revenue: $182,100 • Average Profit Margins: 4.30% • Startup Cost: $2K-$10K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.5% • Best For: Organized entrepreneurs who like driving, people who want a semi-passive business

Automated vending appears to have a small growth rate and average profit margins. Meanwhile, it’s one of those business opportunities that combines low startup costs and good cash flow, and it gets more profitable as you add more machines to a route.

Just ask vending machine business owner Adam Hill, who makes $700K per year working just two days per week.

Did you enjoy the video? Check out our vending machine business course .

• Average Annual Revenue: $182,100 • Average Profit Margins: 4.30% • Startup Cost: $2K-$10K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.50% • Best For: Organized entrepreneurs who like driving, people who want a semi-passive business

Another boring business you can start is placing ATMs in other small businesses. Many businesses need ATMs but don’t want to manage them. You’ll make $2 to $5 per transaction, and potentially even more in high-demand areas, like Vegas casinos.

You can manage the services or turn the revenue into 100% passive income by using services like ATM Together , which help (or completely) set up your business.

There are even specialized ATMs like Bitcoin ATMs or Coinstar .

#5. Franchises

• Average Annual Revenue: $621,212 • Average Profit Margins: Varies by industry • Startup Cost: $1K-$3.5M • Time to Revenue: 3-18 months • Annual Market Growth Rate: Varies by industry • Best For: People who want to skip the trial-and-error phase of small businesses

Companies in several industries offer franchising opportunities, making it easy to start making money as a business owner.

Over 10% of companies are a franchise, and franchises account for 3% of GDP. The McDonald’s down the street, for instance, is likely a franchise, meaning it’s owned and run by an independent franchisee with the company’s permission.

Franchises are boring businesses because the business model's success has already been proven and you can use existing intellectual property and processes in day-to-day operations to make a great living.

If you’re ready to buy a small business, check out our blog on the best franchises to own .

#6. Rental properties

• Average Annual Revenue: $27,375 per home • Average Profit Margins: -11% to +10% • Startup Cost: $60K+ • Time to Revenue: 3-12 months • Annual Market Growth Rate: Fluctuates with tourism and value compared to hotels • Best For: Recognized real estate professionals or service business owners

Real estate ownership is the number one driver of wealth for most American households. In fact, second homes contribute to wealth creation in 4% to 6% of the population. That makes rental properties a great way to earn more money and develop a steady stream of recurring revenue.

Two particularly successful rental property management strategies include opening Airbnb rentals and buying and leasing quadplexes.

Find out how to turn real estate rentals into a $3M per year business below:

#7. Home maintenance services

• Average Annual Revenue: $204,700 • Average Profit Margins: 5.40% • Startup Cost: $500-$5K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.7% • Best For: Construction and repair pros, creative problem solvers, outgoing and hands-on entrepreneurs

Providing home maintenance can be a very consistent way to earn money because you’re providing an essential service. It’s also one of the few small businesses in the construction industry that doesn’t require a contractor's license.

Learn how to start a home maintenance service company from a handyman making $250K per year with just two trucks.

#8. Office supplies

• Average Annual Revenue: $1.94M • Average Profit Margins: .9% • Startup Cost: $100-$5K • Time to Revenue: 1-3 months • Annual Market Growth Rate: -2.3% • Best For: SEO experts and people who are great at finding low-competition keywords

The office supply industry can be risky to invest money in because there is declining demand for many of the products they offer. But there are plenty of ways to get customers, especially if you run an online business.

You can make a steady stream from eCommerce if you offer business supplies with a dropshipping business model. If you have a physical location, you can include services-based offerings, like graphic design, printing, and shipping.

#9. Bookkeeping

• Average Annual Revenue: $1.57M • Average Profit Margins: 18% • Startup Cost: $500-$5K • Time to Revenue: 1-3 months (not including time training as a CPA) • Annual Market Growth Rate: 1.7% • Best For: CPAs, finance experts, entrepreneurs with strong math skills

One of the most boring businesses you can conceive of is an accounting or bookkeeping business.

There’s a high demand for these services because 33 million small businesses and 124 million U.S. households need tax advice and other services. You can increase your success by specializing in niche areas, like eCommerce accounting.

Of course, accountants and bookkeepers require specialized education.

#10. Storage units

• Average Annual Revenue: $135,882 • Average Profit Margins: 66.5% • Startup Cost: $100K-$10 million • Time to Revenue: 6-18 months • Annual Market Growth Rate : -1.8% • Best For: Commercial landowners, remote workers, and people who like having spare time during their day job

When you invest in storage space, most of the cost will be the purchase of the building and any upgrades you do. Many businesses in this industry can be turned into almost entirely passive income sources by adding keypads, automated locks, and online booking.

#11. Landscaping companies

• Average Annual Revenue: $272,790 • Average Profit Margins: 8.7% • Startup Cost: $1K-$100K • Time to Revenue: 1-3 months • Annual Market Growth Rate: 8.1% • Best For: Gardeners, landscape designers, people who love hands-on, outdoor work

There’s constant demand in this growing market, and there’s also great opportunity.

Most landscaping companies lose 8% to 10% of their customers each year, and their biggest challenge is when people aren’t happy with their services. That makes the industry ripe for businesses that focus on offering clients great customer service. If you can automate the business processes, your revenue could increase even more.

Mike Andes started in landscaping services when he was just a teenager, and today, he’s sold over 133 Augusta Lawn Care Services franchises and has expanded into real estate. Check out our playlist of interviews with Mike Andes below:

#12. Cleaning companies

• Average Annual Revenue: $755,180 ($62K for solo) • Average Profit Margins: 10.8% • Startup Cost: $1K+ • Time to Revenue: 1-18 months • Annual Market Growth Rate: 5.1% • Best For: Friendly professionals with an attention to detail

This boring business idea is in high demand. You can clean homes on a one-time or routine basis, and people pay good money for it.

Before you invest in a cleaning business, review our resources for cleaning businesses that we created with Chris Mondragon. He’s a featured speaker at housecleaning conventions and runs a multi-million-dollar house and Airbnb cleaning service.

We even have a cleaning business course that promises to help you earn $10K and comes with a 90-day refund policy.

#13. Parking lots

• Average Annual Revenue: $1.47M • Average Profit Margins: 5% to 10% • Startup Cost: $100K-$3.5M • Time to Revenue: 6-18 months • Annual Market Growth Rate: 4.3% • Best For: Landowners in high-traffic areas

Owning parking lots is perfect for people who want to run an automated business or sit outside all day at work.

Many businesses in this industry have lots of land in high-demand areas, like downtown in major cities. They charge by the hour and make money accepting cash and credit cards, so no one is required to be on site.

Parking lot owners commonly have relationships with the local government so law enforcement tickets people who don’t pay to use their parking spaces.

#14. Dry cleaning

• Average Annual Revenue: $265,808 • Average Profit Margins: 22.10% • Startup Cost: $100K-$3.M • Time to Revenue: 6-18 months • Annual Market Growth Rate: -6.7% • Best For: Customer service pros with high attention to detail

Dry cleaning can be decent money, but the industry is in decline with the rise of work-from-home jobs. That just means you have opportunities to buy businesses at a discount.

Many of the dry cleaners for sale online are asking for less than two times the annual cash flow. If you buy them using seller financing with 20% of the money down, you could buy a dry cleaner for as little as $20K now and pay it off over time.

For more on seller financing, check out our guide to buying businesses with little to no money .

You may have difficulty getting loans from traditional lenders when considering this investment because of the industry decline.

#15. Pre-made meals

• Average Annual Revenue: $25.4M • Average Profit Margins: 1%-10% • Startup Cost: $1K+ • Time to Revenue: 1-18 months • Annual Market Growth Rate: 7% • Best For: People who love cooking

Providing customers with pre-proportioned meals is boring because it consists of primarily repetitive tasks and has a low profit margin.

A small business in this industry makes money by cooking food in bulk and breaking it into individual meals. Its clients are mostly busy professionals who want to eat healthier and don’t have time to do their own meal prep.

People can pay by the meal and may get a discount if they return the reusable packaging.

#16. Pet sitting

• Average Annual Revenue: $73,533 • Average Profit Margins: 11.5% • Startup Cost: $1K-$100K • Time to Revenue: 3+ months • Annual Market Growth Rate: 1.1% • Best For: Pet lovers and experts, salon and grooming professionals, empathetic and detail-oriented entrepreneurs with strong customer service skills

Pet sitting and grooming companies are boring business ideas that can make decent profits. They aren’t high-growth and are labor-intensive, but you get to play with cute dogs and kitties.

Martin Burt and his wife explain how to start a pet sitting business in our definitive guide. We have information on pet boarding , too.

#17. Waste management

• Average Annual Revenue: $8.72M • Average Profit Margins: 7.29% • Startup Cost: $1K+ • Time to Revenue: 3-18 months • Annual Market Growth Rate: 1.9% • Best For: Customer service pros with high attention to detail

Waste management companies remove junk from sites and take it to the dump. Society’s reliance on them is here to stay.

When you buy a waste removal business, you’ll want one with employees already if you’d like it to be a passive income source. Otherwise, you’ll have to work in the business until the hiring systems, insurance, and payroll are in place.

Learn how Kyle Landwehr started his junk hauling business and turned it into a $3 million per year business.

Next, let’s look at how to buy a business with little money and convert it into a steady stream of revenue.

You can buy many small businesses with less capital than it takes to start a new business, but you’ll need to go through a defined process before you invest. We suggest the following process for buying businesses:

• Work with business brokers.
• Identify your goals.
• Find the right business for sale.
• Value the business.
• Negotiate the deal.
• Close the deal and transition into ownership.

You’ll specifically want to master securing seller financing to achieve the most success when pursuing boring businesses for sale. Again, you can learn about the process in our blog about how to buy a business without money .

Now let’s look at a list of property management businesses that can help you make a great living.

Real estate and property management businesses are boring businesses that lots of people look to for investment opportunities. Whether you’re just getting started in the real estate investment world or have years in the space, you can make a great living.

You’ll earn cash flow, at least, but you may also earn additional funds from appreciation of assets when you sell them. Check out the list of real estate businesses I love:

• Airbnb rentals
• Apartment buildings
• Mailbox centers
• Mobile home parks
• Property management and repair companies
• Rental arbitrage
• Storage space rentals
• Tiny home rentals

The best thing about these boring businesses is you can manage your entire investment portfolio from a single platform and website, which makes it easier to manage multiple businesses as the demand grows.

Want more bloody boring business ideas?

Check out the list of 99 more boring businesses below!

Now you have plenty of boring businesses to consider buying or starting up. They span several industries and skill sets. You might want to start with a business that costs less and build up to more expensive ones as you develop wealth.

The Boring Company is the most boring business in all the world. Seriously! 

Maybe not the take on “boring” you expected, but Elon Musk started The Boring Company because he was tired of dealing with traffic.

The Boring Company uses boring machines called Prufrocks to bore tunnels at a rate of one mile per week, but they aim to eventually bore seven times faster than that. The tunnels are used to transport passengers around the Las Vegas Convention Center and to Resorts World in Tesla vehicles. There are other tunnels in the works.

Start your own business

The world is full of opportunities with lots of demand and not a lot of competition. It’s up to you to find the boring businesses that work for your portfolio.

What boring businesses do you find the most appealing for your investment strategy?

How to Start an Advertising Agency (and Make $500K/Year)

One of the hottest industries to start a business in is the tech industry—more specifically social media marketing.

We're going to walk you through the process of how to start an advertising agency so you can begin your path to success in digital marketing.

We talked to Jason Yormark, founder and Chief Social Officer of Socialistics , about how he started his company and has 4x the revenue since starting it 2.5 years ago.

He started off with Microsoft then started blogging during a year layoff before getting hired back.

He started the Socialistics advertising agency as a side project but has grown it to managing $2-5K social media marketing campaigns for 15 clients, including Habitat for Humanity and the U.S. Air Force .

We'll give you everything you need to know when starting an advertising agency, including an overview of the industry, developing the business concept, getting all the licensing/business requirements, commonly asked questions about advertising and marketing, strategies for launching, and business operations. 

Throughout, we'll provide input from Jason and myself on what we have found that works and doesn't work. Keep reading to find out more.

Advertising Industry Overview

Business owners in all industries need marketing. Most small businesses don't have the time and knowledge to run their own ad campaigns, so there's a ton of opportunity for starting a new business in marketing or advertising.

Let's start by discussing the state of the industry. Because of the global pandemic, marketing spending dropped to $1.28 Trillion in 2020 according to PQ media . Jason experienced a drop in revenue which he attributes to:

I saw similar results in my marketing and blogging business from February through September of last year and then spending started ramping up again.

This year I've been getting approximately 3x the requests of previous years, which I attribute to my business maturing, combined with more business confidence.

Despite a drop in overall spending, according to Beroe Inc , global digital marketing was between $330-340 billion in 2020 and grew almost 13% over 2019.

Meanwhile, spending on legacy advertising formats like TV, billboards, and radio declined by 30%.

According to Safe Frog Marketing Group (through Hubspot), nearly 2/3 of companies hire an advertising agency or freelancer to manage part of their digital marketing needs. 

Combine this with the number of marketing companies staying the same ,and spending on advertising expected to increase by 8-15% according to Forbes , this is the perfect time for starting an advertising agency.

One of the opportunities Jason told us about in digital advertising is the ability to attract potential clients with reduced retainers. Here's what he had to say,

Major Advertising Agencies and Other Competitors

Globally, the 50 largest marketing/advertising agencies make over $460 million in revenue or more. The top ad agency, Accenture Interactive made over $4.4 Billion in 2018. Wow! They are killing it! If you want to see the full list check out this article by Agency Spotter.

According to IBIS World , there are 5,585 digital advertising agencies in the United States, so there is a ton of competition, but plenty of revenue to start your own agency and work for your ideal client.

I did a little estimation of what the average marketing agency makes based on these numbers, and it's around $20 million.

Granted, some aren't going to be anywhere near this, but even if you are making $75,000+ working from home as a one-man company, that's not bad money.

Currently 2 years in, I make enough working part-time to pay the bills without stressing. It's not nearly what Jason estimated:

Inspiration for Starting an Advertising Agency

The first step when you want to start an ad agency is to conduct research to determine what is right for you. Your marketing company should be focused on satisfying your potential client's marketing needs while utilizing your current skill base. 

You may want to start a marketing company focused on a specific niche, such as Business to Business (B2B) or Business to Customer (B2C), a general marketing company, or you may want to start a digital marketing firm focused primarily on a specific social media network like Facebook.

You aren’t limited to just one type, but this decision will impact how to start a media company. This decision will drive every move going forward.

Some of the common types of marketing companies are:

• Social Media Marketing - Focused on marketing through social media 
• Email Marketing - Email-based marketing
• Brand Management - Building a brand through a variety of techniques
• Content Management - Managing the flow of content
• Copywriting - Writing about products, services, tutorials, or website wording
• Product Marketing - Focused on analyzing interest in a product then selling the product
• Marketing Analysis - Analyzing how to improve through meeting market demand
• Growth Marketing - Focused on increasing the market share through marketing
• PR/Communications - Communicating with external stakeholders
• Event Marketing - Marketing events like concerts or business conferences
• SEO/SEM - Improving organic search results or paid search results
• E-Commerce - Marketing products sold online

The Muse has a great article that describes what each type of marketing is like.

Socialistics focuses on social media marketing for B2B primarily. Jason told us,

Marketing is focused on helping people or companies become aware of a product or service and helping them move from unaware, to aware, to researching the offering, and finally to purchase.

Each business has a different model for accomplishing this. We'll show you some of the ways to achieve this.

Keep reading for different types of marketing agencies.

Name Your Marketing Company

I can't stress enough the importance of the name you choose when starting a marketing company. It will communicate what the company is all about. Keep reading for ideas about how to name your startup marketing agency.

Does the name explain the business?

Socialistics' name is a bit of a challenge for me to picture what it does. The name is unique, but here's how I break it down:

Social - " of or relating to human society , the interaction of the individual and the group, or the welfare of human beings as members of society" - Merriam-Webster Dictionary

-istics- "of, relating to, or characteristic of" -  Merriam-Webster Dictionary

It took me a minute to wrap my mind around the name to realize it meant relating to social media. I wonder whether Jason was going for something that made people think more about what it does.

He could be taking the exact opposite strategy of what I'd normally suggest, which could potentially offer similar results.

I tend to prefer including words like Marketing, Advertising, or something to identify what your company actually does, which can make it easier for people to think of it when they are looking for help.

Is it easy to spell?

Make sure your business name is easy to remember when using a search engine. A crazy name like Onomatopoeia Tees makes searching for your business difficult because it's hard to spell.

Because people tend to type fast, it can be helpful to register domain names for common misspellings of your business name and forward them to your website to make it easier for customers to find you.

Including your state, county, or city identifies you as a local business. For example, Sin City Modeling Agency would obviously be focused on models in Las Vegas.

I would typically discourage this for a marketing company unless you are specifically trying to narrow your business model to serve clients in the local area.

There is too much remote work available to limit yourself from the start. Later it might make sense, but in the beginning, it can be hard to get that first big client.

Does your name fit your branding? Some business owners focus on visual ideas for a logo before a name. Fortunately, Socialistics logo spells out what they do for people. Take a look:

As you can see, it has their name and "a social media agency."

The "S" in the logo also hints at one of the advantages of social media marketing: the fact that internet marketing offers a closed-loop marketing strategy, while other forms of advertising do not.

Overall, I like it. It tells what the company does, suggests differentiation to those who know about the industry, and also could have ties to their belief in community service because what we put out into the world comes back to us.

Register a .com

Find a name for which the .com domain is available. It's the most recognizable. You can conduct a search by clicking here . The longer you can purchase it for, the better. This helps communicate that you are in it for the long haul.

Some great places to buy a domain include:

• Google Domains
• Your Web Builder
• Unstoppable Domains   - only use if you are familiar with blockchain technology

Test Your Name!

See how people like it. Check Google Trends. Read articles like Five Tools for Naming a Business.

Make sure to check what happens if people shorten it. You wouldn't want to name a business Sensational Product Advertising & Marketing because people might shorten it to SPAM, and that goes right to junk mail.

Once you're satisfied with the name, register your business name with the government so you can protect someone else from getting it.

Write a Business Plan for Your Ad Agency

You need a business plan to help define the advertising agency's objectives and strategy.

A business plan for your advertising agency guides decision-making, helps financiers consider whether to provide startup costs, and gives you something to show businesses who could be potential partners or clients. 

A business plan should answer the following questions:

• What was your inspiration for starting an advertising agency?
• What problem are you solving for clients?
• What is the market opportunity? Who are your clients? What types of businesses need your services?
• What is different about your advertising agency? Why should other businesses believe you will be successful?
• What progress has your agency made so far?
• What startup costs have you already incurred by starting an agency?
• What do you need funding for? What are the costs associated with incremental sales?

A creative business plan goes a long way. It needs to be inspiring, informative, and factual. There are a ton of businesses in constantly changing environments, so you need to stand out to a potential client.

A business plan that is constantly evolving helps you keep your business plan in line with where the business is and where you want it to go. We've compiled some resources to help you build an awesome business plan.

We've gathered templates to help you develop your business plan. Here are some of the best:

• One-page business plan
• U.S. Small Business Administration (SBA) Business Guide
• State-specific templates
• Business Plan Template for a Startup Business

It gets better! Here's some free and low-cost education on business plans:

• How to Write a  Business Plan
• SCORE's free business plans and startup assistance resources
• The Complete Business Plan Course (Includes 50 Templates)

How to Start an Online Advertising Agency

Most types of businesses have similar processes that have to be performed.

Whether you want to know how to start a digital marketing agency or how to start a social media marketing agency, there are related expenses that will be incurred. Every agency will need to:

• Legally establish the advertising agency
• Obtain necessary licenses and tax requirements
• Obtain funding
• Establish a location
• Create a website
• Create social media profiles
• Have a tech stack that simplifies the operations of your small business

We'll give you tips and information on how to get the most of your digital marketing company in each of these areas.

Legally Establish the Advertisement Agency

You've developed a plan and created a name for your advertising agency. It's time to create the legal structure.

For best results, hire legal representation that has experience starting advertising agencies, like an attorney, accountant, or tax specialist.

It will simplify the process so you can get clients, build a team, and run creative campaigns.

There are five basic types of legal structures that most people will utilize: sole proprietorships, Limited Liability Corporations (LLC), Partnerships, Corporations, and Franchises.

Each has its pros and cons. You'll have to decide which is best for you, but we've gathered information on each to make it easier.

A sole proprietorship is the easiest way to start a digital ad company, but the structure doesn't protect the owner's personal assets from legal issues. That means if something goes wrong, you could lose both your agency and your home.

This structure is the least difficult to set up, but I'd recommend agencies getting professional liability insurance and cybersecurity insurance because you'll be a potential entry point to clients' systems.

If your website, email, or other services get hacked, it could be detrimental to more than just your agency: it could cause client lawsuits.

To start a sole proprietorship, fill out a special tax form called a  Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Corporation (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner's personal assets.

It's similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state's requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here's a blog on the top 10 states to get an LLC.

Partnerships and Corporations

Partnerships and corporations are typically for massive organizations or legal firms.

Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of 10 advertising companies that you can start as a franchise.

This makes it where an entrepreneur can benefit from the reputation of an established clothing printer that has already worked out many of the kinks of starting from scratch.

Check out our BigFrog videos to learn more about franchise benefits. They are a t-shirt printing company, but they still have great advice on the business model.

Obtain Necessary Licenses

Each location has different licenses, permits, or tax forms required. Use the SBA License and Permits page to find requirements for your locations. Some locations have very confusing regulations.

If you don't work with a legal representative, make sure to talk to the employees who work in the licensing and tax offices. They can give you advice on which licenses you actually need.

Make it a point to follow the laws. I once met a person who failed to follow the proper regulations, and it cost her a substantial fine and nearly 100 hours of community service per month.

Obtain Funding

Ad Agency startup costs can be achieved for under $1,000. You basically need some space in your home, a website, social media, and some time.

If you are going to rent an office space or run a ton of paid ad campaigns, the cost goes dramatically up.

That's not really necessary unless you are starting a franchise or have a local team that needs a space to all work together. When it's just you, an advertising agency can be started for less than a few hundred per month.

If you do need to obtain external funding, other options include:

• Loan from family or friends
• Business partner(s)
• Government programs

The SBA offers free courses on financing options and funding programs . For info on using personal funds to start a business, check out this article from The Hartford.

Alternative sources of funding include:

• Crowdfunding  
• Credit cards
• Home equity loan
• Rollover for business startups (ROBS)

Establish a Location

For most small business owners, an advertising agency can be a home-based business until you've reached profitability. Many will meet a client at a local coffee shop.

If you feel you need a more professional location to book the job, I'd recommend looking into office-sharing services like WeWork . They let you share space with others, reducing the expenses of having an office.

Some things to consider if you go other routes are:

• How many people will be on my team?
• How many people will come to a client meeting?
• How can I display my campaigns?
• Does space encourage the exchange of ideas?
• How quickly is the company growing?
• Will we have a sales team to answer client calls?
• Are we 24/7 because we offer services across the world?

Contact a local commercial real estate agent to assist you in the search. You can search for them by your area here.

Create a Website

A website is critical to a marketing company. It's often the first thing people see, and if the job isn't done right, why should they trust you to do their advertising right?

From a marketing perspective, your website needs to show you get results. But what does that mean?

Some things I look for when I search for businesses include:

• Do they come up when I search them? With Target, Yes they do.
• Does it show Wikipedia or Google My Business information in the search? If not, make sure you fix that.
• When I click on the link, how fast does it load? I want instantaneous on desktop or less than 3 seconds if over cell phone data. Any less, and you are losing customers. Google has extensive data on what is expected to rank high in search.
• Now that I'm on the site, does it look professional? If not, I'm probably going to run unless I can tell they use it for experimentation.

Building a great website is so important. Fortunately, there's a lot of things that make it easy. Using web builders has never been easier. They have tons of plugins and drag-and-drop functionality. I'd recommend the following:

• Easiest to use: Wix
• Best features: Wordpress
• Other Options: Great List

Add the list of website builders into the article. Get affiliate links from Serge.

Alternatively, you can hire a web developer, but they'll probably charge you up to $25k to do the same setup you would anyways. They just accomplish it quicker because they know what they are doing.

Create Social Media Profiles

I'd recommend having all possible social media profiles because you never know where you'll find a client. For B2B, the best is LinkedIn , but I'd also make sure you are on:

• YouTube - Best for Video 
• Instagram - Best for products and other marketing that uses pictures
• Facebook - Best for B2C marketing
• Twitter - Financial markets, political, and crypto are big industries on Twitter
• TikTok - Short fun videos primarily targeted to ages 30 and under

You can start with one and focus on it or try them all and narrow them down based on the results. Hootsuite has some good information on best practices . You'll need to keep up to date on these if you are starting an advertising agency.

Have a tech stack that simplifies the operations of your advertising agency

Every advertising agency will need a tech stack to make running the business easier.

I'm not going to go into great detail on each of them as they all have great educational resources available that I suggest you utilize as you'll be using them a lot. Here's the list of some I love:

• HootSuite or other social media management tools that put all your social accounts in one place and let you manage it from their dashboard.
• Google Workspace for email, spreadsheets, presentations, and cloud storage.
• Integrated accounting software that connects to your bank and allows automation so you only have to set a rule once. PC Mag has a great article about various options.
• Customer Relationship Management (CRM) software to keep all your information in one place. Agencies have a ton of content they handle for a lot of clients. Being able to keep track of it in one place is crucial for the success of the business.
• Content Management Software (CMS) is used for storing, labeling, and sorting content. A CMS may be part of a CRM, or it may have to be integrated, but easy access to files is critical to assist clients.
• Analytics Software will be needed and attached to all web assets so you can track how you are performing . This will be true for both the advertising agency and your clients. You can't improve results if you aren't measuring them.

These are the bare minimum I would suggest before starting an advertising agency.

Business Expansion

Now that you have everything you need to start an advertising agency, it's time to find clients and expand the business.

Marketing and Advertising Strategy for an Advertising Agency

Finding clients can be done in a variety of ways. Agencies can use their personal network, the same ad strategies you plan to use for clients, conventions, and other techniques. The biggest thing is to be sincere.

Jason told us about how he managed to land the Air Force and Habitat for Humanity. He told us,

In other words, always be ready to listen because that might be enough to land a client.

Here's what he had to say about Habitat for Humanity:

[su_youtube url="https://www.youtube.com/watch?v=kb1czTEK8f8 "]

In that scenario, he had to do lots of follow up and be patient. When clients say "no," they mean they aren't ready yet.

Potential Partnerships and Collaborations for an Advertising Agency

Partnerships and collaboration for an advertising agency may come from selling other tech that they find useful, being listed in blogs and reviews, or through fields like photographers, graphic designers, and developers.

Another source of partnerships is non-profit institutions. As Jason pointed out:

[su_quote]Habitat for Humanity wasn't so much about the money as the message it sends about our business and our values.[/su_quote]

If you can get a client that people know and share their values, it makes expansion so much easier.

Contact List Building for an Advertising Agency

Every person you come in contact with is a referral. Anything you do you should be trying to get followers, likes, and people signing up for your email list.

This makes a huge difference. You can then share more content with them to help them get closer to becoming a client. Even if they don't own a business one day, they might soon.

Some useful tools include:

• Hubspot - Free email marketing tools, including forms, databases, analytics, and templates
• MailChimp   - Similar to Hubspot’s marketing services but started as an email marketing company.
• SendGrid   - Most of my software development clients prefer SendGrid. It’s more tech-heavy though

Advertising Agency Daily Operations

An advertising agency makes its money from retainers and is mostly a time-intensive business.

The reason digital marketers use scheduling tools for as much of their work as possible is they need someone to be available when their clients need them.

People tend to use Facebook at specific times every day. If no one is available to respond to comments because they are working on something else, that is going to harm the advertising agency's clients.

If you are unable to satisfy your clients' needs, they'll go somewhere else.

Jason focuses on "service over revenue growth" because the revenue growth will come with time.

As long as they retain the customers they have, they know they'll have around $40k/month coming in consistently while managing 15 clients.

Remote Workforce in Advertising Agencies

Jason was concerned that his team being spread across the world would hurt him.

The idea that your team couldn't be all together was something he viewed as a challenge at first, but now he views it as one of the main sales points.  He told us:

There are a ton of great resources to be able to utilize the global workforce. Companies like Upwork are a great place to start. You can find reviews of other places to find marketing freelancers in this blog .

Top Advertising/Marketing Influencers

• Neil Patel - He’s marketed everything and has over 2 million followers across all channels. His blog gets over 4 million views per month.
• Matt Bailey   - Over 20 years in Marketing and author of Internet Marketing: An Hour a Day (2011)
• Gary Vaynerchuk   - Over 30 Million followers across his platforms. 

Starting an ad agency can be a highly rewarding career. We used insights from Jason Yormark and myself to help you get an inside look at what life in the marketing business is like.

We provided you with the knowledge and resources to learn about the industry and name your company.

You have tons of resources to get the business up and running, ideas on where to find clients, and ways to operate the business.

Now it's up to you. Will you be the world's next great advertising agency?

How to Start a Trucking Business and Earn $100K/Month (2024)

How to Start a Trucking Company in 7 Steps

Want to get into one of the fastest-growing industries in the country? The trucking business isn’t known for its high profits, but that changes when you start hauling 80,000 pounds per truck. That’s right! We’ll learn how to start a trucking business with expert advice from a trucking company.

Mikael Sant, the founder of Sant Lines, is ahead of the game. He started Sant Lines in May of 2021 at the age of 19. The trucking company made over $159,000 in revenue in the first six months. That’s more than many owner-operators make in a year. He has grown to four trucks, expects to have 100 in seven years, and is working to be a dominant force in the industry.

We’ve outlined the process to start a trucking company in just 7 steps. Click any of the links below to jump ahead.

[su_note note_color="#dbeafc"]

Step 1. Know the Trucking Business

Step 2. starting a trucking company business plan, step 3. secure startup funding, step 4. is a trucking business hard to start, step 5. get customers, step 6. manage your trucking business finances, step 7. trucking companies need admins, how to start a trucking business frequently asked questions, so what’s the best trucking business to start, quick warning.

Before you even consider operating a trucking company, you should:

• Get a DMV printout: If you have a DUI, vehicular manslaughter, or other charges, you will not be able to get a job or insurance.
• Have no convictions for drugs, felonies, violent crimes, or fraud: It will be difficult or impossible to qualify for a job, insurance, or getting an authority.
• Check insurance price: . Mikael spends $45,000 per year for his insurance because he is a new CDL driver.
• Understand Finances: Every load you accept will have costs that impact it. Real simply, if you can’t multiply and calculate percentages, you are likely to struggle immensely. You need to be able to calculate the costs based on mileage and the weight of load. To make good money, you’ll need each load to be at least three times the cost.

How to Start a Trucking Business Case Study: Sant Lines

Mikael is a serial entrepreneur. He owns:

• Sant Logistics & Freight LLC
• Rettig & Sant LLC
• Squeaky Clean Pressure Washing & Paint LLC 
• VESTALO LLC

Check out our interview with him below:

[su_youtube url="https://youtu.be/-8TnsjDRXUE"]

You can write your own success story in trucking by following Mikael's advice with these seven steps.

Most of us are familiar with trucking on some level, whether it's seeing big rigs on the road or utilizing local moving companies. Behind the products we receive from those giant trucks, plenty of government regulations ensure every trucking company delivers products safely.

If you haven’t worked in a trucking company, it’s important to get some industry experience and specific licenses. You might want to work with a moving company to learn about the industry.

How do truckers make money?

Very simply, truckers make money based on miles and weight as they transport products. A trucking company operates under one of four main NAICS codes:

• 48412 Long Distance Trucking
• 48411 Local Freight Trucking
• 48422 Local Specialized Freight Trucking
• 49222 Courier and Local Deliver Services

Trucking businesses charge different amounts based on what they are hauling and where they are hauling it. I combined the IBIS World statistics for the four sectors and found that the industry makes $557.2 billion in annual revenue and $33.2 billion in profit. Check out the rest of my findings below:

How much can you make owning your own trucking company?

The average trucking company has over $410K in revenue. Specialized freight makes the most at over $860K, while the others earn far less. If you plan to start a trucking company, it’s reasonable to assume you will make no more than the following amounts during each of the first few years.

• Long Distance Freight : $461K
• Couriers : $364K
• Local Freight : $282K

Learn more on our podcast where we discuss trucking with Mikael. 

In the podcast, Mikael explains how he built his company from the ground up, including startup costs, and how he's adapted to new systems as his company has grown. Plus, he talks about some surprising obstacles he's had to overcome to keep the company running. 

Is owning a trucking business profitable?

Yes, owning a trucking company can be highly profitable. The average trucker makes around $54K per year in wages and another $6,000 in profits, assuming they meet industry averages.

Mikael currently makes over $135K per year. He only drives in case of emergencies and pays his drivers to do most of the driving. So it can be highly profitable to start a trucking company without driving consistently.

New trucking businesses

More and more truckers choose to go out on their own once they have gotten some experience. In fact, owner-operators have the highest rate of solo entrepreneurs in the United States. 

That’s because they can make a great living. Assuming the 4.2% rent is helping pay off their homes, that means the average business owner is paying off around $17,000 of their mortgage as a business expense.

Follow Commercial Truck Regulations

When you start a trucking company, it is important to understand you are entering one of the most regulated industries in the United States. If you provide long haul services, you’ll need to register with multiple agencies including:

• Department of Transportation
• Department of Labor
• State Agencies (in every state you operate in)

Mikael told us:

[su_quote]For e very state you have to be 18 to get a CDL, and 21 to get cross-state licenses. [/su_quote]

He also told us:

[su_quote] I focus mostly on running the business, but there are times when I have to drive too. It cost $4,500 to get my CDL. [/su_quote]

All of these costs add up, of course. Let's have a look at the hard numbers so there are no surprises when you start to pay your startup expenses.

How much does it cost to start a trucking business?

You’ll want at least $50K-$60K to start a trucking company. Mikael explained the startup costs for a trucking company, which include the following:

• Truck : $32,000 (10 years or newer)
• Refurbished Trailer : $9,500 (currently worth $30K)
• Repairs : $6,000
• Fuel : $2,000 (first week)
• Insurance : $4,500 (down payment and first month)
• Permit : $950 per truck
• IFTA : $2,800 to get cross-country license plates
• Total : $57,750

The good news is:

[su_quote] We made our money back in the first three months and have been profitable since. [/su_quote]

How to start a trucking company with no money

Yes, many major transportation businesses offer company drivers the ability to transition to owner-operators after working with them for a certain amount of time. They do this by setting up brokerages, leasing companies, and load boards.

The leasing company leases the owner-operator a truck in exchange for the truck company owner committing to a multi-year contract with them. At the end of the contract, you have your own trucking company and truck owned outright.

We’ll discuss the leases more in later sections, but first let's check out more resources to learn how to start a trucking company.

More resources for trucking businesses

There are industry organizations that you’ll want to follow to stay up to date on the trucking industry. These are some of the biggest in the U.S.

• American Trucking Association (ATA) : The ATA is the largest group that collects industry data, lobbies for the industry, and provides info for trucking companies, moving companies, suppliers, and companies that need shipping.
• Transport Topics : This group publishes a variety of information about the industry including a Top 100 For-Hire list. FYI you need to make $244 million or more to be in the top 100.
• US Environmental Protection Agency (EPA) : The EPA is tasked with regulating environmental concerns. Remember to pay attention to their rules involving trucking and agriculture because most trucking companies will be impacted.
• US Energy Information Administration (EIA) : Be sure to pay attention to the transportation reports from the EIA if you haul oil and refined products.
• America's Independent Truckers' Association Inc. (AITA) : Larry Daniel started AITA in 1997 to give independent truckers the same purchasing power as major conglomerates. It’s $10 per year for membership or $180 for fleets. If you find better discounts anywhere, they ask you to gather as much information as possible and send it to them so they can secure the same deal for all.

As the saying goes, if you fail to plan, you plan to fail. You need a solid business plan. Trucking company business operations comply with numerous regulatory agencies. Your truck company business plan should address all aspects of the business that are essential to your success.

The business plan dictates the plan of action. Once you have some knowledge and experience in the trucking industry, writing your new trucking company’s business plan is the next logical step.

Your business plan is your venture’s founding document, and it will be the reference point for all business decisions moving forward. You want to put time and effort into composing the business plan because a well-written one will help improve the probability of business success.

Luckily, there are great resources for entrepreneurs who are writing their own business plans. Check out our business plan template and watch our interview with Mike Andes below.

[su_youtube url="https://youtu.be/Seac5PbUZXk"]

The Small Business Association (SBA) is part of the federal government and provides a step-by-step guide to writing your business plan.

Truckstop.com also has a guide to writing a business plan for trucking companies.

Keep reading to learn how to identify the target market for your own trucking company.

Identify the target market

Your target market will mostly be businesses when you open your new trucking company. Depending on the type of truck, you might want to build relationships with different kinds of businesses. Some businesses that consistently need truckers include:

• Distributors
• Car manufacturers
• Agricultural businesses
• Marijuana growing facilities
• Moving companies
• Car dealerships

You’ll want to build relationships with load boards and brokers like datboard and truckstop.com , but Mikael also wins a lot of business with word of mouth recommendations. You’ll probably also want to consider seasonal fluctuations. Mikael told us:

[su_quote] Everything is good during winter. $75K monthly and summers around $125K. Potato season is July to November, but our best run on a per-mile basis was Oregon to Phoenix. It totaled $6 a mile or around $9,000. [/su_quote]

It can be hard to describe your market accurately, but it’s a critical assessment to make. Market research firms gather data that are good for validating your original research. It’s worth considering hiring one if you aren’t confident in your research methods.

You can find a guide to market research for new businesses at Entrepreneur, and Joe Gardiner, CEO of VentureDevs , has a complete guide to market research at Forbes .

Define your business structure

Because of the investment, you’ll probably start a trucking business as a Limited Liability Company (LLC). A trucking LLC filing as an S-Corporation is the prevailing business structure when someone starts a trucking company. 

Limited Liability Companies can opt for the business entity to be treated as an S-Corp for tax purposes. You just have to file an 1120-S with the Internal Revenue Service.

A successful trucking company will find this business entity and tax structure beneficial because they will be able to:

• Pay themselves a salary.
• Receive various personal liability protections.
• Separate business and personal assets.
• Save money on taxable income over $200,000.

Running your business in this method provides a good balance of liability protection and business structure if you choose to grow beyond a solo entrepreneur. Almost every successful trucking business will use either this structure or a C-Corporation.

You might want to hire a law firm to form your corporation because it’s easier to head off any problems as the business is formed rather than to go back and change your founding documents or business protocols once issues arise.

Check out our business hub for more in-depth information on business licenses and entities. Alternatively, review the Small Business Administration startup guide for more information.

Choose your trucking business name

Your trucking name can reflect your geographic origins, or it can be more abstract, or even the name of the founder. Sant Lines uses Mikael’s last name.

Choosing your trucking name is an important consideration that can affect both the present and future of your business.

For example, naming your company the Trucking Business of North Carolina may attract customers in your home state that want to do business with local trucking companies, but it might hinder your expansion outside of your state.

For some help with choosing a name for your business, check out our guide and business name generator . Alternatively, Forbes has a guide, as does The Balance.  

Once you’ve determined your trucking name, run searches at your Secretary of State’s website and get a domain name from sites like GoDaddy or NameCheap .

Address start-up and operations costs

Your plan should outline the source(s) of your capital plus how and when investors will be paid back. Outline your operational costs carefully. For a trucking company, there are three main sources of operations costs:

1. Purchases

The primary costs associated with trucking are purchases including gas, maintenance, and repairs. These will be nearly ⅓ of your business expenses, so make sure to calculate them effectively. That means if you are doing long haul trucking, you should assume $153,667 of purchases per truck each year.

Your wages and any employee wages will be up to 29% of the revenue. That means you should assume you’ll be paying up to $133,690 if you are making the average amount for a long haul trucker. On average wages are around $55,000 per year across the industry.

3. Miscellaneous

The third largest expense relates to other costs like technology, miscellaneous business expenses, and taxes. These account for approximately 25% of revenue. I have created an automated 10 year calculator that estimates the revenue, expenses, and profits when considering the compound annual growth rate (CAGR) and how many trucks you want to add each year. Feel free to download it and try it out.

How much does a trucking owner make?

An owner-operator will normally pay themselves a salary plus profits paid out as either a dividend or return of capital. If you run as a sole operator, you need to make sure you set your pay correctly. There are a few ways you might fall under on the Bureau of Labor Statistics site :

• Heavy Truck Driver : $51,790
• Operations Manager : $106,630
• Top Executives : $109,880
• Chief Executives : $198,610

In addition, an average trucking company would offer around $20,000–30,000 in profits which can be treated as dividends. If you pay yourself less than the $106K salary, which I suspect most would for the first few years, do not give yourself more than a $30K dividend check unless you want to risk an audit.

(I’m not a tax attorney, but I know enough that you don’t want to deal with IRS audits. If you make enough to pay yourself $200K, it is the safest bet.)

Consult a corporate attorney to get legal advice.

Once you’ve put together a plan, it’s time to start considering how to secure startup funding. As Mikael stated, you’ll need around $50K to $60K just to make it through the first couple of months. If you factor in the first year, you’ll need almost $300K, and to make it through the first five years you can expect to need over $2 million. These numbers do not include wages or depreciation (because depreciation is not a hard cost).

Most business owners start their trucking company with personal savings or by borrowing from friends and family, but you can also qualify for equipment financing and other loans that use the truck to back the loan. We suggest reaching out to National Business Capital first because they offer flexible financing options and work with you to find the best loan for your business from over 75 lenders.

Crowdfunding

If your business will serve a particular community or industry, you might be able to use crowdfunding to get the startup costs. Of course, you’ll normally have to offer them something like discounted pricing or a free local delivery depending on how much they contribute. 

Kickstarter is a popular site for business funding. If you’d like to learn more about the Kickstarter process, check out our interview with Pooch Selfie’s founder .

Major fleet owner-operator lease programs

While talking with one of my relatives about how to get into the trucking industry, he advised going through one of the major fleets to get financing. The way they work is they basically finance the truck in exchange for a contract of five years. After those five years, you own the truck. 

He warned that you need to be cautious with these, however. Some of the fleets are a bit shady. If you are making less than $400 per day, they aren’t doing right by you. In addition, after five years you should absolutely own the vehicle. Make sure to read the contract carefully.

I asked about the best ones. He specifically mentioned:

• Knight Transportation (From Arizona)
• Werner Enterprises (Based in Nebraska)
• Schneider (Based in Wisconsin)

A trucking business isn’t hard to start, but you will have some unique requirements that most business owners do not. 

First, you’ll need to get your commercial driver’s license (CDL). You’ll also need to perform the following tasks when you start a trucking company:

• Get your CDL.
• Get a truck and trailer.
• Submit IFTA Form 290.
• Apply for insurance.
• Register with the federal Department of Transportation (DOT).
• Join the International Fuel Tax Alliance.
• Get an IRP plate.
• Let’s look at the considerations.

Get Your Commercial Driver's License

To drive a semi-truck, you’ll need a commercial driver's license. Each state has different requirements, but most consist of the following: 

• Be of good health based on hearing and response times, but there are other reasons you might not qualify.
• Pass background and driver safety checks.
• Get your state CDL manual from the Department of Motor Vehicles. Some states use alternate names .
• Take a commercial permit knowledge test.
• Go to a third-party commercial driving school. The manual should list licensed schools.
• Take the driver test.

[su_quote] I don’t normally drive, but you’ll want to have the license in case one of your drivers calls out. [/su_quote]

He suggested JJ Keller for the school.

Next, you’ll want to apply for insurance because many of the following steps require it.

Buy A Truck

• Age : Under 10 years old
• Mileage : Under 750,000 miles
• Brands : Kenworth, Volvo, Peterbilt, Freightliner, Western Star
• Features : Sleeper included for long haul trips
• Market Price : Should be market price or slightly below to get the best value

He told us:

[su_quote] I try to stay between [the] $50 to $70 thousand range for used trucks that have between 450K miles to 650K miles. [/su_quote]

He also suggested bringing someone with you that can check the engine and transmission. They will be able to provide reasonable estimates for the cost of repairs and help you negotiate the price.

Types of Trucks

Trucks in the United States are rated by the gross vehicle weight rating (GVWR). The GVWR is a rating that manufacturers use to specify the maximum weight that a vehicle can operate safely. This weight includes the truck, trailer, gas, occupants, and freight. There are eight basic levels including: 

• Passenger vehicles (light duty) : Classes 1, 2a, and 2b have a GVWR of under 10,000 pounds. These also include popular trucks and SUVs like the Ford F150 and some box trucks.
• Medium duty vehicles : These go in Classes 3-6, which are below the 26,000 pound GVWR. Common vehicles in this class include Ford F350 to F650, Silverado 3500 to 6500, and Ram 3500 to 5500. A box truck company will fall in this category as well as some smaller semi-trucks with sleepers.
• Heavy duty trucks: Class 7 is 26,001 to 33,000 pounds, and Class 8 is over 33,000 pounds. These are the big boys, and they require a CDL.

The federal government requires heavy-duty trucks to have a commercial driver's license, but each state has its own policies. California requires any vehicle over 6,000 pounds and 3 axles to have a CDL.

Tow trucks and other vehicles may also require CDLs. To learn more about tow truck driving, check out our interview with K.O. Towing below:

[su_youtube url="https://youtu.be/pk4B1Q28SCs"]

Types of Trailers

There are a ton of different trailers you can use for trucking. It just depends on what you need to carry. Some of the most common are:

• Dry Van Trailers: Standard trailers are 53 feet long and around 45,000 pounds maximum weight.
• Standard Flatbed Trailers: These trailers are great for products that don’t need to be protected from the elements.
• Refrigerated Trailers (Reefers): If you transport food, you’ll need temperature control with a max weight of 42,000–45,000 pounds. 
• Drop-Deck, Step-Deck Trailers : These are similar to flatbeds but prevent height problems, and are up to 53 feet long.
• Double Drop, Lowboy Trailers : Double Drops are higher at the front and the back and carry 40K–80K pounds.
• Hotshot Trailers : This low-lying flatbed is 30–40 feet long, but only carries 16,500 pounds and is usable with Class 3 to 6 trucks.
• Conestoga Trailers : If you need a flatbed with a sliding tarp cover, use a Conestoga trailer.
• Curtainside Trailers : Need a dry-van with a solid front, top, and back, but tarp curtain sides to make it easier to load from the side? Curtain Trailers are the answer.
• Extendable Drop-Deck Trailers : These drop decks are built for lengths longer than 53 feet.
• Removable Gooseneck (RGN) Trailers : Use these to drive vehicles onto the trailer.
• Extendable RGN Trailers : These RGN trailers extend based on the length of your load.

Watch the video below to learn more about these trailers:

[su_youtube url="https://youtu.be/fkNaIQOEd34"]

They don’t mention tankers in the video. You can transport hazardous waste or oil products, but those will require specialized licensing and knowledge. You are better off getting some miles on the road before you start hauling these products.

When first starting, you’ll probably only be able to choose one type of trailer. I’d probably go with a reefer or drop deck as they will offer you the most versatility. That sounds consistent with what Mikael told us:

[su_quote]I offer 4 main services:

• Refrigeration and frozen food (best in summer and fall)
• Flatbed for construction (springtime does best)
• Power only: Amazon is the biggest customer I have just 'cause of their volume
• Towing: I’ve delivered as far as Nevada[/su_quote]

Fill out Form 2290

You’ll need to pay your heavy use taxes to the IRS before you can start driving. You’ll use Form 2290 and either apply for an exemption or pay up to $504.17 (subject to increase). You won’t be able to get your authority or IRP License without proof.

Get your trucking insurance

You’ll need active insurance coverage including public liability insurance. The requirements vary based on state and federal laws, but you will need at least $750,000 of Bodily Injury (BI) and Property Damage (PD) liability insurance coverage. If you will be transporting hazardous materials, the requirement is $5 million.

The ATA has an agreement with Sentry as a preferred insurance provider. Most major insurers also have a commercial truck insurance product, or you can also find specialized truck insurance from companies like Owner Operator Direct .

Become a trucking authority

To run an interstate (operating across state lines) business in the U.S. transportation industry, you will need to get licensed as an operating authority with the Federal Motor Carrier Safety Administration ( FMCSA ). To apply, you’ll need to:

• Get your Department of Transportation (DOT) number here .
• Get the proper insurance .
• Apply for the Operating Authorities you wish to qualify under. There are multiple types .
• Pay $300 fee per Operating Authority.

When you perform these steps you will have a temporary operating authority for your self-owned trucking company. The DOT has to perform an audit before you have a permanent operating authority. These are not actually permanent, however, as they will take it away if you do not operate under the laws.

Join International Fuel Tax Association (IFTA)

You’ll want to join the International Fuel Tax Association. It was created under the International Fuel Tax Agreement to simplify the payment of fuel taxes in the continental United States, Alaska, and Canadian provinces.

Truckers are required to pay fuel tax based on the percentage of miles they drive in each state. To simplify the administrative costs, each jurisdiction handles its own member applications, tax returns, and audits. Read up on how it works on the IFTACH website .

You’ll need to apply at your local office and pay a fee which will provide you with two decals to prove your membership.

You can get more details on the IFTA website . 

You’ll need to file a tax return every year for your gas tax. Fortunately, you just file with your state and they’ll distribute it accordingly. You’ll need to track your miles and time in each state to pay the appropriate taxes whether you bought gas in that state or not. You can use a log book or an electronic log (elog). I talked to a relative that is a truck driver and he warned:

[su_quote] Be careful with elogs. When GPS goes down, and it frequently does, they may not log the miles. In addition, when they get hacked you have to get a new one. 16,000 drivers recently got warnings to get a new log or stop driving because of a hack of a provider. If you use them, also keep a manual log. [/su_quote]

Get an IRP plate

You’ll need an International Registration Plan (IRP) before you start a trucking company. An IRP is a plate that allows you to get plates that work in all states. You’ll want to go to the appropriate licensing office in your state to get these. You can find each state in the FMCSA list of providers .

Some states also require additional permits to operate within them. Mikael told us: 

[su_quote] Oregon requires a permit if you operate within the state but are from out of state. [/su_quote]

Allow a DOT Trucking company audit

When you start a trucking company, the DOT will conduct an audit during the first year to verify that:

• You are keeping proper records.
• You have a drug and alcohol testing program.
• All insurance is up to date.
• Periodic inspections are performed and documented.
• No major infractions incur.

You can learn more at FMCSA . If you do not pass this audit, your business will not get permanent authority to operate.

Keep reading for tips on how a successful trucking company gets customers.

With all the regulatory compliance that starting a trucking involves, it’s easy to lose sight of the end goal of any business: attracting and retaining new customers.

Getting customers for your new trucking business isn’t that hard these days. There is a huge shortage of drivers, and you just have to get your name out there.

Mikael had a ton to say about finding customers. He told us: 

[su_quote] My number one niche is reefer. Customers are everywhere. [/su_quote]

Create your brand

One of the best ways to attract new customers is by creating a memorable brand image through an effective branding campaign. 

Branding is the process through which a company’s mission, values, and image enters the public consciousness. 

Get a good logo

Successful branding begins with a good logo that represents the company effectively and in a simple, easily memorable manner.

Getting the logo right is an important step toward corporate success, and if you are not a natural artist or computer graphics expert, plenty of firms offer logo design for reasonable rates. It’s a worthy investment of resources toward a bright future for your new trucking business.

Advertise your brand on social media

Successful advertising happens in both traditional and social media. Mikael told us:

[su_quote] I advertise on Facebook, Instagram, and TikTok. [/su_quote]

He went on to explain that he does short videos to help people understand the industry better. He even hires new drivers through the videos. He had four interviews from a single TikTok video.

Determine your competitive advantage

Branding and advertising can all be for naught if your company’s competitive advantage is not clearly defined. A competitive advantage is a unique service, perk, or reward that differentiates your business from others. 

The trucking business is a very competitive industry with some large players that have thousands of trucks in their fleet and nearly half a million competitors. Some ways to differentiate your trucking company might be:

• Subscription-based models : Charge customers monthly for a guaranteed number of miles or pounds. Mikael has several customers that have a consistent pickup day and time. He’s able to reduce the administrative time and cost for them because they just routinely send their order.
• Service-based models : Guarantee on-time pickup and delivery (better follow through).
• Pricing: Offer premium service or discount service. For instance, you might give someone a discount if they have a delivery that you can just add onto your current load.
• Be more open : Mikael told us that different industries pay better at different times of the year. Share how you calculate pricing so people can create their own estimate and request a pickup.

Don’t neglect traditional marketing

Mikael reminded us that traditional marketing strategies like business cards and networking are really beneficial in the trucking industry. He told us that the trucking industry is in demand by most companies.

[su_quote] It’s always nice to know someone with a truck when you need to move. [/su_quote]

Always be prepared; you never know where you’ll find customers.

Links to resources about business marketing

There are a couple of excellent articles that focus specifically on getting customers. Forbes offers ten ways to get customers to your new small business, and Inc. offers the same, with a focus on also increasing your sales.

Mikael runs multiple businesses so he had a lot to say about how to manage a trucking business (or any business for that matter). Some of the advice he gave us included:

• Get a business bank account with a credit union.
• Make sure you have at least a personal credit score of 680. 
• Be sure to have at least $10K down payment if you’re financing the business.
• Always have money for incidentals. (His company had 2 flat tires in a week and 16 repairs in a month.)
• Use Quickbooks and hire a bookkeeper. 

He told us: 

[su_quote] My brother does the bookkeeping. [/su_quote]

He went on to explain how they try to grow. He explained:

[su_quote] I try to hit $10K per month per truck. I calculate earnings by the week, then try to hit  the median + 30%. Effectively, I’m trying to increase by 30% each week. [/su_quote]

Trucking companies have a lot of administrative work they have to do. If you’re a solo entrepreneur, you’ll be doing it yourself, or you can hire people to help you. A lot of truckers hire their wives to do the dispatch. This can be a good or bad thing. Make sure she understands what she’s doing.

The main administrative work is typically done by dispatchers. A dispatcher will normally make between $30,000 and $75,000 per year and have job responsibilities including:

• Providing estimates to customers
• Preparing dispatch documents
• Planning and adjusting routes
• Scheduling driver pickup and delivery times
• Communicating with customers about delivery or pickup times, freight limitations, and special requests
• Creating bills and invoices
• Maintaining call records, delivery and pickup times, driver routes, and route changes
• Updating drivers on transportation regulations and laws
• Reviewing drivers’ logs and comparing them to quoted arrival times.
• Logging shipping schedules 
• Monitoring truck repairs
• Scheduling maintenance
• Managing complaints

You can outsource your dispatch to a company like Cameron .

You’ll probably need some software to manage this so let’s look at some of the software Mikael suggests.

Mikael suggested the following software:

• Motive : This software is a combination of risk management, security, and customer relationship tools. When used with the video cam, it is also good for an educational tool.
• DAT board : Use this to find a load that you can use to improve your returns by running a fuller truck and getting loads for the return home.

We’ll answer some of the most frequently asked questions on how to start a trucking company in this section so you are better prepared for your own trucking business.

How to start a trucking business with one truck

You can either start your own trucking company as an owner-operator or pay someone else to drive the truck. You’ll want to: 

• Learn more about how to start a truck business.
• Write a business plan about how to start your own trucking company.
• Secure the funds for starting a trucking business.
• Go to a private truck driving school.
• Go through the entire regulatory process. We explain it more if you go to Step 4 in the blog.
• Find customers.
• Manage your company.
• Hire administrative help.
• Pay your taxes.

How to start a trucking business owner-operator

An owner-operator will be required to perform all parts of a successful business. You’ll need to:

• Get all business license requirements.
• Comply with government regulations.
• Maintain business insurance.
• Establish contracts.
• Manage cash flow and fuel costs.
• Haul loads.
• File IFTA’s quarterly tax returns.
• Maintain new or used trucks.

We created an owner-operator startup checklist for those who want more information on how to start a owner-operator trucking business. Download it below.

How to start a box truck business

Starting a box truck business is a little bit easier than other trucking companies. You’ll want to:

• Check if you need a CDL in your state and surrounding states. Get it if you need it.
• Start your LLC or Corporation.
• Get your state and local business licenses.
• Get a business bank account.
• Get your commercial driving and business insurance.
• Transport loads.
• Manage the finances.

Be sure to glance back at the steps included in this article if you have questions about these tasks.

Most box trucking companies are not required to have the following:

• International Registration Plan plates
• International Fuel Tax Agreement decals
• DOT registration
• Unified Carrier Registration

How to start a trucking brokerage business

A truck broker or freight broker is a company that has relationships with suppliers and transportation companies. They manage a load board and help both parties meet their unique business needs. They may be large businesses that also participate in hauling loads, or they may be strictly middlemen.

To start this type of company, you will need to follow the 7 steps outlined above, including:

• Understand how to start a trucking business.
• Write a business plan.
• Secure funding.
• Go through the legal proceeding requirements.
• Get customers.
• Manage your trucking finances.
• Handle administration. This section will be particularly important to a broker.

Read the whole blog for more information on how to start trucking business brokerages.

How to start a trucking business without driving

There are a few ways to start a trucking business without driving. Some of the trucking businesses that don’t require you to drive include:

• Freight factoring company : Provide loans on invoices for a percentage of the load.
• Freight brokerage : Develop relationships with shippers and truckers and play the middleman. You still need all the requirements of a trucking company, though.
• Process Agent: A process agent is a company that has a person and office in every state. They are necessary under the Unified Carrier Registration. You can find a full list on the FMCSA.
• Trucking Software Provider : If you think you can find ways to help truckers simplify reporting, financial projections, taxation methods, or other essential parts of their job, you might have a great opportunity because the industry is in constant flux.
• Hire drivers with CDLs: You can start a trucking business without a CDL, but you’ll have to pay truckers to haul the loads for you. Mikael operates in this manner but still has his CDL just in case something happens.

Who are good trucking influencers to follow on social media?

Checking out what other companies are doing can be really beneficial. Part Catalog has a great list of trucking influencers. We included two with the highest engagement and Mikael Sant’s links.

• Alex the Trucking Guy: YouTube /  Instagram
• Big Rig Barbie: YouTube /  Instagram
• Mikael Sant: TikTok /  Podcast

Starting a trucking company requires complying with a lot of regulations, a lot of administrative functions, and a lot of patience and determination to build a company that makes more than $75K per month. It’s achievable, though.

Just make sure it works with your life. While long-haul trucking is more profitable, you might want to start locally if you have a family you want to see every night.

Given the amount of regulation, starting a truck company might not be the first business you start unless you’re already driving and want to go independent. You can definitely build a successful career in trucking, but it’s a long haul.

For those who successfully scale the formidable barriers to entry, the financial rewards can be great. But the majority of trucking owners love the freedom of the open road and are typically mom-and-pop shops.

Do you have experience running a trucking business? What do you love about it? What would you change? With what other businesses do you get to explore the world as you work?

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My Name is PRETTY NGOMANE. A south African female. Aspiring to do farming. And finding a home away from home for the differently abled persons in their daily needs.

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Advantages of a Business Plan: Definition and What It Entails

• by Folakemi Adegbaju
• August 15, 2023
• No comments
• 6 minute read

Table of Contents Hide

#1. planning further develops asset use, #2. plans give inspiration and responsibility, #3. to position your brand, #4. planning gives a manual for activity, #5. to assess the feasibility of your business, #6. to force you to research and really know your market, #7. provides structure, #8. support for funding, #9. increased clarity, #10. helps to secure talent, #1. a business plan can hamper you from looking forward, #2. analyzing performance can become time-consuming, #4. constant change makes a business plan outdated as soon as it’s written, #5. it prevents the freedom you once possessed., final thoughts, what are advantages of planning, what is the importance of a business plan, what is the disadvantages of a business plan.

A business plan is an important tool to guide you if you want to become a successful business owner. A great business starts with a good business plan. Basically, the better your business plan, the more successful your business will be. It also provides insight into the steps you should take. The success of your business depends on how effective your business plan is. But then you might be worried and confused, asking yourself questions like, “What are the advantages of writing a business plan?” What are the disadvantages of a business plan? Getting answers to these questions will help you develop your business and make it grow.

This is a guide to the advantages and disadvantages of a business plan and everything you need to know.

Let’s kick off.

What Are the Advantages of a Business Plan?

Every business begins with a business plan, since beginning a business without one is like going out on a chilly winter night without a coat. The following are the advantages of writing a business plan:

Assets are always scarce in organizations, and management must guarantee that they will be properly utilized. Planning aids administrators in determining where assets are most commonly required so that they can be assigned where they will provide the most benefit.

People are not motivated when they lack defined aims and have no notion of what is expected of them in general. Planning reduces susceptibility and demonstrates what everyone is expected to accomplish. Individuals feel compelled to pursue a goal that they are familiar with.

Defining your company’s position within the market is one of the advantages of writing a business plan. Such a definition enables you to explain the company and its brand to consumers, investors, and partners in a concise manner. You can best identify how to position your brand using the industry, consumer, and competitor knowledge you acquire during the business planning phase.

 Plans can help organize everyone’s activities in order to achieve the desired outcomes. Activities that are composed of and centered around certain outcomes are usually more effective.

What is the significance of this option? The business plan procedure includes analyzing your target market as well as the competitive landscape, and it also serves as a feasibility analysis for your venture’s success. In some situations, your planning will put the business on hold. It could also be to move forward with a different project that has a better probability of succeeding.

What are some of the significant developments in your field? What are the most serious threats to your business? Is the market expanding or contracting? What is the size of your product/target service’s market? Creating a business plan will assist you in gaining a more comprehensive, in-depth, and nuanced grasp of your market. It will also enable you to use this information to make decisions that will help your business thrive.

A business plan gives your business a structure and defines your management goals. It becomes a go-to resource for keeping the business going with sales goals and operational milestones. It can help you measure and manage your primary areas of attention if you use it correctly and on a frequent basis.

You need a business plan that answers questions about profitability and income generation if you’re aiming for loans from a bank or capital from investors. One of the advantages of writing a business plan is getting funding easily and without stress.

A business plan helps you make decisions about important aspects of your business, including capital investments, leasing, and resourcing. A strong business plan helps you determine the most important business priorities and goals to concentrate on.

Attracting competent employees and partners is important to a company’s success. A business plan’s goal is to assist in attracting the right talent at the right moment. Employees want to know what the business vision is, how it plans to achieve its objectives, and how they may help in their individual jobs.

What Are the Disadvantages of a Business Plan?

In the current chaotic environment, planning more than a few months ahead of time may appear pointless. In most cases, progress is rarely achieved through random movement.  Planning aids development in every situation, even when you are confronted with fragility and a constantly changing atmosphere. The biggest disadvantage of a business plan is that it takes time and money to create, and small firms often lack the resources and experience needed to create a solid business plan, which can cause the business to suffer more than benefit from it.

And we’ve got good news for you! We have a team here at BusinessYield Consult to provide you with the necessary information you’d need to start out.

Meanwhile, here are some disadvantages you need to consider in writing a business plan:

 It means that you may be relying too much on your plan without taking into account other external elements such as market circumstances, trends, and so on. Such reliance can force you to make bad decisions and miss out on potentially lucrative possibilities simply because they weren’t part of the plan.

For example, if you want to start a car detailing business and you feel there might be a disruption or crisis, in the long run, a good business plan can help you fix any issues. However, you can also hire a consultant to come in and help if you feel a plan has run off the rails.

 By focusing on the aims and objectives that you were unable to attain, a business plan can cause you to reflect on your past failures. Such a review of past performance may waste time and resources rather than focusing on how to move forward with confidence.

#3. No Guarantees Are Made

Even with the best research, best employees, and most comprehensive business plan on your side, failure is more likely than success. Many of those that start today will fail within five years, and many of them will have developed comprehensive business plans.

 We all know how quickly the world changes, so it’s extremely probable that your business plan will become obsolete by the time you’re ready to begin. A strong project roadmap is an excellent alternative to a business plan. This is because a business plan contains many critical details, such as the mission statement, that are unlikely to change in either direction. Furthermore, a strategy can assist in laying out the most adaptive and actionable path forward.

Business plans specify what should be done and how it should be done. A thriving business occasionally requires its most innovative employees to be given the freedom to develop novel ideas. Rather than that, the typical plan creates an environment in which the company’s executives dictate the company’s goals and mission to everyone. The people on the front lines are frequently denied the opportunity to influence the implementation of the business plan, which ultimately disadvantages the company.

However, you need to speak to a professional like BusinessYield Consult to help out with any of the disadvantages of the business plan that you might be facing.

Writing a business plan has both advantages and disadvantages, and anyone writing a business plan should keep the above factors in mind.

Planning helps to reduce future uncertainty. Although the future cannot be predicted with 100% precision, planning aids management in anticipating and preparing for risks by incorporating required provisions to meet unexpected events.

A business plan helps you clarify and focus your business ideas and strategies as an entrepreneur. You focus not only on financial difficulties, but also on management, human resource planning, technology, and adding value to your customers.

However, business planning is not a panacea and can occasionally result in the emergence of new problems such as:

• Lack of confidence…
• Lack of liberty

Related Article

• BENEFITS OF A BUSINESS PLAN: Benefits and Drawbacks
• BUSINESS ACTION PLAN: 7 Steps to Create an Action Plan For Your Business Strategy
• HALAL MORTGAGES: All You Need to Know
• Sole Trader Advantages and Disadvantages(Opens in a new browser tab)
• Disadvantages Of A Business Plan

Folakemi Adegbaju

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Home » Pros and Cons » 14 Pros and Cons of a Business Plan

14 Pros and Cons of a Business Plan

Should you create a business plan? Most people will say that you should have at least some sort of outline that helps you guide your business. Yet sometimes an opportunity is so great that you’ve just got to jump right in and grab it before it disappears. If you want funding or growth to be sustainable, however, there is a good chance that you’ll need to create a business plan of some sort in order to find success. Here are some of the pros and cons of a business plan to consider as you go about the process of creating and then running your business.

What Are the Pros of a Business Plan?

A business plan is a guide that you can use to make money. By understanding what your business is about and how it is likely to perform, you’ll be able to see how each result receive can impact your bottom line. With comprehensive plans in place, you’ll be prepared to take action no matter what happens over the course of any given day. Here are some more benefits to think about.

1. It gives you a glimpse of the future. A business plan helps you to forecast an idea to see if it has the potential to be successful. There’s no reason to proceed with the implementation of an idea if it is just going to cost you money, but that’s what you do if you go all-in without thinking about things. Even if the future seems uncertain, you’ll still get a glimpse of where your business should be.

2. You’ll know how to allocate your resources. How much inventory should you be holding right now? What kind of budget should you have? Some resources that your business needs to have are going to be scare. When you can see what your potential financial future is going to be, you can make adjustments to your journey so that you can avoid the obstacles that get in your way on the path toward success.

3. It is necessary to have a business plan for credit. In order for a financial institution to give you a line of credit, you’ll need to present them with your business plan. This plan gives the financial institution a chance to see how organized you happen to be so they can more accurately gauge their lending risks. Most institutions won’t even give you an appointment to discuss financing unless you have a formal business plan created and operational.

4. A business plan puts everyone onto the same page. When you’re working with multiple people, then you’re going to have multiple viewpoints as to what will bring about the most success. That’s not to say that the opinions of others are unimportant. If there isn’t any structure involved with a business, then people with a differing opinion tend to go rogue and just do their own thing. By making sure that everyone is on the same page with a business plan, you can funnel those creative energies into ideas that bring your company a greater chance of success.

5. It allows others to know that you’re taking this business seriously. It’s one thing to float an idea out to the internet to see if there is the potential of a business being formed from it. Creating a business plan for that idea means you’re taking the idea more seriously. It shows others that you have confidence in its value and that you’re willing to back it up. You are able to communicate your intentions more effectively, explain the value of your idea, and show how its growth can help others.

6. It’s an easy way to identify core demographics. No matter what business idea you have, you’re going to need customers in order for it to succeed. Whether you’re in the service industry or you’re selling products online, you’ll need to identify who your core prospects are going to be. Once that identification takes place, you can then clone those prospects in other demographics to continue a growth curve. Without plans in place that allow you to identify these people, you’re just guessing at who will want to do business with you and that’s about as reliable as throwing darts at a dartboard while blindfolded.

7. There is a marketing element included with a good business plan. This allows you to know how you’ll be able to reach future markets with your current products or services. You’ll also be able to hone your value proposition, giving your brand a more effective presence in each demographic.

What Are the Cons of a Business Plan?

A business plan takes time to create. Depending on the size of your business, it could be a time investment that takes away from your initial profits. Short-term losses might happen when you’re working on a plan, but the goal is to great long-term gains. For businesses operating on a shoestring budget, one short-term loss may be enough to cause that business to shut their doors. Here are some of the other disadvantages that should be considered.

1. A business plan can turn out to be inaccurate. It is important to involve the “right” people in the business planning process. These are the people who are going to be influencing the long-term vision of your business. Many small business owners feel like they can avoid this negative by just creating the business plan on their own, but that requires expertise in multiple fields for it to be successful. A broad range of opinions and input is usually necessary for the best possible business plan because otherwise the blind spots of inaccuracy can lead to many unintended consequences.

2. Too much time can be spent on analysis. Maybe you’ve heard the expression “paralysis by analysis.” It cute and catchy, but it also accurately describes the struggle that many have in the creation of a business plan. Focus on the essentials of your business and how it will grow. Sure – you’ll need to buy toilet paper for the bathroom and you’ll want a cleaning service twice per week, but is that more important than knowing how you can reach potential customers? Of course not.

3. There is often a lack of accountability. Because one person is generally responsible for the creation of a business plan, it is difficult to hold that person accountable to the process. The plans become their view of the company and the success they’d like to see. It also means the business plan gets created on their timetable instead of what is best for the business and since there isn’t anyone else involved, it can be difficult to hold their feet to the fire to get the job done.

4. A great business plan requires great implementation practices. Many businesses create a plan that just sits somewhere on a shelf or on a drive somewhere because it was made for one specific purpose: funding. When a solid business plan has assigned specific responsibilities to specific job positions and creates the foundation for information gathering and metric creation, it should become an integral part of the company. Unfortunately poor implementation has ruined many great business plans over the years.

5. It restricts the freedom you once had. Business plans dictate what you should do and how you should do it. A vibrant business sometimes needs its most creative people to have the freedom to develop innovative new ideas. Instead the average plan tends to create an environment where the executives of the company dictate the goals and the mission of everyone. The people who are on the front lines are often not given the chance to influence the implementation of the business plan, which ultimately puts a company at a disadvantage.

6. It creates an environment of false certainty. It is important to remember that a business plan is nothing more than a forecast based on plans and facts that are present today. We live in a changing world where nothing is 100% certain. If there is too much certainty in the business plan that has been created, then it can make a business be unable to adapt to the changes that the world is placing on it. Or worse – it can cause a business to miss an exciting new opportunity because they are so tunnel-visioned on what must be done to meet one specific goal.

7. There are no guarantees. Even with all of the best research, the best workers, and a comprehensive business plan all working on your behalf, failure is more likely to happen than success. In the next 5 years, 95 out of 100 companies that start-up today will be out of business and many of them will have created comprehensive business plans.

The pros and cons of a business plan show that it may be an essential component of good business, but a comprehensive plan may not be necessary in all circumstances. The goal of a business plan should be clear: to analyze the present so a best guess at future results can be obtained. You’re plotting out a journey for that company. If you can also plan for detours, then you’ll be able to increase your chances to experience success.

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Advantages and Disadvantages of Business Plan

Every business starts with a business plan because starting a business without a plan is like going on a chilled winter night without warm clothes and since starting a business involves money and where there is money one cannot take chances of going ahead without a plan. In order to understand it better let’s look at some of the advantages and disadvantages of business plan –

Advantages of Business Plan

• The first and foremost advantage of business plans is that once the company has business plan ready then only it can take it forward and present it to prospective investors who in turn if they like the plan will finance the business plan and we all know how important capital is for starting a business because without capital no business can start.
• Another benefit of business plans is that it helps the promoter in getting things right because if plans are in mind only then it can lead to confusion as mind has dozen of ideas but once the plan in mind is put into paper in the form of business plan than it gets more clarity and the owner can concentrate on one plan only rather than thinking about dozen of plans.
• Another advantage of the business plans is that it helps in prioritizing the work and also putting the right people for right job which in turn increases the possibility of the business plan being a success as the owner can keep track of milestones of business as envisaged in the business plan.

Disadvantages of Business Plan

• The biggest disadvantage of the business plans is that it involves time and expenses and as far as small businesses are concerned they neither have money and expertise to make a proper business plan which in turn can lead to business suffering more rather than gaining from the business plan.
• Another drawback of it is that due to the presence of business plans the owners may lose flexibility and become rigid also they will keep sticking to the business plan even if it detrimental to the interests of the business. So for example, if business plan has envisaged 10000 units of production but due to change in consumer taste sales of only 5000 units can be done and if the owner sticks to the business plan then it will be a loss making the decision. Hence a good business plan is one which has the scope of flexibility in it.
• Another disadvantage of business plans is that though plans are good to see and hear but execution of those plans has many problems and uncertainties right from procurement of finance, production related uncertainty, marketing and selling challenges and many other problems and it is next to impossible that plans are carried out in exact fashion as set out by the top management or the owner of the company.
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Importance of Business Plan

In the world of entrepreneurship and business, a well-crafted business plan is often hailed as the compass that guides a company toward its goals. It serves as the roadmap, the strategic blueprint, and the foundation upon which successful ventures are built. Whether you are launching a startup , seeking investors, or steering an established company toward growth, the importance of a business plan cannot be overstated. In this article, we delve into the significance of business plans, exploring how they contribute to businesses’ success, sustainability, and resilience in today’s dynamic and competitive landscape.

What is a Business Plan?

A business plan is like a roadmap for your business, typically comprising 15 to 20 pages. It outlines your strategy, including details about your product, how you will market it, and your financial plans. Creating and updating this plan as your business grows is essential.

For small business owners, understanding the importance of a business plan is like having a reliable guide. It helps you avoid getting lost, asking for directions, or starting over from scratch. Instead, it boosts your chances of success by helping you plan, see the big picture, and make crucial decisions. It’s a valuable tool for entrepreneurs .

Click here to learn more about How to Write a Business Plan

Importance of a Business Plan

The importance of a business plan cannot be overstated. It is a crucial tool for entrepreneurs and small business owners, helping them define their goals and monitor their progress as their company evolves. A well-thought-out business strategy should be the top priority when starting a new business. Additionally, business plans are pivotal in attracting investors, enabling potential investors to assess whether your company is headed in the right direction and is a wise investment.

Business plans typically contain detailed information that can significantly enhance your company’s chances of success, including:

• Market Analysis: Gathering data on the factors and conditions that impact your industry.
• Competitive Analysis: Evaluating the strengths and weaknesses of your competitors.
• Customer Segmentation: Categorizing your customers into distinct groups based on specific characteristics to improve your marketing efforts.
• Marketing Strategy: Utilizing research to promote your business effectively.
• Logistics and Operations Plans: Deciding on and implementing the most efficient production methods.
• Cash Flow Projection: Preparing for your company’s inflow and outflow of funds.

A well-crafted business plan provides a comprehensive roadmap for long-term growth and success.

Reasons Why You Need a Business Plan

Several reasons why you need a business plan, and here are some of them:

Test the Practicality of Your Business Ideas

Assess Feasibility of Ideas: Use a business plan to evaluate the practicality of your business ideas, distinguishing viable initiatives from those that are unrealistic or too risky.

Structured Framework

A business plan offers a structured approach for turning your ideas into actionable steps, from the initial setup to achieving both short-term and long-term goals.

Informed Decision-Making

Encourages you to make decisions based on careful evaluation, helping to discard impractical ideas and focus on those with real potential.

Resource Management

Saves time and resources by preventing investment in ideas that lack practicality.

Clarity and Direction

Provides clear guidance and direction in the complexities of starting and running your business.

• Roadmap for Success: Acts as a roadmap, aiding in making informed decisions, securing financing, attracting investors, and maintaining focus on your business objectives.
• Valuable for All Entrepreneurs: Essential for both seasoned entrepreneurs and newcomers, a well-structured business plan is a crucial tool for business success.

Show Investors the Feasibility of Your Business Idea

Securing financing is often one of the most challenging aspects of launching a business. Whether you are approaching banks or seeking investments from venture capitalists, potential funders need to be confident in the potential and viability of your business concept before committing their capital.

This is precisely why investors emphasise creating a comprehensive business plan that thoroughly addresses all their concerns. Understanding the significance of well-structured business plans can be the key to your venture’s success, allowing it to thrive in a competitive market while mitigating risks and ultimately turning a profit.

Fine-Tune Business Strategies and Tactics

As mentioned earlier, your business strategy is a roadmap for reaching your objectives. When creating a business plan, you devise strategies, outline how you plan to execute them and establish a timeline.

The process of creating this document entails thorough research. It allows you to identify and rectify any weaknesses or inconsistencies in your strategies. Addressing these issues in advance helps prevent the wastage of resources. Furthermore, it aids in anticipating obstacles and preparing proactive responses to overcome them.

Organize and Oversee Business Operations

A business plan provides a comprehensive overview of your business operations and outlines how you plan to manage them. It covers all key aspects of your company, including:

• Manufacturing
• Customer analysis
• Market analysis
• Human resources

Your business plan serves as a reference manual that you and your team can consult in times of uncertainty. Standardized procedures ensure that tasks are executed as expected, enhancing consistency and uniformity in your operations.

Monitor Your Progress in Real-Time

A business plan allows you to clearly define your ultimate goal for starting your company . Within the operations section of your business plan, you can track your progress toward achieving your current objectives using relevant metrics.

This might involve increased output, reduced unnecessary expenses, improved product quality, and more. Additionally, this section outlines the responsibilities and contributions of each team member.

Mitigate the Risk of Failure

Business failures can result from various factors, but understanding the common elements that can lead to your company’s failure is essential. Some of the typical causes include:

• Insufficient market research
• Financial instability
• Lack of a competent team
• Weak business model
• Absence of unique selling propositions (USPs)

A business plan delves into these aspects in detail, making it easier for you to identify the risks your company may encounter. Armed with these insights, you can equip yourself with the necessary tools to safeguard your business against future failures.

Create a Knowledge Repository

Educating and instructing your employees or contractors about various aspects of your company often necessitates a well-written, error-free guide. However, crafting such guides for every situation can be time-consuming. This step can be streamlined with the use of a business plan.

Your business plan essentially encapsulates your entire business, encompassing every aspect. This facilitates sharing specific sections of your business plan as needed, as a valuable resource for conveying information to your team.

Be Ready for Unforeseen Challenges

Creating a business plan compels you to address potential future challenges, including the uncomfortable and difficult situations that may arise. Doing so ensures that you have a well-defined plan in place to handle such circumstances when they occur.

This readiness is crucial because it can be challenging to predict when a crisis will emerge. However, it is possible to anticipate the challenges that may arise.

During the business plan development process, you thoroughly examine your company’s internal and external aspects, identify potential issues, and compile them through a SWOT (strengths, weaknesses, opportunities, and threats) analysis. This proactive approach allows you to effectively formulate contingency plans to address foreseeable difficulties.

In Conclusion

A business plan is vital for effective management and strategic planning, encompassing all aspects of your business journey from inception to growth. Developing a comprehensive business strategy that aligns with the abovementioned objectives is crucial to ensure your organisation’s success. If you require further guidance on understanding the significance of a business plan, you can also seek assistance from the experts at IndiaFilings.

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