14 Reasons Why You Need a Business Plan
10 min. read
Updated May 10, 2024
There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.
A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.
A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.
Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?
Good questions. Here’s every reason why you need a business plan.
- 1. Business planning is proven to help you grow 30 percent faster
Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed.
You don’t have to just take our word for it. Studies have proven that companies that plan and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience cash flow crises that threaten to close them down.
- 2. Planning is a necessary part of the fundraising process
One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.
Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture.
A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality.
Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money.
- 3. Having a business plan minimizes your risk
When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations.
As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans.
Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.
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- 4. Crafts a roadmap to achieve important milestones
A business plan is like a roadmap for your business. It helps you set, track and reach business milestones.
For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.
In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.
And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.
- 5. A plan helps you figure out if your idea can become a business
To turn your idea into reality, you need to accurately assess the feasibility of your business idea.
You need to verify:
- If there is a market for your product or service
- Who your target audience is
- How you will gain an edge over the current competition
- If your business can run profitably
A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.
Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.
6. You’ll make big spending decisions with confidence
As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.
These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.
7. You’re more likely to catch critical cash flow challenges early
The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together for your business plan. (The other two are your balance sheet and your income statement (P&L).
Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.
- 8. Position your brand against the competition
Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:
- What is your competition doing well? What are they doing poorly?
- What can you do to set yourself apart?
- What can you learn from them?
- How can you make your business stand out?
- What key business areas can you outcompete?
- How can you identify your target market?
Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete.
- 9. Determines financial needs and revenue models
A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind.
Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business.
Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.
- 10. Helps you think through your marketing strategy
A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers.
Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc.
Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.
- 11. Clarifies your vision and ensures everyone is on the same page
In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there.
Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.
- 12. Future-proof your business
A business plan helps you to evaluate your current situation and make realistic projections for the future.
This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.
Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.
By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.
You’ll also be in a better position to seize opportunities as they arise.
Further Reading: 5 fundamental principles of business planning
- 13. Tracks your progress and measures success
An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.
By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.
Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.
- 14. Your business plan is an asset if you ever want to sell
Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale.
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- Writing your business plan
By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one.
Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
Table of Contents
- 6. You’ll make big spending decisions with confidence
- 7. You’re more likely to catch critical cash flow challenges early
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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.
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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What is a Business Plan? Definition, Tips, and Templates
Updated: June 28, 2024
Published: August 04, 2020
Years ago, I had an idea to launch a line of region-specific board games. I knew there was a market for games that celebrated local culture and heritage. I was so excited about the concept and couldn't wait to get started.
But my idea never took off. Why? Because I didn‘t have a plan. I lacked direction, missed opportunities, and ultimately, the venture never got off the ground.
And that’s exactly why a business plan is important. It cements your vision, gives you clarity, and outlines your next step.
In this post, I‘ll explain what a business plan is, the reasons why you’d need one, identify different types of business plans, and what you should include in yours.
Table of Contents
What is a business plan?
What is a business plan used for.
- Business Plan Template [Download Now]
Purposes of a Business Plan
What does a business plan need to include, types of business plans.
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A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies. The plan also includes a financial section that forecasts revenue, expenses, and cash flow, as well as a funding request if the business is seeking investment.
The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.
The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.
Business Plan Template [ Download Now ]
Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.
In an era where 48% of businesses survive half a decade on, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.
Here’s why I think a business plan is important:
1. Securing Financing From Investors
Since its contents revolve around how businesses succeed, break-even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.
I’ve seen that all banks, investors, and venture capital firms will want to see a business plan before handing over their money. Therefore, these investors need to know if — and when — they‘ll be making their money back (and then some).
Additionally, they’ll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.
2. Documenting a Company's Strategy and Goals
I think a business plan should leave no stone unturned.
Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.
To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.
These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.
3. Legitimizing a Business Idea
I’ve seen that everyone‘s got a great idea for a company — until they put pen to paper and realize that it’s not exactly feasible.
A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.
As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.
It ensures you have everything in order before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.
4. Getting an A in Your Business Class
Speaking from personal experience, there‘s a chance you’re here to get business plan ideas for your Business 101 class project.
If that's the case, might I suggest checking out this post on How to Write a Business Plan , which provides a section-by-section guide on creating your plan?
5. Identifying Potential Problems
Business plans act as early warning systems that identify potential problems before they escalate into major obstacles.
How? When you conduct thorough market research, analyze competitor strategies, and evaluate financial projections, your plan pinpoints vulnerabilities and risks. This allows you to develop contingency plans and risk mitigation strategies.
This helps you prevent costly mistakes and shows investors and lenders you’re well-prepared and have considered various scenarios.
6. Attracts and Retains Talent
A well-articulated plan outlines your company's vision, mission, and values, showcasing a clear direction and purpose. People who want meaningful work that aligns with their ambitions will love this.
Also, it shows the company's potential for growth and stability. This instills confidence in employees and assures them of a secure future and opportunities for career advancement.
When you show growth potential and highlight a positive work culture, your business plan becomes a magnet for top talent.
7. Provides a Roadmap
A business plan provides a detailed roadmap for your company's future. It outlines your objectives, strategies, and the specific actions you need to achieve your goals.
When you define your path forward, a business plan helps you stay focused and on track, even when you face challenges or distractions. It’s a great reference tool that allows you to make smart decisions that align with your overall vision.
This way, having a comprehensive roadmap in the form of a business plan provides direction and clarity at every stage of your business journey.
8. Serves as a Marketing Tool
A business plan is not only an internal guide but also serves as a powerful marketing tool. Your business plan can showcase your company‘s strengths, unique value proposition, and growth potential when you’re looking for investors, partnerships, or new clients.
It provides a professional and polished overview of your business, which shows your commitment and strategic thinking to potential stakeholders.
Your business plan helps you attract the right people by clearly articulating your target market, competitive advantages, and financial projections. In summary, it acts as a persuasive sales pitch.
- Business Plan Subtitle
- Executive Summary
- Company Description
- The Business Opportunity
- Competitive Analysis
- Target Market
- Marketing Plan
- Financial Summary
- Funding Requirements
1. Business Plan Subtitle
Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.
2. Executive Summary
Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read.
The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.
3. Company Description
This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement.
You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.
4. The Business Opportunity
The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can.
This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.
5. Competitive Analysis
Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition.
In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.
6. Target Market
Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.
7. Marketing Plan
Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan, will suffice.
Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy?
This kind of information should guide the marketing plan section of your business plan.
8. Financial Summary
Money doesn’t grow on trees. Even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section.
Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful additions here.
So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results?
The “team” section of your business plan answers that question by providing an overview of the roles responsible for each goal.
Don’t worry if you don’t have every team member on board yet. Knowing what roles to hire for is helpful as you seek funding from investors.
10. Funding Requirements
Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill.
Considering that global funding fell 61% from 2021 to 2023 , it’s very important to be clear in this section. Include the amount your business needs, for what reasons, and for how long.
- Startup Business Plan
- Feasibility Business Plan
- Internal Business Plan
- Strategic Business Plan
- Business Acquisition Plan
- Business Repositioning Plan
- Expansion or Growth Business Plan
There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.
For even more examples, check out these sample business plans to help you write your own .
1. Startup Business Plan
As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.
I think the biggest challenge with the startup business plan is that it's written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.
Because startup business plans expand on an original idea, the contents will vary by the top priority goals.
For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.
Eric Heckstall , the founder and CEO of EDH Signature Inc ., which offers premier grooming products, also suggests keeping your startup business plan short.
“The traditional business plan can be 40+ pages, which is too large of a document to really be useful, can be difficult for staff to understand, and have to dig for information which most people won’t do,” Heckstall says.
Conversely, a one-to-two-page business plan improves clarity and focus. Heckstall says this format “is easy to use on a day-to-day basis, teams as well as potential investors can understand the purpose and direction of the company, and can easily be incorporated into team meetings.”
2. Feasibility Business Plan
This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:
- A detailed product description.
- Market analysis.
- Technology needs.
- Production needs.
- Financial sources.
- Production operations.
Startups can fail because of a lack of market need and mistimed products. Plus, nearly half of entrepreneurs , founders, CEOs, and COOs report that price sensitivity and evolving market conditions are the number one prospect and customer challenges they face right now.
Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then, the feasibility plan centers on that one product or service.
Zach Dannett , co-founder at rug company Tumble highlights how some business owners take a very idealistic approach too. And forget barriers to entry like regulatory issues in the process.
He adds how considering this aspect in their business plan helped.
Before launching the team, Dannett first took time to understand regulatory requirements in our industry, checking to make sure we needed to secure any certifications or licenses.
Then, “we reviewed financial requirements, which would cover initial investments, operational costs, and potential expenses. We then conducted thorough market research to understand our market, how saturated this market is, and identify major competitors with significant market share,” Dannett says
3. Internal Business Plan
Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.
Besides the typical elements in a startup business plan, an internal business plan may also include:
- Department-specific budgets.
- Target demographic analysis.
- Market size and share of voice analysis.
- Action plans.
- Sustainability plans.
Most external-facing business plans focus on raising capital and support for a business. But, an internal business plan helps keep the business mission consistent in the face of change.
You can also reduce your workload by using a free business template that helps you get a headstart on what to include.
4. Strategic Business Plan
Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.
These types of business plans may include:
- Relevant data and analysis.
- Assessments of company resources.
- Vision and mission statements.
It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in.
David Sides , marketing specialist at The Gori Law , highlights how it’s important not to create this plan in isolation and involve key stakeholders from across the organization in the planning process.
“We make a point of bringing together attorneys, paralegals, and support staff to discuss our long-term goals and how we can work together to achieve them. This not only helps ensure buy-in and alignment, but it also allows you to tap into a wider range of perspectives and ideas,” Sides says.
This way, the strategic business plan can add value by outlining how your business plans to reach specific goals and considering a holistic perspective from the most important stakeholders. This type of planning can also help a business anticipate future challenges.
5. Business Acquisition Plan
Investors use business plans to acquire existing businesses, too — not just new businesses.
I recommend including costs, schedules, or management requirements. This data will come from an acquisition strategy.
A business plan for an existing company will explain:
- How an acquisition will change its operating model.
- What will stay the same under new ownership.
- Why things will change or stay the same.
- Acquisition planning documentation.
- Timelines for acquisition.
Ilia Tretiakov , owner and lead strategist, at So Good Digital , a marketing agency suggests adding a Day Zero Plan. This is a thorough plan outlining the steps you will take the moment the acquisition is completed.
It consists of stakeholder communication plans, critical system integration, quick operational adjustments, and cultural alignment initiatives.
Here’s why Ilia believes it’s important.
“A Day Zero Plan establishes the framework for the integration process and guarantees a seamless transition. This comprehensive strategy goes above and beyond the typical post-acquisition integration plan, taking care of urgent issues and laying the groundwork for long-term success,” Tretiakov says,
Apart from this, I believe the business plan should speak to the current state of the business and why it's up for sale.
For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:
- What the new owner will do to turn the business around.
- Historic business metrics.
- Sales projections after the acquisition.
- Justification for those projections.
6. Business Repositioning Plan
When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.
This plan will:
- Acknowledge the current state of the company.
- State a vision for the future of the company.
- Explain why the business needs to reposition itself.
- Outline a process for how the company will adjust.
Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.
For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.
7. Expansion or Growth Business Plan
When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.
For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.
This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:
- SWOT analysis.
- Growth opportunity studies.
- Financial goals and plans.
- Marketing plans.
- Capability planning.
These types of business plans will vary by business, but they can help you quickly rally around new priorities to drive growth.
Getting Started With Your Business Plan
At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.
I personally recommend using the feasibility business plan template. It helps me assess the viability of my business idea before diving in head-first.
By completing a feasibility plan, I feel more confident and prepared to tackle the full business plan. Plus, it saves me time and effort in the long run by ensuring I'm pursuing an idea with real potential.
When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.
Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.
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Table of Contents
What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.
Every year, thousands of new businesses see the light of the day. One look at the World Bank's Entrepreneurship Survey and database shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.
According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.
Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.
Several other statistics expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.
This isn’t surprising at all.
Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%) don't have a formal business plan in place.
It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.
But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.
Now before we begin with the details of business planning, let us understand what it is.
No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.
More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.
A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained.
However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes.
Before getting into learning more about business planning, let us learn the advantages of having one.
Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.
- Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals.
- Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
- Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
- Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
- Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
- Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest.
Now let's look at the various types involved in business planning.
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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.
Here’s an overview of a few fundamental types of business plans.
- Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
- Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments.
- Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
- Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
- Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.
There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them.
Here are the key elements of a good business plan:
- Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.
- Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
- Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
- Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time.
- Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.
The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:
- Business Sorter
The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:
- Create a business plan to determine your company's direction, obtain financing, and attract investors.
- Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
- Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
- You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.
Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success.
Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.
While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.
Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.
What Is Meant by Business Planning?
Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.
What Are the 4 Types of Business Plans?
The following are the four types of business plans:
Operational Planning
This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.
Strategic Planning
Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.
Tactical Planning
Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.
Contingency Planning
When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.
What Are the 7 Steps of a Business Plan?
The following are the seven steps required for a business plan:
Conduct Research
If your company is to run a viable business plan and attract investors, your information must be of the highest quality.
Have a Goal
The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.
Create a Company Profile
Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.
Describe the Company in Detail
Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.
Create a marketing plan ahead of time.
A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.
Be Willing to Change Your Plan for the Sake of Your Audience
Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.
Incorporate Your Motivation
Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.
What Are the Basic Steps in Business Planning?
These are the basic steps in business planning:
Summary and Objectives
Briefly describe your company, its objectives, and your plan to keep it running.
Services and Products
Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.
Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.
Operations are the process of running your business, including the people, skills, and experience required to make it successful.
How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.
Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.
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More From Forbes
Why your business-planning process is more important than the plan itself.
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Shane Jackson, President of Jackson Healthcare , a $1.5 billion healthcare staffing and technology company built on a values-led culture
There is an old adage that no battle plan survives contact with the enemy. Or, as Mike Tyson is famously known to have said, “Everybody has a game plan until they get punched in the face.”
I don’t know about you, but I feel like all my plans for the past two years were punched. It’s that time of year again where so many businesses are kicking off the New Year with fresh plans and budgets. I have written a lot of business plans over the years and created many, many financial forecasts. There was one thing that was consistent about all of them: They were all wrong.
Here’s the thing: Plans are based on assumptions. I make plans for dinner based on the assumption that my family will eat with me. Then I learn my teenage kids have made other plans to hang out with their friends. I made an incorrect assumption. Now, what do I do with all these groceries?
Business leaders have never faced as many unknowns as they have during the pandemic. Just when we think we are starting to get some certainty back, we add inflation, supply chain issues and Covid-19 variants. As a result, planning is harder than ever.
You might be tempted, as I have been lately, to just throw planning out the window completely. Why take the time to do a financial forecast when changes in the pandemic could make it irrelevant in 30 days?
But I would argue the answer is not to stop planning; it is to do more planning.
Put aside for a moment that plans and budgets can be necessary for pesky things like resource allocation. The real value of planning lies in the questions you must consider when creating the plan. Who is your customer? What are their needs? How can you best solve their problems? What should you be paying attention to in the market? What can you learn from your latest successes and failures?
The business plans I’ve written in the past weren’t wrong because I’m not good at my job or because I had bad ideas or reached bad conclusions. They were wrong because the information I had when creating the plan was limited and sometimes incorrect. I had hypotheses about how the market would react but not proof. I made an assumption that the way a small group of customers behaved was representative of the way the rest of the market would behave. I thought I could hire people with certain skills at a specific time but had not yet done so.
As leaders, we are sometimes lulled by the notion that we can run our businesses as though we can forecast the year ahead with complete accuracy. We create business plans assuming we know everything about the market, exactly what the solutions are to the market problem we want to solve, and exactly how our people and processes will act in delivering those solutions. Then we take this plan and put it on a shelf to collect dust until perhaps we pull it out to reference in next year’s plan. Or, worse, we actually operate the company using it.
Perhaps you’ve had a conversation that goes something like this: “Hey, we’ve got this great new product that will really boost sales. Can we hire this person to help us get it to market faster?” And you find the answer is, “No, sorry; we created a budget 14 months ago and that position isn’t in there. Wait another three months for your meeting with the CFO, and maybe you can get it approved.”
I believe the most important part of writing a business plan is the process, not the plan itself. Planning shouldn’t happen once a year; it should happen all year long. The questions one attempts to answer in strategic planning should be asked and answered as often as you have new information.
A big part of leaders' job is to build a rhythm of learning in their organizations. Make sure you are instilling disciplines that force you to regularly work on the business — versus working in the business — in a way that helps you identify and challenge the assumptions behind your decisions. What has changed in the market or in your ability to deliver? You built this plan thinking one thing, but then discovered that something else actually happened. Now, how do you react?
The ripple effect of the pandemic has created an environment that forced all of us to become more agile. Let’s codify that agility into our businesses and all become better planners, all year long.
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A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.
Learn why you need a business plan to guide your small business, avoid mistakes, and attract investors. A business plan is a 15-20 page document that outlines your goals, strategies, and finances for your business.
Learn why a business plan is important for validating your idea, setting goals, taking action, managing resources, making decisions, managing risk and communicating with stakeholders. Find out how to write a business plan and get professional help.
A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies.
The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning: Create a business plan to determine your company's direction, obtain financing, and attract investors.
Put aside for a moment that plans and budgets can be necessary for pesky things like resource allocation. The real value of planning lies in the questions you must consider when creating the plan.