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What Is a Business Plan?

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

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

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

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

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

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

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

Harvard Business Review. " How to Write a Winning Business Plan ."

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

SCORE. " When and Why Should You Review Your Business Plan? "

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What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

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Purposes of a Business Plan

These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

What are the essential components of a business plan?

Executive summary

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

Business description or overview

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

Product and price

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Competitive analysis

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Target market

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

Financial plan

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Funding requirements

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

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Types of business plan.

Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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How often should a business plan be reviewed and revised?

A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

What are the key elements of a lean startup business plan?

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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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.

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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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What Is a Business Plan? Definition and Planning Essentials Explained

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11 min. read

Updated September 23, 2024

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster , and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. 

The biggest mistake you can make is not writing a business plan, and the second is never updating it. By regularly reviewing your plan, you can understand what parts of your strategy are working and those that are not.

That just scratches the surface of why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those who are ready to start a business. It’s just as valuable for those who have an idea and want to determine whether it’s actually possible. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

Market and competitive research alone can tell you a lot about your idea. 

• • Is the marketplace too crowded?
• • Is the solution you have in mind not really needed? 

Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability, and you can paint a pretty clear picture of your business’s potential.

Document your strategy and goals

Understanding where you’re going and how you’re going to get there is vital for those starting or managing a business. Writing your plan helps you do that. It ensures that you consider all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll know where you want your business to go and how you’ve performed in the past. This alone prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. 

So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can keep it up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but also easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover:

• • The problem you’re solving
• • A description of your product or service
• • Your target market
• • Organizational structure
• • A financial summary
• • Necessary funding requirements.

This will be the first part of your plan, but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. 

Lastly, outline the steps or milestones you’ll need to hit to launch your business successfully. If you’ve already achieved some initial milestones, like taking pre-orders or early funding, be sure to include them here to further prove your business’s validity. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the industry’s overall state and potential, who your ideal customers are, the positioning of your competition, and how you intend to position your own business.

This helps you better explore the market’s long-term trends, what challenges to expect, and how you will need to introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps.  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add them. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history.

Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing your business’s viability. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

• • Sales and revenue projections
• • Profit and loss statement
• • Cash flow statement
• • Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first; only add documentation that you think will benefit anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function depend on how you intend to use your business plan . So, to get the most out of your plan, it’s best to find a format that suits your needs. Here are a few common business plan types worth considering. 

Traditional business plan

The tried-and-true traditional business plan (sometimes called a detailed business plan ) is a formal document meant for external purposes. It is typically required when applying for a business loan or pitching to investors. 

It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

A traditional 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. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

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. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update and much easier for you, your team, and anyone else to visualize your business operations. 

The business model canvas is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan . Sometimes referred to as a lean plan, this format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. 

A one-page business plan is 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.

Growth plan

Now, the option that we here at LivePlan recommend is a growth plan . However, growth planning 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 holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . 

However, it’s even easier to convert into a more detailed business plan thanks to how heavily it’s tied to your financials. The overall goal of growth planning isn’t to just produce documents that you use once and shelve. Instead, the growth planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, concise, more focused on financial performance, and ensures that your plan is always up-to-date.

How can you write your own business plan?

Now that you know the definition of a business plan, it’s time to write your own.

Get started by downloading our free business plan template or try a business plan builder like LivePlan for a fully guided experience and an AI-powered Assistant to help you write, generate ideas, and analyze your business performance.

No matter which option you choose, writing a business plan will set you up for success. You can use it to test an idea, figure out how you’ll start, and pursue funding.  And if you review and revise your plan regularly, it can turn into your best business management tool.

Like this post? Share with a friend!

Kody currently works as the Inbound and Content Marketing Specialist at Palo Alto Software and runs editorial for both LivePlan and Bplans, working with various freelance specialists and in-house writers. A graduate of the University of Oregon, he specializes in SEO research, content writing, and branding.

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What is a Business Plan? Definition and Resources

9 min. read

Updated July 29, 2024

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

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

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

• What is a business plan?

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

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

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

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

Reasons for writing a business plan

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

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

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

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

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

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

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

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What research shows about business plans

Numerous studies have established that planning improves business performance:

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

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

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

When should you write a business plan?

No two business plans are alike. 

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

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

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

Ideal times to write a business plan include:

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

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

How often should you update your business plan?

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

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

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

Related Reading: 5 fundamental principles of business planning

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

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

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

The planning process is what uncovers those insights.

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

• How long should your business plan be?

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

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

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

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

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

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

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

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

Read More: How long should your business plan be?  

What information is included in a business plan?

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

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

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

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

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

• Different types of business plans

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

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

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

Business plan vs. operational plan vs. strategic plan

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

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

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

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

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

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

• Business plan vs. business model

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

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

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

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

• Moving from idea to business plan

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

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

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

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

Table of Contents

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

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

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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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How to Write a Business Plan, Step by Step

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What is a business plan?

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

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

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

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

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

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

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

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

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

Your business’s registered name.

Address of your business location .

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

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

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

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

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

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

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

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

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

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

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

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

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

Licenses and permits.

Equipment leases.

Bank statements.

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

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

How much do you need?

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

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

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

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

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

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

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Business Plan

Last Updated :

21 Aug, 2024

Blog Author :

Wallstreetmojo Team

Edited by :

Reviewed by :

Dheeraj Vaidya

Table Of Contents

What Is A Business Plan?

A business plan is an executive document that acts as a blueprint or roadmap for a business. It is quite necessary for new ventures seeking capital, expansion activities, or projects requiring additional capital. It is also important to remind the management, employees, and partners of what they represent. 

Creating a business plan is an indispensable part of any business. The main purpose of creating such a document is to attract prospective investors to provide capital to the enterprise. Therefore, the plan should cover all the important perspectives of a business - financial, operational, personnel, competition, etc. 

Table of contents

Business plan explained, business plan vs business model, frequently asked questions (faqs), recommended articles.

• A business plan is a critical document for any business – whether a start-up or a well-established one. It can be considered a self-written bible for the company.
• The purpose of this plan should not just be restricted to convincing investors, but it should also extend to the company's morals and ethics, and every stakeholder should be aware of it. 
• It can communicate the business idea's viability and, most importantly, the entrepreneurs' dedication to the business. As this dedication keeps them going, the investors are generally motivated to approve a venture when it is evident from the plan.

Business plan writers are responsible for crafting the face of a business organization they hope to build. It cannot be easy because a business plan should be a versatile document that covers various perspectives and aspects of the business that the readers might expect.

The business plan objective is to talk about the company's unique selling proposition ( USP ), business culture, and what the company is. Finally, and most importantly, it is not a static document. With the company's growth, it needs to change by incorporating more relevant information and goals. 

The outline of a business plan should be prepared from three perspectives - first, the market; second, the investors; and finally, the company. However, most plans tend to become business-oriented rather than focusing on the market and the investors. This might create a negative impression on the investors.

First, the entrepreneurs must understand a demand-supply gap from the market's perspective. This gap can be the perfect opportunity for the company. Or maybe the company has an innovative product or service idea, which they believe will have a high demand. Either way, the market should accept the product. 

According to the Massachusetts Institute of Technology (MIT) Enterprise Forum, 1978, investors are more likely to approve market-driven businesses rather than technology or service-driven ones.

Also, the plan should address the investors' needs. What is in it for the investor? Since they invest a lot of money, they expect higher returns. Of course, no investor would demand profits upfront. But it's important to tell them when they can expect returns and how much. So the business should provide them with the data on the estimated payback period .

There are many types of business plans based on the size of the document and its scope.

#1 - Size-based plans

First, depending on the size of the plan, there are traditional and lean start-up plans. The traditional plan is a lengthy document with more than 20 pages. It covers various facets of the business in such a way as to answer the different questions that may arise in the readers' minds. But the disadvantage of this plan is that it might hold the readers' concentration only for a limited time.

The lean start-up plan is a concise and brief version of an actual plan, usually consisting of a single page. The demerit of this plan is that it might be too small and not include all the important and relevant information. But the entrepreneurs must be ready to provide the investors with a detailed document if required. 

#2 - Scope-based plans

The second classification is based on the scope of the plan. It can be a start-up plan for new businesses seeking capital or an internal plan to communicate with different departments on a new project. Other types based on scope include strategic, feasibility, operations, and growth. 

A strategic plan can communicate how the business will achieve its goal, while a feasibility plan can focus on the feasibility of the company's offerings. For example, the operations plan focuses on production and supply operations. In contrast, a business prepares the growth plan for its aspiring expansion projects, focusing on additional investments and financial projections .

The outline of a business plan should be carefully designed to incorporate all the focus points deemed essential by the audience. The following are the elements of any business plan sample:

• Executive summary  – Also known as the elevator pitch , the business plan executive summary is the most important element of any business plan, best fitted in a page or two. A business should draw its plan from the mission and vision, which are the founding principles of any business. Next, it provides an idea and an overview of the company. It also introduces the product or service the company aims to offer. Finally, it is a summary of the plan.
• Business description  – This is an elaboration of the company goals and objectives. It includes the market or industry the business belongs to, its target audience, etc. It can also provide information on the company structure and how it operates.
• Market research and analysis  – Market research is the concrete floor on which the business plan stands. It should include facts and figures and give the readers an understanding of the market, its preferences, classifications, and the number and size of competitors. Analyzing the market lets businesses identify a gap and fill it. The plan should also inform the market's acceptance of the product or service.
• Competitive analysis  – Competitors can make or break any business. Therefore, before entering the market, the businesses must evaluate how the competitors operate, their profits and costs, their offerings, etc. This will give the enterprise an idea of what it can do differently from the competitors to have the edge over them. This should be effectively communicated to the investors, as it might convince them of the venture's success.
• Marketing and sales plan  – The whole point of any business is to make sales. For this, they need marketing campaigns and strategies targeting the right audience with minimal cost but maximum returns. For example, a firm selling study tools and materials will target students, especially through social media. Like this, businesses should plan their campaigns and decide their advertising channels.
• Operating plan  – As the term implies, it talks about how the business is operated. The manufacturing and supply patterns, strategies like agile or lean, inventory approach, etc., decided by the management come under this. In addition, the expected quantity to be produced and supplied in a given period and the reverse logistics plan are good additions to the operating plan .
• Organization description  – This gives information on the total employees, departments, management qualifications, job description, and total skill set of the organization's human resources. The decided salary and wages, HR policies, etc., are also part of an organization's description.
• SWOT analysis  – SWOT analysis helps the business identify its strengths, weaknesses, opportunities, and threats, which will help them choose the critical approach. The business should take advantage of its strengths and opportunities while simultaneously working on the weaknesses and finding the best strategy to deal with the threats. This will balance the company and its internal and external environment.
• Financials  – These refer to the financial projections, including the budget , estimated costs , payments, expected break-even point, payback period, etc. Forecasts on expected revenue and costs for at least one year or until the business breaks will be necessary. Also, the net capital requirements with proper accounting calculations must be part of the plan.
• Appendices  – This can include other important or relevant documents to prepare the plan. For example, financial documents, proof of people's acceptance of products, resumes of the management, study on competition, etc.

Presentation is as important as the content when firms draft the business plan. Therefore, it is best to add graphs, pie charts, 3D models, and other visuals, which will enhance the presentation and understandability of the plan. In addition, factual data and simple statistical tools can make the plan look genuine and instill investor confidence. 

Let us consider the following instances to understand the concept better:

Jack wants to establish a toy manufacturing business for which he requires considerable funding. However, to make sure the business idea is convincing enough for investors for them to take interest in the project, he designs a business plan. In the plan, he includes everything from the requirements to the sales promotion measures he would be using to make people, especially parents and kids, be aware of the products.

As a special mention, he specified that the material that would be used for manufacturing the toys will be kids-friendly and will have no chemical included that could harm kids even in a minute way. Given the features of the business, Jack tries to mention the strongest points that could help him get the funding from investors.

Sixteen experts from Forbes Business Council collectively listed a few ways in which entrepreneurs can leverage their business plans for making expansion decisions. The main components of preparing such plans range from conducting thorough research to setting realistic standard and ensuring regular reviews to check the progress status from time to time.

This example guides the entrepreneurs with no prior experience of how to write a business plan to understand the basics and accordingly present their ideas to the authorities/investors.

Creating a business plan is more important due to the negative impression its absence can cause rather than the benefits it might provide. The impression is what matters when it comes to a plan. So, let's understand the importance of making a good impression.

Perhaps the reason why most businesses make a plan is for the investors. These investors can be venture capitalists or financial institutions . For these investors, new ventures are like investments. Hence, before putting in money, they want to be sure if the investment will be worth it. 

Therefore, presenting all the important details in an understandable format helps them realize the clarity and the level of commitment the entrepreneurs have towards their business. The business plan writer should also give due to the executive summary and financials while creating the plan.

Secondly, every business needs a blueprint based on which it operates. It should govern the functions of a business and especially in decision-making. Usually, when a plan is created before the enterprise starts functioning, it speaks about the business and what it stands for. Even after the business takes off and expands, it should stick to its roots, which would evolve with the company's growth.

Making every stakeholder – employees, partners, suppliers, investors, etc. - aware of the plan would increase commitment and sense of belonging to the enterprise. This, too, is important to improve the productivity and contribution of everyone.

Business plan and business model are terms that are considered to be similar, but then, they differ in various aspects from what the emphasis is on to who they target.

Let us have a look at the differences between the two below:

• While a business plan is the document that details every aspect of the business to give investors or readers a complete and clear picture of what the business is or would be all about, a business model defines and describes the channel to be adopted to deliver products and services to consumers.
• The focus of the former is to cover information about every department, section, and services of the business and specify the functions, including sales and marketing, advertising, revenue predictions, etc. On the contrary, the business model emphasize sales funnels, marketing approach to be used, etc.
• Business plans are formulated for investors and other stakeholders of the business, while business models are created for the internal members of the business who have to take care of the distribution of products and services to customers.
• The plans of a business focus on defining and describing the products and services that a company is aiming to produce. On the other hand, the models discuss the ways in which the products and services can be delivered to consumers.

The elements of a business plan comprise an executive summary, company description, market research, competitive analysis, SWOT analysis, marketing strategy, operating plan, financial projections, etc.

Businesses create plans on their own by putting relevant content on paper and using their basic computer skills to make it look attractive. Ideally, plans are not expenses. Instead, they are created from the effort of the entrepreneurs.

All plans need not be highly visual. However, adequate data charts, graphs, 3-D models, etc., can make the document look attractive and creates an impression about the effort that has gone into furnishing the plan. It also increases the understandability of the document.

Businesses can draft plans for any period - maybe a year, three years, or just three months. Some plans are also created until the payback period. But it doesn't mean that the plan is rendered useless after the expiry of the period. On the contrary, a company should always have a constantly updated plan better suited to evolving needs.

This article is a guide to what is a Business Plan. Here, we explain the concept along with examples, components, importance, types, and vs business model. You can also go through our recommended articles on corporate finance –

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Business Plan

By Entrepreneur Staff

Business Plan Definition:

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask. Generally, a business plan has the following components:

Title Page and Contents A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.

Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.

Executive Summary The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front. Are you looking for a $10,000 loan to remodel and refurbish your factory? A loan of $25,000 to expand your product line or buy new equipment? How will you repay your loan, and over what term? Would you like to find a partner to whom you'd sell 25 percent of the business? What's in it for him or her? The questions that pertain to your situation should be addressed here clearly and succinctly.

The summary or statement should be no more than half a page in length and should touch on the following key elements:

• Business concept describes the business, its product, the market it serves and the business' competitive advantage.
• Financial features include financial highlights, such as sales and profits.
• Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
• Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
• Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.

Description of the Business The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Remember that bankers and investors want to know hard facts--they won't risk money on assumptions or conjecture.

When describing your business, say which sector it falls into (wholesale, retail, food service, manufacturing, hospitality and so on), and whether the business is new or established. Then say whether the business is a sole proprietorship, partnership, C or Sub chapter S corporation. Next, list the business' principals and state what they bring to the business. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.

Description of the Product or Service The business description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs.

When you describe your product or service, make sure your reader has a clear idea of what you're talking about. Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors.

Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful. If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Give hard facts, such as "new equipment will create an income stream of $10,000 per year" and briefly describe how.

Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

Market Analysis A thorough market analysis will help you define your prospects as well as help you establish pricing, distribution, and promotional strategies that will allow your company to be successful vis-à-vis your competition, both in the short and long term.

Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain. Keep in mind that no one gets 100 percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections.

You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning." Positioning helps establish your product or service's identity within the eyes of the purchaser. A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP (unique selling proposition) is.

How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas. Many methods of establishing prices are available to you, but these are among the most common.

• Cost-plus pricing is used mainly by manufacturers to assure that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing is used by companies that sell their products through a variety of sources at differing prices based on demand.
• Competitive pricing is used by companies that are entering a market where there's already an established price and it's difficult to differentiate one product from another.
• Markup pricing is used mainly by retailers and is calculated by adding your desired profit to the cost of the product.

You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user. Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services. To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales.

Competitive Analysis The purpose of the competitive analysis is to determine:

• the strengths and weaknesses of the competitors within your market.
• strategies that will provide you with a distinct advantage.
• barriers that can be developed to prevent competition from entering your market.
• any weaknesses that can be exploited in the product development cycle.

The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.

Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.

Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.

The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you'll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.

In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don't need a business plan unless you're trying to borrow money. Of course, it's true that you do need a good plan if you intend to approach a lender--whether a banker, a venture capitalist or any number of other sources--for startup capital. But a business plan is more than a pitch for financing; it's a guide to help you define and meet your business goals.

Just as you wouldn't start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before--and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

More from Business Plans

Financial projections.

Estimates of the future financial performance of a business

Financial Statement

A written report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Executive Summary

A nontechnical summary statement at the beginning of a business plan that's designed to encapsulate your reason for writing the plan

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What Is A Business Plan (& Do I Really Need One?)

The term "business plan" is a familiar one, often bandied about in entrepreneurial circles. Yet, despite its ubiquity, it's remarkable how much mystery and confusion can surround this essential business tool.

What exactly is a business plan? What purpose does it serve? How is it structured? This article aims to lift the veil, demystifying the business plan and revealing its multifaceted nature.

Business Plan Definition

A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them. It's more than a mere document; it's a structured communication tool designed to articulate the vision of the business, allowing stakeholders to easily find the information they seek.

The business plan is a tangible reflection of the strategic planning that has gone into the business's future. While the plan is a static document, the planning is a dynamic process, capturing the strategic thinking and decision-making that shape the business's direction.

Purposes of a Business Plan

1. attracting funding opportunities.

A well-crafted business plan illustrates the company's potential for growth and profitability. It outlines the company's vision, mission, and strategies, providing a clear roadmap for success. A potential investor, whether venture capitalists or angel investors, can see how capital will be utilized, fostering trust and confidence in the business venture. A bank or financial institution can assess your company's ability to meet debt service obligations and compliance with strict financial accounting to meet underwriting requirements.

2. Aligning Organizational Objectives

A business plan acts as a unifying document that aligns the team with the company's goals and strategies. It ensures that everyone is on the same page, working towards common objectives. This alignment fosters collaboration and efficiency, driving the business towards its targets.

3. Validating the Business Concept

Before launching, a business plan helps in validating the feasibility of the business idea. It's a rigorous process that tests the concept against real-world scenarios, ensuring that the idea is not only innovative but also practical and sustainable. This validation builds credibility and prepares the business for the challenges ahead. For an existing business, a business plan can help address a possible merger and acquisition (M&A), rolling out a new business product or location, or expanding the target market.

4. Facilitating Legal and Regulatory Compliance

Whether it's securing a visa for international operations or meeting other regulatory requirements, a business plan can be an essential tool. It provides the necessary information in a structured format, demonstrating compliance with legal and regulatory standards. This can streamline processes and prevent potential legal hurdles.

5. Articulating and Formalizing the Business Vision

The business plan is more than a set of numbers and projections; it's the embodiment of the business vision. It communicates the essence of the business to stakeholders, turning abstract ideas into a concrete operational plan. It's a vital tool for leadership to articulate and formalize the vision, setting the stage for strategic execution.

Identifying the Right Type of Business Plan

Once you understand who your business plan is for and what specific needs it must address, you can identify the type of plan that best suits your situation. Business plans can be categorized into two main types: traditional and lean, each serveing its own unique purpose.

Traditional Business Plan

The Traditional Business Plan is a detailed and comprehensive document, often used by a new business, especially those seeking significant funding. It provides a complete picture of the company's vision, strategies, and operations. A traditional business plan leaves no stone unturned, offering a robust tool that communicates the business's entire vision and plan to stakeholders.

Lean Business Plan

In contrast, the Lean Business Plan is an abbreviated structure that still emphasizes the key elements of a Traditional Business Plan, but in less detail. It's suitable for early-stage startups, small businesses, or situations where agility and speed are essential. The Lean Business Plan focuses on the essentials, providing a quick overview without overwhelming details. It's a flexible and adaptable tool that can evolve with the business. One of the primary distinctions between it and a Traditional Business Plan is that a Lean Business Plan does not typically include financial planning, or if it does, it's a simple financial forecast or cash burn.

Components of a Business Plan

There are many places online where you can buy a business plan template. Often, those documents are just an outline of the sections of the business plan and what is included in each. If that's what you're looking for, here's a good business plan outline:

Executive Summary

The Executive Summary is the first section read but often the last written, as it encapsulates the entire plan. If the company has a mission statement, it's typically included here. When used for funding, it includes the ask or uses of funds, and for investment, it may contain an investor proposition. It's a concise overview that sets the tone, summarizing each section that follows.

Company Overview

The Company Overview is the foundation of the business, articulating how it operates, generates revenue, and delivers unique value to its customers. This section defines products and/or service the business sells, as well as the company’s business model and unique value proposition. It covers key partners, pricing strategy, revenue model, and other essential business activities. 

Market Analysis Summary

The Market Analysis is the business intelligence portion of the plan. It comprises an industry analysis, market segments, target customers, competitive analysis, competitive advantage. This section provides insights into the market landscape, identifying opportunities, challenges, and how the business positions itself uniquely within the industry.

Strategy & Implementation Summary

Here, the business plan should outline the short-term and long-term objectives, marketing strategy and sales approach. It's a roadmap that details how the business will achieve its goals, including tactical steps, timelines, and resources. In a business plan for investors, the inclusion of an exit strategy can provide a vision for the future, considering various potential outcomes.

Management Summary

The Management Summary offers profiles of key personnel, their qualifications, roles, and plans to fill talent gaps. It's a snapshot of the leadership team, providing assurance that the right people are in place to execute the business plan successfully.

Financial Projections

This section includes standard financial statements like the profit & loss statement (P&L), the balance sheet, and the cash flow statement. It offers a detailed financial blueprint, illustrating the company’s revenue drivers and unit assumptions, income statement, a break-even analysis, and a sensitivity analysis to examine how changes in variables affect outcomes. For businesses with complex structures, framing the revenue in terms of market share can offer additional insight into the viability and feasibility of the financial projections.

The Appendices often include year 1 and year 2 monthly financial statements, intellectual property like patents and trademarks, construction blueprints, and other essential documentation. It's a repository for supporting information that adds depth and context to the main sections of the plan.

Do I Need a Business Plan?

The question "Do I need a business plan?" is one that many entrepreneurs and business leaders grapple with. The answer, however, is not as straightforward as it might seem. While not every business requires a traditional business plan, the strategic planning process is essential for all. 

In some cases, a traditional business plan is required. Applying for a Small Business Administration (SBA) loan , obtaining a entrepreneurship visa , or meeting specific investor requirements may mandate a comprehensive business plan.

However a traditional business plan isn’t always necessary. For example, in early-stage investor funding, particularly in industries like SaaS, a lean business plan accompanied by a pitch deck presentation will often suffice. The focus here is on agility and essential information rather than exhaustive detail.

Every Business Needs Business Planning

Unlike the traditional business plan, which may or may not be required depending on the situation, business planning as a process is indispensable for every business, regardless of size or stage.

Business planning is a dynamic, continuous process. It's not confined to a single document but evolves with the business, adapting to changes, challenges, and opportunities. Effective strategic planning ensures internal alignment with both long-term vision and short-term objectives. It's a holistic approach that guides business goal-setting decision-making, resource allocation, and strategic direction. It often serves as the basis for a fully developed marketing plan.

Every business, from a small startup to a large corporation, benefits from strategic planning. It's a practice that fosters growth, innovation, and resilience, providing a roadmap for success.

Not every business needs a traditional business plan as a document, but all businesses need to engage in business planning as a process. While the traditional business plan serves specific purposes and audiences, business planning is a universal practice that guides and grows the business.

Entrepreneurs and business leaders must assess their specific needs, recognizing that the traditional business plan is just one tool among many. The true value of the business plan lies in continuous planning, adapting, and aligning with the unique vision and goals of the business.

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What Is a Business Plan?

Definition and Examples of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Morsa Images / Getty Images

A business plan is a document that summarizes the operational and financial objectives of a business. It is a business's road map to success with detailed plans and budgets that show how the objectives will be realized.

Keep reading to learn the basic components of a business plan, why they're useful , and how they differ from an investment plan.

A business plan is a guide for how a company will achieve its goals. For anyone starting a business , crafting a business plan is a vital first step. Having these concrete milestones will help track the business's success (or lack thereof). There are different business plans for different purposes, and the best business plans are living documents that respond to real-world factors as quickly as possible.

In a nutshell, a business plan is a practice in due diligence. When it's done well, it will prevent entrepreneurs from wasting time and money on a venture that won't work.

How Does a Business Plan Work?

If you have an idea for starting a new venture, a business plan can help you determine if your business idea is viable. There's no point in starting a business if there is little or no chance that the business will be profitable, and a business plan helps to figure out your chances of success.

In many cases, people starting new businesses don't have the money they need to start the business they want to start. If start-up financing is required, you must have an investor-ready business plan to show potential investors that demonstrates how the proposed business will be profitable.

Since the business plan contains detailed financial projections, forecasts about your business's performance, and a marketing plan, it's an incredibly useful tool for everyday business planning. To be as effective as possible, it should be reviewed regularly and updated as required.

Business owners have leeway when crafting their business plan outline. They can be short or long, and they can include whatever detail you think will be useful. There are basic templates you can work from, and you'll likely notice some common elements if you look up examples of business plans.

Market Analysis

The market analysis will reveal whether there is sufficient demand for your product or service in your target market . If the market is already saturated, your business model will need to be changed (or scrapped).

Competitive Analysis

The competitive analysis will examine the strengths and weaknesses of the competition and help direct your strategy for garnering a share of the market in your marketing plan . If the existing market is dominated by established competitors, for instance, you will have to come up with a marketing plan to lure customers from the competition (lower prices, better service, etc.).

Management Plan

The management plan outlines your business structure, management, and staffing requirements. If your business requires specific employee and management expertise, you will need a strategy for finding and hiring qualified staff and retaining them.

Operating Plan

The operating plan describes your facilities, equipment, inventory, and supply requirements. Business location and accessibility are critical for many businesses. If this is the case for your business, you will need to scout potential sites. If your proposed business requires parts or raw materials to produce goods to be sold to customers, you will need to investigate potential supply chains.

Financial Plan

The financial plan is the determining factor as to whether your proposed business idea is likely to be a success. If financing is required, your financial plan will determine how likely you are to obtain start-up funding in the form of equity or debt financing from banks, angel investors , or venture capitalists . You can have a great idea for a business, along with excellent marketing, management, and operational plans, but if the financial plan shows that the business will not be profitable enough, then the business model is not viable and there's no point in starting that venture.

Business Plan vs. Investment Proposal

A business plan is similar to an investment proposal. In fact, investment proposals are sometimes called investor-ready business plans . Generally speaking, they both have the same contents. You can think of an investment proposal as a business plan with a different audience.

The business plan is largely an internal document, intended to guide the decisions of executives, managers, and employees. The investment proposal, on the other hand, is designed to be presented to external agencies.

Key Takeaways

• A business plan is a detailed road map that explains what the company's goals are and how it will achieve them.
• The exact details of a business plan will depend on the intended audience and the nature of the business.
• It's a good idea to regularly revisit your business plan so you know it's as accurate, realistic, and detailed as possible.

The Leading Source of Insights On Business Model Strategy & Tech Business Models

What Is A Business Plan And Why It Matters In Business

A business plan is a document that details key operational and financial goals for a business and how they will be achieved in the future. Essentially, a business plan is an exercise in due diligence. While no business plan can accurately predict the future, they do demonstrate and give insight into the likelihood of eventual profitability. This in turn removes some of the entrepreneurial risk associated with investing large amounts of time and capital into a new venture.

Table of Contents

A typical business plan structure

Business plan structure varies considerably across industries, but most incorporate these parts as a part of a 10 to 20-page document.

Business concept

What is the nature of the industry the business intends to operate in?

What is the structure of the business and what are the products or services it will offer? How will it achieve success?

Marketplace analysis

Who is the potential target audience and why are they motivated to buy? Is there an existing demand for the product or service? In this part, it’s crucial to be as detailed as possible.

Develop a target demographic and associated buyer persona through in-depth research.

Competitive analysis

Who are the main competitors and what are their strengths and weaknesses? Is the market saturated or impenetrable?

If the market does have established players, then strategies must be devised to acquire market share.

Financial plan

If financing is required, then a sound financial plan will be key in attracting capital from banks, investors, or venture capitalists.

As best as possible, develop income and cash flow statements, balance sheets, and break-even analyses.

The goal here is to convince interested parties that the business has a realistic chance of success.

Management and legal structure

How will the company be structured and who will lead it? What skills do management bring to the table and how will they contribute to success?

A sound business plan should also define the intended legal structure, whether that be incorporated, partnership, sole proprietor, or LLC.

The four main categories of business plans

Business plans usually fall under one of four main categories:

The mini-plan

Used to quickly test a concept or gauge the interest of a prospective investment partner. Mini-plans are typically short at 1-10 pages in length.

The working plan

Used to describe how a business could operate once established.

The working plan is primarily an internal document; it does not need to look attractive with supporting photography, formatting, and appendices.

The presentation plan

Or a working plan submitted to interested external parties. Industry jargon and slang should be removed in favor of standard business language.

The presentation plan should incorporate all aspects of a typical business plan structure.

Attention to detail is also a must. Figures must be correct and words free of typing errors. The plan should also be professionally bound and printed.

The electronic plan

In the digital age, many organizations find it useful to keep electronic copies of their business plans.

These are useful for savvy investors who want to delve into complex spreadsheets for analysis . They are also ideal for presentations and virtual meetings.

How to build an effective business plan according to Peter Thiel

According to Pether Thiel, former CEO of  PayPal and founder of the software company Palantir, there are seven questions to answer if you want to create a company that will go from Zero to One.

Those questions are critical to building a business that will be able to capture value in the long run. In fact, according to Peter Thiel the value of a business isn’t to go from 1 to  n  but to real value is to go from Zero to One.

In short, build a company that creates new things, rather than building a business based on the existing “best practices,” which according to Peter Thiel, leads to dead ends.

This framework of going from Zero to One can be summarised in seven questions to answer if you want to have a great business plan.

In fact, you don’t need complicated Excel models or reasonings. You only need to address now these seven questions.

Indeed, that is how Peter Thiel puts it in Zero to One:

Whatever your industry, any great business plan must address every one of them.If you don’t have good answers to these questions, you’ll run into lots of “bad luck” and your business will fail. If you nail all seven you’ll master fortune and succeed.

The Engineering Question

Can you create breakthrough technology instead of incremental improvements? 

The Timing Question

Is now the right time to start your particular business? 

The Monopoly Question

Are you starting with a big share of a small market? 

The People Question

Do you have the right team? 

The Distribution Question

Do you have a way to not just create but deliver your product?

The Durability Question

Will your market position be defensible 10 and 20 years into the future? 

The Secret Question

Have you identified a unique opportunity that others don’t see? 

Key takeaways

• A business plan is a comprehensive document that highlights the goals of a business and how it plans to achieve them.
• A business plan is essential for new businesses where due diligence is crucial in attracting external investment or predicting long-term viability. All businesses – regardless of maturity – should use and adhere to such a plan.
• There are four main categories of business plans, with each category suited to a particular stage of the business life cycle.

Key Highlights:

• Business Plan Definition: A business plan is a detailed document outlining a business ’s operational and financial goals, along with strategies for achieving them. It serves as a tool for due diligence, demonstrating the potential profitability of a venture and reducing entrepreneurial risk.
• Business Concept: Describes the industry, business structure, products/services, and success strategies.
• Marketplace Analysis: Identifies the target audience, demand, and buyer persona through detailed research.
• Competitive Analysis: Assesses main competitors, their strengths and weaknesses, and market saturation.
• Financial Plan: Presents income statements, cash flow projections, balance sheets, and break-even analyses.
• Management and Legal Structure: Defines the company’s structure, leadership, and legal status.
• Mini-Plan: Brief, used to test concepts or attract investment partners.
• Working Plan: Describes how a business will operate, primarily for internal use.
• Presentation Plan: Tailored for external parties, incorporates all aspects of a typical plan.
• Electronic Plan: Digital copies useful for analysis , presentations, and virtual meetings.
• Peter Thiel, co-founder of PayPal, outlines seven critical questions to address in a business plan.
• These questions guide businesses to create new value and avoid dead-end practices.
• The seven questions include: Engineering Question, Timing Question, Monopoly Question, People Question, Distribution Question, Durability Question, and Secret Question.
• Addressing these questions enhances a company’s chances of success by creating breakthrough technology, timing the market entry, targeting a niche market, forming the right team, ensuring product delivery, building defensible market positions, and identifying unique opportunities.
• A business plan outlines a business ’s goals and strategies for achieving them.
• It is essential for attracting investment, reducing risk, and guiding business operations.
• The plan’s components include business concept, marketplace analysis , competitive analysis , financial plan, and management structure.
• Business plans can fall into four categories: mini-plan, working plan, presentation plan, and electronic plan.
• Addressing Peter Thiel’s seven questions can enhance a business plan’s effectiveness and increase the chances of long-term success.

Read also:  Business Strategy, Examples, Case Studies, And Tools

Read Next:  Lean Canvas ,  Agile Project Management ,  Scrum ,  MVP ,  VTDF .

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13 Key Business Plan Components

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As is the case with most big projects, crafting a business plan is one of those things that takes an incredible amount of diligence and no shortage of courage. After all, your business idea is probably more than just some passionless money-making ploy — it’s your dream that you’re getting ready to lay bare for the world to scrutinize!

Never fear!

We have 4 sample business plans here to make it all less scary.

If you approach this with a firm understanding of what key information to include in each section of your business plan and know how each section works together to form a cohesive, compelling, and — above all — persuasive whole, it will make the writing process a whole lot less daunting.

We’re about to help you do exactly that by deconstructing each of the core components of your business plan one at a time and showing you exactly what information you should present to your readers so when all is said you done, you can walk away confidently knowing you’ve penned the most effective business plan possible.

As we learned in the “ What is a Business Plan? ” article, a business plan generally consists of the following sections:

Executive Summary

Company Synopsis

Market Analysis / Overview

Product (How it Works)

Revenue Model

Operating Model

Competitive Analysis

Customer Definition

Management Team

Financial Statements

Let’s dive in, shall we?

1. Executive Summary

In the same way that a great movie trailer gives you a basic understanding of what the film is about while also enticing you to go check out the full-length feature, your Executive Summary serves as an overview of the main aspects of your company and business plan that you will discuss in greater length in the rest of your plan.

In other words, your Executive Summary is the highlight reel of your business plan.

Remember, you’re not giving away every last little detail about your company and business opportunity right up front. Just enough of the “good parts” to both inform and intrigue your reader to dig in further.

You do this by presenting a concise, 1-sentence outline of the following information:

Mission Statement

A “big idea” statement that introduces why your company exists, what it does for your customers, and why it matters.

Product/Service Summary

A brief description of your company’s products or services, with a special emphasis on what makes them unique.

Market Opportunity Summary

A quick explanation of the one or two key problems and/or trends your product/service addresses, and how it translates to a big opportunity for your company (and investors ).

Traction Summary

Highlight a few of the biggest accomplishments that you have achieved and describe how those accomplishments lay the groundwork for what’s to come.

Outline the next objectives or milestones that you hope to meet and what it means for the growth of your company.

Vision Statement

What is the scope or “big picture vision” of the business you are trying to build? If you’re in tech, are you trying to build the next Nest? If you’re in food and beverage, are you aiming to be the next Chipotle? In other words, how big is this company going to get, and why should an investor/partner/hire be excited to be a part of it?

A word of advice:

While your Executive Summary is the first piece of content people will read in your business plan, it’s usually a good idea to write this section last so you can take a step back after you’ve written everything and have a better sense of which high-level information you want to pull from the rest of your plan to focus on here.

First impressions are everything!

2. Company Synopsis

The Company Synopsis section is where you provide readers with a more in-depth look at your company and what you have to offer.

Before your readers will ever bother caring about things like your marketing strategy or your financial assumptions, they’ll want to know two absolutely fundamental details that will set up the rest of the plan that follows:

What painful PROBLEM are you solving for your customers?

What is your elegant SOLUTION to that problem?

You might have the most revolutionary product the world has ever seen, but if you don’t take the time to carefully articulate why your product exists in the first place and how it helps your customers solve a pain point better than anything else out there, nothing else in your business plan really matters from the reader’s perspective.

If you spend the majority of your time on any one part of your business plan, take the time to really nail this part. If you can build an engaging story around the problem that your audience can relate to, it makes the payoff of your solution statement all the more powerful.

When considering how to position your problem in the context of your business plan, think to yourself: what is the single greatest problem my customers face? How do other solutions in the market fail to alleviate that problem, thus creating a major need for my product?

Once you’ve thoroughly explained the problem you’re setting out to solve, it’s time to tell investors how your product/service solves that problem beautifully.

The goal here is less about describing how your product or service actually works (you’ll get to that in the “How It Works” section later) than it is about communicating how your solution connects back directly to the problem that you just described.

Key questions to consider:

What is the product/service you’re offering?

In what way does it solve my customers’ most painful problem?

What impact does my solution have on my customers’ lives?

How does my product/service effectively address the biggest shortcomings of other solutions currently in the market?

3. Market Overview

While your problem and solution statements help set the stage and provide readers with insight into why you’re starting this company in the first place, clearly defining your market will allow you to call attention to the trends and industry conditions that demonstrate why now is the time for your company to succeed.

You’re going to want to supplement your own expertise with plenty of evidence in the form of market statistics and research to show readers that you’re not only an expert when it comes to your product, but your industry as well. Your goal here is to help illustrate:

The SIZE of the market opportunity your company is positioned to address

The amount of GROWTH occurring in your market

The TRENDS driving the demand for your solution

The SUCCESS STORIES happening with similar companies in your industry

Market Size & Growth

Indicating to your readers that your problem addresses a big enough market will play a huge role in how excited they’ll be about getting involved in helping your company. This is where you’ll want to put your research cap on and start uncovering some numbers that help your reader better understand:

How big the market is (locally/nationally/internationally)

Approximately how much revenue it generates every year

If it’s growing

How much it’s expected to grow over the next 5-10 years

What recent emerging trends have you developed your product/service in response to?

Are there any new technologies that have emerged recently that make your product/solution possible? Are there any specific brands or products you can point to that illustrate the demand for products/services like (but not too like) yours?

Examples of Trends

An increasing number of consumers are “cutting the cord,” replacing traditional cable subscriptions with subscriptions to services like Netflix, Amazon Prime and HBO NOW.

As the Baby Boomer generation continues to age, there is a growing demand for products that empower them to stay safe and maintain their independence for longer.

Consumers are increasingly seeking food options that feature locally-sourced ingredients.

The emergence of image recognition technology for smartphones.

Industry Success Stories

Are there any examples of similar companies that investors have supported that you could point to? Are there any recent acquisitions (examples of larger companies buying up companies similar to yours) that could bolster the case for your own exit strategy ? Are there any similar companies that have recently IPO’d (gone public)?

4. Product (How it Works)

You used your Company Synopsis section to cover why your new product delivers crazy value to your customers by breaking down the ways that it benefits your customers and meets a highly specific need for them.

Now it’s time to use your Product or How it Works section to get into the finer details around the mechanics of how it does so.

This might sound like they’re one and the same. Not exactly. And here’s a good way to distinguish this.

Let’s say you were building a subscription box service for pet flea treatment. In your Company Synopsis section, you’d probably spend your time talking about how your solution conveniently spares pet owners the hassle of remembering to make a vet appointment, traveling to the clinic, and waiting to talk with the vet just to pick up Scrambles’ medication.

In your How it Works section, on the other hand, you’d shift your focus to describing how your customers have the ability to choose from a variety of brand name medications, set their own delivery schedule, enjoy 2-day delivery, and gain real-time support 24/7 from a team of industry experts.

What are some of your product’s key features ?

How will customers actually use your product or service?

Is there any technology underlying your solution you will need to explain in order for readers to fully understand what your company does and how it works?

If your product or service has some sort of proprietary element or patent at the core of what makes it work, you might be a bit hesitant to show your hand for fear that someone might run off with your idea. While this is a completely understandable concern, know that this pretty much never happens.

That being said, you can still give your readers a clear idea of how your product or service works by explaining it through the lens of how it relates to the problems that your customers face without giving up your secret sauce.

Put another way, you don’t have to explicitly tell your readers the precise source code to your new app, but you will want to call attention to all of the great things it makes possible for your customers.

5. Revenue Model

It’s the age-old question that every business owner has had to answer: how will your company make money?

If you’re just starting out , clearly defining your framework for generating revenue might seem like somewhat of a shot in the dark. But showing investors you have even a cursory idea of how you will convert your product or service into sales is absolutely fundamental in lending credibility to your business plan.

You’ll want to determine the following:

Revenue Channels

Are you leveraging transaction-based revenue by collecting one-time payments from your customers? Are you generating service revenue based on the time spent providing service to your customers? Are you following a recurring revenue model selling advertising and monthly subscriptions for your mobile app?

What are your price points and why have you set them that way? How does your pricing compare with similar products or services in the market?

Cost of goods sold, otherwise known as COGS, refers to the business expenses associated with selling your product or service, including any materials and labor costs that went into producing your product.

Your margin refers to the profit percentage you end up with after you subtract out the costs for the goods or services being sold. If you purchase your inventory for $8 per item from a supplier and sell them for $10, for example, your margin on sales is 20%.

Why is this revenue model the right fit for this product/market/stage of development?

Are there any additional revenue sources that you expect to add down the line?

Have you generated any revenue to date? If so, how much?

What have you learned from your early revenue efforts?

If you haven’t started generating revenue, when will you “flip the switch”?

6. Operating Model

Where your Revenue Model refers to how you’re going to make money, your Operating Model is about how you’re going to manage the costs and efficiencies to earn it.

Basically, it’s how your business will actually run. For this component, you’ll want to focus on the following:

Critical Costs

Your Critical Costs are the costs that make or break your business if you can’t manage them appropriately. These essentially determine your ability to grow the business or achieve profitability.

Cost Maturation & Milestones

Often your Critical Costs mature over time, growing or shrinking. For example, it might only cost you $10 to acquire your first 1,000 users, but $20 to acquire the next 10,000. It’s important to show investors exactly where costs might improve or worsen over time.

Investment Costs

Investment costs are strategic uses of capital that will have a big Return on Investment (ROI) later. The first step is to isolate what those investment costs are.  The second step is to explain how you expect those investments to pay off.

Operating Efficiencies

What can you do from an efficiency standpoint that no one else can? It could be the way you recruit new talent, how you manage customer support costs, or the increasing value your product provides as more users sign up.

7. Competitive Analysis

Now that you’ve introduced readers to your industry and your product, it’s time to give them a glimpse into the other companies that are working in your same space and how your company stacks up.

It’s important to research both your direct competitors (businesses that offer products or services that are virtually the same as yours) and your indirect competitors (businesses that offer slightly different products or services but that could satisfy the same consumer need).

A skimpy Competitor Analysis section doesn’t tell investors that your solution is unrivaled. It tells them that you’re not looking hard enough.

Pro tip: avoid saying that you have “no competitors” at all costs.

Why? Because while there may not be anyone exactly like you out there, if you say this, the investor is more than likely thinking one of two things: Either, “They don’t know what they’re talking about,” or, “If there’s truly no competition, is there even a market worth pursuing here at all?”

When you set out to identify your fiercest competitors, ask yourself this:

What products/services are my target customers using to solve this problem now?

What products/services could they potentially use to solve this problem now?

Identify at least three sources of competition and answer the following questions about each one:

Basic Information

Where is your competitor based? When was the company founded? What stage of growth is your competitor in? Are they a startup? A more established company?

How much revenue does your competitor generate each year? Approximately how many users/customers do they have? Have they received venture funding? How much? From whom?

Similarities & Differences

What are the points of similarity between your competitor and you in terms of the offering, price point, branding, etc?  What are the points of difference, both for the better and for the worse?

Strengths & Weaknesses

What are your competitors’ biggest strengths? What do you plan to do to neutralize those strengths? What are your competitors’ biggest weaknesses? How do they translate into an advantage for your company?

8. Customer Definition

The name of the game here is to know your audience !

This is where you show readers that you know who your audience is (who’s most likely to buy and use your product), where they are, and what’s most important to them. Are they price-conscious? Do they value convenience? Are they concerned about environmental impact? Do they tend to be early adopters of new technologies?

Once you have a good idea of your customer personas and demographics, you’ll want to explain how you’re designing your products/services, branding, customer service, etc. to appeal to your target audience and meet their needs.

Who are the people that your product/service is designed to appeal to?

What do you know about customers in this demographic?

Does your target audience skew more male or more female?

What age range do your target customers fall in?

Around how many people are there in this target demographic?

Where do your target customers live? Are they mostly city dwellers? Suburbanites?

How much money do they make?

Do they have any particular priorities or concerns when it comes to the products/services they buy?

9. Customer Acquisition

Now that we know who your customers are, the next question is — how do you plan on getting them ? This essentially refers to your marketing plan where you’ll go into detail about how you intend on raising awareness for your brand to expand your customer base .

Which channels will you use to acquire your customers? Direct sales? Online acquisition (paid ads, organic SEO, social, email)? Offline acquisition (newspaper, TV, radio, direct mail)? Channel partners (retailers, resellers)? Word-of-mouth? Affiliates?

Channel Cost Assumptions

There are hard costs associated with every customer acquisition channel. Yes, even social media. It’s your job here to forecast and compile all of the associated costs with a particular channel so that you can arrive at a preliminary budget for what it would cost to use this channel.

Are there specific subcategories of customers that you plan to target first?

Will you introduce your product in certain key geographic locations?

Are there specific components of your product offering that you will introduce to the market first?

Are there any existing brands that you are planning to partner with to increase brand awareness / expedite market penetration?

10. Traction

Many investors see hundreds of deals every year.

If you want to stand a chance of making any sort of meaningful impression, it’s important to show them that your business is more than just an idea and that you’ve already got some irons in the fire.

Traction is a huge part of making that case.

When investors see that Founders are already making things happen, they think to themselves, “Wow, look at everything they’ve already accomplished! If they can do that much by themselves, just think what they can do with my money behind them!”

Here are some common categories of traction that can help emphasize your business is gaining momentum:

Product Development

Where are you in the product development process? Do you have a working prototype? Is your product already in the market and gaining customers?

Manufacturing/Distribution

Do you already have an established partner for production/manufacturing? How about distribution? Tell us about your relationships and what they can handle.

Early Customers & Revenue

Do you have any existing customers? If so, how many, and how fast is your customer base growing? Have you started generating revenue? If so, how much?

Testimonials & Social Proof

Do you have any client reviews or comments that can illustrate positive customer responses to your product/service? Has your product/service been reviewed/endorsed by any industry experts? Do you have any high-profile customers (celebrities or industry experts if it’s a B2C product, well-known brands if it’s a B2B product)

Partnerships

Have you secured partnerships with any established or notable companies or brands?

Intellectual Property

Do you have any patents for the technology or ideas behind your company?

Is your company name trademarked?

Press Mentions

Has your company been featured by any media outlets? Which ones?

11. Management Team

Your Management Team section is where you introduce your team and, if possible, explain how each team member’s background is highly relevant to the success of your company.

You may have gotten a Ph.D. in Chemical Engineering from Carnegie Mellon, but if you’re building the next hot dating app, that doesn’t really lend much credence to why you’re uniquely qualified for this particular product.

An ideal Management Team section shows investors that your team’s combination of skills, experience, relationships, and expertise make you the best group of people on the planet to drive the success of your company.

Each team bio should cover:

The team member’s name

Their title and position at the company

Their professional background

Any special skills they’ve developed as a result of their past experience

Their role and responsibilities at your company

It’s important to keep team bios focused and to the point: readers don’t need to know where you were born or what your favorite hobbies were growing up. They don’t even necessarily need to know what you studied in undergrad (unless what you studied in undergrad is super-relevant to what they’re doing at your company.)

Aim for around 3-5 sentences of good information on each team member.

12. Funding

Chances are you’re shopping your business plan around to secure capital for your project. If that’s the case , don’t forget to actually ask for the one thing you set out to achieve!

In fact, you’ll want to devote an entire section to your request for funding. This is your opportunity to tell investors:

What your funding goals are

How they can help you achieve those goals

What they have to gain from getting involved in your company

Funding Goal

How much funding do you need to move forward with your goals? How did you arrive at this figure?

What will investors get in exchange for their investment in your company?

Use of Funds

How will you use the funding that you secure from investors? Provide a very basic breakdown, either by amounts or by percentages, of how you plan to allocate the funds you receive. For example:

25%: R&D

25%: Marketing

25%: Product Development

25%: Key Hires

What key milestones will you and your company be able to achieve with the help of this funding?

Why Invest? / Conclusion

Wrap up your Funding section with by driving home why investors should get involved with your company. Is it the experience of your team? The originality of your product? The size of the market? Identify a few key factors that make your company a great opportunity from an investment perspective.

13. Financials

At last, we’ve arrived at everybody’s least favorite section of the business plan: Financials !

Your Financials section comes last after what we’ll call the more “narrative”-driven content that makes up the vast majority of your business plan.

It’s here where you’ll present your various spreadsheets, charts, tables, and graphs that communicate to investors your projections for the company in dollars and cents over the next few years. And while this is a numbers-dominant section, you’ll still want to back-up all of your figures with either a quick intro or summary explaining how you got there.

Because despite the fact that some people underplay financials as merely a guessing game, it’s crucial to remember that investors are looking for estimates, not guesses.

Simply put, you want to build your financial forecasts on a series of assumptions that incorporate as many known parameters as possible. Indicate how you arrived at these assumptions (maybe you compared them against similar products in the market, for example).

Some common elements included in your Financials section are:

Income Statement

A financial statement that showcases your revenues, expenses, and profit for a particular period and whether or not your business is profitable at that point in time.

Balance Sheet

A summary of your business’s net worth at a particular point, breaking it into assets, liabilities, and capital.

Cash Flow Projection

An estimate of the amount of cash that is expected to flow in and out of your business. Your cash flow projection will give you a good idea of how much capital investment you need to secure.

Break-Even Analysis

Just like it sounds, your break-even analysis helps you determine when your total revenue equals your total expenses. In other words, your break-even point. The total profit here equals 0.

If this sounds intimidating, it’s because it kind of is. On the plus side, there are some great online tools available designed to help you create super sleek financials and still maintain your sanity.

We’ve spent time picking apart each core component of a business plan, and as it has probably become abundantly clear, each section is essentially its own in-depth presentation within the overarching plan itself.

While no two business plans will ever be exactly the same, the key takeaway here is that every great plan incorporates the same basic elements that give investors the information they need when determining whether your business idea has legs or not.

Now that you’re ready to roll up your sleeves and finally launch into the writing process , you can refer back to this as you start tailoring these elements to your specific business. If you find yourself getting hung up along the way, check out one of our many other resources on business planning to help you tackle this project head-on!

Karlina Popwell

This article was immensely helpful. Thank you for writing in such a thorough manner. Very grateful!!

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• Enterprise resource planning (ERP)

business plan

• Katie Terrell Hanna

What is a business plan?

A business plan is a formal document that outlines a company's objectives, strategies and financial forecasts , serving as a comprehensive roadmap for business growth and development.

Business plans are crucial, whether they're for a startup or an offshoot of an existing business. They help in strategizing the launch and growth of a business by providing direction and building a case to attract investment.

For startups, business plans are vital for securing funding from investors, banks or venture capitalists. For established companies, business plans aid in strategic planning , guiding long-term operations and achieving business goals .

Key components of a business plan

A business plan typically includes several standard sections that provide detailed information about different aspects of the business:

• Executive summary. The executive presentation offers a concise overview of the entire business plan, highlighting key points that are detailed in subsequent sections. It includes the business's mission statement, proposed model and basic information about the leadership team.
• Business description. This part elaborates on what the business does, its legal structure, its unique value proposition and the market needs it aims to fulfill.
• Market analysis. The market analysis section provides a detailed look at the industry, market environment, target audience and competitive landscape. This includes demographics , market size, market trends and an analysis of competitors.
• Organizational structure. This section outlines the company's organizational structure, detailing the roles and responsibilities of executives, the management team and departmental structures.
• Products or Services. This area describes the products or services offered by the company, including a thorough description of the product lifecycle, and any intellectual property or research and development activities.
• Marketing and sales strategy. This part of the plan outlines strategies for branding, marketing, sales approaches and customer acquisition . It describes how the product or service will be promoted to the target market.
• Funding request. For startups and businesses seeking funding, this section specifies the amount of funding needed, the proposed use of funds and the preferred financial arrangements.
• Financial projections. The financial section provides projections of the business's financial performance over the next three to five years, including forecasted income statements, balance sheets, cash flow statements and capital expenditure ( Capex ) budgets.
• Appendix. The appendix includes any additional information that supports the data included in the plan, such as resumes of the management team, legal agreements, technical specifications and any other relevant documents.

Creating and using a business plan

Developing a business plan involves conducting extensive market research, understanding the industry, defining clear objectives and setting achievable goals. It is crucial for business owners to regularly update their business plans to reflect the changing market conditions and the business's progress.

Beyond securing funding, a well-crafted business plan also serves as a tool for managing and steering a business toward success. It acts as a framework within which the business operates and a baseline against which its performance can be measured.

Setting detailed business goals that come with deadlines motivates employees and can keep your company on track. See how to set business goals with this step-by-step guide .

Continue Reading About business plan

• Implementing an analytics business plan requires commitment
• Best practices for a sustainable marketing strategy
• Let customer acquisition costs steer marketing, service plans
• Ethical issues in marketing to avoid
• Why businesses should prioritize customer retention

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• Business Planning

Business Model vs. Business Plan: Key Differences Explained

Written by Vinay Kevadiya

Published Sep. 24 2024 · 6 Min Read

“Failing to plan is planning to fail," as the old saying goes. This sentiment rings especially true in the modern business world.

For entrepreneurs, effective business planning can be the difference between a dream and a reality. And this reality hinges on two important blueprints: business models and business plans.

But what differentiates them, and when should you focus on each?

In this article, we will explore the key differences in the business model vs business plan debate and help you clarify these concepts.

What is a business model?

A business model is a plan that shows how a company creates, delivers, and captures value. It explains how a business operates, spends money, and makes money in a way that leads to profit.

A good business model answers key questions like:

• What problem are you solving?
• What is your target market?
• How much money do you need?
• What will you sell, and how will you make money?

Pricing and costs are the key factors that affect profitability.

Beyond the financials, some business models consider the broader social or cultural impact a company will have. Think of it as the exchange of value beyond just money–it's about the difference you'll make in your community or industry.

Here are some basic types of business models:

• Advertising: Show ads from other companies to specific groups of people. Think of platforms like LinkedIn and YouTube.
• Affiliate: Get a small commission for promoting other people's products. You've probably seen this on Amazon or through programs like ClickBank or Share-a-Sale.
• Franchise: Take a successful business model and let others open their own branches. You get a share of their profits. McDonald's and The UPS Store are prime examples.
• Bundling: Packaging multiple products or services together at a discounted price. (Common in telecoms.)
• Fee-for-service: Selling skills or expertise at an hourly rate or project-based fee. Consulting firms like McKinsey & Company and even freelance writers fall into this category.
• Freemium: Gives a basic version of something away for free, but you pay for the better version with more features. LinkedIn and Slack are the most common examples.
• Manufacturer: Takes raw materials and turns them into products people can buy. This is how we get cars, furniture, and even our phones.
• Pay-as-you-go: You only pay for what you use. Internet phone plans are the perfect example, where you buy internet data.

What is a Business Plan?

A business plan is your detailed guide, outlining everything from launching products and setting milestones to even planning your exit. It clearly defines what your company does, its long-term vision, and the strategies to achieve success.

In short, a business plan is your roadmap to growth.

Business plans typically come in two main styles: traditional and lean startup. The U.S. Small Business Administration notes that traditional business plans are the more commonly used format.

• Traditional business plans are like a detailed document for your business. They cover everything from your marketing strategy to your financial projections .
• Lean startup plans are more like a sketch–focusing on the core essentials. They highlight the key elements, like the problem you're solving, your target customers, and your unique value proposition.

Components of a business plan vs. business model

The components of your business model are the foundation of your business. They define your business operations and strategy for company success.

Here are some of the key ones you'll want to include when creating your business model:

• Customer segment
• Value proposition
• Revenue streams
• Customer relationships
• Key activities
• Key resources
• Key partners
• Cost structure

While a clear business model explains how your business works, a business plan is like your company's resume.

It’s a detailed document often shared with investors, lenders, and other stakeholders to give them a clear view of the company's potential for success.

Because of this, business plans tend to include more detailed sections, such as:

• Executive summary
• Company description
• Products and services
• Market analysis
• Customer analysis
• Competitor analysis
• Marketing and sales plan
• Operations plan
• Financial plan

Business model vs. business plan: what’s the difference?

Both business model and business plan are important for your business. However, they play unique roles at various stages of your business journey.

Let's break down those key differences:

When to use a business model vs. a business plan

A business model is best for early-stage startups or entrepreneurs who want to check or improve their ideas. It's a flexible organizational structure for outlining how your company will create and capture value for customers.

You can use a business model when you're:

• Testing the viability of a new business idea.
• Pitching the business concept to investors or partners.
• Evaluating revenue streams and cost structures.
• Making adjustments to an existing business or pivoting strategies.

A business plan is commonly used once a business idea has been approved or for businesses that are looking to grow or secure funding. It includes more detailed steps and formal strategies.

When to use a business plan:

• Seeking investment or loans.
• Managing long-term growth and scaling.
• Setting clear objectives and milestones for internal teams.
• Presenting a comprehensive roadmap to stakeholders.

For the best results, we recommend using both the business model and business plan together. Start with the business model to sketch out the essentials of your business and quickly test your ideas.

Once those ideas are approved, create a business plan to prep your execution strategy. This ensures that your detailed plan is rooted in a solid, tested foundation.

There's no single right way to choose between a business plan and a business model–it all depends on your specific goals.

Remember, planning is a continuous process. You can't just make a plan once and expect it to work forever!

To keep your business model and plan up-to-date, try a tool like Bizplanr. It uses AI to help you quickly create professional business plans, including essential financial projections, and makes it easier to move from idea to execution.

Get Your Business Plan Ready In Minutes

Answer a few questions, and AI will generate a detailed business plan.

Generate your Plan

Frequently Asked Questions

Do I need both a business model and a business plan?

Yes, having both is ideal. The business model will lay out your revenue streams and how your business delivers value. On the other hand, a business plan will have strategies and steps to grow and manage the business. Together, they give a complete picture of how to operate and scale effectively.

Can a business plan include a business model?

Yes, a business model is usually part of the business plan. It forms the basis for understanding how you’ll generate income. The rest of the plan sheds more light on operational details like marketing and finances.

What is a better starting point, a business model or a business plan?

It’s generally advisable to start with a business model as it will give you a clear idea of how your business will create and capture value. Once that concept is clear, you can then create a detailed business plan to fill out the details like market research and strategies for execution.

How does a business model impact financial projections in a business plan?

It impacts because the business model defines revenue streams, cost structures, and pricing strategy. These details shape how you project your profits, losses, and cash flow in the business plan.

Is a business model canvas the same as a business plan?

No, they’re different tools. A business model canvas is a one-page snapshot that has key components like value propositions and customer segments. A good business plan is much more detailed. As it covers everything from market strategies to financial forecasts. The canvas helps with clarity, while the plan helps with execution.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

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Business Plan

Who should write a business plan, pros and cons of a business plan, the anatomy of a business plan, .css-uphcpb{position:absolute;left:0;top:-87px;} what is a business plan, definition of a business plan.

A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them.

In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and which tactics you plan to use to reach commercial success.

Whilst every enterprise should have a plan of some sort, a business plan is of particular importance during the investment process. Banks, venture capitalists, and angel investors alike will need to see a detailed plan in order to make sound investment decisions — think of your plan as a way of convincing them your idea is worth their resources.

Roadmapping From A to Z

Business plans can also be useful as a guide to keeping a new business on track, especially in the first few months or years when the road ahead isn’t too clear.

Starting a business isn’t an exact science. Some companies organically develop out of trial and error, while others are plotted out from start to finish.

So if you’re asking whether your company needs a lengthy business plan, the answer would be ‘no’. That said, there are definitely a few situations in which writing a plan makes sense and can help increase the chances of a business becoming successful:

In situations when the market is new and untested — or simply volatile — it can be very helpful to have a business plan to refer back to when the road ahead isn’t clear.

For those who have an exciting business idea but haven’t necessarily distilled it down into black-and-white. Writing a business plan is a great way to look at a concept from all angles and spot any potential pitfalls.

How to write a business plan?

The most important step in writing a business plan is to identify its purpose.

Who are you trying to attract with it, and why?

Here are a few key pointers for writing a business plan:

Are you looking to secure a bank loan, get funding from private investors, or to lure skilled professionals to join you?

Include a brief history of your business, the concept, and the products or services. Keep it professional and transparent.

Don’t exaggerate your experience or skills, and definitely don’t leave out information investors need to know. They’ll find out at some point, and if they discover you lied, they could break off their involvement. Trust is crucial.

Explain what the product or service your business offers in simplistic terms.

Watch out for complex language and do whatever you can to prevent readers from becoming confused.

Focus on the benefits the business offers, how it solves the core audience’s problem(s), and what evidence you have to prove that there is a space in the market for your idea. It’s important to touch on the market your business will operate in, and who your main competitors are.

Another essential aspect of writing an effective business plan is to keep it short and sweet. Just focus on delivering the crucial information the reader has to know in order to make a decision. They can always ask you to elaborate on certain points later.

Still, deciding whether or not a business plan will benefit you at this stage of your venture?

Let’s look at a few reasons why you might (or might not) want to write a business plan.

A business plan will help you to secure funding even when you have no trading history. At the seed stage, funding is all-important — especially for tech and SaaS companies. It’s here that a business plan can become an absolute lifesaver.

Your business plan will maintain a strategic focus as time goes on. If you’ve ever heard of “mission creep”, you’ll know how important an agreed can be — and your business plan serves exactly that purpose.

Having a plan down in black and white will help you get other people on board . Again, with no trading history, it can be hard to convince new partners that you know what you’re doing. A business plan elegantly solves this problem.

Your business plan can cause you to stop looking outward. Sometimes, especially in business, you need to be reactive to market conditions. If you focus too much on your original business plan, you might make mistakes that can be costly or miss golden opportunities because they weren’t in the plan.

 A lot of time can be wasted analyzing performance. It’s easy to become too focused on the goals and objectives in your business plan — especially when you’re not achieving them. By spending too much time analyzing past performance and looking back, you may miss out on other ways to push the business forward.

A business plan is out of date as soon as it’s written. We all know how quickly market conditions change. And, unfortunately, certain elements in your business plan may have lost relevance by the time you’re ready to launch. But there is another way — by transferring your strategic plan into an actionable roadmap , you can get the best of both worlds. The business plan contains important detail that is less likely to change, such as your mission statement and target audience, and the roadmap clarifies a flexible, adaptable, route forward.

So, you’ve decided to write a business plan — a great choice! 

But now comes the tricky task of actually writing it. 

This part can be a little frustrating because there is no one-size-fits-all template appropriate for all business plans. The best approach, in fact, is to look at common ingredients of a business plan and pick out the ones that make sense for your venture.

The key elements of a great business plan include:

An overview of the business concept . This is sometimes referred to as an executive summary and it’s essentially the elevator pitch for your business.

A detailed description of the product or service. It’s here that you’ll describe exactly what your core offering will be — what’s your USP , and what value do you deliver?

An explanation of the target audience. You need a good understanding of who you’ll be selling your product or service to, backed up by recent market research.

Your sales and marketing strategy. Now that you know who you’re targeting, how do you plan to reach them? Here you can list primary tactics for finding and maintaining an engaged client base.

Your core team . This section is all about people: do you have a team behind you already? If not, how will you build this team and what will the timeline be? Why are you the right group of people to bring this idea to the market? This section is incredibly important when seeking external investment — in most cases, passion can get you much further than professional experience.

Financial forecasts . Some investors will skim the executive summary and skip straight to the finances — so expect your forecasts to be scrutinized in a lot of detail. Writing a business plan for your eyes only? That’s fine, but you should still take time to map out your financial requirements: how much money do you need to start? How do you plan to keep money coming in? How long will it take to break even ? Remember, cash is king. So you need a cash flow forecast that is realistic, achievable and keeps your business afloat, especially in the tricky first few years.

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Harris Casts Herself as a Pro-Business Pragmatist in a Broad Economic Pitch

Declaring “I am a capitalist” in a speech in Pittsburgh, Kamala Harris promised not to be “constrained by ideology” even as she said she would fiercely defend unions and the middle class.

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By Nicholas Nehamas and Reid J. Epstein

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• Sept. 25, 2024

Vice President Kamala Harris laid out a broad vision of her economic plan on Wednesday as she sought to bridge the political divide between the progressive senator who ran for president in 2019 and the pragmatic, pro-business candidate she is presenting herself as now.

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