why do we need layout of a business plan and their definition

• Search Search Please fill out this field.

What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for April 2024 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How To Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Sign up for our newsletter for product updates, new blog posts, and the chance to be featured in our Small Business Spotlight!

The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for unlimited transactions during the offer period. After the offer ends: over 10 transactions per month at 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions.

See Terms of Service for more information.

Send invoices, get paid, track expenses, pay your team, and balance your books with our financial management software.

2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Understanding the importance of a business plan

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

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

Related Posts

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

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

What is a Business Plan? Definition and Resources

9 min. read

Updated April 25, 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. 

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

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

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.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

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

Related Articles

3 Min. Read

Don't Make These 4 Mistakes in Your Executive Summary

How Long Should a Business Plan Be?

8 Min. Read

How to Write a Home Health Care Business Plan

9 Min. Read

How to Create a Sales Plan for Your Business

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

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

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

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

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

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

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

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

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

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

Six Reasons You Really Need To Write a Business Plan

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

1. Legitimize your business idea.

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

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

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

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

2. Give your business a foundation for success.

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

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

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

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

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

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

3. Obtain funding and investments.

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

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

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

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

4. Hire the right people.

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

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

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

5. Communicate your needs.

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

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

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

6. It makes it easier to sell your business.

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

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

A Business Plan Is Essential

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

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

Don't forget to share this post!

Related articles.

24 of My Favorite Sample Business Plans & Examples For Your Inspiration

How to Write a Powerful Executive Summary [+4 Top Examples]

What is a Business Plan? Definition, Tips, and Templates

Maximizing Your Social Media Strategy: The Top Aggregator Tools to Use

The Content Aggregator Guide for 2023

7 Gantt Chart Examples You'll Want to Copy [+ 5 Steps to Make One]

The 8 Best Free Flowchart Templates [+ Examples]

16 Best Screen Recorders to Use for Collaboration

The 25 Best Google Chrome Extensions for SEO

Professional Invoice Design: 28 Samples & Templates to Inspire You

2 Essential Templates For Starting Your Business

Marketing software that helps you drive revenue, save time and resources, and measure and optimize your investments — all on one easy-to-use platform

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 .

The FourWeekMBA Business Strategy Toolbo x

Tech Business Model Framework

Blockchain Business Model Framework

Business Competition

Technological Modeling

Transitional Business Models

Minimum Viable Audience

Business Scaling

Market Expansion

Speed-Reversibility

Growth Matrix

Revenue Streams

Revenue Model

Methodologies & Frameworks

• Business Model Canvas Guide 
• Business Model Patterns
• Business Model Navigator
• Build An Exceptional Viable Product
• Blitzscaling Canvas Guide
• Lean Startup Canvas
• Business Model Framework
• Flywheel And Virtuous Sales Cycles
• Growth Marketing
• Pretotyping Methodology
• SEO Hacking Framework
• Technology Adoption Curve
• Value Proposition Canvas
• What Is OKR
• What Is Scrum?

Business Models Case Studies

• Amazon Business Model
• Netflix Business Model 
• Starbucks Business Model
• LinkedIn Business Model
• Google Business Model
• Uber Business Model
• Lyft Business Model
• Robinhood Business Model
• Nike Business Model
• DuckDuckGo Business Model
• ALDI Business Model
• Apple Business Model
• TOMS Business Model
• Slack Business Model
• Fiverr Business model
• Pinterest Business Model
• Telegram Business Model
• TripAdvisor Business Model
• Booking Business Model

Startup Resources

• Business Strategy
• Business Models
• Business Model Innovation
• Product-Market Fit
• Digital Business Models
• Sales And Distribution Lessons
• Business Development
• Market Segmentation
• Marketing vs. Sales
• Distribution Channels
• Inventory Turnover Ratio
• Business Books To Read
• What Is A Unicorn Company?

More Resources

About The Author

Gennaro Cuofano

Discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

• 70+ Business Models
• Airbnb Business Model
• Facebook [Meta] Business Model
• Microsoft Business Model
• Netflix Business Model

Business Plan Development

Masterplans experts will help you create business plans for investor funding, bank/SBA lending and strategic direction

Investor Materials

A professionally designed pitch deck, lean plan, and cash burn overview will assist you in securing Pre-Seed and Seed Round funding

Immigration Business Plans

A USCIS-compliant business plan serves as the foundation for your E-2, L-1A, EB-5 or E-2 visa application

Customized consulting tailored to your startup's unique challenges and goals

Our team-based approach supports your project with personal communication and technical expertise.

Pricing that is competitive and scalable for early-stage business services regardless of industry or stage.

Client testimonials from just a few of the 18,000+ entrepreneurs we've worked with over the last 20 years

Free tools, research, and templates to help with business plans & pitch decks

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.

How to Write a Management Summary for Your Business Plan

Entrepreneurs are often celebrated for their uncanny ability to understand others – their customers, the market, and the ever-evolving global...

Understanding Venture Debt vs Venture Capital

Despite growth in sectors like artificial intelligence, venture capital funding has seen better days. After peaking at $347.5 billion in 2021, there...

Going Beyond Writing: The Multifaceted Role of Business Plan Consultants

Most people think of a professional business plan company primarily as a "business plan writer." However, here at Masterplans, we choose to approach...

20 Reasons Why You Need a Business Plan in 2024

Written by Dave Lavinsky

What is the Purpose of a Business Plan?

The purpose of a business plan is to provide a clear roadmap for the company’s future. It outlines the vision, goals, and strategies of the business, guiding entrepreneurs and stakeholders in understanding its operations and objectives. A business plan template helps attract investors and funding by showcasing the potential for profitability and growth.

Top 20 Reasons Why you Need a Business Plan

1. to prove that you’re serious about your business.

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

2. To Establish Business Milestones

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

3. To Better Understand Your Competition

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

Finish Your Business Plan Today!

Quickly & easily complete your business plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.

4. To Better Understand Your Customer

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

5. To Enunciate Previously Unstated Assumptions

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

6. To Assess the Feasibility of Your Venture

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

7. To Document Your Revenue Model

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

8. To Determine Your Financial Needs

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

9. To Attract Investors

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

10. To Reduce the Risk of Pursuing the Wrong Opportunity

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

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

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

12. To Attract Employees and a Management Team

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

13. To Plot Your Course and Focus Your Efforts

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

14. To attract partners

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

15. To Position Your Brand

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

16. To Judge the Success of Your Business

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

17. To Reposition Your Business to Deal with Changing Conditions

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

18. To Document Your Marketing Plan

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

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

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

20. To Uncover New Opportunities

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

Business Plan FAQs

What is a business plan.

A business plan is a document that details your business concept and strategy for growth.

A business plan helps guide your company's efforts and, if applicable, gives investors and lenders the information they need to decide whether or not to fund your company. A business plan template helps you to most easily complete your plan.

Why Do You Need a Business Plan?

A business plan provides details about your company, competition, customers and industry so that you make the best possible decisions to grow your company.

What is the Importance of a Business Plan?

The 3 most important purposes of a business plan are 1) to create an effective strategy for growth, 2) to determine your future financial needs, and 3) to attract investors (including angel investors and VC funding ) and lenders.

Why is a Business Plan Important to an Entrepreneur?

Business plans help entrepreneurs take their visions and turn them into tangible action plans for success.

Need help with your business plan? 

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

The World’s #1 Business Plan Template

Would you like to know the quickest and easiest way to create a winning business plan?

And how to use it to raise funding, improve your strategy, or both?

Well, we’ve developed the ultimate business plan template to help you do this. Simply click below to learn more.

Other Helpful Business Plan Articles & Templates

What is a business plan and why your business needs it

Q1: firstly, let us define the following: what is a business plan.

A business plan is a guide and a roadmap for your business that outlines goals, how you plan to achieve then, how it will work and succeed.

Q2: How to write a business plan?

These are simple guidelines or rules if you want to know how to write a business plan:

Keep it short and concise, as you want your business plan to be read. A business plan should be a tool you use to run and grow your business, something you continue to use and refine over time. An excessively long business plan is a huge hassle to revise.

Know your audience. Write your plan using language that your audience will understand. Accommodate your investors and keep explanations of your product simple and direct, using terms that everyone can understand. You can always use the appendix of your plan to provide the full definitions if needed.

Don’t be intimidated. Most business owners and entrepreneurs aren’t business experts. Just like you, they’re learning as they go and don’t have degrees in business. Think about the option of hiring a business coach or advisor.

You know your business, you’re the expert on it. For that reason alone, writing a business plan and then leveraging your plan for growth won’t be nearly as challenging as you think.

Start with a simple, one-page lean business plan and then come back and build a slightly longer, more detailed business plan later.

Q3: What do you need to include in a business plan?

Starting with a lean business plan makes the planning process much less daunting. You start simple and grow it organically.

The lean plan has just a few bullet points to focus strategy, tactics, milestones to track tasks and responsibilities, and the basic financial projections you need to plan cash flow, budget and expenses.

If you do need a formal business plan document there are business plan templates, business plan examples and business plan sample s available online. They should include these elements for a good plan:

1. An overview or an executive summary business plan . It comes first in your plan and is ideally only one to two pages. It is key and shows just the highlights of your business, including the details of what funding you need in the executive summary.

2. A company overview which contains information about your products and/or services.

3. A section on what the opportunities are. Start the opportunity chapter by describing the problem that you are solving for your customers. Define what you are selling, your target market and competition. What advantages does your product or service have over the competition? Go out and talk to potential customers to get the broad view on this.

4. Execution will cover your marketing and sales plan, operations, and your milestones and metrics for success. Set specific times to review your progress toward your goals. The marketing and sales plan section of your business plan details how you plan to reach your target market segments. Your positioning strategy will often be a major driver of how you price your offerings. Price sends a very strong message to consumers and can be an important tool to communicate your positioning to consumers. Look at your promotion strategy. If you are selling a product, the packaging of that product is critical. Your business plan should include an overview of the kinds of advertising you plan to spend money on. Public relations, content marketing and social media are other considerations. Strategic alliances—you may rely on working closely with another company in a form of partnership. The operations section is how your business works. It’s the logistics, technology, and other nuts and bolts. For product companies, a distribution plan is an important part of the complete business plan. While the milestones and metrics section of your business plan may not be long, it’s critical that you take the time to look forward and schedule the next critical steps for your business. Finally, you should detail the key assumptions you have made that are important for your business’s success.

5. Company and management summary. Investors look for great teams in addition to great ideas. Use this chapter to describe your current team and who you need to hire. You will also provide a quick overview of your legal structure, location, and history if you’re already up and running, as well as some information about each member of the management team and their role in the company.

6. Details of your financial plan . Ideally include a chart that shows your planned sales, expenses and profitability. Funding requirements to get a bank loan or venture capitalists for funding. Your sales forecast is your projections of how much you are going to sell over the next few years. Your personnel plan details how much you plan on paying your employees. The profit and loss (P&L) is where your numbers all come together and show if you’re making a profit or taking a loss. Cash flow statements keep track of how much cash (money in the bank) you have at any given point. The balance sheet provides an overview of the financial health of your business. It lists the assets in your company, the liabilities and your (the owner’s) equity. If you subtract the company’s liabilities from assets, you can determine the net worth of the company. A brief section of your business plan that details exactly how you plan on using your investors’ cash. An exit strategy is your plan for eventually selling your business, either to another company or to the public in an IPO.

Finally, an Appendix. If you need more space for product images or additional information or definitions, use the appendix for those details.

About the author

The Microsoft 365 team is focused on sharing resources to help you start, run, and grow your business.

Get started with Microsoft 365

It’s the Office you know, plus the tools to help you work better together, so you can get more done—anytime, anywhere.

5 reasons to consolidate your cloud apps

Create a well planned and successful product launch, the top 10 tips for getting more backlinks for your website, are you maximizing your ranking with seo.

Business Insights and Ideas does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation..

Plan Smarter, Grow Faster:

25% Off Annual Plans! Save Now

0 results have been found for “”

 Return to blog home

15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

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

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

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

What is the key purpose of a business plan? 

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

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

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

Why do you need to write a business plan?

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

1. Reduce your risk

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

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

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

2. Uncover your business’s potential

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

3. Test a new business idea

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

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

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

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

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

5. Plan for different scenarios

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

6. Research shows that business plans definitely work

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

7. Build a better budget and a financial forecast

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

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

8. Determine your financial needs

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

9. Attract employees

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

10. Get your team all on the same page

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

11. Manage your business better 

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

12. Understand your market and build a marketing plan

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

13. It’s easier than you think

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

14. You’ll sleep better at night

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

15. Effectively navigate a crisis

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

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

Don’t wait, start writing your business plan today

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

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

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

Like this post? Share with a friend!

Noah Parsons

Posted in business plan writing, join over 1 million entrepreneurs who found success with liveplan, like this content sign up to receive more.

Subscribe for tips and guidance to help you grow a better, smarter business.

You're all set!

Exciting business insights and growth strategies will be coming your way each month.

We care about your privacy. See our privacy policy .

Home Page | Blog | Managing | Marketing | Planning | Strategy | Sales | Service | Networking | Voice Marketing Inc.

• Privacy Policy

Use a Business Plan Outline

Or business plan layout.

Why do you need a business plan outline ? Because if you need small business startup money, or you want to focus and grow an existing business, you need a business plan. Use an outline, or business plan layout, or examples of business plans to help develop and build your own plan.

Search This Site

This is a comprehensive business plan outline.

Not all small business owners will want (or need) to do a plan as comprehensive and intensive as this one.

But it does help to understand the full range of plan components.

If you are about to startup a business, you will need to do a thorough plan to be able to access small business startup money from banks or financial institutions.

If you are adding new products or services, or looking at a business expansion (maybe through a merger or acquisition), or if you are looking to sell your business, having a comprehensive plan is important to succeeding with your goals.

Using a Business Plan Outline

What's the difference between a business plan outline or a business plan layout? An outline is a usually a full detailed list of the activities needed in the plan; whereas the layout is a higher level overview of what's in the plan.

Review some examples of business plans in your industry (often an industry association will have some sample business plans for review or check out the local community college) to see the type of information you need in your plan.

This business plan outline includes a number of strategic management elements that are not common in all plans but that are useful and necessary if you have a highly active and competitive market, complex products or services, and/or complex buyer behavior.

First, determine why you want to do a business plan:

• Is it to manage and operate your business better?
• Is it to manage fast growth better?
• Is it to manage in a declining market better?
• Is it to manage the impact of your competition better?
• Is it to introduce more products or services (or to consider doing so)? Or to add more locations?
• Is it to change ownership: adding new partners, adding key employees?
• Is it to obtain financing?
• Is it to sell your business?

There are many reasons to write a business plan and how you write your plan depends a lot on why you want to write it.

Here's what I recommend: do the key elements of the plan to start your business or if you haven't done a plan or updated a plan in a long time (key elements will be in italics in the business plan outline below). Then each year when you update your plan, add another element or two. Often the updates will not take as much time as originating the work or the research - and the numbers should be tracked by your system as your business operates.

However if your business is fairly complex, if you have a lot of products or services, if you have a highly active competition, if your life-cycle is in the introductory or the declining phases, do as much of this business plan outline as possible. Outsource some, or all, of the work if necessary: this means do what you can yourself (if you want to) and have a consultant or business plan writer do the sections that you can't do, or don't want to do.

Business Plan Outline:

• Business concept (if a new business) or Business focus (if a plan renewal or update)
• Current Business Environment
• Key Management and/or Ownership
• Key Success Factors
• Key Risk Factors
• Requirements for the plan: managing the business, significant change in the marketplace, selling the business, obtaining bank loans, obtaining grants, obtaining venture capital, going from a private to public enterprise, and more.
• Strategic Vision Statement - set the direction of where your business is going (future)
• Mission Statement - define your business, where it is today
• SWOT Analysis (internal strengths and weaknesses; external opportunities and threats): rank the weaknesses and threats in particular to decide which ones you need to focus on first.
• The Industry
• Market Environment
• Driving Forces in the Industry
• Market Segmentation
• Target Marketing: primary, secondary and tertiary
• Buyer Behavior: characteristics, needs, wants, decisions
• Post purchase buyer/customer behavior
• Conduct a market opportunity analysis which looks at unmet customer needs
• Identifying your competition
• Competition: strengths and weaknesses
• Competition: strategies and objectives
• How does your competition react?
• Primary competitors and their impact
• Competitive Intelligence
• External Opportunities and Threats: impact on competition
• Competive Advantages: Defensive and Offensive Tactics
• Differentiation, Niche, Low-Cost, OR Leader Strategy and Why
• Identify How You Will Implement Your Strategy (What you will do)
• Products or Services List, including features, advantages, and benefits
• Service or Product Differentiation
• Service or Product Positioning
• Your Service or Product Life-Cycle
• Comparison to Competitive Products or Services
• New Services or New Product Development Plan (future)
• demographics
• psychographics
• technological
• political/legal
• Market Research
• Value Chain Analysis
• Price and Pricing Strategy
• Sales tactics, contests, incentives
• Advertising and Media
• Trade shows, Events and Conventions
• Direct Marketing Campaigns, such as Postcard Marketing
• Relationship Marketing
• Personal Selling
• Place or Distribution: Location, Retail and/or Marketing Channels
• Assumptions
• Notes or Comments
• 5 year plan by customer, by sales representative, by geographic market, by product line
• Organization (culture, management team)
• Products or Services List, including production standards, how to produce, and standard operating procedures (SOPs)
• Human Resources Plan, including key personnel list
• Capital Expenditures Plan
• Equipment and Asset List
• Customer Service Plan
• Facilities/Location, including future space needs
• Maintenance Plan
• Safety Plan
• Quality Plan
• Environmental Plan
• Management Informations System Plan, including back-up and security
• Financial Plan
• Pro Forma (projected) Balance Sheet
• Pro Form (projected) Income Statement
• Cash Flow Projections
• Financial Ratios
• Business Exit Strategy: yes, you need to plan your exit and your strategy for succession even as you build your business.
• Business Plan Objectives
• Action Plan
• Measure for Success
• Adjust for Improvement Where Necessary

Write a Business Plan: Use Examples of Business Plans

I am often asked how long does it take to write a business plan. The real answer is 'it depends': on how complex your business is, how easy it is to access industry information, how well you know your market, and much more.

But, because I am usually pressed to give a more specific answer, I will assume that the level of complexity is low, industry information is relatively easy to access, and you know your market well. Under those circumstances, to write a simple business plan, if you spend 8 hours a day writing and researching, it can take about 15 business days to do it.

To do a comprehensive business plan, if you spend 8 hours a day writing and researching, it will take you about 30 to 40 business days to do it. Yes, as you can see by this business plan outline, this is a big investment of time.

The Advantages of Outsourcing

Consider outsourcing and hire an outside consultant or business plan writer, it will likely take less time (for either types of plan) because consultants are experienced at writing plans and because they often have other resources (e.g. accountants) that they work with. But they cannot work on producing your plan unless you provide them with the information they need.

Please note, not all business plan writers or consultants will work exclusively for you on your plan so the actual elapsed time might be longer. But negotiate what you want and need up front.

P.S. I am also often asked how much it costs to write a business plan. But the answer to this comes from determining what needs to be done: is this a simple 10 page plan? Is it a basic plan (such as identified in italics in the business plan outline )? Are you wanting part of your plan done or all of it? Are you wanting a comprehensive, strategic plan? Are you wanting your plan edited or reviewed?

There are too many parameters to provide a price here but I can tell you that I have seen pricing range from $500 for an edit and review to over $40,000 for a comprehensive strategic plan that was developed to 'win' a large (multi-million dollar) venture capital investment.

If you need a small business plan writer to build, or help you build, your small business plan, contact us for a quote.

More-For-Small-Business Newsletter:

For more timely and regular monthly information on managing your small business, please subscribe here., additional reading:.

Return from Business Plan Outline to Small Business Plan .

Ensure your Business Financial Plan includes a provision for emergencies.

Your Business Exit Strategy needs to include management succession planning.

Or return to More For Small Business Home Page.

Subscribe to

More Business Resources E-zine

Implement your plan: for results.

Once you've built your plan, you need to implement it.

Developing your strategy (in the plan) is the first, necessary, step. You need to know the direction you want to go, and you need the strategy and the plan to help you get there.

But once you've built the plan, you must execute it.

There is no value in building a plan that just gathers dust.

When building your business plan, make sure that you include an action plan for the strategies, techniques and tactics.

The actions need to include who's responsible for doing what; measurements for success (such as deadlines and timelines, targets and goals, costs, etc.); and why you need to take the action (in some cases, one action needs to be accomplished before subsequent ones can be launched).

As you work through the plan, make sure that you build reporting periods into the implementation: you need to know what's going on and why something is working, or not.

Make sure to communicate progress, or lack of it, throughout the organization. And re-visit the plan when and where necessary.

• Build Your Marketing

Administration

• Advertising

Focus on Your Plan

Plan for the future: lots of business owners want to get, or keep, moving forward. Planning seems to be more of a passive activity.

However, to ensure that your business goes in the right direction and that it optimizes all its opportunities, and manages its challenges, it is important to plan.

Balance your activities against the plan: make sure that you are investing your time, and money, on the elements of your business that will help you succeed.

Measure what works, and what doesn't work, and keep your focus: use your business plan as a map to guide you in the direction you want to go.

 Contact

We are located in the Greater Vancouver area of British Columbia, Canada.

You can reach us through our contact page or request a quote for services here .

• What is Value Chain Analysis?
• Business plan outlines?
• Do you have resources for marketing planning?
• More Questions and Answers

Find the right network for you!

Managing Time | Money | Human Resources | Website Building | FAQs | Privacy Policy | Site Index | About Us | Contact Us | Request Quote

Copyright © 2002 - 2018 Voice Marketing Inc. All Rights Reserved.

Site Policies | Privacy Policy | Disclosure | Advertising

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

As an Amazon Associate we earn from qualifying purchases.

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/entrepreneurship/pages/1-introduction

• Authors: Michael Laverty, Chris Littel
• Publisher/website: OpenStax
• Book title: Entrepreneurship
• Publication date: Jan 16, 2020
• Location: Houston, Texas
• Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
• Section URL: https://openstax.org/books/entrepreneurship/pages/11-4-the-business-plan

© Jan 4, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

• Business Essentials
• Leadership & Management
• Credential of Leadership, Impact, and Management in Business (CLIMB)
• Entrepreneurship & Innovation
• Digital Transformation
• Finance & Accounting
• Business in Society
• For Organizations
• Support Portal
• Media Coverage
• Founding Donors
• Leadership Team

• Harvard Business School →
• HBS Online →
• Business Insights →

Business Insights

Harvard Business School Online's Business Insights Blog provides the career insights you need to achieve your goals and gain confidence in your business skills.

• Career Development
• Communication
• Decision-Making
• Earning Your MBA
• Negotiation
• News & Events
• Productivity
• Staff Spotlight
• Student Profiles
• Work-Life Balance
• AI Essentials for Business
• Alternative Investments
• Business Analytics
• Business Strategy
• Business and Climate Change
• Design Thinking and Innovation
• Digital Marketing Strategy
• Disruptive Strategy
• Economics for Managers
• Entrepreneurship Essentials
• Financial Accounting
• Global Business
• Launching Tech Ventures
• Leadership Principles
• Leadership, Ethics, and Corporate Accountability
• Leading with Finance
• Management Essentials
• Negotiation Mastery
• Organizational Leadership
• Power and Influence for Positive Impact
• Strategy Execution
• Sustainable Business Strategy
• Sustainable Investing
• Winning with Digital Platforms

Why Is Strategic Planning Important?

• 06 Oct 2020

Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?

If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.

It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .

Here’s a look at what strategic planning is and how it can benefit your organization.

Access your free e-book today.

What Is Strategic Planning?

Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.

It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.

“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”

Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.

Related: 4 Ways to Develop Your Strategic Thinking Skills

Benefits of Strategic Planning

1. create one, forward-focused vision.

Strategy touches every employee and serves as an actionable way to reach your company’s goals.

One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.

This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.

2. Draw Attention to Biases and Flaws in Reasoning

The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.

A few examples of cognitive biases are:

• The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
• Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
• Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways

One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.

If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.

Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.

Related: 3 Group Decision-Making Techniques for Success

3. Track Progress Based on Strategic Goals

Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .

By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.

It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.

Improve Your Strategic Planning Skills

Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.

Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).

Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.

Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

About the Author

.css-s5s6ko{margin-right:42px;color:#F5F4F3;}@media (max-width: 1120px){.css-s5s6ko{margin-right:12px;}} AI that works. Coming June 5th, Asana redefines work management—again. .css-1ixh9fn{display:inline-block;}@media (max-width: 480px){.css-1ixh9fn{display:block;margin-top:12px;}} .css-1uaoevr-heading-6{font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-1uaoevr-heading-6:hover{color:#F5F4F3;} .css-ora5nu-heading-6{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:start;-ms-flex-pack:start;-webkit-justify-content:flex-start;justify-content:flex-start;color:#0D0E10;-webkit-transition:all 0.3s;transition:all 0.3s;position:relative;font-size:16px;line-height:28px;padding:0;font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-ora5nu-heading-6:hover{border-bottom:0;color:#CD4848;}.css-ora5nu-heading-6:hover path{fill:#CD4848;}.css-ora5nu-heading-6:hover div{border-color:#CD4848;}.css-ora5nu-heading-6:hover div:before{border-left-color:#CD4848;}.css-ora5nu-heading-6:active{border-bottom:0;background-color:#EBE8E8;color:#0D0E10;}.css-ora5nu-heading-6:active path{fill:#0D0E10;}.css-ora5nu-heading-6:active div{border-color:#0D0E10;}.css-ora5nu-heading-6:active div:before{border-left-color:#0D0E10;}.css-ora5nu-heading-6:hover{color:#F5F4F3;} Get early access .css-1k6cidy{width:11px;height:11px;margin-left:8px;}.css-1k6cidy path{fill:currentColor;}

• Business strategy |
• What is strategic planning? A 5-step gu ...

What is strategic planning? A 5-step guide

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. In this article, we'll guide you through the strategic planning process, including why it's important, the benefits and best practices, and five steps to get you from beginning to end.

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. The strategic planning process informs your organization’s decisions, growth, and goals.

Strategic planning helps you clearly define your company’s long-term objectives—and maps how your short-term goals and work will help you achieve them. This, in turn, gives you a clear sense of where your organization is going and allows you to ensure your teams are working on projects that make the most impact. Think of it this way—if your goals and objectives are your destination on a map, your strategic plan is your navigation system.

In this article, we walk you through the 5-step strategic planning process and show you how to get started developing your own strategic plan.

How to build an organizational strategy

Get our free ebook and learn how to bridge the gap between mission, strategic goals, and work at your organization.

What is strategic planning?

Strategic planning is a business process that helps you define and share the direction your company will take in the next three to five years. During the strategic planning process, stakeholders review and define the organization’s mission and goals, conduct competitive assessments, and identify company goals and objectives. The product of the planning cycle is a strategic plan, which is shared throughout the company.

What is a strategic plan?

A strategic plan is the end result of the strategic planning process. At its most basic, it’s a tool used to define your organization’s goals and what actions you’ll take to achieve them.

Typically, your strategic plan should include: 

Your company’s mission statement

Your organizational goals, including your long-term goals and short-term, yearly objectives

Any plan of action, tactics, or approaches you plan to take to meet those goals

What are the benefits of strategic planning?

Strategic planning can help with goal setting and decision-making by allowing you to map out how your company will move toward your organization’s vision and mission statements in the next three to five years. Let’s circle back to our map metaphor. If you think of your company trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from point A (where you are now) to point B (where you want to be in a few years).

When you create and share a clear strategic plan with your team, you can:

Build a strong organizational culture by clearly defining and aligning on your organization’s mission, vision, and goals.

Align everyone around a shared purpose and ensure all departments and teams are working toward a common objective.

Proactively set objectives to help you get where you want to go and achieve desired outcomes.

Promote a long-term vision for your company rather than focusing primarily on short-term gains.

Ensure resources are allocated around the most high-impact priorities.

Define long-term goals and set shorter-term goals to support them.

Assess your current situation and identify any opportunities—or threats—allowing your organization to mitigate potential risks.

Create a proactive business culture that enables your organization to respond more swiftly to emerging market changes and opportunities.

What are the 5 steps in strategic planning?

The strategic planning process involves a structured methodology that guides the organization from vision to implementation. The strategic planning process starts with assembling a small, dedicated team of key strategic planners—typically five to 10 members—who will form the strategic planning, or management, committee. This team is responsible for gathering crucial information, guiding the development of the plan, and overseeing strategy execution.

Once you’ve established your management committee, you can get to work on the planning process. 

Step 1: Assess your current business strategy and business environment

Before you can define where you’re going, you first need to define where you are. Understanding the external environment, including market trends and competitive landscape, is crucial in the initial assessment phase of strategic planning.

To do this, your management committee should collect a variety of information from additional stakeholders, like employees and customers. In particular, plan to gather:

Relevant industry and market data to inform any market opportunities, as well as any potential upcoming threats in the near future.

Customer insights to understand what your customers want from your company—like product improvements or additional services.

Employee feedback that needs to be addressed—whether about the product, business practices, or the day-to-day company culture.

Consider different types of strategic planning tools and analytical techniques to gather this information, such as:

A balanced scorecard to help you evaluate four major elements of a business: learning and growth, business processes, customer satisfaction, and financial performance.

A SWOT analysis to help you assess both current and future potential for the business (you’ll return to this analysis periodically during the strategic planning process). 

To fill out each letter in the SWOT acronym, your management committee will answer a series of questions:

What does your organization currently do well?

What separates you from your competitors?

What are your most valuable internal resources?

What tangible assets do you have?

What is your biggest strength? 

Weaknesses:

What does your organization do poorly?

What do you currently lack (whether that’s a product, resource, or process)?

What do your competitors do better than you?

What, if any, limitations are holding your organization back?

What processes or products need improvement? 

Opportunities:

What opportunities does your organization have?

How can you leverage your unique company strengths?

Are there any trends that you can take advantage of?

How can you capitalize on marketing or press opportunities?

Is there an emerging need for your product or service? 

What emerging competitors should you keep an eye on?

Are there any weaknesses that expose your organization to risk?

Have you or could you experience negative press that could reduce market share?

Is there a chance of changing customer attitudes towards your company? 

Step 2: Identify your company’s goals and objectives

To begin strategy development, take into account your current position, which is where you are now. Then, draw inspiration from your vision, mission, and current position to identify and define your goals—these are your final destination. 

To develop your strategy, you’re essentially pulling out your compass and asking, “Where are we going next?” “What’s the ideal future state of this company?” This can help you figure out which path you need to take to get there.

During this phase of the planning process, take inspiration from important company documents, such as:

Your mission statement, to understand how you can continue moving towards your organization’s core purpose.

Your vision statement, to clarify how your strategic plan fits into your long-term vision.

Your company values, to guide you towards what matters most towards your company.

Your competitive advantages, to understand what unique benefit you offer to the market.

Your long-term goals, to track where you want to be in five or 10 years.

Your financial forecast and projection, to understand where you expect your financials to be in the next three years, what your expected cash flow is, and what new opportunities you will likely be able to invest in.

Step 3: Develop your strategic plan and determine performance metrics

Now that you understand where you are and where you want to go, it’s time to put pen to paper. Take your current business position and strategy into account, as well as your organization’s goals and objectives, and build out a strategic plan for the next three to five years. Keep in mind that even though you’re creating a long-term plan, parts of your plan should be created or revisited as the quarters and years go on.

As you build your strategic plan, you should define:

Company priorities for the next three to five years, based on your SWOT analysis and strategy.

Yearly objectives for the first year. You don’t need to define your objectives for every year of the strategic plan. As the years go on, create new yearly objectives that connect back to your overall strategic goals . 

Related key results and KPIs. Some of these should be set by the management committee, and some should be set by specific teams that are closer to the work. Make sure your key results and KPIs are measurable and actionable. These KPIs will help you track progress and ensure you’re moving in the right direction.

Budget for the next year or few years. This should be based on your financial forecast as well as your direction. Do you need to spend aggressively to develop your product? Build your team? Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for those.

A high-level project roadmap . A project roadmap is a tool in project management that helps you visualize the timeline of a complex initiative, but you can also create a very high-level project roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or years to make the plan more actionable and understandable.

Step 4: Implement and share your plan

Now it’s time to put your plan into action. Strategy implementation involves clear communication across your entire organization to make sure everyone knows their responsibilities and how to measure the plan’s success. 

Make sure your team (especially senior leadership) has access to the strategic plan, so they can understand how their work contributes to company priorities and the overall strategy map. We recommend sharing your plan in the same tool you use to manage and track work, so you can more easily connect high-level objectives to daily work. If you don’t already, consider using a work management platform .  

A few tips to make sure your plan will be executed without a hitch: 

Communicate clearly to your entire organization throughout the implementation process, to ensure all team members understand the strategic plan and how to implement it effectively. 

Define what “success” looks like by mapping your strategic plan to key performance indicators.

Ensure that the actions outlined in the strategic plan are integrated into the daily operations of the organization, so that every team member's daily activities are aligned with the broader strategic objectives.

Utilize tools and software—like a work management platform—that can aid in implementing and tracking the progress of your plan.

Regularly monitor and share the progress of the strategic plan with the entire organization, to keep everyone informed and reinforce the importance of the plan.

Establish regular check-ins to monitor the progress of your strategic plan and make adjustments as needed. 

Step 5: Revise and restructure as needed

Once you’ve created and implemented your new strategic framework, the final step of the planning process is to monitor and manage your plan.

Remember, your strategic plan isn’t set in stone. You’ll need to revisit and update the plan if your company changes directions or makes new investments. As new market opportunities and threats come up, you’ll likely want to tweak your strategic plan. Make sure to review your plan regularly—meaning quarterly and annually—to ensure it’s still aligned with your organization’s vision and goals.

Keep in mind that your plan won’t last forever, even if you do update it frequently. A successful strategic plan evolves with your company’s long-term goals. When you’ve achieved most of your strategic goals, or if your strategy has evolved significantly since you first made your plan, it might be time to create a new one.

Build a smarter strategic plan with a work management platform

To turn your company strategy into a plan—and ultimately, impact—make sure you’re proactively connecting company objectives to daily work. When you can clarify this connection, you’re giving your team members the context they need to get their best work done. 

A work management platform plays a pivotal role in this process. It acts as a central hub for your strategic plan, ensuring that every task and project is directly tied to your broader company goals. This alignment is crucial for visibility and coordination, allowing team members to see how their individual efforts contribute to the company’s success. 

By leveraging such a platform, you not only streamline workflow and enhance team productivity but also align every action with your strategic objectives—allowing teams to drive greater impact and helping your company move toward goals more effectively. 

Strategic planning FAQs

Still have questions about strategic planning? We have answers.

Why do I need a strategic plan?

A strategic plan is one of many tools you can use to plan and hit your goals. It helps map out strategic objectives and growth metrics that will help your company be successful.

When should I create a strategic plan?

You should aim to create a strategic plan every three to five years, depending on your organization’s growth speed.

Since the point of a strategic plan is to map out your long-term goals and how you’ll get there, you should create a strategic plan when you’ve met most or all of them. You should also create a strategic plan any time you’re going to make a large pivot in your organization’s mission or enter new markets. 

What is a strategic planning template?

A strategic planning template is a tool organizations can use to map out their strategic plan and track progress. Typically, a strategic planning template houses all the components needed to build out a strategic plan, including your company’s vision and mission statements, information from any competitive analyses or SWOT assessments, and relevant KPIs.

What’s the difference between a strategic plan vs. business plan?

A business plan can help you document your strategy as you’re getting started so every team member is on the same page about your core business priorities and goals. This tool can help you document and share your strategy with key investors or stakeholders as you get your business up and running.

You should create a business plan when you’re: 

Just starting your business

Significantly restructuring your business

If your business is already established, you should create a strategic plan instead of a business plan. Even if you’re working at a relatively young company, your strategic plan can build on your business plan to help you move in the right direction. During the strategic planning process, you’ll draw from a lot of the fundamental business elements you built early on to establish your strategy for the next three to five years.

What’s the difference between a strategic plan vs. mission and vision statements?

Your strategic plan, mission statement, and vision statements are all closely connected. In fact, during the strategic planning process, you will take inspiration from your mission and vision statements in order to build out your strategic plan.

Simply put: 

A mission statement summarizes your company’s purpose.

A vision statement broadly explains how you’ll reach your company’s purpose.

A strategic plan pulls in inspiration from your mission and vision statements and outlines what actions you’re going to take to move in the right direction. 

For example, if your company produces pet safety equipment, here’s how your mission statement, vision statement, and strategic plan might shake out:

Mission statement: “To ensure the safety of the world’s animals.” 

Vision statement: “To create pet safety and tracking products that are effortless to use.” 

Your strategic plan would outline the steps you’re going to take in the next few years to bring your company closer to your mission and vision. For example, you develop a new pet tracking smart collar or improve the microchipping experience for pet owners. 

What’s the difference between a strategic plan vs. company objectives?

Company objectives are broad goals. You should set these on a yearly or quarterly basis (if your organization moves quickly). These objectives give your team a clear sense of what you intend to accomplish for a set period of time. 

Your strategic plan is more forward-thinking than your company goals, and it should cover more than one year of work. Think of it this way: your company objectives will move the needle towards your overall strategy—but your strategic plan should be bigger than company objectives because it spans multiple years.

What’s the difference between a strategic plan vs. a business case?

A business case is a document to help you pitch a significant investment or initiative for your company. When you create a business case, you’re outlining why this investment is a good idea, and how this large-scale project will positively impact the business. 

You might end up building business cases for things on your strategic plan’s roadmap—but your strategic plan should be bigger than that. This tool should encompass multiple years of your roadmap, across your entire company—not just one initiative.

What’s the difference between a strategic plan vs. a project plan?

A strategic plan is a company-wide, multi-year plan of what you want to accomplish in the next three to five years and how you plan to accomplish that. A project plan, on the other hand, outlines how you’re going to accomplish a specific project. This project could be one of many initiatives that contribute to a specific company objective which, in turn, is one of many objectives that contribute to your strategic plan. 

What’s the difference between strategic management vs. strategic planning?

A strategic plan is a tool to define where your organization wants to go and what actions you need to take to achieve those goals. Strategic planning is the process of creating a plan in order to hit your strategic objectives.

Strategic management includes the strategic planning process, but also goes beyond it. In addition to planning how you will achieve your big-picture goals, strategic management also helps you organize your resources and figure out the best action plans for success. 

Related resources

How Asana uses work management to optimize resource planning

How Asana uses work management for organizational planning

Solve your tech overload with an intelligent transformation

9 steps to craft a successful go-to-market (GTM) strategy