why is it necessary to update a business plan

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How to Update your Business Plan?

Business Plan Template

• June 3, 2024

Finally, after a lot of effort, you wrote a business plan. But the journey doesn’t end here!

A business plan is a living document—you need to work on it continuously to keep it relevant and up-to-date according to the market situations.

Your plan should evolve along with your business. This ensures it remains a valuable tool for decision-making. Regular updates can help you adapt to new opportunities, overcome challenges, and maintain a clear path toward your goals.

Let’s explore the hows, whens, and whats of updating a business plan .

Why should you keep updating your business plan?

The first question that arises is why a business plan update is necessary. Is it not possible to have a plan that remains relevant for a longer duration?

Moreover, some might wonder if updating a detailed business plan halfway could have a negative impact. All of these questions may cross your mind when managing a small business.

There are several benefits of updating a business plan, some of them are:

1. Keeping up with the demands of the customer base

The first and most obvious reason is to keep up with the needs of your customers. A business’s one of the key drivers is an increased demand. When you create what people want, it naturally leads to more consumption.

Many businesses make the blunder of never altering products that worked once. However, in the case of businesses, demands change constantly – whether one likes it or not!

For instance, Blackberry phones were considered the go-to phones for professionals in one era, and now they are just nostalgia. So, going with the trends and changing your plan accordingly becomes necessary to stay significant in the industry.

2. Accommodating and expanding market requirements

There are prominent benefits of updating your business with a market expansion strategy. What does this mean?

With ever-increasing products and services in every domain, expanding your product to a new market can help you increase your sales.

For example, a company serving coffee beans to the urban market could expand its reach by offering instant coffee to consumers who don’t have specialized equipment for coffee beans.

3. Keeping up with the competitors

To succeed, businesses need to keep up with their competitors. It means updating your plans and strategies after analyzing your competitors to make your brand stand out.

It includes updating your marketing strategies, pricing models, product offerings, and more to stay relevant for your customers.

4. Tracking your progress

Updating your plan allows you to compare your projections with actual results. It helps you to understand in which areas you are performing well and which needs better performance. It’s like checking the map to make sure your small business is still heading in the right direction.  

How to update your business plan?

The next thing to talk about is what exactly is to update. Is it the strategy that needs a change? Or do the actual technical aspects of the business need to be updated? The answer to that is – both. Some constant checks need to be kept on integral aspects. Let’s move ahead and see the steps for updating a business plan:

1. Review the mission and vision statement

The mission and vision statement of the plan defines the purpose, values, and long-term goals of the business. Therefore, it is necessary to review and update them first.

Check if are they still pertinent to your long-term goals. Think about any changes in your business world or new ideas that might make you need to update these statements to keep them current and motivating.

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2. Conduct industry and market analysis

Research about recent trends & developments going on in the industry. Also, check for any regulatory shifts or changes in consumer behavior.

If there are any changes, then update the sections to reflect current trends and insights that might affect your business strategy.

For instance, let’s say you are running a tech startup. And in your market research, you explored current trends like AI and eco-friendly tech. After knowing the current trends, you might make any changes in your business strategy.

3. Reassess your business strategies

Based on the market and industry analysis, revisit your strategies and determine if all the strategies & business objectives are still up-to-date with the analysis.

Revise your strategy according to the current situation and make sure that your goals are achievable through the new strategies.

For example, you are running a bakery business, and after market analysis, you got to know people are preferring more gluten-free items. So, now you reassess your strategy and include more dishes on your menu that are gluten-free.

4. Update your financial projections

See your current financial situation and match it with financial plan projections to know the difference. Now, update your forecasts (cash flow, profit & loss, & balance sheet statements) to reflect your current financial situation and performance.

Adjust the new forecasts in a way that reflects new assumptions, strategies, and initiatives that have emerged from your reassessment.

At last, review the overall business plan thoroughly and make necessary changes where needed in the whole business plan. This way you should make your planning process continuous and smooth.

When to update your business plan?

For a successful business, you need to update your plan yearly or whenever there are any internal or external changes. Some of the situations when you need to alter your plan are:

• It’s been a year since you last reviewed your business plan
• You’re adding any new products or services
• Your direct competitors are changing
• There is a change in the market demand
• If there is any financial change
• For internal changes (supply chain issues, management change, etc)
• If you are applying for funding

Thus, for any significant changes, you need to update your plan and accommodate it as per the current situation.

Update and transform your plan with AI

So, without a doubt, keeping a business plan up-to-date is necessary for your business. But, doing it regularly need a lot more effort.

An AI business plan creator —Upmetrics provides you with AI features that save time. Its AI assistant can automatically write and improve sections of your business plan, and answer all your business-related queries.

Apart from all that, it is efficient and affordable. The plans start from only $7 a month which is great when you want to continuously update your business plan.

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Frequently Asked Questions

Do i need to rewrite my entire business plan when i update it.

No, you don’t have to rewrite your whole plan when you update it. If the changes are small, you can update the parts that need changing. But if the changes affect important parts like your market research or financial plans, then rewrite those sections. Anyway, it’s always a good idea to review your whole plan.

What tools and resources can help me update my business plan?

Updating your plan becomes easy with the help of business planning software like Upmetrics , where you can collaborate in real-time, use AI assistance, and get a step-by-step guide through the entire planning process.

Should business plans be updated annually?

Yes, business plans should be updated annually or when the time feels right. For example, you need to update your business plan when you start using a new tech platform, machinery, or other raw materials. Even an annual review of the plan might lead to minor updates.

Which aspects of a business plan should be updated?

When updating a business plan, key aspects to revise include the executive summary, company description, and market analysis.

Additionally, update the organization and management structure, product or service offerings, financial sections, and marketing strategies based on current performance data.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Why Is it Necessary to Update the Business Plan?

Why is it necessary to update the business plan? Updating your business plan is essential to keep all your information up to date. 3 min read updated on September 19, 2022

Why is it necessary to update the business plan? Updating your business plan is essential to keep all your information up to date. It might need updating to show a change in physical location, alter your business goals, add a new business partner, or similar adjustments.

Reasons to Update Your Business Plan

There are a number of important reasons you may need to update your business plan. Some of these include:

• You need to seek financing. A lender will require proof of an updated business plan in order to make their decision on whether or not to approve your loan.
• There is stronger or new competition you need to worry about losing customers to.
• You are about to start a new financial period. It's best to choose a regular interval, like annually or quarterly. If you are in an industry that changes often, you may want to update your business plan every month.
• Your business has undergone a management change.
• Your business develops a new technology, product, skill, or service. When major changes like these occur after your initial business plan, it's important to update it.
• Your old business plan does not reflect your current state anymore. Perhaps it's not a well-drafted business plan, it is no longer relevant, or things have drastically changed.
• Your business has reached a threshold, like reaching a sales goal or employing a certain amount of people.
• There has been a significant change in your market . A shift in client tastes, altered regulatory climates, or consolidation trends among customers are some elements that can be the trigger for an updated plan.

Don't make your business plan update a robotic-type task where you simply address any necessary routine changes. Challenge yourself to take a hard look at your plan to understand whether the contents are still applicable or not. Is your new location not performing as well as you anticipated? Are your profit margins higher than expected? Look at different aspects of your business plan and address questions like these — both the positive and negative aspects of your current business situation.

You'll find that in large corporations that have strict planning routines that require regular updates, the managers spend a portion of their time thinking about plan updates or a new business plan altogether. That research then is disseminated to senior managers through the distribution of the new business plan, which keeps them informed. It is also useful information for lower level employees to understand how the business is performing, especially if they are directly judged or compensated based on past performance.

When to Update Your Business Plan

You should update your business plan when:

• You have a new location or change your existing one.
• You have a new owner or add a new partner .
• You have a financial snag like falling revenue, a decline in sales figures, you don't meet your financial projections, or important customers are leaving.
• There is competitive disruption, like a technological advancement, that ends up disrupting your business model.
• You need to secure financing so investors can see your updated business plan.
• You are growing at a fast pace.
• Your company's goals are not being met or you are falling behind. You should have SMART goals — Specific, Measurable, Achievable, Relevant, and Time-bound.
• You are experiencing a pivot in your business.

These are all important events that should trigger you to update your business plan. Situations like a fast-growing business can actually create problems if you don't update your business plan. You could suffer a decline in customer satisfaction or employees may suddenly feel overwhelmed and start making mistakes, miss deadlines, or overlook key quality control elements.

When your business is experiencing competitive disruption, it can cause upheaval in your operations. This is when you need to take a look at your competitors' business and then look at yours to see how you can differentiate yourself. This may call for changes to your product, marketing strategy, or customer service.

When you hit a financial snag, don't wait until the next annual report to address a large financial loss. Reassess your market now and get some customer feedback. Perhaps you need to change how you deliver your product to consumers or alter your brand positioning.

If you need help with updating a business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Start » startup, how to refine your business plan for every stage of your business.

Your business plan is a living document that should always reflect your current position. Here is how to refresh and refine your plan during each stage of your business.

Writing a solid business plan is important in the early stages of your business, but it’s equally important to regularly refine and update your plan to meet the current needs of your business and set new goals.

To ensure your business plan is up to date, follow this guide to refresh and refine your plan with each stage of your business:

Startup stage

One of the most important tasks of launching a new company is writing a business plan . While your first business plan should be well-researched and accurately depict how you anticipate your business will operate, it is never too early to change directions. Rather, it is best practice to update and refine your plan in the early stages of your organization to ensure a successful business venture.

Here are a few common reasons why startups and early-stage companies refresh their business plans:

• Your target audience has shifted. If your original target customer has shifted, you must reconsider how your business will meet their wants and needs. Formalize the new audience direction in your business plan and go through each section, adjusting as necessary.
• You’re seeking a new investor. If you are seeking an investor — or any outside funding — you will likely spend a significant amount of time in the early stages of your company meeting with potential business investors. If you are having trouble finding an investor, work with a colleague, mentor or industry professional to refine your business plan.
• A new competitor entered the market. According to Yahoo Small Business , approximately 543,000 new businesses are started each month, which means your company will likely find new competitors. If you believe a competitor will likely carve into your market, take a look at your business plan and find ways to differentiate yourself from everyone else.
• Your current goals need to be rethought. It’s common for new entrepreneurs to set aggressive and unachievable goals. As your business becomes more established, reevaluate your goals and create a roadmap to help you and your team reach them.

[Read: 5 Business Plan Templates to Help You Plan for Success ]

If your products or services have significantly evolved from your early startup stage, make sure your business plan accounts for this evolution.

Growth mode

During your company’s growth mode, you should constantly evaluate and adjust your business plan. Depending on how quickly your business expands, you may need to update your plan on a monthly basis to account for new employees, markets or new products or services.

The following list provides some of the most common reasons why you may need to adjust your business plan during a period of rapid growth:

• You want to refinance your business. It’s not uncommon for businesses to seek refinancing after they enter growth mode and refresh their plan. When refinancing your business, pay particular attention to your financial sections to make sure all your data is accurate.
• Your products or services have changed. If your products or services have significantly evolved from your early startup stage, make sure your business plan accounts for this evolution.
• Your brand image has changed. Your branding should reflect your mission and values , and any adjustment to one element should be reflected in the other. If you decide to rebrand your business during your growth stage, make sure your business plan reflects any new changes to your mission and values.

Shake-out and maturity stages

As your business enters the shake-out phase — or when sales continue to increase but at a slower rate — and ultimately matures, reassess your business plan. During these stages, your business is likely to have reached market saturation, and you will need to seek new opportunities to expand or grow.

Refine your business plan when you encounter the following situations:

• You plan on entering a new market. When you decide to enter into a new market, you’ll need to add new information, or amendments, to every section of your business plan. Everything from your company description to your financial documents must include information pertaining to the new market.
• You adjust your supply chain. When you work with a new supplier, logistics company, etc., your supply chain is affected in some way. Your business plan should always include detailed information on your supply chain, which will, in turn, provide you with more accurate forecasts, timelines and other projections.
• You reset your pricing strategy. Any adjustment you make to your pricing strategy should include copious details in your business plan. For large businesses, a small price adjustment can equate to millions of dollars of revenue, so it’s important to have every detail from projections and estimations to market analyses and consumer data documented.

[Read: Smart Strategies for Presenting Your Business Plan ]

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• Home > Blog > Small Business Success > The Importance of Updating Your Business Plan
• By Laura Drechsler
• Mar 5, 2018
• 4 mins read

The Importance of Updating Your Business Plan

A business plan is a formal document that guides you through each stage of starting and managing your business. However, some business owners make the mistake of creating a business plan and then never looking at it again. But it is vital to treat it like a living document. Updating your business plan regularly can help provide greater clarity on the different aspects of your business and lead it to further growth.

Business Plans: What They Are and Why They Change

If you don’t already have a business plan in place, you may be falling behind. Business plans serve as a roadmap for everyone involved in a company. This includes employees, investors, and the founders. Even within a smaller business, it can be difficult to keep everyone aligned with the group’s primary goals and their methods used to achieve them. A business plan serves as a reference when this confusion arises.

You also need to establish a plan for how to use it and when to update it. The first version of a business plan will serve as a valuable internal tool. Your business plan should plot a course for the first months of the firm’s life. Like most plans, though, things don’t always turn out the way they’re supposed to. Employees come and go, competitors shift their strategy, and unexpected roadblocks arise. To succeed, a business needs to constantly adapt to these inevitable changes. That means its official business plan must be routinely revised.

Updating Your Business Plan

According to Ernst and Young advisor Jeffrey Tannenbaum, you should be updating your business plan at least once per year. This gives business owners and their teams a chance to evaluate their performance in accordance with their prior year’s goals. Based on your evaluation you can make necessary changes and take advantage of new growth opportunities. That often requires tapping into small business financing to bolster working capital and move forward with new projects.

However, as Tannenbaum and others often warn, this shouldn’t be the only time in a year when business leaders strategize and set objectives. Many companies set monthly and quarterly target goals for revenue, expenses, and other key performance indicators. They also benefit from setting firm deadlines for their goals and constantly monitoring and analyzing their progress. If things start slipping, strategic changes need to be made as soon as possible instead of waiting for the next planning session. Again, a short-term business loan can be the perfect tool to launch new projects without sacrificing daily operations.

Managing Change and Uncertainty

As you continue utilizing and updating your business plan, you might grow frustrated with the process. What’s the point of having a business plan at all if it’s constantly changing, and assumptions rarely prove to be correct?

Tim Berry, a guest writer at Entrepreneur.com, explains this conundrum in brief.

“You have to realize your business plan is wrong,” Berry wrote. “All business plans are wrong. Plans are about the future – and nobody gets the future right very often, so keep the plan fresh and watch closely as reality moves forward.”

Berry’s point is that the content of a business plan isn’t as important as how it’s used in structuring and managing your business and how it’s revised. In the process of updating your business plan, you should examine why certain past projected assumptions were incorrect and adjust future projections accordingly. An updated plan should account for what your business has learned to create a better picture of where it needs to improve.

Managing a business boils down to managing uncertainty. Whether it’s an unexpected opportunity, immediate need for employee growth or an unplanned financial cost, a partnership with a dependable small business lender like QuickBridge helps fill in the gaps. Get in touch today and learn how we are making small business loans better and helping small business owners find certainty in even the most uncertain situations.

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10 Indications It’s Time to Update Your Strategic Plan – Why, When & How

If you’re wondering when to update your company’s strategic plan, here are ten indicators it may be time:

• Someone wrote “Update Me” in the dust on the printed version of your plan.
• You vaguely remember creating your plan about the same time you bought your first fax machine.
• When asked if they’ve ever seen your company’s strategic plan, your employees laugh and reply, “Strategic plan? This company has a strategic plan? I don’t believe it!”
• You ask eight different employees to identify the top three projects the company is working on and you get eight different answers.
• Projects and project budgets drift and are regularly “cannibalized” by new projects.
• There are regular turf battles across departments on whose project is more important.
• Your company no longer does what your mission statement says you do.
• Your current company vision is similar to: As a premier company, we will provide exceptional services so that we may exceed our customers’ expectations.
• The economy has changed. Regulations have changed. There are new competitors and new business models challenging your products and services.
• Another year has passed.

You probably need to update your strategic plan, right? However, before you dust off your old one, stop and ask yourself a very basic but important question:

“What do I need this plan to do for my company?”

“Do I need an updated plan to share with my bank or an investor to support my request for credit or capital? Do I need an updated plan to reshape the focus and direction of the company given changes in our industry, the economy, or other factors? Do I need an updated plan for my team to use as our roadmap over the next few years? Or, do I need to update my plan because it’s SO out of date!”

Whatever your reason for realizing an update to your strategic plan is in order: Great! However, you need to be clear and honest with yourself and your team going into the planning process. Whatever the reason: to gain financing, or to guide strategic and business operations , if you want your plan to actually be of use to you, you need to be clear in how you intend to use it, and then it needs to become one of your primary management tools that you consider every day – and I do mean every day. It’s not doing you or your company any good if it’s dormant in a computer file. An effective plan takes time, dedicated thought, and coordinated planning to develop. Updating your plan doesn’t have to be painful. However, it needs to be purposeful and then it becomes incredibly useful. First, I’ll share why and when to update your plans and then I’ll share how to update them and manage them.

A strategic plan projects where the organization needs to go or where it wants to go over the next 3-5+ years. An organization’s business operations plan outlines more specifically, what will occur each year of the strategic planning period. These plans are more internally targeted as the audience is more often the board, management team, and employees. Stakeholders and others may also review the plans, but with these types of plans, you’re not focused on “selling” your qualifications to anyone. Again, the purpose of a strategic plan is to clarify where your organization needs to be 3+ years into the future to ensure its viability and success – i.e., your company’s big goal; its vision, and then broadly outline, how you will get there. The business operations plan then details the goals (projects & major initiatives) that need to be accomplished to move your organization toward its vision.

Given the rapid changes in technology, the economy, regulations, etc., my clients are now limiting their strategic plans to roughly only 3+ years out even though they may have a 30-year vision. Business Operations plans serve as a roadmap for management on what needs to happen and when to ensure there is a well-orchestrated coordination among all departments, projects, budgets, and resources to move the organization forward year-by-year. When created effectively, strategic and business operations plans become critical management planning and tracking tools that effective leaders reference regularly.

Now you know when and why you would update your company’s plan. Now you can click here to find out how to update and manage your plan .

Copyright MMX – Liz Weber, CMC, CSP – Weber Business Services, LLC – www.WBSLLC.com +1.717.597.8890

Liz supports clients with strategic and succession planning, as well as leadership training and executive coaching. Learn more about me on LinkedIn!

(As printed in the PA Business Woman Magazine MMX)

Liz Weber CMC CSP

Liz Weber coaches, consults, and trains leadership teams. She specializes in strategic and succession planning, and leadership development.

Liz is one of fewer than 100 people in the U.S. to hold both the Certified Management Consultant (CMC) and Certified Speaking Professional (CSP) designations.

Contact Liz’s office at +1.717.597.8890 for more info on how Liz can help you, or click here to have Liz’s office contact you.

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What is a Business Plan? Definition and Resources

9 min. read

Updated July 29, 2024

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

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

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

• What is a business plan?

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

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

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

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

Reasons for writing a business plan

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

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

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

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

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

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

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

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What research shows about business plans

Numerous studies have established that planning improves business performance:

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

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

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

When should you write a business plan?

No two business plans are alike. 

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

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

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

Ideal times to write a business plan include:

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

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

How often should you update your business plan?

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

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

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

Related Reading: 5 fundamental principles of business planning

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

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

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

The planning process is what uncovers those insights.

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

• How long should your business plan be?

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

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

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

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

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

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

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

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

Read More: How long should your business plan be?  

What information is included in a business plan?

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

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

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

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

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

• Different types of business plans

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

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

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

Business plan vs. operational plan vs. strategic plan

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

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

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

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

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

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

• Business plan vs. business model

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

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

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

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

• Moving from idea to business plan

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

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

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

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

Table of Contents

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

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How (and Why) to Continually Update Your Business Plan

“New year, new business plan.” Well, that’s not the exact saying, but in an increasingly competitive business world, it’s a nice catchphrase as we quickly approach the second month of 2020.

Truthfully, you should always update your business plan to reflect your company’s current standing in the marketplace, finances, personnel, technology and more. These things change rapidly in virtually every industry, so it’s vital to stay in tune with what your business is and isn’t doing well.

This time of year offers a natural opportunity to take a look at your business and update your plan accordingly. As we enter a new decade, here are some considerations and tips for refreshing your business plan.

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Analyze your finances.

Your financials play an important role in updating your business plan.  Think back to last year: when you began 2019, you likely made financial forecasts for the year. If you managed your business responsibly, you frequently updated those projections based on actual results. The adjustments you made throughout the year should help you to make more accurate, better informed projections for the year ahead.

There are many factors that may affect your financial analysis for the new year:

• Missed goals: If you frequently missed goals last year, adjust the goals or timelines to be more realistic in the coming year. Then, pay attention and take note of any underlying problems that may cause you to miss goals. Maybe the goals are too ambitious, or maybe your overhead is too high.
• Losing money: Speaking of overhead, if you’re losing money, you need to adjust your financial forecast accordingly and reduce operating costs as much as possible.
• New hires: More employees may help you accomplish more, but they will also affect your cash flow, so be sure to adjust expectations.
• Technology: If new or emerging tech can help lower your operating costs, assist customers better or reduce the time it takes you to do something, take note.

While these factors may influence your initial projections for the year, you should still visit your plan every month and make adjustments accordingly.

Entrepreneur Tim Berry recommends tracking your financials in three tables : your business plan’s original projections, another with actual results, and a third with the difference between the plan and actuals, called a variance. This way, you can proactively change your business plan and refocus your financial projections based on early year success (or failure). 

If scaling your business is a priority this year, you may also want to include a funding section in your business plan. Whether you plan to apply for a business loan or you’re approaching investors, you’ll need cash flow reports, profit and loss reports, budgets and projections on hand and ready to go. All of these documents will be essential to getting that influx of capital. Do not make projections based on that capital before you’ve secured the funding.

Likewise, if your business doesn’t have any credit history, you should open a business credit card and pay off the balance regularly to build strong credit in 2020. That can help when applying for additional funding down the road.

Related: How to Create a Fundable Business Plan

Talk to your customers.

Customers are any business’s lifeblood, and a new year represents an excellent chance to check in with them. Again, you should always be in touch with your customers and actively gathering feedback to improve your product or service, but a new calendar year is a great opportunity to send out a survey or set up some time to speak with your best customers directly on a one-on-one basis.

Whether you failed to retain customers or noticed that some of your biggest customers cut back on their business with you, you need to understand why. A business plan should illustrate how your product or service can satisfy a customer need or solve a customer problem. It should demonstrate how you can drive demand.

A good business plan emphasizes the customer, so you can’t effectively update your business plan without current customer feedback. Check in at the beginning of the year so you’ll know what you can do better.

You should try to identify the following:

• Have competitors cut into your market share?
• Are customer expectations not being met?
• Is your product not satisfying the need it’s supposed to?
• Have changes in your field changed how customers want to shop for or use your product?

Customer feedback may profoundly affect your business plan. It will also help you understand how to target and convert potential customers in 2020.

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Analyze your market.

As stated before, businesses must constantly adapt to stay relevant. That’s because the market isn’t static. Your competitors change, peoples’ tastes and preferences change, expectations change. You have to be a trendsetter rather than a follower.

As the calendar year changes, perform an audit of your industry and your niche in the marketplace. What are you doing better than anyone else? What should you do better than anyone else that you’re not doing now?

Some things to look at:

• Changing competitors: If a major competitor dropped out of the picture, you should adjust your projections accordingly. Likewise, if a new competitor appears, your business plan should reflect the increased competition.
• Segmentation: Change the way you perceive the market to get a fresh perspective for a new year. If you normally view your market by product type, try looking at it by channel or potential buyer. Divide by region, disposable income, occupation—new segmentation lets you develop fresh perspectives and, therefore, fresh approaches to the marketplace.
• Existing problems: Identify what’s not working in your business. Your updated business plan should comment on those problems and come up with solutions.

Everything changes in business, often at a moment’s notice. New competitors rise, new marketing solutions emerge. Your business plan should reflect changes not just in your own business, but in the market at-large.

New goals, new costs and new competitors can all make 2020 significantly different from 2019. Whether you haven’t updated your business plan in a while  or you’re constantly making adjustments, these tips can help you bring a fresh perspective to your plan.

• business competition
• business plan
• financial projections
• goal setting
• market analysis

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6 Reasons to Update Your Business Plan Revise your business plan so it grows with your company and your goals.

By Nina Zipkin May 13, 2015

Business plans are living documents. Make sure that they evolve with your company and reflect the business you're running by revising when your company meets these six milestones.

You want to refinance or fundraise. Investors and lenders want to know about your current challenges and have the most up-to-date look at the costs and opportunities you're forecasting. Read more: Update Your Business Plan to Renew Your Drive and Focus

You launch a new product or service. A new revenue stream will impact how you manage your resources – and can impact profitability. Let partners and investors in on your vision to get their buy-in and help with execution. Read more: How and Why Business Plans Have Changed

You expand into new markets. How you allocate your time and resources will change dramatically as you expand into different cities and countries. An updated plan can help you set realistic goals and communicate those to you team.

Your competitors have changed. Half the battle of running a successful business is staying aware of what the others in your industry are doing. If your major competitor pivots or there is an up and coming venture that enters the field, include that in your plan Read more: Updating Your Business Plan

You change suppliers or technologies. Changing your supply chain could help you cut costs or even position your company as more environmentally friendly. Furthermore, a shift to a new tech platform could give your company an important competitive advantage that investors will want to know about. Read more: 8 Reasons to Update Your Business Plan Right Now

Your customer changes. If your target customer has shifted, you might need to meet a different set of wants and need. If so, you'll need to explain in your business plan how you'll find your new core market and retain it. Read more: A Better Business Plan Can Lead to New Customers

Entrepreneur Staff

Staff Reporter. Covers media, tech, startups, culture and workplace trends.

Nina Zipkin is a staff reporter at Entrepreneur.com. She frequently covers media, tech, startups, culture and workplace trends.

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15 Reasons Why You Need a Business Plan in 2024

Posted august 5, 2024 by noah parsons.

Imagine you’re going on a road trip. You know your final destination, but you haven’t figured out how to get there. 

While it might be fun to start driving and figure things out as you go, your trip will likely take longer than expected and end up costing more. But, if you take the time to 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 much different, which is why a business plan is so important to your continued success.

What is the purpose of a business plan? 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you will get there. Writing a business plan 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.

15 reasons why you need a business plan

“Creating a road map for my business is all well and good, but do I really need a business plan? I’d rather just get started.”

If you’re still thinking like this and decide to skip writing a business plan, you’re making a big mistake and setting yourself up to fail. Even if your business survives, without a plan, you’ll miss valuable growth opportunities and never truly be in control.

Still not convinced? Here are the critical reasons why a business plan is important for small businesses. 

1. You’re more likely to start

Documenting your business idea makes it more official. It takes rough ideas and turns them into the making of a real business. 

According to a study by the Harvard Business Review , entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don’t.

Even if it’s just notes about your potential business, writing things down will make you more likely to proceed with your business. Without a plan, you can’t prove to yourself, partners, mentors, or investors that you’re serious about starting.

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2. Reduce potential risks

Writing a business plan takes some of the risk out of starting a business. It helps you think 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?

Your business plan can answer these startup questions .

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?
• Will you 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 growth questions and mitigate risk.

3. Test a new business idea and prove it’s viable

When you have a new business idea, it helps to spend time thinking through all the details. 

A business plan will help you think about your:

• Target market
• How much money you’ll need to launch
• 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. 

There’s no need to create a detailed business plan either. 

Instead, I recommend using a one-page business plan to quickly test your ideas and determine if you have a viable business. 

4. 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 will get the word out to them. 

That’s where a marketing plan comes in. It can be an indispensable tool to figure out how you get your first customers as well as your thousandth customer. It can start as a simple bulleted list of potential marketing channels that expands in detail as you need it.

5. Build a better budget and a financial forecast

Without a business plan, it’s impossible to know how much money it will cost to start and run a business. You don’t just need money for your initial purchases; you need enough cash in the bank to maintain your cash runway and keep your business afloat while you get fully up and running.

When you plan, you’ll need to create your expense budget , set sales goals, and identify how much cash is needed to keep your doors open, purchase inventory, and more. 

The beauty of incorporating forecasts into your business plan is that you don’t need 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 revisit your business plan and update your forecasts to generate a more accurate picture of your business’s future.

6. Attract investors and get funding

Sharing your business idea with investors requires a 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 pitch your business to investors, having a business plan 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.

7. Plan for different scenarios

Things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive. 

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.

Without a business plan, you’ll be reacting blindly with no way to track if your decisions are making a real impact.

8. 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 prospective employees understand your business strategy and growth plans 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 hire more employees . 

9. Get your team on the same page

A great business strategy 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 and working towards the same goals. 

It’s even better if you regularly review your plan with members of your team. Have everyone revisit your core strategy, analyze it, and explore how it impacts individual and team goals .

10. 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 business plan to manage your business, you’ll see which parts of your strategy are working and which 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 adjust your strategy, pivoting to new opportunities that will drive profitability.

Regular business plan reviews , ideally monthly, will help you build a strong, resilient business.

11. 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 by leveraging your business plan, you can be prepared to face each crisis head-on.

A plan helps you assess your current situation, determine how the crisis will alter your plan, and explore what it will take to recover. 

With a little planning, you can even prepare your business for future downturns with this same process. Having the right plan and processes in place will make crisis planning easier and, ideally, recession-proof your business .

12. You’ll be ready to sell

You might decide to sell your business or position yourself for acquisition down the road. Having a solid business plan helps make the case for a higher valuation. 

Your business is likely worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

Remember, if you were buying a business , you’d likely want to see their business plan and any previous documentation. So, the more organized and professional your plan is, the easier it will be for a buyer to say yes.

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 by writing a simple business plan you can complete in about half an hour. With the emergence of AI business plan generators , getting stuck with a blank page is a thing of the past. Just be sure that you don’t just let AI write your plan for you and keep yourself involved in the planning process.

From there, refine your plan until your idea is solid. At that point, you can invest 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 works, and you’ve considered different financial scenarios so you can handle the unexpected. 

Plus, you have a management tool to run your business better than your competitors. 

15. Research shows that business plans 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 who have or are working on a plan feel confident in their business, even amidst a crisis. 

A study in Small Business Economics found that entrepreneurs who write business plans for their ideas are 152% more likely to actually start their businesses.

There’s plenty of additional research linking business planning with success, so it’s a proven fact that you won’t waste time when you write your plan.

Why is a business plan important? Because it sets you up for success

There are plenty of reasons to write a business plan, but they all relate to one thing—increasing the likelihood of 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. 

If you’ve been putting off writing a business plan, now is the time to do it. Start by downloading one of the many free business plan templates out there, or for additional guidance, invest in an online business plan builder .

No matter what business planning tool you choose, just deciding to write a business plan will set you up to build, run, and grow your business. So, don’t wait—start planning today.

What is a business plan?

A business plan is a structured document that outlines the goals, strategies, target market, and financial forecasts of a business. It serves as a roadmap for the business, detailing the steps necessary to achieve success.

Why is planning necessary?

Business planning is essential because it helps businesses set clear goals, allocate resources efficiently, identify potential challenges, and develop strategies to overcome them. It also provides a framework for decision-making and helps attract investors by demonstrating the viability of the business.

What happens if a business doesn’t plan?

Without planning, a business may lack direction and clarity, leading to inefficient use of resources, missed opportunities, and an inability to respond effectively to market changes. This can result in financial difficulties, operational challenges, and ultimately, business failure.

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The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

What is the purpose of a business plan?

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

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Business plan FAQs

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

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

What industry-specific issues can business plans help tackle?

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

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

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

Understanding the importance of a business plan

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

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

Related Posts

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

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

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How Often Should You Update Your Business Plan?

Southern California business attorneys can provide you with assistance in determining how frequently a business plan needs to be updated. Companies should have a comprehensive business plan both when they first start operating and once they are established. This business plan can be used to help set goals, resolve disputes, and ensure that the company is on track to remain successful.

Brown & Charbonneau, LLP can assist with the creation of your initial business plan so you are prepared and ready to start your company and build a successful business. We can also provide you with assistance making periodic updates to your business plan as needed. Not only can we guide you through the actual updating process, but we can also give you insight and advice as to how frequently you should update your plan.

Entrepreneur.com recommends that you do a thorough update to your business plan at least once annually. This big update to your plan should include a review of your value proposition; a look at new market segmentations; and a look at the larger potential market for whom your products or services could provide a solution.

You can also do a monthly update, which involves reviewing the difference between the actual results you achieved over the course of the month and the planned results you had hoped to achieve. This update of your plans does not need to be as comprehensive or as detailed as your annual update. The goal is simply to see how you are doing with achieving your objectives and to make any necessary adjustments going forward during the rest of the year.

When major changes occur at your company or in your industry, this is also a good time to update your business plan. Your plan needs to reflect the current situation and it needs to be relevant within the current business landscape that you are operating in. If something major has changed, it is essential that you make an update to your business plan to accommodate that shift.

Why is it Important to Keep Your Business Plan Updated?

Keeping your business plan updated is vital because no company can succeed unless it stays current with the times and unless it evolves. The goals that you have for your organization will be different when you first get started than the goals you have once your organization is already underway. You want your plan to reflect the latest goals that you hope your company will accomplish so you have clear and measurable objectives to work towards.

Updating your business plan regularly can help you to ensure that you and your partners or co-owners are on the same page if there are multiple owners of your company. Sitting down together to update your plans and make any necessary changes ensures that you still have a shared vision and are making company decisions with that vision in mind.

Keeping your plans updated also allows you to adjust to any changes in the law or market conditions that could affect profitability; helps you to identify new competitors and new potential sources of business; and allows you to see how your company is progressing with enhancing profitability over time.

These are just a few of the many reasons why updates to a business plan are so essential for any organization. It is up to you to keep your business plan current and comprehensive, but our legal team can help you with this process to make it easy.

Getting Help from Expert Business Law Attorneys

Working with California business attorneys to keep your plan updated is a smart choice. You want to ensure you update your plans periodically to address legal and regulatory changes, as well as to make certain your company is continuing to make the choices necessary for success.

Your attorney can advise you on when laws or regulations may affect your organization and can help you to ensure you always have a comprehensive business plan aimed at achieving your latest goals.

Brown & Charbonneau, LLP has extensive experience helping companies with the business planning process. Whether your company is just getting off the ground or you have an established business that you want to ensure keeps growing and thriving, our legal team can bring our expertise, business knowledge, and legal knowledge to the table to help you make the plans you need.

Give us a call at 866-237-8129 or contact us online today to find out more about the ways in which our legal team can help you.

More From Forbes

Why you need a written business plan.

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CFP®, CEPA®, CVGA®, at Heritage Investors, LLC, is a financial educator, wealth manager, author, and speaker. More at  FinanciallySimple.com.

Imagine setting out on a road trip without knowing where you wanted to go. There are immediate and inherent problems with this idea. First, without knowing where you’re going, you can’t possibly chart a course to arrive there. Likewise, without defining a clear destination, you would have no idea of how long your trip will be, how much fuel is required, or even what your necessary budget for food and lodging should be. With so many problems being raised by failing to clearly define your destination, why would you ever take such a trip? You wouldn’t. Yet, an alarming number of small-business owners are doing just that.

Many entrepreneurs are operating businesses with no formal business plan in place. Although you may know how to “run” a business, a fully developed and well-written business plan is an absolute necessity. But why? I mean, couldn’t the time spent developing a business plan be used to grow your business? Technically, yes. However, there are many reasons why taking the time to flesh out one of your organization’s most salient documents is helpful.

At some point, you’re probably going to need funding for your business. Whether this comes in the form of investors or securing a business loan from your bank, you likely won’t see a penny without showing a well-thought-out business plan. Bankers and investors alike need answers to questions surrounding profitability and revenue generation. But even before requesting funds from lenders and investors, a carefully crafted business plan will inform you of just how much capital you’ll need to raise for long-term viability.

Additionally, your business plan can assist with making sound business decisions. Ideally, you will have thought of every aspect of your business — including growth and upgrade scenarios — when writing out your business plan. If you did, your business plan can provide a step-by-step approach to all your major business decisions. However, even if you didn’t think of everything, you still have a basic guide to help you determine if and when you should expand to a new location or upgrade processes, systems and software, and whether it makes more sense to buy or lease. This also applies to handling management issues, human resources and creating value for your clients.

A CEO’s Guide To Succession Planning

Unlocking exponential growth: the power of capability building, how leaders can handle workplace conflict and protect their well-being.

Next, working through the process of drafting a fully developed business plan forces you to take an objective look at your business. As business owners, we’re often too emotionally invested in our businesses to truly see them as they are. Your business is your baby, and your baby is often ugly. As you write your business plan, you’ll begin to notice all of the weaknesses that exist in your company. I even encourage my clients to let others look at their business plans just so they can poke holes in them. The more clearly you see your business, the better equipped you are to improve it.

Finally, a written business plan is an excellent communication device. With this one document, you can effectively communicate exactly what your business is and how it functions to anyone. As I mentioned earlier, your plan tells financiers how much capital you need and how it can be repaid. But your business plan can also help you acquire new talent, gain inroads with vendors and suppliers, and even attract potential clients. 

Whether you’re just starting your business or if you’ve been operating for years, a business plan is your road map. A written business plan takes your vision and creates a clear path for making it a reality. If you’re thinking, “Well, I’ve made it this long without it,” you may be surprised to learn that a meta-analysis of studies on the growth of more than 11,000 companies found that planning actually improved company performance. In fact, it benefited businesses that were already on their feet even more so than it did startups.

One likely reason for this finding is that established companies have the benefit of knowing exactly who their customers are and what they need or want. On the other hand, startups are often making educated guesses. This is also the reason that business owners need to review and update their business plans from time to time.

If you don’t have a written business plan, now is the time to remedy that. Consider who will read your business plan and how you want them to respond, and write your plan accordingly. Let trusted friends and family review your plan throughout the process, looking for areas that can be improved upon. Once you’re able to effectively answer all questions about your business, then your business plan should be ready.

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Why You Should Write a Business Plan

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

To Test the Feasibility of Your Business Idea

To give your new business the best chance of success, to secure funding, to make business planning manageable and effective, to attract investors, frequently asked questions (faqs).

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A business plan  is the blueprint for your business. Starting a business without a business plan is like building a house without a blueprint. Yet, unlike a house, a business isn't static. We often make the mistake of thinking of a business plan as a single document that you put together once when you're starting out and never touch again. But as the business develops, so should its business plan. In fact, any particular business may have multiple business plans as its objectives change.

Writing a business plan is time-consuming, but it's essential if you want to have a successful business that's going to survive the startup phase.

Key Takeaways

• Writing a business plan reveals how tenable your idea is.
• Updating and amending a business plan as the business develops and its goals change is vital to your success.
• A good business plan helps you define your target market, competitive advantage, optimum pricing strategies, and better prepares the business for upcoming challenges.
• A business plan helps you secure funding and attract new investors.

Writing a business plan is the best way—other than going out and doing it—to test whether an idea for starting a business is feasible. In this sense, the business plan is your safety net. If working through a business plan reveals that your business idea is untenable, it will save you a great deal of time and money.

Often, an idea for starting a business is discarded at the marketing analysis or competitive analysis stage , freeing you to move on to a new (and better) idea.

Unfortunately, many prospective business owners are so convinced that their idea for a product or service is a can't-miss proposition, that they don't take the time to do the necessary research and work through a proper business plan. The more you know about your industry, your prospective customers, and the competition, the greater the likelihood that your business will succeed.

Writing a business plan will ensure that you pay attention to the broad operational and financial objectives of your new business and the small details, such as budgeting and market planning. The process will ultimately make for a smoother startup period and fewer unforeseen problems as your business gets up and running.

The exercise of budgeting and market planning will help you define your  target market , your unique selling proposition, optimum pricing strategies, and outline how you intend to sell and deliver your products to customers. In addition, developing a budget for implementation will assist with determining your startup and operating capital requirements.

According to the Small Business Administration, one of the most-cited reasons why businesses fail is inadequate planning. By starting too soon and without a sufficient plan, your business is setting itself up for failure.

Most new businesses need startup and operating capital to get off the ground. Without a well-developed business plan, there is no chance of getting  debt financing from established financial institutions such as banks or  equity financing  from angel investors.

Established businesses often need money, too, to buy new equipment or property, or because of market downturns. Having an up-to-date business plan gives you a much better chance of getting the money you need to keep operating or expand.

Even an angel investor will want to ensure their money is going to a business that knows what it's doing. The easiest way to prove this is via a well-developed business plan.

Investors and financiers are always looking at the risk of default, and word of mouth is no substitute for written facts and figures in a properly prepared business plan.

A business plan is essential if you're thinking of starting a business, but it's also an important tool for established businesses. Viable businesses are dynamic; they change and grow. Your company's original business plan needs to be revised as you set new goals .

Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company's growth should take.

Whether you want to shop your business to venture capitalists or attract angel investors , you need to have a solid business plan. A presentation may pique their interest, but they'll need a well-written document they can study before they'll be prepared to make any investment commitment.​​​

Be prepared to have your business plan scrutinized. Both venture capitalists and angel investors will want to conduct extensive background checks and competitive analyses to be certain that what's written in your business plan is indeed the case.

What are the sections of a business plan?

A comprehensive business plan should include the following sections:

• Executive summary
• Company description
• Competitor analysis
• Industry analysis
• Product and services description
• Financial data

What is the purpose of a business plan?

A business plan has four main purposes:

• Tests the feasibility and model of your business idea
• Attracts investors
• Sets a plan for growth
• Identifies capital needs

Small Business Administration. " Selecting a Business That Fits ."

20 Reasons Why You Need a Business Plan in 2024

Written by Dave Lavinsky

What is a Business Plan?

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

What is the Purpose of a Business Plan?

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

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

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

20 Reasons Why You Need a Business Plan

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

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

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

2. To Establish Business Milestones

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

3. To Better Understand Your Competition

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

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4. To Better Understand Your Customer

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

5. To Enunciate Previously Unstated Assumptions

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

6. To Assess the Feasibility of Your Venture

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

7. To Document Your Revenue Model

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

8. To Determine Your Financial Needs

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

9. To Attract Investors

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

10. To Reduce the Risk of Pursuing the Wrong Opportunity

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

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

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

12. To Attract Employees and a Management Team

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

13. To Plot Your Course and Focus Your Efforts

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

14. To Attract Partners

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

15. To Position Your Brand

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

16. To Judge the Success of Your Business

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

17. To Reposition Your Business to Deal with Changing Conditions

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

18. To Document Your Marketing Plan

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

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

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

20. To Uncover New Opportunities

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

Make Your Business Planning Count

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

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

Need help with your business plan? 

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

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