why is it important to write a business plan in starting a business list three components of it

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

Free business plan template

Join over 1-million businesses and make planning easy with our simple, modern, investor-approved business plan template.

Download Template

• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

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

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

Related Articles

7 Min. Read

8 Business Plan Templates You Can Get for Free

5 Consequences of Skipping a Business Plan

5 Min. Read

How to Run a Productive Monthly Business Plan Review Meeting

11 Min. Read

Use This Simple Business Plan Outline Example to Organize Your Plan

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

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

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

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

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

The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

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.

Send invoices, estimates, and other docs:

• via links or PDFs
• automatically, via Wave

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for the first 10 transactions of each month of your subscription, then 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions for the US and Canada . See Wave’s Terms of Service for more information.

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

2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

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.

6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

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

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

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

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

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

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

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

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

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

Six Reasons You Really Need To Write a Business Plan

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

1. Legitimize your business idea.

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

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

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

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

2. Give your business a foundation for success.

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

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

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

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

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

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

3. Obtain funding and investments.

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

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

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

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

4. Hire the right people.

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

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

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

5. Communicate your needs.

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

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

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

6. It makes it easier to sell your business.

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

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

A Business Plan Is Essential

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

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

Don't forget to share this post!

Related articles.

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

23 of My Favorite Free Marketing Newsletters

The 8 Best Free Flowchart Templates [+ Examples]

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

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

How to Write an Executive Summary Execs Can't Ignore [+ 5 Top Examples]

20 Free & Paid Small Business Tools for Any Budget

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

The Content Aggregator Guide for 2024

2 Essential Templates For Starting Your Business

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

We earn commissions if you shop through the links below.  Read more

8 Components of a Business Plan

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023 Updated on August 18, 2024

A key part of the business startup process is putting together a business plan , particularly if you’d like to raise capital. It’s not going to be easy, but it’s absolutely essential, and an invaluable learning tool. 

Creating a business plan early helps you think through every aspect of your business, from operations and financing to growth and vision. In the end, the knowledge you’ll gain could be the difference between success and failure. 

But what exactly does a business plan consist of? There are eight essential components, all of which are detailed in this handy guide.

1. Executive Summary 

The executive summary opens your business plan , but it’s the section you’ll write last. It summarizes the key points and highlights the most important aspects of your plan. Often investors and lenders will only read the executive summary; if it doesn’t capture their interest they’ll stop reading, so it’s important to make it as compelling as possible.

The components touched upon should include:

• The business opportunity – what problem are you solving in the market?
• Your idea, meaning the product or service you’re planning to offer, and why it solves the problem in the market better than other solutions.
• The history of the business so far – what have you done to this point? When you’re just getting started, this may be nothing more than coming up with the idea, choosing a business name , and forming a business entity.
• A summary of the industry, market size, your target customers, and the competition.
• A strong statement about how your company is going to stand out in the market – what will be your competitive advantage?
• A list of specific goals that you plan to achieve in the short term, such as developing your product, launching a marketing campaign, or hiring a key person. 
• A summary of your financial plan including cost and sales projections and a break-even analysis.
• A summary of your management team, their roles, and the relevant experience that they have to serve in those roles.
• Your “ask”, if applicable, meaning what you’re requesting from the investor or lender. You’ll include the amount you’d like and how it will be spent, such as “We are seeking $50,000 in seed funding to develop our beta product”. 

Remember that if you’re seeking capital, the executive summary could make or break your venture. Take your time and make sure it illustrates how your business is unique in the market and why you’ll succeed.

The executive summary should be no more than two pages long, so it’s important to capture the reader’s interest from the start. 

• 2. Company Description/Overview

In this section, you’ll detail your full company history, such as how you came up with the idea for your business and any milestones or achievements. 

You’ll also include your mission and vision statements. A mission statement explains what you’d like your business to achieve, its driving force, while a vision statement lays out your long-term plan in terms of growth. 

A mission statement might be “Our company aims to make life easier for business owners with intuitive payroll software”, while a vision statement could be “Our objective is to become the go-to comprehensive HR software provider for companies around the globe.”

In this section, you’ll want to list your objectives – specific short-term goals. Examples might include “complete initial product development by ‘date’” or “hire two qualified sales people” or “launch the first version of the product”. 

It’s best to divide this section into subsections – company history, mission and vision, and objectives.

3. Products/Services Offered 

Here you’ll go into detail about what you’re offering, how it solves a problem in the market, and how it’s unique. Don’t be afraid to share information that is proprietary – investors and lenders are not out to steal your ideas. 

Also specify how your product is developed or sourced. Are you manufacturing it or does it require technical development? Are you purchasing a product from a manufacturer or wholesaler? 

You’ll also want to specify how you’ll sell your product or service. Will it be a subscription service or a one time purchase?  What is your target pricing? On what channels do you plan to sell your product or service, such as online or by direct sales in a store? 

Basically, you’re describing what you’re going to sell and how you’ll make money.

• 4. Market Analysis 

The market analysis is where you’re going to spend most of your time because it involves a lot of research. You should divide it into four sections.

Industry analysis 

You’ll want to find out exactly what’s happening in your industry, such as its growth rate, market size, and any specific trends that are occurring. Where is the industry predicted to be in 10 years? Cite your sources where you can by providing links. 

Then describe your company’s place in the market. Is your product going to fit a certain niche? Is there a sub-industry your company will fit within? How will you keep up with industry changes? 

Competitor analysis 

Now you’ll dig into your competition. Detail your main competitors and how they differentiate themselves in the market. For example, one competitor may advertise convenience while another may tout superior quality. Also highlight your competitors’ weaknesses.

Next, describe how you’ll stand out. Detail your competitive advantages and how you’ll sustain them. This section is extremely important and will be a focus for investors and lenders. 

Target market analysis 

Here you’ll describe your target market and whether it’s different from your competitors’.  For example, maybe you have a younger demographic in mind? 

You’ll need to know more about your target market than demographics, though. You’ll want to explain the needs and wants of your ideal customers, how your offering solves their problem, and why they will choose your company. 

You should also lay out where you’ll find them, where to place your marketing and where to sell your products. Learning this kind of detail requires going to the source – your potential customers. You can do online surveys or even in-person focus groups. 

Your goal will be to uncover as much about these people as possible. When you start selling, you’ll want to keep learning about your customers. You may end up selling to a different target market than you originally thought, which could lead to a marketing shift. 

SWOT analysis 

SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s one of the more common and helpful business planning tools.   

First describe all the specific strengths of your company, such as the quality of your product or some unique feature, such as the experience of your management team. Talk about the elements that will make your company successful.

Next, acknowledge and explore possible weaknesses. You can’t say “none”, because no company is perfect, especially at the start. Maybe you lack funds or face a massive competitor. Whatever it is, detail how you will surmount this hurdle. 

Next, talk about the opportunities your company has in the market. Perhaps you’re going to target an underserved segment, or have a technology plan that will help you surge past the competition. 

Finally, examine potential threats. It could be a competitor that might try to replicate your product or rapidly advancing technology in your industry. Again, discuss your plans to handle such threats if they come to pass. 

5. Marketing and Sales Strategies

Now it’s time to explain how you’re going to find potential customers and convert them into paying customers.  

Marketing and advertising plan

When you did your target market analysis, you should have learned a lot about your potential customers, including where to find them. This should help you determine where to advertise. 

Maybe you found that your target customers favor TikTok over Instagram and decided to spend more marketing dollars on TikTok. Detail all the marketing channels you plan to use and why.

Your target market analysis should also have given you information about what kind of message will resonate with your target customers. You should understand their needs and wants and how your product solves their problem, then convey that in your marketing. 

Start by creating a value proposition, which should be no more than two sentences long and answer the following questions:

• What are you offering
• Whose problem does it solve
• What problem does it solve
• What benefits does it provide
• How is it better than competitor products

An example might be “Payroll software that will handle all the payroll needs of small business owners, making life easier for less.”

Whatever your value proposition, it should be at the heart of all of your marketing.

Sales strategy and tactics 

Your sales strategy is a vision to persuade customers to buy, including where you’ll sell and how. For example, you may plan to sell only on your own website, or you may sell from both a physical location and online. On the other hand, you may have a sales team that will make direct sales calls to potential customers, which is more common in business-to-business sales.

Sales tactics are more about how you’re going to get them to buy after they reach your sales channel. Even when selling online, you need something on your site that’s going to get them to go from a site visitor to a paying customer. 

By the same token, if you’re going to have a sales team making direct sales, what message are they going to deliver that will entice a sale? It’s best for sales tactics to focus on the customer’s pain point and what value you’re bringing to the table, rather than being aggressively promotional about the greatness of your product and your business. 

Pricing strategy

Pricing is not an exact science and should depend on several factors. First, consider how you want your product or service to be perceived in the market. If your differentiator is to be the lowest price, position your company as the “discount” option. Think Walmart, and price your products lower than the competition. 

If, on the other hand, you want to be the Mercedes of the market, then you’ll position your product as the luxury option. Of course you’ll have to back this up with superior quality, but being the luxury option allows you to command higher prices.

You can, of course, fall somewhere in the middle, but the point is that pricing is a matter of perception. How you position your product in the market compared to the competition is a big factor in determining your price.

Of course, you’ll have to consider your costs, as well as competitor prices. Obviously, your prices must cover your costs and allow you to make a good profit margin. 

Whatever pricing strategy you choose, you’ll justify it in this section of your plan.

• 6. Operations and Management 

This section is the real nuts and bolts of your business – how it operates on a day-to-day basis and who is operating it. Again, this section should be divided into subsections.

Operational plan

Your plan of operations should be specific , detailed and mainly logistical. Who will be doing what on a daily, weekly, and monthly basis? How will the business be managed and how will quality be assured? Be sure to detail your suppliers and how and when you’ll order raw materials. 

This should also include the roles that will be filled and the various processes that will be part of everyday business operations . Just consider all the critical functions that must be handled for your business to be able to operate on an ongoing basis. 

Technology plan

If your product involves technical development, you’ll describe your tech development plan with specific goals and milestones. The plan will also include how many people will be working on this development, and what needs to be done for goals to be met.

If your company is not a technology company, you’ll describe what technologies you plan to use to run your business or make your business more efficient. It could be process automation software, payroll software, or just laptops and tablets for your staff. 

Management and organizational structure 

Now you’ll describe who’s running the show. It may be just you when you’re starting out, so you’ll detail what your role will be and summarize your background. You’ll also go into detail about any managers that you plan to hire and when that will occur.

Essentially, you’re explaining your management structure and detailing why your strategy will enable smooth and efficient operations. 

Ideally, at some point, you’ll have an organizational structure that is a hierarchy of your staff. Describe what you envision your organizational structure to be. 

Personnel plan 

Detail who you’ve hired or plan to hire and for which roles. For example, you might have a developer, two sales people, and one customer service representative.

Describe each role and what qualifications are needed to perform those roles. 

• 7. Financial Plan 

Now, you’ll enter the dreaded world of finance. Many entrepreneurs struggle with this part, so you might want to engage a financial professional to help you. A financial plan has five key elements.

Startup Costs

Detail in a spreadsheet every cost you’ll incur before you open your doors. This should determine how much capital you’ll need to launch your business. 

Financial projections 

Creating financial projections, like many facets of business, is not an exact science. If your company has no history, financial projections can only be an educated guess. 

First, come up with realistic sales projections. How much do you expect to sell each month? Lay out at least three years of sales projections, detailing monthly sales growth for the first year, then annually thereafter. 

Calculate your monthly costs, keeping in mind that some costs will grow along with sales. 

Once you have your numbers projected and calculated, use them to create these three key financial statements: 

• Profit and Loss Statement , also known as an income statement. This shows projected revenue and lists all costs, which are then deducted to show net profit or loss. 
• Cash Flow Statement. This shows how much cash you have on hand at any given time. It will have a starting balance, projections of cash coming in, and cash going out, which will be used to calculate cash on hand at the end of the reporting period.
• Balance Sheet. This shows the net worth of the business, which is the assets of the business minus debts. Assets include equipment, cash, accounts receivables, inventory, and more. Debts include outstanding loan balances and accounts payable.

You’ll need monthly projected versions of each statement for the first year, then annual projections for the following two years.

Break-even analysis

The break-even point for your business is when costs and revenue are equal. Most startups operate at a loss for a period of time before they break even and start to make a profit. Your break-even analysis will project when your break-even point will occur, and will be informed by your profit and loss statement. 

Funding requirements and sources 

Lay out the funding you’ll need, when, and where you’ll get it. You’ll also explain what those funds will be used for at various points. If you’re in a high growth industry that can attract investors, you’ll likely need various rounds of funding to launch and grow. 

Key performance indicators (KPIs)

KPIs measure your company’s performance and can determine success. Many entrepreneurs only focus on the bottom line, but measuring specific KPIs helps find areas of improvement. Every business has certain crucial metrics. 

If you sell only online, one of your key metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase. 

Perhaps the purchase process is too complicated or your product descriptions are vague. The point is, learning why your conversion rate is low gives you a chance to improve it and boost sales. 

8. Appendices

In the appendices, you can attach documents such as manager resumes or any other documents that support your business plan.

As you can see, a business plan has many components, so it’s not an afternoon project. It will likely take you several weeks and a great deal of work to complete. Unless you’re a finance guru, you may also want some help from a financial professional. 

Keep in mind that for a small business owner, there may be no better learning experience than writing a detailed and compelling business plan. It shouldn’t be viewed as a hassle, but as an opportunity! 

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

• Executive Summary 
• Products/Services Offered 
• Marketing and Sales Strategies

Subscribe to Our Newsletter

Featured resources.

Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya

Carolyn Young

Published on October 13, 2023

In the first segment of our conversation with Vinay Kevadiya, the visionary behind Upmetrics, we explored the platform’s origins and itsunique ...

LivePlan Software Review: Features, Cost, Pros & Cons

Published on September 15, 2023

When you’re starting a business, a business plan is essential whether you’re going to obtain financing or not. Creating a business plan helpsyou ...

What to Include in Your Business Plan Appendix?

Published on September 13, 2023

Launching a business involves countless tasks, and one of the crucial early hurdles is writing a business plan. Many entrepreneurs who aren’tlooki ...

No thanks, I don't want to stay up to date on industry trends and news.

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Tips White Papers
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

12 Reasons You Need a Business Plan In the new book "Write Your Own Business Plan," business expert Eric Butow breaks down how a solid business plan can save your startup during those tough early days.

By Dan Bova Sep 19, 2023

Running a business can be unpredictable, which is why having a solid business plan as a foundation is vital to surviving and thriving in the early days of your startup. Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to write the second edition of our best-selling book Write Your Business Plan , providing you with a roadmap for success.

In the following excerpt, Butow explains how a well-thought-out plan can power your startup and help your vision come to life.

Business plans could be considered cheap insurance. Just as many people don't buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas, intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.

1. A plan helps you set specific objectives for managers.

Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.

2. You can share your strategy, priorities, and plans with your spouse or partner.

People in your personal life intersect with your business life, so shouldn't they know what's supposed to be happening?

Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium

• Easy step-by-step business plan generator
• Built-in financial c alculators
• 500+ sample plans and templates

3. Use the plan to explain your displacement.

A short definition of displacement is, "Whatever you do is something else you don't do." Your plan will explain why you're doing what you've decided to do in your business.

4. A plan helps you figure out whether or not to rent or buy new space.

Do your growth prospects and plans justify taking on an increased fixed cost of new space?

5. You can explain your strategy for hiring new people.

How will new people help your business grow and prosper? What exactly are they going to do?

6. A plan helps you decide whether or not to bring on new assets.

How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what's going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.

7. Share your plan with your team.

Explain the business objectives in your plan with your leadership team, employees, and new hires. What's more, make selected portions of your plan part of your new employee training.

8. Share parts of your plan with new allies to bring them aboard.

Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.

9. Use your plan when you deal with professionals.

Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.

Write Your Own Business Plan is available now at Entrepreneur Bookstore | Barnes & Noble | Amazon

10. Have all the information in your plan when you're ready to sell.

Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and why they want it.

11. A plan helps you set the valuation of the business.

Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. Usually, that takes a business plan as well as a professional with experience. The plan tells the valuation expert what your business is doing, when it's doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.

12. You can use information in the plan when you need cash.

Seek investment for a business no matter what stage of growth the business finds itself in. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.

Entrepreneur Staff

VP of Special Projects

Dan Bova is the VP of Special Projects at Entrepreneur.com. He previously worked at Jimmy Kimmel Live, Maxim, and Spy magazine. His latest books for kids  include  This Day in History , Car and Driver's Trivia Zone ,  Road & Track Crew's Big & Fast Cars , The Big Little Book of Awesome Stuff , and  Wendell the Werewolf . 

Read his humor column This Should Be Fun  if you want to feel better about yourself.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick Red Arrow

• Lock How to Design a Work Session That Tricks Your Brain Into Peak Performance, According to a Neuroscientist
• She Launched Her Black-Owned Beauty Brand with $1,500 in Her Pockets — Now Her Products Are on Sephora's Shelves
• No One Explained a 401(k) Until He Reached the NFL. So He Started Putting His Money to Work — and Helping Others Do the Same .
• Lock How to Land Your Next Job Without Sending a Single Resume
• Kevin O'Leary Says This Is the One Skill He Looks For in a Leader — But It's 'Almost Impossible to Find'
• Food Franchisees Are Shifting to Non-Food Investments — And You Should, Too

Most Popular Red Arrow

She started a 'fun' side hustle — then it earned $100,000 and became a multimillion-dollar business: 'beyond what i could ever have expected'.

Melissa Tavss, founder and CEO of boozy ice cream company Tipsy Scoop, was burnt out from her corporate job — so she revived a family tradition.

Jennifer Lopez and Ben Affleck Are Divorcing and Reportedly Didn't Have a Prenup. Here's Why Formalized Agreements Should Be a Non-Negotiable.

Two years after Jennifer Lopez and Ben Affleck tied the knot, the couple officially called it quits. Here's what business leaders can learn from their split.

Our Brains Are Hardwired to Resist Change — Here's How to Leverage Neuroscience to Embrace It Instead

Discover how neuroscience can help you develop and implement effective change management strategies.

Build Across Platforms with Visual Studio 2022 for Just $34.97

Empower your development team—or yourself—with Microsoft Visual Studio Professional 2022.

ChatGPT Is Roasting Instagram Profiles in a Hilarious New Social Media Trend — Here's How to Get Access

ChatGPT has something to say about your Insta aesthetic.

3 Ways to Get Out of the Way of Your Business's Success

You may want to exit your business one day. Focusing on your business's value can make that exit successful.

Successfully copied link

• Sources of Business Finance
• Small Business Loans
• Small Business Grants
• Crowdfunding Sites
• How to Get a Business Loan
• Small Business Insurance Providers
• Best Factoring Companies
• Types of Bank Accounts
• Best Banks for Small Business
• Best Business Bank Accounts
• Open a Business Bank Account
• Bank Accounts for Small Businesses
• Free Business Checking Accounts
• Best Business Credit Cards
• Get a Business Credit Card
• Business Credit Cards for Bad Credit
• Build Business Credit Fast
• Business Loan Eligibility Criteria
• Small-Business Bookkeeping Basics
• How to Set Financial Goals
• Business Loan Calculators
• How to Calculate ROI
• Calculate Net Income
• Calculate Working Capital
• Calculate Operating Income
• Calculate Net Present Value (NPV)
• Calculate Payroll Tax

12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

Was This Article Helpful?

Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

Hot Summer Savings ☀️ 60% Off for 4 Months. BUY NOW & SAVE

60% Off for 4 Months Buy Now & Save

Wow clients with professional invoices that take seconds to create

Quick and easy online, recurring, and invoice-free payment options

Automated, to accurately track time and easily log billable hours

Reports and tools to track money in and out, so you know where you stand

Easily log expenses and receipts to ensure your books are always tax-time ready

Tax time and business health reports keep you informed and tax-time ready

Automatically track your mileage and never miss a mileage deduction again

Time-saving all-in-one bookkeeping that your business can count on

Track project status and collaborate with clients and team members

Organized and professional, helping you stand out and win new clients

Set clear expectations with clients and organize your plans for each project

Client management made easy, with client info all in one place

Pay your employees and keep accurate books with Payroll software integrations

• Team Management

FreshBooks integrates with over 100 partners to help you simplify your workflows

Send invoices, track time, manage payments, and more…from anywhere.

• Freelancers
• Self-Employed Professionals
• Businesses With Employees
• Businesses With Contractors
• Marketing & Agencies
• Construction & Trades
• IT & Technology
• Business & Prof. Services
• Accounting Partner Program
• Collaborative Accounting™
• Accountant Hub
• Reports Library
• FreshBooks vs QuickBooks
• FreshBooks vs HoneyBook
• FreshBooks vs Harvest
• FreshBooks vs Wave
• FreshBooks vs Xero
• Free Invoice Generator
• Invoice Templates
• Accounting Templates
• Business Name Generator
• Estimate Templates
• Help Center
• Business Loan Calculator
• Mark Up Calculator

Call Toll Free: 1.866.303.6061

1-888-674-3175

• All Articles
• Productivity
• Project Management
• Bookkeeping

Resources for Your Growing Business

The importance of business plan: 5 key reasons.

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

Here’s What We’ll Cover:

What Is a Business Plan?

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

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

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

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

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

1. To Secure Funding

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

2. Set and Communicate Goals

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

3. Prove Viability in the Market

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

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

4. They Help Owners Avoid Failure

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

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

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

5. Business Plans Reduce Risk

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

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

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

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

RELATED ARTICLES

Save Time Billing and Get Paid 2x Faster With FreshBooks

Want More Helpful Articles About Running a Business?

Get more great content in your Inbox.

By subscribing, you agree to receive communications from FreshBooks and acknowledge and agree to FreshBook’s Privacy Policy . You can unsubscribe at any time by contacting us at [email protected].

Flash Sale Savings ⚡

up to 60% off LivePlan Premium. Save Now

0 results have been found for “”

 Return to blog home

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.

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

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.

Like this post? Share with a friend!

Noah Parsons

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

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

You're all set!

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

We care about your privacy. See our privacy policy .

Enter your email below to receive occasional updates in your inbox.

• < Back to email setting

What is a Business Plan and Why is it Important?

What is a business plan.

Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.

While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

In fact, businesses that plan grow 30% faster than those that don’t. 1

For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.

Studies show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans. 2

Your plan should include explicit objectives for hiring new employees , market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.

Building an asset management business plan

Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on additional office, retail or work space.

Creating a marketing strategy

Marketing and market potential are important aspects of a plan for aspiring small businesses.

Getting your business in front of customers on a consistent basis is one of the keys to ensuring your business not only stays afloat but also thrives.

Marketing strategies can be simple, but before you decide on how you will get the word out, getting clear on your target audience and why your business solves their problem can make sticking to your marketing plan easier.

Knowing your unique market positioning can help you determine your messaging. Your marketing strategy should include who your target audience is, the platforms or methods you will connect with them on, and a measurement framework to determine if your efforts are working.

Take entrepreneur Scott Sultzer, who opened Sandwich Joint restaurant in downtown Los Angeles in 2009. “I included the potential marketing demographic of all those who lived in a certain area of the city,” he said of his marketing strategy. “My goal was to capture a certain percentage of all those people who lived and worked nearby.” 4

Created primarily as a marketing tool, Sulzer’s 10-page plan included such topics as target market breakdown, marketing strategy and market penetration. “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?” 4

Depending on your business, it’s important to have both brick-and-mortar marketing strategies as well as a plan for marketing your business online .

Seeking investment for your business

In addition to providing a roadmap for progress and a marketing plan , your business plan could also be important in securing funding .

Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether someone decides to invest – or how much they might choose to invest.

In fact, a study showed that businesses with a plan were more likely to receive formal financial support, such as funding, than businesses without one. 3

Hiring the right talent

A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. Sulzer used his business plan to secure a lease.

“I had to have a viable document that they could trust,” said Sulzer, who leased from one of the largest landowners in downtown Los Angeles. 4

“With a corporate landlord, they wouldn’t deal with me unless I had a business plan. I had to submit all my information and a plan that presented what I wanted to do, with financial breakdowns and percentages, demographics, and how I was going to get customers.” 4

For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan for hiring employees is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.

Setting business plan objectives for management

Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.

Ready to take the next step? Learn how to write a business plan .

Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going.

Find out how small business insurance from Nationwide can help you build and protect your business whether you are just starting up or already established.

1 https://www.effectuation.org/wp-content/uploads/2017/06/The-Multiple-Effects-of-Business-Planning-onNew-Venture-Performance-1.pdf , Accessed October 2021. 2 https://onlinelibrary.wiley.com/doi/abs/10.1111/0447-2778.00006 , Accessed October 2021. 3 https://www.tandfonline.com/doi/abs/10.1080/13504851.2014.967377 , Accessed October 2021. 4 Nationwide Interview with Scott Sultzer, 2016.

Disclaimer: The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide, Nationwide is on your side, and the Nationwide N and Eagle are services marks of Nationwide Mutual Insurance Company. © 2021 Nationwide.

• importance of a business plan
• purpose of a business plan
• what is the purpose of a business plan

Related articles

How to sell at a farmers market.

Strolling around the local farmers market on a Saturday morning is a popular pastime, and if you grow, bake, craft, or create things as a hobby, you may have wondered...

10 Tips for Buying a Business Car

Depending on the type of business you own, buying a company car could provide some noteworthy benefits. It might come in handy for deliveries or driving between work locations, and...

How to Start An Online Store

Starting a business is easier than ever thanks to greater online opportunities and the burgeoning “gig economy.” For many people, opening an online store has been a major success. Some...

How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

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

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

Featured Partners

ZenBusiness

$0 + State Fees

Varies By State & Package

On ZenBusiness' Website

On LegalZoom's Website

Northwest Registered Agent

$39 + State Fees

On Northwest Registered Agent's Website

$0 + State Fee

On Formations' Website

Drafting the Summary

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

Ask for Help

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

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

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

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

Numbers-based Goals

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

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

Intangible Goals

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

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

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

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

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

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

Business Operations Costs

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

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

Other Costs

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

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

How do I write a simple business plan?

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

What are some common mistakes in a business plan?

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

What basic items should be included in a business plan?

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

• Best VPN Services
• Best Project Management Software
• Best Web Hosting Services
• Best Antivirus Software
• Best LLC Services
• Best POS Systems
• Best Business VOIP Services
• Best Credit Card Processing Companies
• Best CRM Software for Small Business
• Best Fleet Management Software
• Best Business Credit Cards
• Best Business Loans
• Best Business Software
• Best Business Apps
• Best Free Software For Business
• How to Start a Business
• How To Make A Small Business Website
• How To Trademark A Name
• What Is An LLC?
• How To Set Up An LLC In 7 Steps
• What is Project Management?
• How To Write An Effective Business Proposal

What Is SNMP? Simple Network Management Protocol Explained

What Is A Single-Member LLC? Definition, Pros And Cons

What Is Penetration Testing? Definition & Best Practices

What Is Network Access Control (NAC)?

What Is Network Segmentation?

How To Start A Business In Louisiana (2024 Guide)

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

• Search Search Please fill out this field.

What Is a Business Plan?

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

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

• How to Start a Business: A Comprehensive Guide and Essential Steps
• How to Do Market Research, Types, and Example
• Marketing Strategy: What It Is, How It Works, How To Create One
• Marketing in Business: Strategies and Types Explained
• What Is a Marketing Plan? Types and How to Write One
• Business Development: Definition, Strategies, Steps & Skills
• Business Plan: What It Is, What's Included, and How to Write One CURRENT ARTICLE
• Small Business Development Center (SBDC): Meaning, Types, Impact
• How to Write a Business Plan for a Loan
• Business Startup Costs: It’s in the Details
• Startup Capital Definition, Types, and Risks
• Bootstrapping Definition, Strategies, and Pros/Cons
• Crowdfunding: What It Is, How It Works, and Popular Websites
• Starting a Business with No Money: How to Begin
• A Comprehensive Guide to Establishing Business Credit
• Equity Financing: What It Is, How It Works, Pros and Cons
• Best Startup Business Loans
• Sole Proprietorship: What It Is, Pros & Cons, and Differences From an LLC
• Partnership: Definition, How It Works, Taxation, and Types
• What is an LLC? Limited Liability Company Structure and Benefits Defined
• Corporation: What It Is and How to Form One
• Starting a Small Business: Your Complete How-to Guide
• Starting an Online Business: A Step-by-Step Guide
• How to Start Your Own Bookkeeping Business: Essential Tips
• How to Start a Successful Dropshipping Business: A Comprehensive Guide

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

Common elements in many business plans include:

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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

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

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

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

• Terms of Service
• Editorial Policy
• Privacy Policy

Please turn on JavaScript in your browser

It appears your web browser is not using JavaScript. Without it, some pages won't work properly. Please adjust the settings in your browser to make sure JavaScript is turned on.

Nine reasons why you need a business plan

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

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

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

What is the purpose of a business plan?

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

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

Here are nine reasons your company needs a business plan.

1. Prove your idea is viable

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

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

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

2. Set important goals

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

3. Reduce potential risks

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

The most common reasons businesses fail include:

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

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

4. Secure investments

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

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

5. Allot resources and plan purchases

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

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

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

6. Build your team

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

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

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

7. Share your vision 

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

8. Develop a marketing strategy

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

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

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

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

9. Focus your energy

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

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

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

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

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

What to read next

Manage your business how to help protect your business from check fraud.

Think writing checks is a safe way to pay vendors? Think again. Learn about five common scams and how to help prevent them.

START YOUR BUSINESS 10 tips before starting your new businesses

Thinking about starting a business? Check these 10 items off your list.

MANAGE YOUR BUSINESS Inventory management can help maintain cash flow

Inventory can eat up a lot of cash. Here are a few ways to manage inventory with cash flow in mind.

MANAGE YOUR BUSINESS Banking tips for cash businesses

Learn how to keep your cash business safe, secure and compliant.

• Start free trial

Start selling with Shopify today

Start your free trial with Shopify today—then use these resources to guide you through every step of the process.

The 12 Key Components of a Business Plan

There are 12 components of a business plan entrepreneurs must know as they lay out how their business will work.

Entrepreneurs who create business plans are more likely to succeed than those who don’t. 

Not only can a sound plan help your business access investment capital but—as the study found—it can even determine the success or failure of your venture. 

Here are the critical components of a business plan to help you craft your own.

What is a business plan?

A business plan is a document outlining your business goals and your strategies for achieving them. It might include your company’s mission statement , details about your products or services, how you plan to bring them to market, and how much time and money you need to execute the plan. 

For a thorough explanation of how to write a business plan, refer to Shopify’s guide .

12 key components of a business plan

Business plans vary depending on the product or service. Some entrepreneurs choose to use diagrams and charts, while others rely on text alone. Regardless of how you go about it, good business plans tend to include the following elements:

• Executive summary
• Company description
• Market analysis
• Marketing plan
• Competitive analysis 
• Organizational structure
• Products and services
• Operating plan
• Financial plan
• Funding sources

1. Executive summary

The executive summary briefly explains your business’s products or services and why it has the potential to be profitable. You may also include basic information about your company, such as its location and the number of employees.

2. Company description

The company description helps customers, lenders, and potential investors gain a deeper understanding of your product or service. It provides detailed descriptions of your supply chains and explains how your company plans to bring its products or services to market. 

3. Market analysis

The market analysis section outlines your plans to reach your target audience . It usually includes an estimate of the potential demand for the product or service and a summary of market research . 

The market analysis also includes information about marketing strategies, advertising ideas, or other ways of attracting customers. 

Another component of this section is a detailed breakdown of target customers. Many businesses find it helpful to analyze their target market using customer segments , often with demographic data such as age or income. This way, you can customize your marketing plans to reach different groups of customers. 

4. Marketing plan

The marketing plan section details how you plan to attract and retain customers. It covers the marketing mix: product, price, place, and promotion. It shows you understand your market and have clear, measurable goals to guide your marketing strategy.

For example, a fashion retail store might focus on online sales channels, competitive pricing strategies, high-quality products, and aggressive social media promotion.

5. Sales plan

This section focuses on the actions you’ll take to achieve sales targets and drive revenue. It’s different from a marketing plan because it’s more about the direct process of selling the product to your customer. It looks at the methods used from lead generation to closing the sale, as well as revenue targets. 

An ecommerce sales strategy might involve optimizing your online shopping experience, using targeted digital marketing to drive traffic, and employing tactics like flash sales , personalized email marketing, or loyalty programs to boost sales.

6. Competitive analysis

It’s essential that you understand your competitors and distinguish your business. There are two main types of competitors: direct and indirect competitors. 

• Direct competitors. Direct competitors offer the same or similar products and services. For example, the underwear brand Skims is a direct competitor with Spanx .
• Indirect competitors. Indirect competitors, on the other hand, offer different products and services that may satisfy the same customer needs. For example, cable television is an indirect competitor to Netflix.

A competitive analysis explains your business’s unique strengths that give it a competitive advantage over other businesses.

7. Organizational structure

The organizational structure explains your company’s legal structure and provides information about the management team. It also describes the business’s operating plan and details who is responsible for which aspects of the company.

8. Products and services

This component goes in-depth on what you’re actually selling and why it’s valuable to customers. It’ll provide a description of your products and services with all their features, benefits, and unique selling points. It may also discuss the current development stage of your products and plans for the future. 

The products and services section also looks at pricing strategy , intellectual property (IP) rights, and any key supplier information. For example, in an ecommerce business plan focusing on eco-friendly home products, this section would detail the range of products, explain how they are environmentally friendly, outline sourcing and production practices, discuss pricing, and highlight any certifications or eco-labels the products have received.

9. Operating plan

Here is where you explain the day-to-day operations of the business. Your operating plan will cover aspects from production or service delivery to human and resource management. It shows readers how you plan to deliver on your promises. 

For example, in a business plan for a startup selling artisanal crafts, this section would include details on how artisans are sourced, how products are cataloged and stored, the ecommerce platform used for sales, and the logistics for packaging and shipping orders worldwide.

10. Financial plan

The financial plan is one of the most critical parts of the business plan, especially for companies seeking outside funding.

A plan often includes capital expenditure budgets, forecasted income statements , and cash flow statements , which can help predict when your company will become profitable and how it expects to survive in the meantime. 

If your business is already profitable, your financial plan can help with convincing investors of future growth. At the end of the financial section, you may also include a value proposition , which estimates the value of your business.

11. Funding sources

Some businesses planning to expand or to seek funds from venture capitalists may include a section devoted to their long-term growth strategy, including ways to broaden product offerings and penetrate new markets.

12. Appendix

The final component of a business plan is the appendix. Here, you may include additional documents cited in other sections or requested by readers. These might be résumés, financial statements, product pictures, patent approvals, and legal records.

Components of a business plan FAQ

What are 8 common parts of a good business plan.

Some of the most common components of a business plan are an executive summary, a company description, a marketing analysis, a competitive analysis, an organization description, a summary of growth strategies, a financial plan, and an appendix.

What is a business plan format?

A business plan format is a way of structuring a business plan. Shopify offers a free business plan template for startups that you can use to format your business plan.

What are the 5 functions of a business plan?

A business plan explains your company’s products or services, how you expect to make money, the reliability of supply chains, and factors that might affect demand.

Keep up with the latest from Shopify

Get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

By entering your email, you agree to receive marketing emails from Shopify.

popular posts

The point of sale for every sale.

Subscribe to our blog and get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

Unsubscribe anytime. By entering your email, you agree to receive marketing emails from Shopify.

Latest from Shopify

Aug 22, 2024

Learn on the go. Try Shopify for free, and explore all the tools you need to start, run, and grow your business.

Try Shopify for free, no credit card required.

Home > Business > Business Startup

How To Write a Business Plan

We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure .

Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

• Write your executive summary
• Do your market research homework
• Set your business goals and objectives
• Plan your business strategy
• Describe your product or service
• Crunch the numbers
• Finalize your business plan

By signing up I agree to the Terms of Use and Privacy Policy .

Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

• Idea: What’s your business concept? What problem does your business solve? What are your business goals?
• Product: What’s your product/service and how is it different?
• Market: Who’s your audience? How will you reach customers?
• Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

Compare the Top Small-Business Banks

Data effective 1/10/23. At publishing time, rates, fees, and requirements are current but are subject to change. Offers may not be available in all areas.

The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

Related content

• 5 Best Business Plan Software and Tools in 2023 for Your Small Business
• How to Get a Business License: What You Need to Know
• What Is a Cash Flow Statement?

Best Small Business Loans

5202 W Douglas Corrigan Way Salt Lake City, UT 84116

Accounting & Payroll

Point of Sale

Payment Processing

Inventory Management

Human Resources

Other Services

Best Inventory Management Software

Best Small Business Accounting Software

Best Payroll Software

Best Mobile Credit Card Readers

Best POS Systems

Best Tax Software

Stay updated on the latest products and services anytime anywhere.

By signing up, you agree to our Terms of Use  and  Privacy Policy .

Disclaimer: The information featured in this article is based on our best estimates of pricing, package details, contract stipulations, and service available at the time of writing. All information is subject to change. Pricing will vary based on various factors, including, but not limited to, the customer’s location, package chosen, added features and equipment, the purchaser’s credit score, etc. For the most accurate information, please ask your customer service representative. Clarify all fees and contract details before signing a contract or finalizing your purchase.

Our mission is to help consumers make informed purchase decisions. While we strive to keep our reviews as unbiased as possible, we do receive affiliate compensation through some of our links. This can affect which services appear on our site and where we rank them. Our affiliate compensation allows us to maintain an ad-free website and provide a free service to our readers. For more information, please see our  Privacy Policy Page . |

© Business.org 2024 All Rights Reserved.

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

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).

The Balance / Getty Images

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 ."

• Newsletters
• Best Industries
• Business Plans
• Home-Based Business
• The UPS Store
• Customer Service
• Black in Business
• Your Next Move
• Female Founders
• Best Workplaces
• Company Culture
• Public Speaking
• HR/Benefits
• Productivity
• All the Hats
• Digital Transformation
• Artificial Intelligence
• Bringing Innovation to Market
• Cloud Computing
• Social Media
• Data Detectives
• Exit Interview
• Bootstrapping
• Crowdfunding
• Venture Capital
• Business Models
• Personal Finance
• Founder-Friendly Investors
• Upcoming Events
• Inc. 5000 Vision Conference
• Become a Sponsor
• Cox Business
• Verizon Business
• Branded Content
• Apply Inc. 5000 US

Inc. Premium

How to Write the Perfect Business Plan: A Comprehensive Guide

Thinking of starting a business here's the best step-by-step template for writing the perfect business plan when creating your startup..

Maybe you think you don't need a step-by-step guide to writing a great business plan . Maybe you think you don't need a template for writing a business plan. After all, some entrepreneurs succeed without writing a business plan. With great timing, solid business skills, entrepreneurial drive, and a little luck , some founders build thriving businesses without creating even an  informal business plan . 

But the odds are greater that those entrepreneurs will fail.

Does a business plan make startup success inevitable? Absolutely not. But great planning often means the difference between success and failure. Where your entrepreneurial dreams are concerned, you should do everything possible to set the stage for success.

And that's why a great business plan is one that helps you  succeed .

The following is a comprehensive guide to creating a great business plan. We'll start with an overview of key concepts. Then we'll look at each section of a typical business plan:

Executive Summary

Overview and objectives, products and services, market opportunities, sales and marketing.

• Competitive Analysis

Management Team

Financial analysis.

So first let's gain a little perspective on why you need a business plan.

Key Concepts

Many business plans are fantasies. That's because many aspiring entrepreneurs see a business plan as simply a tool--filled with strategies and projections and hyperbole--that will convince lenders or investors the business makes sense.

That's a huge mistake.

First and foremost, your business plan should convince  you  that your idea makes sense--because your time, your money, and your effort are on the line.

So a solid business plan should be a blueprint for a successful business . It should flesh out strategic plans, develop marketing and sales plans, create the foundation for smooth operations, and maybe--just maybe--persuade a lender or investor to jump on board.

For many entrepreneurs, developing a business plan is the first step in the process of deciding whether to actually start a business. Determining if an idea fails on paper can help a prospective founder avoid wasting time and money on a business with no realistic hope of success.

So, at a minimum, your plan should:

• Be as objective and logical as possible. What may have seemed like a good idea for a business can, after some thought and analysis, prove not viable because of heavy competition, insufficient funding, or a nonexistent market. (Sometimes even the best ideas are simply ahead of their time.)
• Serve as a guide to the business's operations for the first months and sometimes years, creating a blueprint for company leaders to follow.
• Communicate the company's purpose and vision, describe management responsibilities, detail personnel requirements, provide an overview of marketing plans, and evaluate current and future competition in the marketplace.
• Create the foundation of a financing proposal for investors and lenders to use to evaluate the company.

A good business plan delves into each of the above categories, but it should also accomplish other objectives. Most of all, a good business plan is  convincing . It proves a case. It provides concrete, factual evidence showing your idea for a business is in fact sound and reasonable and has every chance of success.

Who  must  your business plan convince?

First and foremost, your business plan should convince  you  that your idea for a business is not just a dream but can be a viable reality. Entrepreneurs are by nature confident, positive, can-do people. After you objectively evaluate your capital needs, products or services, competition, marketing plans, and potential to make a profit, you'll have a much better grasp on your chances for success.

And if you're not convinced, fine: Take a step back and refine your ideas and your plans.

Who  can  your business plan convince?

1. Potential sources of financing.   If you need seed money from a bank or friends and relatives, your business plan can help you make a great case. Financial statements can show where you have been. Financial projections describe where you plan to go.

Your business plan shows how you will get there. Lending naturally involves risk, and a great business plan can help lenders understand and quantity that risk, increasing your chances for approval.

2. Potential partners and investors. Where friends and family are concerned, sharing your business plan may not be necessary (although it certainly could help).

Other investors--including angel investors or venture capitalists--generally require a business plan in order to evaluate your business.

3. Skilled employees . When you need to attract talent, you need  something  to show prospective employees since you're still in the startup phase. Early on, your business is more of an idea than a reality, so your business plan can help prospective employees understand your goals--and, more important, their place in helping you achieve those goals.

4. Potential joint ventures. Joint ventures are like partnerships between two companies. A joint venture is a formal agreement to share the work--and share the revenue and profit. As a new company, you will likely be an unknown quantity in your market. Setting up a joint venture with an established partner could make all the difference in getting your business off the ground.

But above all, your business plan should convince  you  that it makes sense to move forward.

As you map out your plan, you may discover issues or challenges you had not anticipated.

Maybe the market isn't as large as you thought. Maybe, after evaluating the competition, you realize your plan to be the low-cost provider isn't feasible since the profit margins will be too low to cover your costs.

Or you might realize the fundamental idea for your business is sound, but how you implement that idea should change. Maybe establishing a storefront for your operation isn't as cost-effective as taking your products directly to customers--not only will your operating costs be lower, but you can charge a premium since you provide additional customer convenience.

Think of it this way. Successful businesses do not remain static. They learn from mistakes, and adapt and react to changes: changes in the economy, the marketplace, their customers, their products and services, etc. Successful businesses identify opportunities and challenges and react accordingly.

Creating a business plan lets you spot opportunities and challenges without risk. Use your plan to dip your toe in the business water. It's the perfect way to review and revise your ideas and concepts before you ever spend a penny.

Many people see writing a business plan as a "necessary evil" required to attract financing or investors. Instead, see your plan as a no-cost way to explore the viability of your potential business and avoid costly mistakes.

Now let's look at the first section of your business plan: The Executive Summary.

The Executive Summary is a brief outline of the company's purpose and goals. While it can be tough to fit on one or two pages, a good Summary includes:

• A brief description of products and services
• A summary of objectives
• A solid description of the market
• A high-level justification for viability (including a quick look at your competition and your competitive advantage)
• A snapshot of growth potential
• An overview of funding requirements

I know that seems like a lot, and that's why it's so important you get it right. The Executive Summary is often the make-or-break section of your business plan.

A great business solves customer problems. If your Summary cannot clearly describe, in one or two pages, how your business will solve a particular problem and make a profit, then it's very possible the opportunity does not exist--or your plan to take advantage of a genuine opportunity is not well developed.

So think of it as a snapshot of your business plan. Don't try to "hype" your business--focus on helping a busy reader get a great feel for what you plan to do, how you plan to do it, and how you will succeed.

Since a business plan should above all help you start and grow your business, your Executive Summary should first and foremost help you do the following.

1. Refine and tighten your concept.

Think of it as a written elevator pitch  (with more detail, of course). Your Summary describes the highlights of your plan, includes only the most critical points, and leaves out less important issues and factors.

As you develop your Summary, you will naturally focus on the issues that contribute most to potential success. If your concept is too fuzzy, too broad, or too complicated, go back and start again. Most great businesses can be described in several sentences, not several pages.

2. Determine your priorities.

Your business plan walks the reader through your plan. What ranks high in terms of importance? Product development? Research? Acquiring the right location? Creating strategic partnerships?

Your Summary can serve as a guide to writing the rest of your plan.

3. Make the rest of the process easy.

Once your Summary is complete, you can use it as an outline for the rest of your plan. Simply flesh out the highlights with more detail.

Then work to accomplish your secondary objective by focusing on your readers. Even though you may be creating a business plan solely for your own purposes, at some point you may decide to seek financing or to bring on other investors, so make sure your Summary meets their needs as well. Work hard to set the stage for the rest of the plan. Let your excitement for your idea and your business shine through.

In short, make readers want to turn the page and keep reading. Just make sure your sizzle meets your steak by providing clear, factual descriptions.

How? The following is how an Executive Summary for a bicycle rental store might read.

Introduction

Blue Mountain Cycle Rentals will offer road and mountain bike rentals in a strategic location directly adjacent to an entrance to the George Washington National Forest. Our primary strategy is to develop Blue Mountain Cycle Rentals as the most convenient and cost-effective rental alternative for the thousands of visitors who flock to the area each year.

Once underway, we will expand our scope and take advantage of high-margin new equipment sales and leverage our existing labor force to sell and service those products. Within three years we intend to create the area's premier destination for cycling enthusiasts.

Company and Management

Blue Mountain Cycle Rentals will be located at 321 Mountain Drive, a location providing extremely high visibility as well as direct entry and exit from a primary national park access road. The owner of the company, Marty Cycle, has over 20 years experience in the bicycle business, having served as a product manager for Acme Cycles as well as the general manager of Epic Cycling.

Because of his extensive industry contacts, initial equipment inventory will be purchased at significant discounts from OEM suppliers as well by sourcing excess inventory from shops around the country.

Because of the somewhat seasonal nature of the business, part-time employees will be hired to handle spikes in demand. Those employees will be attracted through competitive wages as well as discounts products and services.

460,000 people visited the George Washington National Forest during the last 12 months. While the outdoor tourism industry as a whole is flat, the park expects its number of visitors to grow over the next few years.

• The economic outlook indicates fewer VA, WV, NC, and MD cycling enthusiasts will travel outside the region
• The park has added a camping and lodging facilities that should attract an increased number of visitors
• The park has opened up additional areas for trail exploration and construction, ensuring a greater number of single-track options and therefore a greater number of visitors

The market potential inherent in those visitors is substantial. According to third-party research data, approximately 30 percent of all cyclists would rather rent than transport their own bicycles, especially those who are visiting the area for reasons other than cycling.

Competitive Advantages

The cycling shops located in Harrisonburg, VA, are direct and established competitors. Our two primary competitive advantages will be location and lower costs.

Our location is also a key disadvantage where non-park rentals are concerned. We will overcome that issue by establishing a satellite location in Harrisonburg for enthusiasts who wish to rent bicycles to use in town or on other local trails.

We will also use online tools to better engage customers, allowing them to reserve and pay online as well as create individual profiles regarding sizes, preferences, and special needs.

Financial Projections

Blue Mountain Cycle Rentals expects to earn a modest profit by year two based on projected sales. Our projections are based on the following key assumptions:

• Initial growth will be moderate as we establish awareness in the market
• Initial equipment purchases will stay in service for an average of three to four years; after two years we will begin investing in "new" equipment to replace damaged or obsolete equipment
• Marketing costs will not exceed 14 percent of sales
• Residual profits will be reinvested in expanding the product and service line

We project first-year revenue of $720,000 and a 10 percent growth rate for the next two years. Direct cost of sales is projected to average 60 percent of gross sales, including 50 percent for the purchase of equipment and 10 percent for the purchase of ancillary items. Net income is projected to reach $105,000 in year three as sales increase and operations become more efficient.

And so on ...

Keep in mind this is just a made-up example of how your Summary might read. Also keep in mind this example focused on the rental business, so a description of products was not included. (They'll show up later.) If your business will manufacture or sell products, or provide a variety of services, then be sure to include a Products and Services section in your Summary. (In this case the products and services are obvious, so including a specific section would be redundant.)

Bottom line:  Provide some sizzle in your Executive Summary, but make sure you show a reasonable look at the steak, too.

Providing an overview of your business can be tricky, especially when you're still in the planning stages. If you already own an existing business, summarizing your current operation should be relatively easy; it can be a lot harder to explain what you plan to  become .

So start by taking a step back.

Think about what products and services you will provide, how you will provide those items, what you need to have in order to provide those items, exactly who will provide those items, and most important, whom you will provide those items to.

Consider our bicycle rental business example. It's serves retail customers. It has an online component, but the core of the business is based on face-to-face transactions for bike rentals and support.

So you'll need a physical location, bikes, racks and tools and supporting equipment, and other brick-and-mortar related items. You'll need employees  with a very particular set of skills  to serve those customers, and you'll need an operating plan to guide your everyday activities.

Sound like a lot? It boils down to:

• What you will provide
• What you need to run your business
• Who will service your customers, and
• Who your customers are.

In our example, defining the above is fairly simple. You know what you will provide to meet your customer's needs. You will of course need a certain quantity of bikes to service demand, but you will not need a number of different types of bikes. You need a retail location, furnished to meet the demands of your business. You need semi-skilled employees capable of sizing, customizing, and repairing bikes.

And you know your customers: cycling enthusiasts.

In other businesses and industries, answering the above questions can be more difficult. If you open a restaurant, what you plan to serve will in some ways determine your labor needs, the location you choose, the equipment you need to purchase. And, most important, it will help define your customer. Changing any one element may change other elements; if you cannot afford to purchase expensive kitchen equipment, you may need to adapt your menu accordingly. If you hope to attract an upscale clientele, you may need to invest more in purchasing a prime location and creating an appealing ambience.

So where do you start? Focus on the basics first:

• Identify your industry. Retail, wholesale, service, manufacturing, etc. Clearly define your type of business.
• Identify your customer. You cannot market and sell to customers until you know who they are.
• Explain the problem you solve. Successful businesses create customer value by solving problems. In our rental example, one problem is cycling enthusiasts who don't--or can't--travel with bikes. Another problem is casual cyclists who can't--or choose not to--spend significant sums on their own bikes. The rental shop will solve that problem by offering a lower-cost and convenient alternative.
• Show how you will solve that problem. Our rental shop will offer better prices and enhanced services like remote deliveries, off-hours equipment returns, and online reservations.

If you are still stuck, try answering these questions. Some may pertain to you; others may not.

• Who is my average customer? Who am I targeting? (Unless you plan to open a grocery store, you should be unlikely to answer, "Everyone!")
• What pain point do I solve for my customers?
• How will I overcome that paint point?
• Where will I fail to solve a customer problem, and what can I do to overcome that issue? (In our rental example, one problem is a potential lack of convenience; we will overcome that issue by offering online reservations, on-resort deliveries, and drive-up equipment returns.)
• Where will I locate my business?
• What products, services, and equipment do I need to run my business?
• What skills do my employees need, and how many do I need?
• How will I beat my competition?
• How can I differentiate myself from my competition in the eyes of my customers? (You can have a great plan to beat your competition, but you also must win the perception battle among your customers. If customers don't feel you are different, then you aren't truly different. Perception is critical.)

Once you work through this list you will probably end up with a lot more detail than is necessary for your business plan. That is not a problem: Start summarizing the main points. For example, your Business Overview and Objectives section could start something like this:

History and Vision

Blue Mountain Cycle Rentals is a new retail venture that will be located at 321 Mountain Drive, directly adjacent to an extremely popular cycling destination. Our initial goal is to become the premier provider for bicycle rentals. We will then leverage our customer base and position in the market to offer new equipment sales as well as comprehensive maintenance and service, custom equipment fittings, and expert trail advice.

• Achieve the largest market share bicycle rentals in the area
• Generate a net income of $235,000 at the end of the second year of operation
• Minimize rental inventory replacement costs by maintaining a 7 percent attrition rate on existing equipment (industry average is 12 percent)

Keys to Success

• Provide high-quality equipment, sourcing that equipment as inexpensively as possible through existing relationships with equipment manufacturers and other cycling shops
• Use signage to attract visitors traveling to the national forest, highlighting our cost and service advantage
• Create additional customer convenience factors to overcome a perceived lack of convenience for customers planning to ride roads and trails some distance away from our shop
• Develop customer incentive and loyalty programs to leverage customer relationships and create positive word of mouth

You could certainly include more detail in each section; this is simply a quick guide. And if you plan to develop a product or service, you should thoroughly describe the development process as well as the end result.

The key is to describe what you will do for your customers--if you can't, you won't  have  any customers.

In the Products and Services section of your business plan, you will clearly describe--yep--the products and services your business will provide.

Keep in mind that highly detailed or technical descriptions are not necessary and definitely not recommended. Use simple terms and avoid industry buzzwords.

On the other hand, describing how the company's products and services will differ from the competition is critical. So is describing why your products and services are needed if no market currently exists. (For example, before there was Federal Express, overnight delivery was a niche business served by small companies. FedEx had to define the opportunity for a new, large-scale service and justify why customers needed--and would actually  use --that service.)

Patents, copyrights, and trademarks you own or have applied for should also be listed in this section.

Depending on the nature of your business, your Products and Services section could be very long or relatively short. If your business is product-focused, you will want to spend more time describing those products.

If you plan to sell a commodity item and the key to your success lies in, say, competitive pricing, you probably don't need to provide significant product detail. Or if you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market in a more cost-effective way than your competition.

But if you're creating a new product (or service), make sure you thoroughly explain the nature of the product, its uses, and its value, etc.--otherwise your readers will not have enough information to evaluate your business.

Key questions to answer:

• Are products or services in development or existing (and on the market)?
• What is the timeline for bringing new products and services to market?
• What makes your products or services different? Are there competitive advantages compared with offerings from other competitors? Are there competitive disadvantages you will need to overcome? (And if so, how?)
• Is price an issue? Will your operating costs be low enough to allow a reasonable profit margin?
• How will you acquire your products? Are you the manufacturer? Do you assemble products using components provided by others? Do you purchase products from suppliers or wholesalers? If your business takes off, is a steady supply of products available?

In the cycling rental business example we've been using, products and services could be a relatively simple section to complete or it could be fairly involved. It depends on the nature of the products the company plans to rent to customers.

If Blue Mountain Cycling Rentals plans to market itself as a provider of high-end bikes, describing those bikes--and the sources for those bikes--is important, since "high-end cycling rentals" is intended to be a market differentiation. If the company plans to be the low-cost provider, then describing specific brands of equipment is probably not necessary.

Also, keep in mind that if a supplier runs out of capacity--or goes out of business altogether--you may not have a sufficient supply to meet your demand. Plan to set up multiple vendor or supplier relationships, and describe those relationships fully. 

Remember, the primary goal of your business plan is to convince  you  that the business is viable--and to create a road map for you to follow.

The Products and Services section for our cycling rental business could start something like this:

Product Description

Blue Mountain Cycle Rentals will provide a comprehensive line of bicycles and cycling equipment for all ages and levels of ability. Since the typical customer seeks medium-quality equipment and excellent services at competitive prices, we will focus on providing brands like Trek bikes, Shimano footwear, and Giro helmets. These manufacturers have a widespread reputation as mid- to high-level quality, unlike equipment typically found in the rental market.

The following is a breakdown of anticipated rental price points, per day and per week:

• Bicycle $30/$120
• Helmet $6/$30
• Customers can extend the rental term online without visiting the store.
• A grace period of two hours will be applied to all rentals; customers who return equipment within that two-hour period will not be charged an additional fee.

Competition

Blue Mountain Cycle Rentals will have clear advantages over its primary competitors, the bike shops located in Harrisonburg, VA:

• Newer equipment inventory with higher perceived quality
• Price points 15 percent below the competition
• Online renewals offering greater convenience
• A liberal return grace period that will reinforce our reputation as a customer-friendly rental experience

Future Products

Expansion will allow us to move product offerings into new equipment sales. We will also explore maintenance and fitting services, leveraging our existing maintenance staff to provide value-added services at a premium price.

When you draft your Products and Services section, think of your reader as a person who knows little to nothing about your business. Be clear and to the point.

Think of it this way: The Products and Services section answers the "what" question for your business. Make sure you fully understand the "what" factor; you may run the business, but your products and services are its lifeblood.

Market research is critical to business success. A good business plan analyzes and evaluates customer demographics, purchasing habits, buying cycles, and willingness to adopt new products and services.

The process starts with understanding your market and the opportunities inherent in that market. And that means you'll need to do a little research. Before you start a business you must be sure there is a viable market for what you plan to offer.

That process requires asking, and more importantly answering, a number of questions. The more thoroughly you answer the following questions, the better you will understand your market.

Start by evaluating the market at a relatively high level, answering some high-level questions about your market and your industry:

• What is the size of the market? Is it growing, stable, or in decline?
• Is the overall industry growing, stable, or in decline?
• What segment of the market do I plan to target? What demographics and behaviors make up the market I plan to target?
• Is demand for my specific products and services rising or falling?
• Can I differentiate myself from the competition in a way customers will find meaningful? If so, can I differentiate myself in a cost-effective manner?
• What do customers expect to pay for my products and services? Are they considered to be a commodity or to be custom and individualized?

Fortunately, you've already done some of the legwork. You've already defined and mapped out your products and services. The Market Opportunities section provides a sense-check of that analysis, which is particularly important since choosing the right products and services is such a critical factor in business success.

But your analysis should go further: Great products are great, but there still must be a market for those products. (Ferraris are awesome, but you're unlikely to sell many where I live.)

So let's dig deeper and quantify your market. Your goal is to thoroughly understand the characteristics and purchasing ability of potential customers in your market. A little Googling can yield a tremendous amount of data.

For the market you hope to serve, determine:

• Your potential customers. In general terms, potential customers are the people in the market segment you plan to target. Say you sell jet skis; anyone under the age of 16 and over the age of 60 or so is unlikely to be a customer. Plus, again in general terms, women make up a relatively small percentage of jet ski purchasers. Determining the total population for the market is not particularly helpful if your product or service does not serve a need for the entire population. Most products and services do not.
• Total households. In some cases determining the number of total households is important depending on your business. For example, if you sell heating and air conditioning systems, knowing the number of households is more important than simply knowing the total population in your area. While people purchase HVAC systems, "households" consume those systems.
• Median income. Spending ability is important. Does your market area have sufficient spending power to purchase enough of your products and services to enable you to make a profit? Some areas are more affluent than others. Don't assume every city or locality is the same in terms of spending power. A service that is viable in New York City may not be viable in your town.
• Income by demographics. You can also determine income levels by age group, by ethnic group, and by gender. (Again, potential spending power is an important number to quantify.) Senior citizens could very well have a lower income level than males or females age 45 to 55 in the prime of their careers. Or say you plan to sell services to local businesses; in that case, try to determine the amount they currently spend on similar services.

The key is to understand the market in general terms and then to dig deeper to understand whether there are specific segments within that market--the segments you plan to target--that can become customers and support the growth of your business.

Also keep in mind that if you plan to sell products online the global marketplace is incredibly crowded and competitive. Any business can sell a product online and ship that product around the world. Don't simply assume that just because "the bicycle industry is a $62 billion business" (a number I just made up) that you can capture a meaningful percentage of that market.

On the other hand, if you live in an area with 50,000 people and there's only one bicycle shop, you may be able to enter that market and attract a major portion of bicycle customers in your area.

Always remember it's much easier to serve a market you can define and quantify.

After you complete your research you may feel a little overwhelmed. While data is good, and more data is great, sifting through and making sense of too much data can be daunting.

For the purposes of your business plan, narrow your focus and focus on answering these main questions:

• What is your market? Include geographic descriptions, target demographics, and company profiles (if you're B2B). In short: Who are your customers?
• What segment of your market will you focus on? What niche will you attempt to carve out? What percentage of that market do you hope to penetrate and acquire?
• What is the size of your intended market? What is the population and spending habits and levels?
• Why do customers need and why will they be willing to purchase your products and services?
• How will you price your products and services? Will you be the low cost provider or provide value-added services at higher prices?
• Is your market likely to grow? How much? Why?
• How can you increase your market share over time?

The Market Opportunities section for our cycling rental business could start something like this:

Market Summary

Consumer spending on cycling equipment reached $9,250,000 in the states of VA, WV, MD, and NC last year. While we expect sales to rise, for the purposes of performing a conservative analysis we have projected a zero growth rate for the next three years.

In those states 2,500,000 people visited a national forest last year. Our target market includes customers visiting the Shenandoah National Forest; last year 120,000 people visited the area during spring, summer, and fall months.

Over time, however, we do expect equipment rentals and sales to increase as the popularity of cycling continues to rise. In particular we forecast a spike in demand in 2015 since the national road racing championships will be held in Richmond, VA.

Market Trends

Participation and population trends favor our venture:

• Recreational sports in general and both family-oriented and "extreme" sports continue to gain in exposure and popularity.
• Western VA and eastern WV have experienced population growth rates nearly double that of the country as a whole.
• Industry trends show cycling has risen at a more rapid rate than most other recreational activities.

Market Growth

According to the latest studies, recreation spending in our target market has grown by 14 percent per year for the past three years.

In addition, we anticipate greater than industry-norm growth rates for cycling in the area due to the increase in popularity of cycling events like the Alpine Loop Gran Fondo.

Market Needs

Out target market has one basic need: The availability to source bicycle rentals at a competitive price. Our only other competition are the bike shops in Harrisonburg, VA, and our location will give us a competitive advantage over those and other companies who try to serve our market.

You may want to add other categories to this section based on your particular industry.

For example, you might decide to provide information about Market Segments. In our case, the cycling rental business does not require much segmentation. Rentals are typically not broken down into segments like "inexpensive," "midrange," and "high-end." For the most part rental bikes are more of a commodity. (Although you'll notice in our Products and Services section, we decided to provide "high-end" rentals.)

But say you decide to open a clothing store. You could focus on high fashion, or children's clothes, or outdoor wear, or casual--you could segment the market in a number of ways. If that's the case, provide detail on segmentation that supports your plan.

The key is to define your market--and then show how you will serve your market.

Providing great products and services is wonderful, but customers must actually know those products and services exist. That's why marketing plans and strategies are critical to business success. (Duh, right?)

But keep in mind marketing is not just advertising. Marketing--whether advertising, public relations, promotional literature, etc.--is an investment in the growth of your business.

Like any other investment you would make, money spent on marketing must generate a return. (Otherwise why make the investment?) While that return could simply be greater cash flow, good marketing plans result in higher sales and profits.

So don't simply plan to spend money on a variety of advertising efforts. Do your homework and create a smart marketing program .

Here are some of the basic steps involved in creating your marketing plan:

• Focus on your target market. Who are your customers? Who will you target? Who makes the decisions? Determine how you can best reach potential customers.
• Evaluate your competition. Your marketing plan must set you apart from your competition, and you can't stand out unless you  know  your competition. (It's hard to stand out from a crowd if you don't know where the crowd stands.) Know your competitors by gathering information about their products, service, quality, pricing, and advertising campaigns. In marketing terms, what does your competition do that works well? What are their weaknesses? How can you create a marketing plan that highlights the advantages you offer to customers?
• Consider your brand. How customers perceive your business makes a dramatic impact on sales. Your marketing program should consistently reinforce and extend your brand. Before you start to market your business, think about how you want your marketing to reflect on your business and your products and services. Marketing is the face of your to potential customers--make sure you put your best face forward.
• Focus on benefits. What problems do you solve? What benefits do you deliver? Customers don't think in terms of products--they think in terms of benefits and solutions. Your marketing plan should clearly identify benefits customers will receive. Focus on what customers  get  instead of on what you provide. (Take Dominos; theoretically they're in the pizza business, but really they're a delivery business.)
• Focus on differentiation. Your products and services have to stand out from the competition in some way. How will you compete in terms of price, product, or service?

Then focus on providing detail and backup for your marketing plan.

• What is your budget for sales and marketing efforts? 
• How will you determine if your initial marketing efforts are successful? In what ways will you adapt if your initial efforts do not succeed?
• Will you need sales representatives (inside or external) to promote your products?
• Can you set up public relations activities to help market your business?

The Sales and Marketing section for our cycling rental business could start something like this:

Target Market

The target market for Blue Mountain Cycling Rentals is western VA, eastern WV, southwestern MD, and northern NC. While customers in the counties surrounding the George Washington National Forest make up 35 percent of our potential customer base, much of our market travels from outside that geographic area.

Marketing Strategy

Our marketing strategy will focus on three basic initiatives:

• Road signage. Access to the forest is restricted to a few primary entrances, and visitors reach those entrances after traveling on one of several main roadways. Since customers currently rent bicycles in the local town of Harrisonburg, road signage will communicate our value proposition to all potential customers.
• Web initiatives. Our website will attract potential visitors to the resort. We will partner with local businesses that serve our target market to provide discounts and incentives.
• Promotional events. We will hold regular events with professional cyclists, like demonstrations and autograph signings, to bring more customers to the store as well as to extend the athletes' "brand" to our brand.

Pricing Strategy

We will not be the low-cost provider for our target market. Our goal is to provide mid- to high-end equipment. However, we will create web-based loyalty programs to incent customers to set up online profiles and reserve and renew equipment rentals online, and provide discounts for those who do. Over time we will be able to market specifically to those customers.

Just as in the Market Opportunity section, you may want to include a few more categories. For example, if your business involves a commission-compensated sales force, describe your Sales Programs and incentives. If you distribute products to other companies or suppliers and those distribution efforts will impact your overall marketing plans, lay out your Distribution Strategy.

The key is to show you understand your market and you understand how you will reach your market. Marketing and promotions must result in customers--your goal is to thoroughly describe how you will acquire and keep your customers.

Also keep in mind you may want to include examples of marketing materials you have already prepared, like website descriptions, print ads, web-based advertising programs, etc. While you don't need to include samples, taking the time to create actual marketing materials might help you better understand and communicate your marketing plans and objectives.

Make sure your Sales and Marketing section answers the "How will I reach my customers?" question.

Competitive Advantage

The Competitive Analysis section of your business plan is devoted to analyzing your competition--both your current competition and potential competitors who might enter your market.

Every business has competition. Understanding the strengths and weaknesses of your competition--or potential competition--is critical to making sure your business survives and grows. While you don't need to hire a private detective, you do need to thoroughly assess your competition on a regular basis even if you plan to run only a small business.

In fact, small businesses can be especially vulnerable to competition, especially when new companies enter a marketplace.

Competitive analysis can be incredibly complicated and time-consuming, but it doesn't have to be. Here is a simple process you can follow to identify, analyze, and determine the strengths and weaknesses of your competition.

Profile  Current  Competitors

First, develop a basic profile of each of your current competition. For example, if you plan to open an office supply store, you may have three competing stores in your market.

Online retailers will also provide competition, but thoroughly analyzing those companies will be less valuable unless you also decide you want to sell office supplies online. (Although it's also possible that they--or, say, Amazon--are your  real  competition. Only you can determine that.)

To make the process easier, stick to analyzing companies you will directly compete with. If you plan to set up an accounting firm, you will compete with other accounting firms in your area. If you plan to open a clothing store, you will compete with other clothing retailers in your area.

Again, if you run a clothing store, you also compete with online retailers, but there is relatively little you can do about that type of competition other than to work hard to distinguish yourself in other ways: great service, friendly salespeople, convenient hours, truly understanding your customers, etc.

Once you identify your main competitors, answer these questions about each one. And be objective. It's easy to identify weaknesses in your competition, but less easy (and a lot less fun) to recognize how they may be able to outperform you:

• What are their strengths? Price, service, convenience, and extensive inventory are all areas where you may be vulnerable.
• What are their weaknesses? Weaknesses are opportunities you should plan to take advantage of.
• What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
• What marketing strategies do they use? Look at their advertising, public relations, etc.
• How can you take market share away from their business?
• How will they respond when you enter the market?

While these questions may seem like a lot of work to answer, in reality the process should be fairly easy. You should already have a feel for the competition's strengths and weaknesses--if you know your market and your industry.

To gather information, you can also:

• Check out their websites and marketing materials. Most of the information you need about products, services, prices, and company objectives should be readily available. If that information is not available, you may have identified a weakness.
• Visit their locations. Take a look around. Check out sales materials and promotional literature. Have friends stop in or call to ask for information.
• Evaluate their marketing and advertising campaigns. How a company advertises creates a great opportunity to uncover the objectives and strategies of that business. Advertising should help you quickly determine how a company positions itself, who it markets to, and what strategies it employs to reach potential customers.
• Browse. Search the Internet for news, public relations, and other mentions of your competition. Search blogs and Twitter feeds as well as review and recommendation sites. While most of the information you find will be anecdotal and based on the opinion of just a few people, you may at least get a sense of how some consumers perceive your competition. Plus you may also get advance warning about expansion plans, new markets they intend to enter, or changes in management.

Keep in mind competitive analysis does more than help you understand your competition. Competitive analysis can also help you identify changes you should make to  your  business strategies. Learn from competitor strengths, take advantage of competitor's weaknesses, and apply the same analysis to your own business plan.

You might be surprised by what you can learn about your business by evaluating other businesses.

Identify  Potential  Competitors

It can be tough to predict when and where new competitors may pop up. For starters, regularly search for news on your industry, your products, your services, and your target market.

But there are other ways to predict when competition may follow you into a market. Other people may see the same opportunity you see. Think about your business and your industry, and if the following conditions exist, you may face competition does the road:

• The industry enjoys relatively high profit margins
• Entering the market is relatively easy and inexpensive
• The market is growing--the more rapidly it is growing the greater the risk of competition
• Supply and demand is off--supply is low and demand is high
• Very little competition exists, so there is plenty of "room" for others to enter the market

In general terms, if serving your market seems easy you can safely assume competitors will enter your market. A good business plan anticipates and accounts for new competitors.

Now distill what you've learned by answering these questions in your business plan:

• Who are my current competitors? What is their market share? How successful are they?
• What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?
• Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?
• How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?
• What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?
• What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?

The Competitive Analysis section for our cycling rental business could start something like this:

Primary Competitors

Our nearest and only competition is the bike shops in Harrisonburg, VA. Our next closest competitor is located over 100 miles away.

The in-town bike shops will be strong competitors. They are established businesses with excellent reputations. On the other hand, they offer inferior-quality equipment and their location is significantly less convenient.

Secondary Competitors

We do not plan to sell bicycles for at least the first two years of operation. However, sellers of new equipment do indirectly compete with our business since a customer who buys equipment no longer needs to rent equipment.

Later, when we add new equipment sales to our operation, we will face competition from online retailers. We will compete with new equipment retailers through personalized service and targeted marketing to our existing customer base, especially through online initiatives.

Opportunities

• By offering mid- to high-end quality equipment, we provide customers the opportunity to "try out" bikes they may wish to purchase at a later date, providing additional incentive (besides cost savings) to use our service.
• Offering drive-up, express rental return services will be seen as a much more attractive option compared with the hassle of renting bikes in Harrisonburg and transporting them to intended take-off points for rides.
• Online initiatives like online renewals and online reservations enhances customer convenience and positions us as a cutting-edge supplier in a market largely populated, especially in the cycling segment, by customers who tend to be early technology adapters.
• Renting bikes and cycling equipment may be perceived by some of our target market as a commodity transaction. If we do not differentiate ourselves in terms of quality, convenience, and service, we could face additional competition from other entrants to the market.
• One of the bike shops in Harrisonburg is a subsidiary of a larger corporation with significant financial assets. If we, as hoped, carve out a significant market share, the corporation may use those assets to increase service, improve equipment quality, or cut prices.

While your business plan is primarily intended to convince  you  that your business makes sense, keep in mind most investors look closely at your competitive analysis. A common mistake made by entrepreneurs is assuming they will simply "do it better" than any competition.

Experienced businesspeople know you will face stiff competition: showing you understand your competition, understand your strengths and weaknesses relative to that competition, and that you understand you will have to adapt and change based on that competition is critical.

And, even if you do not ever plan to seek financing or bring in investors, you absolutely must know your competition.

The Competitive Analysis section helps you answer the "Against whom?" question.

The next step in creating your business plan is to develop an Operations Plan that will serve your customers, keep your operating costs in line, and ensure profitability . Your ops plan should detail strategies for managing, staffing, manufacturing, fulfillment, inventory--all the stuff involved in operating your business on a day-to-day basis.

Fortunately, most entrepreneurs have a better handle on their operations plan than on any other aspect of their business. After all, while it may not seem natural to analyze your market or your competition, most budding entrepreneurs tend to spend a lot of time thinking about how they will  run  their businesses.

Your goal is to answer the following key questions:

• What facilities, equipment, and supplies do you need?
• What is your organizational structure? Who is responsible for which aspects of the business?
• Is research and development required, either during start up or as an ongoing operation? If so, how will you accomplish this task?
• What are your initial staffing needs? When and how will you add staff?
• How will you establish business relationships with vendors and suppliers? How will those relationships impact your day-to-day operations?
• How will your operations change as the company grows? What steps will you take to cut costs if the company initially does not perform up to expectations?

Operations plans should be highly specific to your industry, your market sector, and your customers. Instead of providing an example like I've done with other sections, use the following to determine the key areas your plan should address:

Location and Facility Management

In terms of location, describe:

• Zoning requirements
• The type of building you need
• The space you need
• Power and utility requirements
• Access: Customers, suppliers, shipping, etc.
• Specialized construction or renovations
• Interior and exterior remodeling and preparation

Daily Operations

• Production methods
• Service methods
• Inventory control
• Sales and customer service
• Receiving and Delivery
• Maintenance, cleaning, and re-stocking
• Licenses and permits
• Environmental or health regulations
• Patents, trademarks, and copyrights

Personnel Requirements

• Typical staffing
• Breakdown of skills required
• Recruiting and retention
• Policies and procedures
• Pay structures
• Anticipated inventory levels
• Turnover rate
• Seasonal fluctuations in demand
• Major suppliers
• Back-up suppliers and contingency plans
• Credit and payment policies

Sound like a lot? It can be, but not all of the above needs to be in your business plan.

You should think through and create a detailed plan for each category, but you won't need to share the results with the people who read your business plan

Working through each issue and developing concrete operations plans helps you in two major ways:

• If you don't plan to seek financing or outside capital, you can still take advantage of creating a comprehensive plan that addresses all of your operational needs.
• If you do seek financing or outside capital, you may not include all the detail in your business plan--but you will have answers to any operations questions at your fingertips.

Think of Operations as the "implementation" section of your business plan. What do you need to do? How will you get it done? Then create an overview of that plan to make sure your milestones and timeline make sense.

That way the operations section answers the "How?" question.

Many investors and lenders feel the quality and experience of the management team is one of the most important factors used to evaluate the potential of a new business.

But putting work into the Management Team section will not only benefit people who may read your plan. It will also help  you  evaluate the skills, experiences, and resources your management team will need . Addressing your company's needs during implementation will make a major impact on your chances for success.

• Who are the key leaders? (If actual people have not been identified, describe the type of people needed.) What are their experiences, educational backgrounds, and skills?
• Do your key leaders have industry experience? If not, what experience do they bring to the business that is applicable?
• What duties will each position perform? (Creating an organization chart might be helpful.) What authority is granted to and what responsibilities are expected in each position?
• What salary levels will be required to attract qualified candidates for each position? What is the salary structure for the company, by position?

The Management Team section for our cycling rental business could start something like this:

Jim Rouleur, Owner and Manager

Joe has over 20 years experience in the cycling business. He served for 10 years as a product manager for Acme Bikes. After that he was the operations manager of Single Track Cycles, a full-service bike shop located in Bend, Oregon. He has an undergraduate degree in marketing from Duke University and an MBA from Virginia Commonwealth University. (A complete resume for Mr. Rouleur can be found in the Appendix.)

Mary Gearset, Assistant Manager

Mary was the 2009 U.S. Mountain Biking National Champion. She worked in product development for High Tec frames, creating custom frames and frame modifications for professional cyclists. She also has extensive customer service and sales experience, having worked for four years as the online manager of Pro Parts Unlimited, an online retailer of high-end cycling equipment and accessories.

In some instances you may also wish to describe your staffing plans.

For example, if you manufacture a product or provide a service and will hire a key skilled employee, describe that employee's credentials. Otherwise, include staffing plans in the Operations section.

One key note: Don't be tempted to add a "name" to your management team in hopes of attracting investors. Celebrity management team members may attract the attention of your readers, but experienced lenders and investors will immediately ask what role that person will actually play in the running of the business--and in most cases those individuals won't play any meaningful role.

If you don't have a lot of experience--but are willing to work hard to overcome that lack of experience--don't be tempted to include people in your plan who will not actually work in the business.

If you can't survive without help, that's okay. In fact, that's expected; no one does anything worthwhile on their own. Just make plans to get help from the  right  people.

Finally, when you create your Management section, focus on credentials but pay extra attention to what each person actually will  do . Experience and reputation are great, but action is everything.

That way your Management section will answer the "Who is in charge?" question.

Numbers tell the story. Bottom line results indicate the success or failure of any business.

Financial projections and estimates help entrepreneurs, lenders, and investors or lenders objectively evaluate a company's potential for success. If a business seeks outside funding, providing comprehensive financial reports and analysis is critical.

But most important, financial projections tell you whether your business has a chance of being viable--and if not let you know you have more work to do.

Most business plans include at least five basic reports or projections:

• Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
• Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
• Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
• Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a "dollars" point of view.
• Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable.

It's easy to find examples of all of the above. Even the most basic accounting software packages include templates and samples. You can also find templates in Excel and Google Docs. (A quick search like "google docs profit and loss statement" yields plenty of examples.)

Or you can work with an accountant to create the necessary financial projections and documents. Certainly feel free to do so, but first play around with the reports yourself. While you don't need to be an accountant to run a business, you do need to understand your numbers, and the best way to understand your numbers is usually to actually work with your numbers.

But ultimately the tools you use to develop your numbers are not as important as whether those numbers are as accurate as possible--and whether those numbers help you decide whether to take the next step and put your business plan into action.

Then Financial Analysis can help you answer the most important business question: "Can we make a profit?"

Some business plans include less essential but potentially important information in an Appendix section. You may decide to include, as backup or additional information:

• Resumes of key leaders
• Additional descriptions of products and services
• Legal agreements
• Organizational charts
• Examples of marketing and advertising collateral
• Photographs of potential facilities, products, etc.
• Backup for market research or competitive analysis
• Additional financial documents or projections

Keep in mind creating an Appendix is usually only necessary if you're seeking financing or hoping to bring in partners or investors. Initially the people reading your business plan don't wish to plow through reams and reams of charts, numbers, and backup information. If one does want to dig deeper, fine--he or she can check out the documents in the Appendix.

That way your business plan can share your story clearly and concisely.

Otherwise, since you created your business plan, you should already have the backup.

Tying It All Together

While you may use your business plan to attract investors, partners, suppliers, etc., never forget that the goal of your business plan is to convince  you  that your idea makes sense. 

Because ultimately it's your time, your money, and your effort on the line.

The Daily Digest for Entrepreneurs and Business Leaders

Privacy Policy

Financial modeling spreadsheets and templates in Excel & Google Sheets

• Your cart is empty.

What are the 12 Components of a Business Plan You Need to Know

Crafting a business plan is a crucial step for any entrepreneur aiming to start or grow a business. This foundational document not only sets the vision and direction for the venture but also provides a structured approach to achieving objectives. A well-thought-out business plan encompasses various elements that collectively form a comprehensive strategy. By understanding and implementing these key components, business owners can ensure they are well-prepared to navigate challenges and seize opportunities as they arise. Moreover, this plan acts as a bridge, communicating your business potential to investors and other stakeholders effectively.

The intricacies of what are the 12 components of a business plan stretch far beyond mere bullet points; each segment serves a distinct purpose in the framework of your business strategy. These components range from the Executive Summary, that encapsulates the essence of the plan, to financial projections that detail the anticipated economic performance. Attention to each part ensures clarity and thoroughness, thereby enhancing the credibility of the business plan. Emphasizing these components helps in identifying any gaps or weaknesses early, enabling proactive adjustments to strengthen the overall business strategy.

Understanding the 12 Components of a Business Plan

Creating a successful business requires a well-structured plan that serves as a roadmap for growth and accountability. The blueprint for this endeavor is composed of 12 essential components, each playing a critical role in guiding a venture towards its goals. By understanding these components, aspiring entrepreneurs can articulate their vision clearly and attract potential investors and partners.

1. Executive Summary

The executive summary is often considered the heart of the business plan. This section condenses the entire plan into a brief overview, providing a concise summary of the objectives and key elements of the venture. It should capture attention and compel the reader to explore further.

2. Company Description

A detailed company description follows the executive summary. This section outlines the business’s history, mission statement, vision, and objectives. When detailing your company, emphasize what sets it apart from competitors and its unique value proposition.

3. Market Analysis

Understanding your market is crucial. A comprehensive market analysis includes research on industry trends, target demographics, and competitive landscape. This data helps in identifying potential customer segments and validates the need for your service or product.

4. Organization and Management

In this component, you present the organizational structure of your business. Clarify who is responsible for what, outlining the management team, their qualifications, and roles within the organization. A clear organizational chart can enhance understanding.

5. Service or Product Line

This section delves into the products or services your business will offer. Describe their benefits, lifecycle, and potential for growth. It’s essential to show how your offerings address specific customer needs and what differentiates them from others in the market.

6. Marketing and Sales Strategy

The marketing and sales strategy outlines how you plan to attract and retain customers. Discuss your branding approach, marketing channels, and sales techniques. Highlight any anticipated challenges and how you intend to overcome them to create a sustainable customer base.

7. Funding Request

If you’re seeking funding, this element is vital. Clearly indicate how much money you need, the purpose of the funds, and the type of funding you are seeking—be it equity, loans , or grants. Make sure to present a well-reasoned case for your request based on solid financial projections.

8. Financial Projections

Financial projections provide an outlook on the expected revenue and expenses over a specific period, often spanning three to five years. Include income statements, cash flow statements, and balance sheets. These documents help reinforce the viability of your business plan to investors.

9. Appendix

The appendix serves as a supplementary section for additional information that enhances your business plan. Include resumes, legal agreements, product images, or any market research data here. This allows readers to delve deeper into specifics if they choose to.

10. Implementation Plan

Your implementation plan outlines actionable steps required to launch and operate your business effectively. It should present a timeline of critical milestones and measurable objectives to track progress, ensuring that the venture remains on course.

11. Exit Strategy

An exit strategy details your plan for the future, whether you intend to sell the business, pass it on to heirs, or close it down. Addressing this component shows potential investors that you have considered long-term sustainability and potential returns on their investment.

12. Risk Assessment

Every business faces risks, and a thoughtful risk assessment identifies potential challenges and their possible impact. Address market fluctuations, competition, and operational risks, and articulate your plans to mitigate these issues. This demonstrates proactive management techniques to investors.

When composing a business plan, integrating these 12 components ensures a comprehensive, detailed, and compelling document. Each section serves a purpose, contributing to the overall narrative of your business and reinforcing your vision. By carefully addressing these elements, entrepreneurs can pave the way for their business’s success and secure the necessary support to fulfill their aspirations.

The Importance of Market Analysis in Business Planning

Effective business planning hinges on numerous crucial factors, but few are as vital as understanding the market landscape. A detailed market analysis empowers entrepreneurs to make informed decisions, mitigate risks, and seize opportunities that may not be immediately apparent. This detailed approach helps ensure that businesses are not only prepared to enter the market but are also strategically aligned with consumer needs and industry trends.

One of the core reasons for conducting a market analysis lies in identifying and understanding target demographics. By gathering demographic data, businesses can delineate their potential customer base, paying attention to factors such as age, gender, income level, and lifestyle. This information is pivotal in shaping marketing strategies and product development.

Analyzing Market Trends

Market analysis also includes scrutinizing current trends and forecasting future developments. Understanding these trends provides a roadmap for businesses, allowing them to adapt their offerings promptly. Consideration of elements such as:

• Consumer behavior
• Technological advancements
• Economic indicators
• Regulatory changes

These factors play a considerable role in shaping market dynamics and influencing business strategies.

Competitive Analysis

Another essential component of market analysis is competitive assessment. Gaining insight into competitors helps businesses ascertain their strengths and weaknesses relative to the market. This competitive analysis involves examining:

• Market share of competitors
• Their pricing strategies
• Their marketing approaches
• Their product or service offerings

By understanding where they stand in comparison to competitors, businesses can position themselves more effectively and discover gaps in the market that they can exploit.

Identifying Opportunities and Risks

Through thorough market analysis, businesses can identify both opportunities and risks. Opportunities might arise from underserved customer needs or niche markets that have not been fully capitalized. Conversely, understanding risks involves being aware of potential challenges that could hinder growth, such as economic downturns, increasing competition, or shifting regulations. Businesses can formulate strategies to mitigate these risks, ensuring their plans are resilient and adaptable.

Setting Realistic Goals

Furthermore, a well-rounded market analysis helps in setting realistic and measurable objectives. Knowledge of market conditions allows businesses to create goals that are attainable based on empirical evidence instead of mere speculation. This data-driven approach ensures that targets are both challenging yet achievable, fostering a culture of accountability and success.

Tailoring Marketing Strategies

With insights gleaned from market analysis, businesses can tailor their marketing strategies to engage effectively with their target audience. This can include selecting the most effective channels for advertising, such as social media, email campaigns, or traditional media. A clear understanding of customer preferences informs the creation of marketing messages that resonate with potential customers, ultimately boosting conversion rates.

Enhancing Product Development

Market analysis also informs product development. By understanding customer needs and preferences, businesses can design products or services that directly cater to market demands. This alignment between product offerings and consumer expectations increases the likelihood of successful market entry and customer satisfaction.

In addition to driving product innovation, a comprehensive market analysis allows businesses to assess pricing strategies accurately. Understanding the perceived value of offerings in the context of competition helps in setting competitive yet profitable pricing structures. This analysis ultimately supports sustainable revenue growth.

Incorporating market analysis into business planning promotes an agile approach. In a rapidly changing business environment, having a finger on the pulse of the market allows companies to pivot quickly when necessary, adapting their strategies to align with evolving trends and consumer preferences. This flexibility is crucial for long-term viability and success.

The importance of market analysis in business planning cannot be overstated. It is a multi-faceted tool that aids in understanding the market landscape, identifying opportunities, minimizing risks, setting realistic goals, and ultimately driving successful business outcomes. By prioritizing a thorough market analysis, businesses can create robust strategies that pave the way for sustained growth and success.

Crafting an Effective Executive Summary

Creating an effective executive summary is a crucial part of any business plan. This section serves as the first impression for your readers, often determining whether they will engage with the rest of your document. A concise and compelling executive summary not only encapsulates key elements of your business plan but also highlights the unique aspects that set your business apart from the competition.

To craft a narrative that is engaging and informative, consider the following components to include:

• Business Overview: Start with a brief description of your business. Clearly state what your company does, the products or services offered, and your target market. This sets the stage for the rest of the summary.
• Mission Statement: Include your mission statement to communicate your core purpose. This should convey the essence of your business and what you aim to achieve in the long term.
• Market Opportunity: Describe the market needs your business addresses. Present any data or insights that demonstrate a clear opportunity for growth, indicating why your business is well-positioned to succeed.
• Business Model: Explain how your business plans to make money. Clearly outline the revenue streams, pricing strategies, and any unique selling propositions that differentiate you from competitors.
• Target Audience: Detail your target audience. Understanding your ideal customer is vital for tailoring your services and marketing strategies effectively.
• Competitive Advantage: Discuss how your business stands out in the marketplace. Highlight any unique skills, technologies, or intellectual property that provides an edge over competitors.
• Financial Projections: Provide an overview of expected revenue and profitability. Use clear, concise figures instead of jargon to make the information easily digestible.
• Funding Requirements: If applicable, outline your funding needs. Specify how much money you are looking to raise, how it will be used, and the expected outcomes from these investments.
• Milestones and Objectives: List critical milestones across the timeline of your business. It could include product launches, partnership agreements, or sales targets that mark your path to success.
• Management Team: Introduce key members of your team. Highlight their experience, qualifications, and roles within the company, demonstrating that you have the right people in place to execute your plan.
• Call to Action: End with a compelling call to action. Encourage readers to take the next step, whether it’s to schedule a meeting or to delve deeper into the complete business plan.

As you compile these elements into your summary, remember to keep it focused and to the point. Ideally, the executive summary should be no longer than one to two pages. Strive for clarity and engage the reader immediately; your writing should possess a natural flow.

When drafting, use active voice to convey confidence and directness. Phrases like “We provide innovative solutions” rather than “Innovative solutions are provided by us” create a stronger sense of ownership and commitment. Furthermore, breaking up lengthy sentences will help maintain the reader’s attention. Short, impactful sentences mirror how people communicate in conversations.

Another essential factor is the tone. Although it’s crucial to maintain a professional demeanor, you should also express enthusiasm for your business. Show potential investors or stakeholders why they should be excited about your company.

Visual elements can also enhance engagement. bullet points, bolding essential terms, or including charts can help your executive summary stand out. Visuals break down complex information, making it more accessible for the reader.

Before finalizing your executive summary, solicit feedback. Share it with colleagues or mentors to get their perspective. A fresh set of eyes can identify areas that might be unclear or unconvincing. Consider their feedback seriously and make revisions accordingly.

Crafting an effective executive summary requires careful thought and consideration. By focusing on the key components outlined, maintaining a clear and engaging style, and utilizing feedback, you can create a summary that captivates and informs your audience. Remember, this is your chance to make a remarkable first impression—so invest the time needed to make it outstanding.

Financial Projections: Building a Sustainable Budget

Building a sustainable budget requires careful planning and financial projections serve as the backbone of that process. Without clear projections, businesses can find themselves floundering as they navigate financial challenges. Understanding how to create reliable financial projections can help businesses not only survive but thrive in competitive environments. Here’s an insightful breakdown of how to approach this important aspect of business planning.

Understanding Financial Projections

Financial projections are essentially estimates of future income and expenses. They help business owners regulate their budgets, make informed decisions, and allocate resources efficiently. These projections typically cover a specific period, often three to five years, and consist of several key components that provide a roadmap for businesses.

The 12 Key Components for Effective Financial Projections

To create a robust financial projection, consider including the following components:

• Sales Forecast: Estimate the expected revenue based on past performance, market trends, and sales strategies. Use data analytics to support your forecasts.
• Expense Forecast: Outline operational costs, including both fixed and variable expenses. Understanding where your money will go is crucial for financial health.
• Cash Flow Projections: Analyze incoming and outgoing cash to anticipate liquidity needs and maintain solvency. This will reveal how much cash is available at any given time.
• Profit and Loss Statement: This projected income statement details expected revenues, costs, and profits over time, providing insights into overall profitability.
• Balance Sheet Forecast: Include projections about the assets, liabilities, and equity of the business to understand its financial position at various points in the future.
• Break-even Analysis: Determine the level of sales needed to cover costs, indicating when the business will start generating profits.
• Sensitivity Analysis: Analyze how changes in key assumptions, like sales volume or cost increases, can impact financial outcomes.
• Funding Requirements: Identify how much capital the business needs, when it will be needed, and possible sources to secure that funding.
• Investment and Capital Expenditure Projections: Outline anticipated investments in long-term assets and how they align with expected revenue growth.
• Assumptions and Methodologies: Clearly state the assumptions behind each projection, including market conditions and business strategies.
• Key Performance Indicators (KPIs): Establish metrics to measure financial health and performance against projections.
• Scenario Planning: Prepare for varying outcomes by developing best-case, worst-case, and expected-case scenarios to ensure flexibility.

Creating the Budget

Once you have gathered all necessary projections, you can start creating a sustainable budget. This involves allocating funds based on your forecasts while regularly revisiting your projections. You might find the following strategies helpful:

• Prioritize Expenses: Categorize essential and non-essential expenses to focus spending on what drives your business forward.
• Incorporate Flexibility: Allow a buffer in your budget for unpredicted costs or changes in market conditions.
• Regular Reviews: Schedule monthly or quarterly reviews of your budget against actual performance to adjust your plans as necessary.
• Use Software Tools: Implement budgeting software to help streamline the planning process and maintain organization.

The Importance of Accurate Data

In crafting financial projections, the quality of your data is key. Utilize reliable sources and incorporate historical data for accuracy. Always validate your numbers through alternative methods, like industry benchmarking. This not only improves the reliability of your projections but also instills trust among stakeholders.

Engaging Professionals

If you’re feeling overwhelmed, don’t hesitate to seek professional assistance. Financial consultants can provide expert insights, ensuring that your projections are realistic and aligned with industry standards. They can help identify potential pitfalls before they become issues, ultimately supporting a sustainable financial future.

By understanding and implementing these components, you create a comprehensive framework for financial projections and budgeting. Doing so helps position your business for sustainable growth and operational stability. Remember, the most effective budgets evolve over time, reflecting the changing dynamics of the market and your business’s unique circumstances.

Target Audience: Defining Your Market Segment

Identifying your target audience is a critical step when launching any business or service. Understanding who will buy your product or use your service allows you to shape your marketing strategies effectively. You can optimize your efforts and resources by tailoring your message to the right individuals or groups.

First, begin with demographic information. This is the basic data that encompasses age, gender, income level, marital status, and education. Gathering this info gives you a foundational understanding of who your audience is. For instance, a luxury spa might target affluent women aged 30-50, while a budget gym could focus on young adults in their 20s. The clearer you define your demographics, the more effectively you can tailor your approach.

Next, delve into psychographics, which offer insights into the values, interests, and lifestyles of your potential customers. These factors go beyond basic demographics and reveal what truly motivates your audience. For example, a company selling eco-friendly products may appeal to consumers who value sustainability and are environmentally conscious. Understanding psychographics allows you to create messages that speak directly to the needs and desires of your audience.

Another valuable aspect to consider is geographic segmentation. The location of your audience can significantly impact their purchasing behavior. A business operating in an urban area may adopt a different strategy than one in a rural setting. For instance, a coffee shop in a city might need to focus on convenience and quick service, while a shop in a quieter town can offer a more relaxed environment. Tailoring your approach based on where your audience lives can enhance engagement and drive sales.

Behavioral segmentation is also crucial. This considers how customers interact with your brand, including purchasing habits, brand loyalty, and usage frequency. By analyzing these behaviors, you can generate insights into how to market your product or service effectively. For example, if consumers frequently purchase a specific item, consider promoting it more prominently in your marketing campaigns to foster loyalty.

To help clarify these concepts, here’s a formatted list that encapsulates key steps for defining your target audience:

• Conduct Market Research: Use surveys, interviews, and focus groups to gather insights directly from potential customers.
• Analyze Existing Customers: Look at your current customer base to identify shared characteristics and preferences.
• Utilize Data Analytics: Make use of web analytics and social media insights to track user behavior and preferences.
• Develop Customer Personas: Create fictional profiles that represent segments of your audience to guide marketing strategies.
• Test and Adapt: Regularly revisit your audience definition as markets and consumer preferences can change.

Also, don’t underestimate the power of competition analysis. Examining who your competitors are targeting can reveal valuable insights. If a competitor targets a similar market segment but offers a slightly different product, you may find an opportunity to differentiate yourself further and capture a unique niche.

As you define your market segment, remember that reaching your target audience effectively involves utilizing the right channels. Whether through social media, email marketing, or traditional advertising, understanding where your audience spends their time helps guide your strategy. Using channels that align with your audience’s preferences boosts engagement and conversion rates.

In addition, it’s essential to stay flexible. As customer preferences and market dynamics change, so should your approach. Regularly collecting feedback allows you to refine your audience definition and marketing strategies continuously. Whether it’s adjusting messaging, changing visuals, or trying new platforms, adaptability can set you apart from rigid competitors.

Defining your target audience is not just about identifying who might buy your product. It’s about understanding them on a deeper level—demographics, psychographics, geographical location, behaviors, and preferences all intertwine to create a picture of your ideal customer. By investing the time and resources to accurately define and continuously adapt your market segment, you position your business for success.

Operational Plan: Structuring Your Business for Success

Building a successful business requires more than just a great idea; it demands a well-structured operational plan that lays out the pathway to achieving your goals. An effective operational plan details the processes, resources, and strategies you’ll employ to ensure your business runs smoothly. It’s a crucial element that aligns your operational activities with your overall strategy. Here’s how you can structure your operational plan to set your business up for success.

Define Your Business Objectives

The first step in creating an operational plan is to define your business objectives clearly. What do you want to achieve in the short and long term? Having concrete objectives will guide every aspect of your operational strategy. Consider using the SMART criteria—Specific, Measurable, Achievable, Relevant, and Time-bound—to formulate your goals.

Identify Key Functional Areas

Your operational plan will span several key functional areas of your business. These typically include:

• Production or Service Delivery
• Marketing and Sales
• Customer Support
• Human Resources
• Finance and Accounting

Identifying these areas helps in allocating resources more effectively and facilitates streamlined operations.

Detail Your Processes

Creating a detailed outline of your business processes is essential. This includes how products will be created or how services will be delivered. Break down your processes into specific steps:

• Input: What materials, resources, or data do you need?
• Activity: What actions will be taken using these inputs?
• Output: What will the final product or service look like?

Having a clear picture of these processes helps to minimize errors and enhance efficiency.

Establish Performance Metrics

To gauge the success of your operational strategies, you need to establish key performance indicators (KPIs). These are measurable values that help you track progress toward your objectives. Consider metrics like:

• Customer satisfaction scores
• Operational costs
• Production times
• Employee turnover rates

Choosing relevant KPIs allows you to make data-driven decisions and adjust strategies as needed.

Resource Allocation

Effective resource allocation is crucial in an operational plan. Identify what resources you need to achieve your objectives, including:

• Financial Investments
• Materials and Supplies

Ensuring that resources are appropriately allocated will minimize waste and maximize outputs.

Create a Timeline

Alongside your budget and resources, create a timeline for implementation. Outline when specific tasks will be completed and who will be responsible for them. This timeline provides accountability, ensuring tasks are completed on schedule.

Risk Management Strategy

Every operational plan must include a risk management component. Identify potential risks that could disrupt operations and create contingency plans to address them. This could involve:

• Insurance covering potential losses
• Backup suppliers for key materials
• Strategies to handle personnel shortages

A strong risk management strategy can save your business from unexpected setbacks.

Regular Review and Updates

Your operational plan should be a living document. Make it a habit to review your operational outcomes regularly. Are your objectives being met? Are adjustments needed in processes, resource allocation, or timelines? Regular updates can ensure your operational plan remains aligned with your business goals.

By following these steps, you can construct an operational plan that not only guides your daily operations but also serves as a compass that points your business toward sustained success. Keep your focus on clear objectives, efficient processes, and strategic planning to turn your vision into reality.

Measuring Success: Key Performance Indicators in Business Plans

In the world of business, the quest for success is often defined by measurable outcomes. Key Performance Indicators (KPIs) serve as critical tools in a business plan, guiding both strategists and stakeholders toward objectives that lead to growth and profitability. By clearly determining what success looks like, companies can effectively track performance and make informed decisions.

KPIs are quantifiable metrics that help businesses assess their progress in achieving specific goals. These indicators can vary widely depending on the industry and the specific aspirations of a business. However, a few essential KPIs consistently stand out as vital components across various sectors.

Defining Financial KPIs

Financial performance is paramount for any business. Key financial KPIs often include:

• Revenue Growth Rate: Measures the increase in a company’s sales over a specified period, indicating market demand.
• Net Profit Margin: This figure shows what percentage of revenue remains after expenses, reflecting overall profitability.
• Operating Cash Flow: A gauge of cash generated from operational activities, providing insight into liquidity and financial health.

Understanding Customer-Centric KPIs

Monitoring customer engagement and satisfaction is crucial for sustainable growth. Consider these essential customer KPIs:

• Customer Retention Rate: Represents the percentage of customers retained over a given period, demonstrating loyalty and satisfaction.
• Net Promoter Score (NPS): Measures customer willingness to recommend a business, indicating overall satisfaction.
• Customer Acquisition Cost (CAC): This metric calculates the cost involved in gaining a new customer, critical for evaluating marketing efficiency.

Operational Efficiency Indicators

To determine how effectively resources are utilized, businesses can leverage operational KPIs. Key metrics include:

• Inventory Turnover: The frequency at which inventory is sold and replaced, indicating efficiency in inventory management.
• Employee Productivity: This can be measured through output per employee or revenue per employee, highlighting workforce effectiveness.
• Service Level Agreement (SLA) Compliance: For service-oriented businesses, tracking the adherence to predefined service standards is essential.

Setting Targets and Benchmarks

Establishing clear targets for each KPI is crucial. Each metric should align with the overall business objectives while considering industry standards. For instance, a startup might aim for a high customer acquisition rate in the early stages, while an established company may focus on enhancing profit margins through operational efficiencies.

Benchmarking your KPIs against competitors or industry standards can help contextualize performance. Understanding where a business stands in relation to its peers can provide valuable insights for improvement.

Regular Monitoring and Analysis

Success in business is not static; it requires continuous assessment and adjustment. Regularly reviewing KPIs allows businesses to adapt their strategies in real-time. For example, if customer acquisition costs are climbing, a company might need to revise its marketing strategy or explore different channels.

Furthermore, incorporating data analytics tools can facilitate deeper insights into KPI trends. Visual representations through dashboards can make complex data more intuitive, enabling quick adjustments and informed decision-making.

The Impact on Strategic Planning

Integrating KPIs into the business planning process solidifies their importance across all organizational levels. From executive to operational roles, every stakeholder can align their efforts toward common objectives. This fosters accountability and drives a performance-oriented culture within the organization.

Ultimately, the use of KPIs in business plans isn’t just about numbers; it’s about creating a narrative around performance and progress. It helps businesses identify strengths and weaknesses, make informed decisions, and ensure long-term success. By focusing on the right indicators, organizations can sustain growth, adapt to market changes, and enhance overall stakeholder satisfaction.

Understanding and measuring success through KPIs is fundamental to any business strategy. By continually evaluating performance against clear metrics, companies can navigate the complexities of the market and achieve their desired outcomes.

Creating a thorough business plan is undeniably a crucial step for any entrepreneur. Each of the 12 components serves as a building block that supports the overall structure of your business strategy. They collectively provide a roadmap, guiding you through the intricate process of establishing and growing your business. By understanding each component, you can ensure that your business plan is not only detailed but also functional and aligned with your goals.

Market analysis stands out as a fundamental aspect of successful business planning. It allows you to gain insights into your competitors and understand the dynamics within your industry. A well-researched market analysis equips you with data that aids in making informed decisions, helping you adapt to market trends and consumer demands. By identifying potential opportunities and risks, you can position your business strategically for success.

The executive summary, often the first section potential investors or partners will read, encapsulates the key highlights of your entire business plan. Crafting an effective summary requires not just a brief overview of your business, but also a compelling narrative that grabs attention. It should effectively communicate your mission, vision, and values while summarizing your financial projections and market analysis. A strong executive summary can set the tone for the rest of the plan, making it imperative to take time perfecting this element.

Financial projections are essential for building a sustainable business budget. They provide a realistic outlook on your anticipated income, expenses, and profit margins over a specified time. Investors and stakeholders often look for solid financial plans that indicate growth potential and profitability. By meticulously forecasting your finances, you create trust in your business acumen while also highlighting your understanding of cash flow management, break-even analysis, and how to handle financial contingencies.

Defining your target audience is another critical component that amplifies your business strategy. By identifying specific market segments, you can tailor your products or services to meet their unique needs and preferences. Understanding who your customers are allows for more effective marketing efforts and better product development. A targeted approach helps in maximizing customer satisfaction and loyalty, which in turn will reflect positively on your bottom line.

The operational plan is the skeleton of your business strategy, showcasing how all the pieces work together. This is where you detail the day-to-day operations, management structure, and the logistics that drive your business forward. An effective operational plan not just outlines what needs to be done but also who will be responsible for each task. This clarity is vital for fostering accountability and ensuring that everyone in your team is aligned towards common objectives.

Measuring success is an ongoing endeavor, and establishing key performance indicators (KPIs) reflects your organization’s commitment to continuous improvement. These metrics allow you to gauge performance across various aspects of your business, aligning them with your strategic goals. Whether it’s sales growth, customer retention rates, or market reach, having specific KPIs set in advance offers a benchmark against which you can measure success, adapt strategies, and make informed decisions.

Each component of your business plan intricately weaves into the others, creating a cohesive strategy that supports long-term objectives. They enable you to stay organized, focused, and adaptable in an ever-changing landscape. The journey of entrepreneurship is filled with challenges and uncertainties, but a detailed business plan rooted in the 12 components can instill confidence in your path forward.

By investing the time and resources into building a comprehensive business plan, you are laying the groundwork for sustainable growth and success. Ultimately, the clarity and direction provided by these carefully devised sections can serve as a catalyst for your business, attracting investment and fostering stakeholder interest. Moving forward, remember that writing a business plan isn’t merely a checkbox activity; it’s an ongoing process that should evolve as your business grows. Engage with your classmates, mentors, and peers, and continually refine your business plan to ensure it remains relevant and strategically sound in navigating your entrepreneurial journey.

Freight Brokerage Financial Model Excel Template

Discover Freight Brokerage Pro Forma Projection. Impress bankers and investors with a proven, strategic business plan that impresses every time.... read more

•   Excel - Multi-User  –  $129.00
•   Excel - Single-User  –  $99.00
•   Free Demo  –  $0.00

Port Operator Financial Model

Port Operator Financial Model presents the business case of an already operating port terminal (with planned refurbishments) and an investment in a ne... read more

•   Excel Model  –  $119.00
•   Free PDF  –  $0.00

Public-Private Partnership (PPP) Financial Model

Financial Model presenting development and operating scenarios of various projects under a Public-Private Partnership (PPP) agreement.

•   Excel Financial Model  –  $119.00 Version 1
•   PDF Free Demo  –  $0.00 Version 1

Airport Financial Model (Development, Operation & Valuation)

Financial Model presenting a development and operating scenario of an Airport under a Public-Private Partnership (PPP) agreement.

•   Excel Financial Model  –  $149.00 Version 1

Project Finance Excel Model – 10 Year Projection

The template creates a financial model for your individual project finance initiative The model is suitable for any type of business / industry Includ... read more

•   Full Version  –  $79.00 Version 3

Leave a Reply Cancel reply

You must be logged in to post a comment.

• Case Studies
• Flexible Products

• Expert Insights
• Research Studies

• Creativity and Culture
• Management and Leadership
• Business Solutions

• Member Spotlight
• Employee Spotlight

How to write a business plan in seven simple steps

When written effectively, a business plan can help raise capital, inform decisions, and draw new talent.

Companies of all sizes have one thing in common: They all began as small businesses.  Starting small  is the corner for those just getting off the ground. Learn about how to make that first hire, deal with all things administrative, and set yourself up for success.

Writing a business plan is often the first step in transforming your business from an idea into something tangible . As you write, your thoughts begin to solidify into strategy, and a path forward starts to emerge. But a business plan is not only the realm of startups; established companies can also benefit from revisiting and rewriting theirs. In any case, the formal documentation can provide the clarity needed to motivate staff , woo investors, or inform future decisions.  

No matter your industry or the size of your team, the task of writing a business plan—a document filled with so much detail and documentation—can feel daunting. Don’t let that stop you, however; there are easy steps to getting started. 

What is a business plan and why does it matter? 

A business plan is a formal document outlining the goals, direction, finances, team, and future planning of your business. It can be geared toward investors, in a bid to raise capital, or used as an internal document to align teams and provide direction. It typically includes extensive market research, competitor analysis, financial documentation, and an overview of your business and marketing strategy. When written effectively, a business plan can help prescribe action and keep business owners on track to meeting business goals. 

Who needs a business plan?

A business plan can be particularly helpful during a company’s initial growth and serve as a guiding force amid the uncertainty, distractions, and at-times rapid developments involved in starting a business . For enterprise companies, a business plan should be a living, breathing document that guides decision-making and facilitates intentional growth.

“You should have a game plan for every major commitment you’ll have, from early-stage founder agreements to onboarding legal professionals,” says Colin Keogh, CEO of the Rapid Foundation—a company that brings technology and training to communities in need—and a WeWork Labs mentor in the UK . “You can’t go out on funding rounds or take part in accelerators without any planning.”

How to make a business plan and seven components every plan needs

While there is no set format for writing a business plan, there are several elements that are typically included. Here’s what’s important to consider when writing your business plan. 

1. Executive summary 

No longer than half a page, the executive summary should briefly introduce your business and describe the purpose of the business plan. Are you writing the plan to attract capital? If so, specify how much money you hope to raise, and how you’re going to repay the loan. If you’re writing the plan to align your team and provide direction, explain at a high level what you hope to achieve with this alignment, as well as the size and state of your existing team.

The executive summary should explain what your business does, and provide an introductory overview of your financial health and major achievements to date.  

2. Company description 

To properly introduce your company, it’s important to also describe the wider industry. What is the financial worth of your market? Are there market trends that will affect the success of your company? What is the state of the industry and its future potential? Use data to support your claims and be sure to include the full gamut of information—both positive and negative—to provide investors and your employees a complete and accurate portrayal of your company’s milieu. 

Go on to describe your company and what it provides your customers. Are you a sole proprietor , LLC, partnership, or corporation? Are you an established company or a budding startup? What does your leadership team look like and how many employees do you have? This section should provide both historical and future context around your business, including its founding story, mission statement , and vision for the future. 

It’s essential to showcase your point of difference in your company description, as well as any advantages you may have in terms of expert talent or leading technology. This is typically one of the first pieces of the plan to be written.

3. Market analysis and opportunity

Research is key in completing a business plan and, ideally, more time should be spent on research and analysis than writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent to the wider market is essential for the success of your business, and these considerations should be described here. 

In addition to this, it’s important to include research into the target demographic of your product or service. This might be in the form of fictional customer personas, or a broader overview of the income, location, age, gender, and buying habits of your existing and potential customers. 

Though the research should be objective, the analysis in this section is a good place to reiterate your point of difference and the ways you plan to capture the market and surpass your competition.

4. Competitive analysis 

Beyond explaining the elements that differentiate you from your competition, it’s important to provide an in-depth analysis of your competitors themselves.

This research should delve into the operations, financials, history, leadership, and distribution channels of your direct and indirect competitors. It should explore the value propositions of these competitors, and explain the ways you can compete with, or exploit, their strengths and weaknesses. 

5. Execution plan: operations, development, management 

This segment provides details around how you’re going to do the work necessary to fulfill this plan. It should include information about your organizational structure and the everyday operations of your team, contractors, and physical and digital assets.

Consider including your company’s organizational chart, as well as more in-depth information on the leadership team: Who are they? What are their backgrounds? What do they bring to the table? Potentially include the résumés of key people on your team. 

For startups, your execution plan should include how long it will take to begin operations, and then how much longer to reach profitability. For established companies, it’s a good idea to outline how long it will take to execute your plan, and the ways in which you will change existing operations.

If applicable, it’s also beneficial to include your strategy for hiring new team members and scaling into different markets. 

6. Marketing plan 

It’s essential to have a comprehensive marketing plan in place as you scale operations or kick off a new strategy—and this should be shared with your stakeholders and employees. This segment of your business plan should show how you’re going to promote your business, attract customers, and retain existing clients.

Include brand messaging, marketing assets, and the timeline and budget for engaging consumers across different channels. Potentially include a marketing SWOT analysis into your strengths, weaknesses, opportunities, and threats. Evaluate the way your competitors market themselves, and how your target audience responds—or doesn’t respond—to these messages.

7. Financial history and projections  

It’s essential to disclose all finances involved in running your company within your business plan. This is so your shareholders properly understand how you’re projected to perform going forward, and the progress you’ve made so far. 

You should include your income statement, which outlines annual net profits or losses; a cash flow statement, which shows how much money you need to launch or scale operations; and a balance sheet that shows financial liabilities and assets. 

“An income statement is the measure of your financial results for a certain period and the most accurate report of business activities during that time, [whereas a balance sheet] presents your assets, liabilities, and equity,” Amit Perry, a corporate finance expert, explained at a WeWork Labs educational session in Israel.

It’s crucial to understand the terms correctly so you know how to present your finances when you’re speaking to investors. Amit Perry, CEO and founder of Perryllion Ltd.

In addition, if you’re asking for funding, you will need to outline exactly how much money you need as well as where this money will go and how you plan to pay it back. 

12 quick tips for writing a business plan 

Now that you know what components are traditionally included in a business plan, it’s time to consider how you’ll actually construct the document.

Here are 12 key factors to keep in mind when writing a business plan. These overarching principles will help you write a business plan that serves its purpose (whatever that may be) and becomes an easy reference in the years ahead. 

1. Don’t be long-winded

Use clear, concise language and avoid jargon. When business plans are too long-winded, they’re less likely to be used as intended and more likely to be forgotten or glazed over by stakeholders. 

2. Show why you care

Let your passion for your business shine through; show employees and investors why you care (and why they should too). 

3. Provide supporting documents

Don’t be afraid to have an extensive list of appendices, including the CVs of team members, built-out customer personas, product demonstrations, and examples of internal or external messaging. 

4. Reference data

All information regarding the market, your competitors, and your customers should reference authoritative and relevant data points.  

5. Research, research, research

The research that goes into your business plan should take you longer than the writing itself. Consider tracking your research as supporting documentation. 

6. Clearly demonstrate your points of difference

At every opportunity, it’s important to drive home the way your product or service differentiates you from your competition and helps solve a problem for your target audience. Don’t shy away from reiterating these differentiating factors throughout the plan. 

7. Be objective in your research

As important as it is to showcase your company and the benefits you provide your customers, it’s also important to be objective in the data and research you reference. Showcase the good and the bad when it comes to market research and your financials; you want your shareholders to know you’ve thought through every possible contingency. 

8. Know the purpose of your plan

It’s important you understand the purpose of your plan before you begin researching and writing. Be clear about whether you’re writing this plan to attract investment, align teams, or provide direction. 

9. Identify your audience

The same way your business plan must have a clearly defined purpose, you must have a clearly defined audience. To whom are you writing? New investors? Current employees? Potential collaborators? Existing shareholders? 

Related articles

10. Avoid jargon

Avoid using industry-specific jargon, unless completely unavoidable, and try making your business plan as easy to understand as possible—for all potential stakeholders. 

11. Don’t be afraid to change it

Your business plan should evolve with your company’s growth, which means your business plan document should evolve as well. Revisit and rework your business plan as needed, and remember the most important factor: having a plan in place, even if it changes.

A business plan shouldn’t just be a line on your to-do list; it should be referenced and used as intended going forward. Keep your business plan close, and use it to inform decisions and guide your team in the years ahead. 

Creating a business plan is an important step in growing your company 

Whether you’re just starting out or running an existing operation, writing an effective business plan can be a key predictor of future success. It can be a foundational document from which you grow and thrive . It can serve as a constant reminder to employees and clients about what you stand for, and the direction in which you’re moving. Or, it can prove to investors that your business, team, and vision are worth their investment. 

No matter the size or stage of your business, WeWork can help you fulfill the objectives outlined in your business plan—and WeWork’s coworking spaces can be a hotbed for finding talent and investors, too. The benefits of coworking spaces include intentionally designed lounges, conference rooms, and private offices that foster connection and bolster creativity, while a global network of professionals allows you to expand your reach and meet new collaborators. 

Using these steps to write a business plan will put you in good stead to not only create a document that fulfills a purpose but one that also helps to more clearly understand your market, competition, point of difference, and plan for the future. 

For more tips on growing teams and building a business, check out all our articles on  Ideas by WeWork.

Caitlin Bishop is a writer for WeWork’s  Ideas by WeWork , based in New York City. Previously, she was a journalist and editor at  Mamamia  in Sydney, Australia, and a contributing reporter at  Gotham Gazette .

Should you send that follow-up? Get your answer by discovering the best practices for pitching to investors.

If you’ve been asking questions like, how will I know when I find a product market fit? How long should I explore before launching? Or what should I initially price my product? These are all questions that founders have asked, and below are the answers from the founders who’ve figured it out.

Tom Hewitson, Chief AI Officer at leading AI training company General Purpose , offers tips for small businesses

Money blog: Stamp duty hike on way; 'worrying' increase in energy bills this year

Welcome to the Money blog, a hub for personal finance and consumer news and tips. Today's posts include reaction to Ofgem announcing an energy price cap increase, as well as a warning over stamp duty. Listen to Ed Conway's analysis of UK borrowing and potential tax rises as you scroll.

Friday 23 August 2024 21:14, UK

• Price cap increase 'worrying', energy secretary says
• Warning £2,500 will be added to stamp duty 'overnight' in March
• Nationwide trumps rivals to offer new lowest mortgage rate

Essential reads

• Savings account that could put your child on strong financial footing at 18
• 'I cook with air fryer in living room after kitchen win went wrong'
• Ed Conway : Are tax rises inevitable - or is chancellor considering another way?
• Listen to Conway on the Daily above and  tap here to follow wherever you enjoy podcasts

Tips and advice

• How to get money back when purchase over £100 goes wrong
• What's the best way to buy travel insurance if I have a medical condition?
• Cheap Eats : Top Yorkshire chef shares Yorkshire pudding secrets

Ask a question or make a comment

By Jimmy Rice, Money blog editor

A lot of people have been scratching their chins and wondering whether the new government might be overstating the economic mess left by the previous regime.

The accusation, from the right, is that a narrative is being built to justify tax rises motivated not by necessity but ideology.

Data that's trickled in over the weeks since Rachel Reeves stepped into Number 11 - GDP growth, inflation remaining low - hasn't always helped the Labour story.

But this week, in the words of data and economics editor Ed Conway , "we had the latest public finances numbers and here the picture is considerably closer to the Reeves version than those other bits of data".

Government borrowing for July overshot expectations - and the consequences for public services and the tax burden in the October budget now look "grim", Conway wrote .

He discussed all of this in an episode of the Daily podcast, which you can listen to here or wherever you enjoy podcasts ...

Despite warning about the budget, Conway's sources suggest another route is still being considered by the chancellor, one that involves changing how the public finances are measured and judged. You can read about this here...

We also learned this week of the timeline for new EU visa rules.

UK citizens will need to pay a €7 visa-waiver charge to travel to Europe from next year. The additional charge, which is similar to the US ESTA, is part of a series of new border checks and entry requirements the EU is bringing in.

They'll apply when entering the Schengen area, which includes EU member states, plus Iceland, Liechtenstein, Norway and Switzerland. 

People under 18 or over 70 will be exempt from the charge - as will those travelling to Ireland or Cyprus.

The waiver will last for three years or until your passport expires.

Its official title is the European Travel Information and Authorisation System (ETIAS), and its implementation will follow the introduction of the EU Entry/Exit System (EES). The latter will require people to have their fingerprints registered and their pictures taken on arrival to airports.

Addressing the rollout, EU home affairs commissioner Ylva Johansson said the EES will enter into operation on ­10 November while the ETIAS will follow shortly after that in 2025 - likely May.

However, it is thought there could be a six-month grace period before the visas become compulsory - taking it to November next year.

On Friday morning, it was confirmed that the energy price cap would rise in October, with another hike expected in January.

"Unfortunately, a volatile wholesale market, and a country heavily reliant on imported energy has created a perfect storm for fluctuating household bills," said Dr Craig Lowrey, principal consultant at Cornwall Insight.

He argued that there may be a case for re-examining the price cap system given it's not protecting households from global energy trends.

A typical annual bill will now be £1,717 from the autumn, with £45 forecast to be added to that in the new year.

Here in Money, we examined football shirt prices as the new Premier League season got under way...

For a fuller understanding of this story, watch this explainer put together by our digital video team...

Three more essential reads from Money that are worth checking out are...

We're signing out of regular updates now until after the bank holiday weekend - but do check out our weekend read from 8am on Saturday. This week we're examining whether the Nike trainers bubble has burst.

Lots of stories we've covered in Money over the last week or so prompted a flurry of comments. We'll start with the multiple updates we've done on Gail's...

Some readers were on board with the backlash but more couldn't see what the fuss was about...

Surprised the faux posh in Walthamstow 'village' would baulk at pricey offerings from Gail's. They already seem quite happy to pay up market prices at their existing Spar store without complaint. Pack of sausages with la-de-da ingredients nearly 6-quid. I ask you! Keith

Most places would be thrilled to have Gail's opening. Their food and bread is excellent as is their coffee, they have very attractive décor and bring a touch of class to any high street. Petalin

We also had a fair few who wondered why we were covering this story at all...

Who or what is Gail? Alangillie

When did Walthamstow become a 'leafy suburb'. Thought it was home to East17? And why does this constitute national news? Shops open and close all the time in areas all over the country. Does one of your editors live there and opposes it? I don't see how this is news at all. City boy

Sometimes our posts prompt questions rather than comments - such as the one below following our feature on Section 75 consumer rights...

I want to buy a car for £7,000 from a dealership. Have I got credit card consumer protection if I pay half cash and half on a credit card? Clive Blackpool

The answer is that, yes, you would be protected - even if you just pay 1p of it on credit card. Everything you need to know is here...

Lots of you got in touch following our Saturday feature on how couples split their finances...

Readers shared how they and their partners split things...

We divide all bills more or less equally. He earns a lot more than I do and keeps his money/savings to himself after 50 years of being together. I have absolutely no idea how much in savings he has and he won't share anything. Yes you are reading this correctly! CP

100% all money going into one account for bills, disposable income etc - we manage it all on one spreadsheet! Never had a disagreement ever after 13 years and we're only 30! Can't ever imagine going for dinner and someone saying 'I'll get this' - how do people do it? abbie s

My partner and I are discussing purchasing a property together. Our rule will be 50% of the mortgage each regardless of income as we are both 50% owners of the asset. Other bills we'll just decide based on income. Adam

I earn a lot more than my partner, so once our relationship was mature enough I put the difference into shared savings. Since having a child all money goes into a joint account except for a small allowance each. Financial equality is so important for a happy relationship. Linda

It's simple. I do not know what my wife earns, she does not know what I earn, we have separate [accounts]. We buy what we need and want, when we go out she pays one time I pay next, we do not even look at the bill. That way you have no problems. Cozy Powell

My partner earns around £60k more than me per year and we split our bills down the middle, however, he buys all the food for us and the pets and generally pays when we go out. I couldn’t ask him for extra, I manage just fine with the current arrangement. LHam

All outgoing were paid from a joint bank account which we paid into from our personal accounts, salary split at the start was roughly 60/40 so I would pay 60% of the total and my wife 40% (plus 10%), any money left in our individual accounts was our own. 58mprl

The post that led to the most consternation this week concerned the hiking of fines for parents taking kids out of school...

You said...

Why are the government not looking at the travel agents? My partner and I both work in a school. We have no children at school but we have to pay extortionate prices for our time away as we have to go in school holidays. Tony

If I choose to take my children out of school to go on holiday, because let's face it parents can save a lot of money when the holiday season is over. I am a single parent with two kids, I'm holding down two jobs. Andy Henderson

As a teacher, I understand the frustration many parents feel about the extortionate prices of holidays. It's disheartening to see families AND teaching staff not being able to afford a holiday. I also understand how difficult it is for a child to catch up on missed work. Mikki

Highly disagree with the term time holiday penalty. There are countries where parents can authorise up to five days of leave per year. A long weekend here and there, or a week-long trip once a year is not going to hinder a child's prospect! TermTimeTravel

Starbucks' incoming chief executive, Brian Niccol, is under fire over the company's offer for him to commute around 1,000 miles by private jet.

Social media users were quick to criticise the world's biggest coffee shop chain over the move in light of its sustainability efforts elsewhere, such as banning plastic straws.

Mr Niccol's job offer said he will not have to relocate to the company's headquarters in Seattle, Washington, from his family home in Newport Beach, California, when he takes up his new role on 9 September.

Read more here...

Storm Lilian is causing disruption to travellers and festival-goers ahead of the bank holiday weekend.

Two stages at Leeds Festival have closed for the day, the BBC Radio 1 Stage and Aux Stage.

British Airways has cancelled 14 flights from Heathrow and delayed others, while two flights from Leeds Bradford Airport were cancelled and three morning arrivals diverted to Liverpool.

The energy price cap increase has led to renewed calls for a winter fuel payment U-turn.

The government plans to means test the payment for pensioners, making it available only to those receiving pension credit.

But Caroline Abrahams, charity director at Age UK, said this was "reckless and wrong" and "spells disaster for pensioners on low and modest incomes" after the latest bad news for energy costs.

Shein found two cases of child labour in its supply chain last year, the fast fashion retailer has said.

The company's 2023 sustainability report, published yesterday, said it suspended orders from the suppliers that had employed children under 16.

Both cases had been "resolved swiftly", it said, with remediation steps including ending underage employees' contracts, arranging medical check-ups, and facilitating repatriation to parents or guardians as necessary.

"We remain vigilant in guarding against such violations going forward, and in line with current policies, will terminate any non-compliant suppliers," Shein said in the report.

Shein has stepped up audits of manufacturers in China to assuage criticisms of its low-cost business model ahead of a planned flotation.

It tightened its supplier policy last October after the child labour cases were found, so that any severe breaches - called "Immediate Termination Violations" - would result in ending the relationship with the supplier immediately.

Previously, suppliers such as those that employed minors had 30 days to resolve the issue, failing which Shein would cut ties.

It's time to check if you have any Tesco Clubcard vouchers close to expiring, as £14m worth are due to run out on Saturday.

Vouchers are only valid for two years from the date they were issued, so it's worth making sure you don't have any hidden away in your account.

To check online, go to the Tesco Clubcard website and select "Clubcard account" and then "Vouchers". 

 You should then be able to see a table listing your available vouchers and their expiry dates.

If you're using the Tesco app, open it up, go to "Clubcard" and then to the "Vouchers" section.

What to do with your vouchers?

You can spend your hard-earned vouchers either online or in person. 

Alternatively, you can double the value of your vouchers by spending them at Tesco's reward partners , including Disney+, RAC and Zizzi.

By James Sillars , business reporter

It's a tentative start to the day's trading on financial markets with the focus firmly on the United States. Jackson Hole in Wyoming, to be exact.

That is where the chair of the US central bank will make an eagerly anticipated speech in which he is widely expected to signal that the first interest rate cut by the Federal Reserve will come next month.

Jay Powell is, however, expected to temper market expectations for several rate cuts by the end of the year.

That could hamper recent progress against the US currency by the pound, which is currently trading at one-year highs versus the dollar at $1.31.

It could also hurt a rate-sensitive stock market, which is desperate for lower borrowing costs.

As such, the FTSE 100 is trading 0.2% up in early deals at 8,304.

Miners and energy stocks are leading the way on upticks in prices.

Brent crude oil stands at $77 a barrel.

The energy price cap limits what utility companies can charge customers for a daily standing charge and each kilowatt-hour of gas and electricity they use.

Regulator Ofgem releases the cap quarterly and estimates how much the average household would typically pay over a year at the new unit price.

This figure, £1,717, assumes a household with 2.4 people living in it consuming 2,700 kWh for electricity and 11,500 kWh for gas.

The real annual cost per customer will be different depending on how much energy you actually use. If you use more gas and electric than £1,717 buys, you will pay more.

With prices fluctuating significantly at each quarterly release over the last four years, the use of a yearly figure is also quite an imperfect basis for medium-term household budgeting.

Here's what is actually capped: 

• Each unit of electricity: 24.5p per kWh (up from 22.36p)
• Each unit of gas: 6.24p per kWh (up from 5.48p)
• Electric standing charge: 60.99p (up from 60.12p)
• Gas standing charge: 31.66p (up from 31.41p)

Ofgem's price cap only applies to people in England, Scotland and Wales on standard variable or default tariffs.

This is most households, whether you pay by direct debit or a prepayment meter.

It doesn't apply to the small numbers of people still on fixed-rate tariffs.

Another quarter, another energy price fluctuation to contend with - another change to make to your household budget.

But there are fixed deals available cheaper than the new price cap, according to Uswitch.

The average household can save £125 against October's price cap with the cheapest 12-month fixed tariff, said Richard Neudegg, director of regulation at Uswitch.

At £1,592 typically per anum, it would also stave off another small increase expected in January, he said. 

It is worth pointing out that it is in Uswitch's favour for people to move, and a fixed tariff could always end up costing you more if the price cap were to drop below that fixed rate in April and June next year.

"Customers staring down the barrel of winter might question whether the current price cap system is really the best way to put real pricing pressure on suppliers," said Mr Neudegg.

"It's important for households looking for certainty to run a comparison to see what's available to them and see personalised prices based on how much energy they are likely to use."

Here are the top 10 fixed energy-only tariffs that could help you beat the price rise, according to Uswitch:

Pensioners are being urged to check if they are eligible for the winter fuel allowance after universal payments were scrapped by new Chancellor Rachel Reeves last month.

Previously, the money was available to everyone above state pension age, but now it will be limited to people over state pension age who are receiving pension credit or other means-tested support.

It means the number of people entitled to the money will drop from 11.4 million to just 1.5 million.

The payment is £200 for households where the recipients are all under 80, and £300 where they are over 80.

While around 1.4 million pensioners are already receiving pension credit, there are up to an estimated 880,000 households eligible for the support who are yet to claim, the Department for Work and Pensions says.

The government's awareness drive will help identify households not claiming the benefit, and encourage pensioners to apply by 21 December - the last date for making a backdated claim for pension credit in order to receive the Winter Fuel Payment.

It will focus on "myths" that may stop people applying, such as how having savings, a pension or owning a home are not necessarily barriers to receiving pension credit.

More information on applying for pension credit can be found on the  government's How to Claim page .

Stockbroker AJ Bell says a price rise at the start of colder months is the "exact scenario" British households hoped was behind them - particularly pensioners.

Combined with the effects of two years of high inflation, residents are set to spend another winter watching "thermostats like a hawk", said head of financial analysis Danni Hewson.

Many pensioners, in particular, have already tried all the tricks available to keep bills down and will be left merely hoping temperatures stay mild, she added.

"For many people having to find an extra £149 a year will be akin to pouring fresh salt on healing wounds," Ms Hewson said.

"For around 10 million older people who are also faced with having to make do without their winter fuel payments, it adds insult to injury. 

"Some pensioners will be able to manage, but others will find the winter months particularly tough."

Energy costs will be £117 below those last Autumn, but will still be £675 higher than October 2020.

Be the first to get Breaking News

Install the Sky News app for free