how important is a business plan to an entrepreneur

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

• 3. Having a business plan minimizes your risk

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

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

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

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• 4. Crafts a roadmap to achieve important milestones

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

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

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

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

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

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

You need to verify:

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

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

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

6. You’ll make big spending decisions with confidence

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

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

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

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

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

• 8. Position your brand against the competition

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

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

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

• 9. Determines financial needs and revenue models

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

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

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

• 10. Helps you think through your marketing strategy

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

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

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

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

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

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

• 12. Future-proof your business

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

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

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

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

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

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

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

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

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

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

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

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• Writing your business plan

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

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

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

Table of Contents

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

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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.

What Is a Business Plan?

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

Key Takeaways

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

Investopedia / Ryan Oakley

Understanding Business Plans

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

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

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

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

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

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

How to Write a Business Plan

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.

Common Elements of a Business Plan

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

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

What Does a Lean Startup Business Plan Include?

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

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

The Bottom Line

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

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

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

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The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

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.

How to make a business plan

Table of Contents

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]

Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

You're all set!

Click this link to access this resource at any time.

Free Business Plan [Template]

Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

• Business Plan Subtitle
• Executive Summary
• Company Description
• The Business Opportunity
• Competitive Analysis
• Target Market
• Marketing Plan
• Financial Summary
• Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

• Startup Business Plan
• Feasibility Business Plan
• Internal Business Plan
• Strategic Business Plan
• Business Acquisition Plan
• Business Repositioning Plan
• Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

• A detailed product description
• Market analysis
• Technology needs
• Production needs
• Financial sources
• Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

• Department-specific budgets
• Target demographic analysis
• Market size and share of voice analysis
• Action plans
• Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

• Relevant data and analysis
• Assessments of company resources
• Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

• How an acquisition will change its operating model
• What will stay the same under new ownership
• Why things will change or stay the same
• Acquisition planning documentation
• Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

• What the new owner will do to turn the business around
• Historic business metrics
• Sales projections after the acquisition
• Justification for those projections

6. Business Repositioning Plan

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

• Acknowledge the current state of the company.
• State a vision for the future of the company.
• Explain why the business needs to reposition itself.
• Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

• SWOT analysis
• Growth opportunity studies
• Financial goals and plans
• Marketing plans
• Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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Importance of Business Plan to an Entrepreneur – A business plan is an essential road map that entrepreneurs use to navigate the difficult process of starting and expanding a profitable firm. It performs as a strategic instrument for outlining the goals. Also, serve as a financial prediction of a company.

Whether you’re just starting or an experienced entrepreneur looking to sharpen your strategies, this guide will provide you with the knowledge and instructions you need to harness the power of a well-structured business plan.

Importance of a Business Plan to an Entrepreneurs

A strong business plan’s importance cannot be overstated since it provides entrepreneurs with a comprehensive framework for making decisions, attracting investors , securing funding, and navigating the dynamic business world. This article will cover the significance of a business plan. Also, offer practical guidance on how entrepreneurs can utilize it to advance their ventures. Let’s discuss what are the importance of a business plan to an entrepreneur.

A Business Plan Provides a Roadmap for a Business

A business plan may be compared to a road map that directs businesses toward commercial success. It acts as a strategy document that explains the objectives, strategies, and activities necessary to establish and expand a successful company. A business plan offers entrepreneurs a clear path to follow to accomplish their business goals. It is just like a roadmap that aids travelers in navigating new roads and arriving at their destination.

Picture you are going on a road trip to a dream destination. Before setting off, you would carefully plan your route, mark critical milestones, estimate travel time, and consider alternative paths in case of detours. Similarly, a business plan helps entrepreneurs chart their course by defining their vision, identifying target markets, assessing competition, setting financial goals, and mapping out strategies to overcome challenges.

Read – Can Anyone Be an Entrepreneur

Helps Entrepreneurs to Define Their Objectives

A business plan is a valuable tool that helps entrepreneurs in defining their objectives clearly. It offers business owners a well-organized framework for expressing their vision and establishing clear objectives. Entrepreneurs that go through the process of writing a business plan find clarity and concentration in their goals.

Imagine that an entrepreneur wishes to launch a sustainable clothing line. They would specify their goals through the business planning process, such as advancing ethical fashion, minimizing environmental effects, and making a good social impact. The business plan would outline these objectives and establish strategies and action steps to align the business activities with these goals.

Defined objectives in a business plan help entrepreneurs think critically, establish purpose, and guide decision-making. By setting SMART objectives, entrepreneurs can track performance, evaluate strategies, and make necessary adjustments to achieve desired outcomes. For example, an e-commerce business can increase online sales by 50% within a year, allowing regular monitoring, analysis, and adjustments to achieve its target.

Importance of Entrepreneurs to Identifying Their Target Market

When determining the target market for their goods or services, businesses place a lot of weight on their business plans. A business plan aids entrepreneurs in comprehending their potential clients, their demands, and their preferences by doing in-depth market research and analysis. This knowledge is essential for creating efficient marketing plans and modifying the company’s product offerings to satisfy the needs of the target market.

Let’s use the example of an entrepreneur who wants to launch a line of fitness clothes to demonstrate the significance of this. They would do market research as part of the process of writing a business plan to pinpoint their target consumers, such as fitness fanatics, gym visitors, or athletes. The business plan would include insightful information on the target market’s demographics, hobbies, and purchase patterns. With this knowledge, the business owner may carefully coordinate their product offering, price, and marketing messaging to appeal to the determined target demographic.

Entrepreneurs may focus on the appropriate audience, avoid one-size-fits-all techniques, and customize their products, services, and marketing strategies to their consumers’ needs by determining their target market. This aids in comprehending the competitive landscape, spotting gaps, and creating distinctive value propositions that appeal to the target market.

Read – Qualities of a Good Businessman

Helps Entrepreneurs to Assesses Competition

A business plan is a valuable tool that helps entrepreneurs assess their competition and gain a deeper understanding of the market landscape in which they operate. By following a structured approach, a business plan guides entrepreneurs on how to effectively analyze and evaluate their competitors.

A business plan helps entrepreneurs identify their key competitors by conducting research and gathering information about their products or services, pricing strategies, target market, marketing tactics, distribution channels, and customer reviews. This helps entrepreneurs understand their unique selling points and position themselves in the market. Entrepreneurs can compare their strengths and weaknesses to those of their competitors, identifying areas for differentiation. They also analyze market demand and customer preferences to identify gaps or underserved segments, tailoring their products or services to cater to these needs. A business plan guides entrepreneurs in positioning themselves against their competition, developing a unique value proposition that resonates with the target market. This roadmap helps entrepreneurs stay agile and adapt their strategies accordingly.

Importance to Evaluate Feasibility

When assessing the viability of their business idea, entrepreneurs must give the highest priority to their business plans. It acts as a helpful road map for business owners as they determine whether their idea is workable and has the potential to succeed.

Entrepreneurs should undertake in-depth market research and analysis, create financial predictions, perform a SWOT analysis, examine operational factors, and seek professional guidance to determine whether a company strategy is feasible. These steps help determine the feasibility of the business idea, identify potential blind spots, and develop contingency plans. By addressing factors such as resource availability, skills, expertise, infrastructure requirements, and operational processes, entrepreneurs can develop contingency plans and strategies to mitigate risks and ensure the venture’s success.

Read – Benefits of Being an Entrepreneur

Importance of Entrepreneurs to Attract Investors

A business plan holds immense importance for entrepreneurs when it comes to attracting investors to support their venture. A well-crafted business plan serves as a persuasive tool that demonstrates the potential of the business and convinces investors to provide financial backing.

To attract investors, entrepreneurs should create a compelling executive summary, detailed business description, market analysis, competitive advantage, financial projections, marketing and sales strategy, management team, risk assessment and mitigation, and clear exit strategy. These elements help investors understand the business’s growth potential, market potential, and competitive advantage.

Helps Entrepreneurs to Secures Their Funding

A business plan is essential for assisting entrepreneurs in obtaining finance for their projects. It acts as a roadmap that details the company’s potential, financial estimates, and growth plans. Entrepreneurs should write a succinct executive summary, thorough business description, market and competitive analysis, financial projections, funding requirements, marketing and sales strategy, management team, risk assessment, and mitigation, and supporting documents to obtain funding through a business plan.

These elements help investors and lenders understand the business’s unique value proposition, target market, revenue potential, and funding requirements. By presenting realistic financial projections, well-supported financial projections, and a well-thought-out marketing and sales strategy, entrepreneurs can secure funding and attract investors and lenders.

Read – Common Myths about Entrepreneurs

Business Plan Guides Entrepreneurs to Resource Allocation

A business plan serves as a valuable tool that guides entrepreneurs in allocating their resources effectively. It provides a clear roadmap for resource allocation by outlining the key areas of the business that require attention and investment.

To effectively allocate resources in a business plan, entrepreneurs should identify resource needs, set priorities, allocate financial resources based on projections and budget, allocate human resources based on skills and expertise, optimize time management, monitor and adjust resource allocation, seek efficiency and optimization, and regularly review and update the plan to reflect changes in resource needs. By doing so, entrepreneurs can optimize their resources and maximize the value derived from available resources. Regularly reviewing and updating the business plan ensures that resources are allocated effectively and efficiently.

Importance to Facilitate Decision-Making

A business plan holds great importance for entrepreneurs in facilitating effective decision-making throughout their entrepreneurial journey. It provides a framework that helps entrepreneurs make informed decisions by considering various factors and evaluating potential outcomes.

To effectively use a business plan for decision-making, entrepreneurs should define goals and objectives, gather relevant information, evaluate alternatives, consider financial implications, analyze risks and mitigation strategies, seek input from experts, regularly review and update the plan, and trust intuition and vision. This balances analytical thinking with an entrepreneurial instinct, ensuring long-term sustainability and informed decisions.

Read – Entrepreneur Mindset Books

Identifies Risks and Mitigation Strategies

A business plan plays a vital role in helping entrepreneurs identify risks and develop effective mitigation strategies. By carefully considering potential challenges and uncertainties, entrepreneurs can proactively address them and minimize their impact on the business.

To identify risks and develop mitigation strategies in a business plan, conduct a comprehensive risk assessment, analyze the impact and likelihood of risks, and develop specific strategies. Allocate resources, including financial, personnel, and time, to support the implementation of these strategies. Regularly monitor and update the business plan, seeking external expertise or consulting with industry professionals to gain insights. Communicate the identified risks and mitigation strategies clearly to stakeholders, including investors, lenders, and partners, to demonstrate professionalism and confidence in the business.

Importance of Entrepreneurs to Assists in Team Building

A business plan holds great importance for entrepreneurs in assisting them with team building, as it provides a clear framework for recruiting, developing, and managing their team effectively.

Entrepreneurs can use a business plan to aid in team building by defining roles and responsibilities, establishing recruitment criteria, developing a training and development plan, fostering a collaborative culture, setting performance goals and metrics, regularly evaluating and providing feedback, and fostering leadership and empowerment. These steps help attract and select the right individuals, align with the business plan’s objectives, and promote a supportive environment for innovation and creativity.

Read – Entrepreneurship Books for Students

Business Plan Supports Marketing and Sales Efforts

A business plan holds significant importance in supporting marketing and sales efforts for entrepreneurs. It provides a strategic roadmap for effectively promoting products or services and attracting customers. A business plan helps understand the target market, define the unique selling proposition (USP), develop marketing strategies, allocate budgets, monitor and measure results, and adapt and evolve.

By conducting thorough market research, defining the USP, and focusing on channels and tactics, entrepreneurs can effectively reach and engage their target audience. Regularly updating the business plan to reflect market trends and competitors can help entrepreneurs stay competitive and adapt their strategies accordingly.

Guides Product or Service Development

A business plan is essential for directing entrepreneurs as they create their goods or services. It offers a methodical way to determine consumer demands, specify product characteristics, and create a schedule for product development.

A business plan can guide product or service development by identifying customer needs, defining product or service features, setting development milestones, determining resource requirements, conducting testing and iteration, and integrating marketing and launch strategies. This helps entrepreneurs stay focused, track progress, and ensure the timely completion of activities. The plan should also outline the necessary funding, collaborations, and resources needed for the development process. By incorporating continuous improvement and iterative development, entrepreneurs can create a high-quality offering that meets or exceeds customer expectations.

Read – Green Innovation

Importance of Entrepreneurs to Manage Finances Effectively

A business plan holds great importance for entrepreneurs when it comes to managing finances effectively. It offers a thorough foundation for comprehending the financial facets of the firm and aids business owners in making defensible choices to maximize financial resources.

Entrepreneurs should construct a financial overview, define financial goals and objectives, develop a budget, track financial performance, plan for managing cash flow, and seek expert financial assistance to manage their money efficiently. This helps entrepreneurs forecast future financial needs, allocate resources effectively, and identify potential issues early on. By implementing these strategies, entrepreneurs can ensure the sustainability of their businesses and make informed decisions about their financial future.

Business Plan Measures Progress and Success

A business plan holds significant importance for entrepreneurs in measuring their progress and success. They may compare their accomplishments to it as a standard to see if they are progressing in the correct path.

Establish Key Performance Indicators (KPIs) that are in line with the goals of the business’s plan to successfully measure the growth and success of entrepreneurs. Regularly track and monitor KPIs to assess progress and make informed decisions. Conduct periodic reviews to evaluate progress against the plan, identify areas for adjustments or course corrections, and celebrate milestones and successes. Continuously update and evolve the business plan to reflect evolving goals, strategies, and market conditions.

Read – Difference Between Entrepreneur and Intrapreneur

Business Plan Importance to Enhance Credibility

A business plan plays a crucial role in enhancing the credibility of entrepreneurs and their ventures. It demonstrates to stakeholders, including potential investors, lenders, partners, and even customers, that entrepreneurs have a well-thought-out and strategic approach to their business.

To enhance entrepreneurs’ credibility, a well-presented business plan should present a professional image, conduct thorough market research, highlight the unique selling proposition, provide detailed financial projections, incorporate risk analysis and mitigation strategies, seek third-party validation, and regularly update and refine the plan. This shows credibility and commitment to continuous improvement, demonstrating the business’s ability to adapt and thrive in the ever-changing landscape.

Business Plan Provides a Basis for Partnerships

When forming partnerships, entrepreneurs place a lot of weight on their business plans. It offers a strong platform for prospective partners to comprehend the company. Also, its objectives, and the value it brings.

To successfully attract and establish partnerships, entrepreneurs should clearly define their business, highlight their target customers, market opportunities, and competitive advantages, outline partnership opportunities, develop partnership plans, and use the business plan as a communication tool. This aids potential partners in comprehending the goals and potential of the company as well as the growth potential of the market. Entrepreneurs may successfully convey their vision, ambitions, and potential to potential partners by emphasizing the advantages of collaboration, promoting development and success for both parties.

Read – Imitative Entrepreneurship

Importance of Entrepreneurs to Do Business Expansion

A business plan plays a crucial role for entrepreneurs when it comes to business expansion. It provides a strategic framework and guidance for expanding operations, entering new markets, or launching new products or services.

Entrepreneurs can use a business plan to facilitate expansion by evaluating current performance, defining expansion goals and objectives, conducting market research, developing a strategic expansion plan, assessing financial requirements, monitoring and adjusting the plan as needed, and continuously monitoring and adjusting the plan to ensure success. This approach helps businesses navigate market dynamics, identify strengths and weaknesses, and adapt to unforeseen challenges or opportunities.

Guides Entrepreneurs to Succession Planning

A business plan is of significant importance when it comes to guiding entrepreneurs in succession planning, which involves preparing for the future transition of leadership and ownership within a business.

To effectively use a business plan for succession planning, assess current leadership and ownership, identify potential successors, define succession goals and timeline, develop a succession plan, communicate with stakeholders, and regularly review and update the plan. This process ensures alignment with the long-term vision and aspirations of the business and its stakeholders. Regularly assess the progress of potential successors and provide development opportunities to enhance their skills and knowledge.

Importance to Increases Self-Awareness

A business plan is crucial for entrepreneurs because it may help them become more self-aware and better grasp their advantages, disadvantages, and possibilities for growth.

Entrepreneurs should consider their objectives and values, perform a SWOT analysis, create reasonable company goals, ask for criticism and mentoring, constantly evaluate their success, and change to improve their self-awareness. By identifying strengths, weaknesses, opportunities, and threats, entrepreneurs can create a clear vision and align their business plans with their values. By seeking feedback and mentoring, entrepreneurs can develop a stronger self-awareness and improve their business strategies.

An effective business plan is a crucial tool for entrepreneurs . It gives them a path to success. A successful business plan may help entrepreneurs define clear goals. Also, identify their target market, analyze the competition, determine whether their idea is feasible, draw in investors, manage funds, and track their progress. It functions as a manual to assist business owners make wise decisions, manage resources effectively, and adjust to changing conditions.

A solid business plan is crucial for entrepreneurs to navigate the complex commercial world, guiding their companies toward expansion, profitability, and long-term success. It should be evaluated and revised regularly to reflect company demands, serving as a compass for entrepreneurs.

FAQ about the Importance of Business Plans to Entrepreneurs

Why is a business plan important.

Because it gives business owners a clear road map for their venture, a business plan is crucial. It aids in establishing goals, locating target markets, evaluating rivalry, obtaining finance, and coming to wise conclusions. Describing their vision and plans, it functions as a strategic instrument that leads business owners toward success.

When is the Best Time to Write a Business Plan?

Typically, before launching a new firm. It is the ideal time to draft a business plan. Likewise, when a current firm is expected to undergo significant adjustments. Be sure you have a solid strategy in place before approaching investors, looking for finance. Especially, starting a business. Making a business plan, though, is never too late, and you can always change it as your company grows.

What is a Business Plan’s Main Objective?

A business plan’s main objective is to outline an organization’s goals, strategies, and financial predictions. It helps business owners communicate their vision, pinpoint their target market, assess the profitability of their endeavor, entice investors, and allocate their resources effectively. It serves as a compass for monitoring growth and making adjustments as needed.

What are the Typical Challenges of Writing a Business Plan?

Entrepreneurs face hurdles while drafting a business plan, such as limited time and resources, writing skills, market research, financial predictions, and strategic planning. The complexity of the process may be increased by using accurate market data, reasonable estimates, strategic planning, clear writing, and managing other elements of the firm.

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A business journal from the Wharton School of the University of Pennsylvania

Knowledge at Wharton Podcast

How entrepreneurs can create effective business plans, march 2, 2010 • 16 min listen.

When an entrepreneur has identified a potential business opportunity, the next step is developing a business plan for the new venture. What exactly should the new plan contain? How can the entrepreneur ensure it has the substance to find interest among would-be investors? In this installment of a series of podcasts for the Wharton-CERT Business Plan Competition, Wharton management professor Ian MacMillan explains that business plans must contain several crucial elements: They must articulate a market need; identify products or services to fill that need; assess the resources required to produce those products or services; address the risks involved in the venture; and estimate the potential revenues and profits.

An edited transcript of the interview appears below:

Knowledge at Wharton: Professor MacMillan, thank you for speaking with us about the necessity of entrepreneurs writing business plans. To start with a basic question, what exactly is a business plan?

Ian MacMillan: A business plan to me is a 25-page, maximum 30-page, document, which is a description, analysis and evaluation of a venture that you want to get funded by somebody. It provides critical information to the reader — usually an investor — about you, the entrepreneur, about the market that you are going to enter, about the product that you want to enter with, your strategy for entry, what the prospects are financially, and what the risks are to anybody who invests in the project.

Knowledge at Wharton: Could you explain some of these elements in a little more detail and describe how entrepreneurs can develop an effective business plan?

MacMillan: Let me start by saying that you probably want to avoid developing a detailed business plan unless you have done some initial work. Basically what happens is that by doing a little bit of work, you earn the right to do more work. The first thing I would do before you start a business plan is think about a concept statement. A concept statement is about three to five pages that you put together and share with potential customers or investors just to see if they think it’s worth the energy and effort of doing more detailed work.

The concept statement has a few pieces to it. You are going to have a description of the market need that has to be fulfilled; a description of the products or services that you think are going to fulfill that need; a description of the key resources that you think are going to be needed to provide that product or service; a specification of what resources are currently available; an articulation of what you think the risks are; and then a sort of rough and ready estimate of what you think the profits and profitability will be.

The idea is to put together this concept document and begin to share it around with people who are going to have to support your venture if you take it forward. This allows you to rethink as a result of feedback that you get. You might get word back from the various stakeholders — like potential customers or distributors — that this really wasn’t such a good idea after all. That saves you the energy and effort of putting together a big business plan.

Knowledge at Wharton: Assuming the concept statement works out and you want to move towards the business plan, what else would you need? And where can you find the information? Some information can be hard to locate, especially about your competitors.

MacMillan: It’s really important to go out and speak to your potential customers. You need to find the people who you think will buy your product and talk to them about what dissatisfies them with their current offerings. You should get a sense from them about who is providing the alternative at the moment. Remember, the world has gone for maybe 100,000 years without your idea — and people are getting by; they’re not dying. Something out there is servicing their need. So what is the closest competitive alternative to what you want to offer?

That is what you need to find out — and that involves talking and listening. And for all the enthusiasm you have for your venture or your idea, you really need to listen to people who are eventually going to write a check for it.

Before you go on to write a business plan, you have to do some more work. If the concept statement looks good, then the next step is to do a 15- to 20-page feasibility analysis. This means we are now going to take this idea to the next level. We’ve learned from potential customers and distributors. We’ve learned who the major competitors are. We’ve shaped the idea more clearly, and now we’re digging deeper.

The next challenge you face is to say, well, if you start this business, what evidence do you have that the market actually wants it? Who do you think would write a check for your product? You need to articulate what makes your product or your service feasible. What has to be done in order to make this thing real? You need a description of how you intend to enter the market, a description of who the major competitors are, a preliminary plan — a very rough plan — which specifies what you think your revenues and profits are going to be, and an estimate of what you think the required investment will be. And only then, once you have articulated that, and once again shared it with your stakeholder community, will you perhaps be able to go and write a business plan.

Knowledge at Wharton: Once you have done your feasibility analysis and assuming you get the go ahead from your stakeholders, what is the next step?

MacMillan: The idea of the business plan is to convince the stakeholders. First, what we need to do in a business plan is show that we understand the needs — the unmet needs — of potential customers. Second, we need to understand the strengths and weaknesses of the current most competitive offering out there. Third, we need to understand the skills and capabilities that you and your team have as entrepreneurs. Next we need to understand what the investors need to get out of their investment, because they have to put their money in and they need to have some kind of sense of what they are going to get in terms of returns. In addition, the investment needs to be competitive with alternative investments that the investors might make.

The most important idea in the business plan is to articulate and satisfy the different perspectives of various stakeholders. This process sets in motion some basic requirements in the business plan — to tee up right from the start — evidence that the customer will accept it. Probably a third of the ventures out there that fail are because some person came up with the right product that they thought the world would love and then found out that the customers couldn’t care less. What you want to try to do in a business plan is convince the reader that there are customers out there who will in fact buy the product — not because it’s a great product, but because they want it and they are willing to pay for it.

Moreover, you need to convince the reader that you have some kind of proprietary position that you can defend. You also need to convince your readers that you have an experienced and motivated management team and that you have the experience and the management capabilities to pull it off. You need to convince potential investors that they are going to get a better return than they could get elsewhere, so you need to estimate the net present value of this venture. You need to show that the risk they are taking will be accompanied by appropriate returns for that risk. If we look at the contents of a typical business plan, you need to be able to articulate all these issues in some 25 to 30 pages. People get tired if they have to read too much.

Now let’s look at the various components of the business plan document:

First, you need an executive summary that grabs the attention of the potential investor. This should be done in no more than two pages. The executive summary is meant to convince the potential investor to read further and say, “Wow! This is why I should read more about this business plan.”

Next, you need a market analysis. What is the market? How fast is it growing? How big is it? Who are the major players? In addition, you need a strategy section. It should address questions such as, “How are you going to get into this market? And how are you going to win in that marketplace against current competition?”

After that, you need a marketing plan. How are we going to segment the market? Which parts of the market are we going to attack? How are we going to get the attention of that market and attract it to our product or service?

You also need an operations plan that answers the question, “How are we going to make it happen?” And you need an organization plan, which shows who the people are who will take part in the venture.

You need to list the key events that will take place as the plan unfolds. What are the major things that are going to happen? If your plan happens to be about a physical product, are you going to have a prototype or a model? If it happens to be a software product, are you going to have a piece of software developed — a prototypical piece of software? What are the key milestones by which investors can judge what progress you are making in the investment? Remember that you will not get all your money up front. You will get your funds allocated contingent on your ability to achieve key milestones. So you may as well indicate what those milestones are.

You should also include a hard-nosed assessment of the key risks. For example, what are the market risks? What are the product risks? What are the financial risks? What are the competitive risks? To the extent that you are upfront and honest about it, you will convince your potential investors that you have done your homework. You need to also be able to indicate how you will mitigate these risks — because if you can’t mitigate them, investors are not going to put money into your venture.

After that, what you get down to is a financial plan where you basically do a five-year forecast of what you think the finances are going to be — maybe with quarterly data or projections for the first two years and annual for the next three years.

You need a pro forma profit and loss statement. You need a pro forma balance sheet if you have assets in the balance sheet. You need to have a pro forma cash flow. Your cash flow is important, because it is the cash flow that kills. You may have great profits on your books but you may run out of money — so you need a pro forma cash flow statement. And you need a financing plan that explains, as the project unfolds, what tranches of financing you will need and how will you go about raising that money.

Finally you need a financial evaluation that tells investors, if you make this investment, what is its value going to be to you as an investor. That is basically the structure of the plan.

Knowledge at Wharton: Let’s say you have written a business plan and presented it to your investors. How closely do you have to be tied to the plan? Does it mean that once you are executing against the plan, you should reject new opportunities you find because they are not part of your plan? Or should you build in some flexibility that allows you to explore emerging opportunities?

MacMillan: Is this an opportunity for me to speak about discovery-driven planning?

Knowledge at Wharton: Of course.

MacMillan: Okay. The thing about most entrepreneurial ventures is that your outcome is uncertain — because what you are doing is very new. It is very, very hard to predict what the actual outcome is going to be. One of the most fundamental flaws is that in the face of unfolding uncertainty, you single-mindedly and bloody-mindedly pursue the original objective.

The reality is that the true opportunity will emerge over time. What venture capitalists do is they will put a small amount of money into the project, allow the entrepreneur to enter that market space and then — contingent on performance and contingent on what apparent traction you can get in that market space — completely re-plan to find out what the true opportunity really is. It is insanity to insist that people actually meet their plan as it was originally written.

This doesn’t mean you compromise your objectives. The idea is that I want to keep on trying to meet my objectives, but how I meet them must change as the plan unfolds. That’s basically what led to all the work that Wharton has done in the last few years on discovery driven planning. It’s a way of thinking about planning that says, “I’m going to make small investments. If I’m wrong early, I can fail fast, fail cheap and move on. But as I find out what the true opportunity is, I can aggressively invest in what this opportunity is.”

Knowledge at Wharton: Could you give an example of a company that has used this discovery-driven planning process to take its business to the next level?

MacMillan: One company that has done the most in this area is Air Products. What they have been able to do is use discovery-driven planning to unfold completely different businesses from the ones that they were in. Air Products makes things like carbon dioxide and oxygen and nitrogen. It is a very old-line company. Using discovery-driven planning, they have been able to move aggressively into, for instance, the service sector. Once they recognized that they were able to deliver reliably and predictably in the face of uncertain demand, they developed a set of skills that allowed them to enter the service business where the return on investment and return on assets are far higher than putting a huge plant in place.

Knowledge at Wharton: Professor MacMillan, thanks so much.

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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!

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11.4 The Business Plan

Learning objectives.

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

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

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

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

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

Business Plan Overview

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

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

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

Purposes of a Business Plan

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

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

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

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

Link to Learning

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

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

Types of Business Plans

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

Brief Business Plan or Executive Summary

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

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

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

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

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

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

Are You Ready?

Create a brief business plan.

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

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

Full Business Plan

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

Executive Summary

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

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

Business Description

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

Industry Analysis and Market Strategies

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

Competitive Analysis

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

Operations and Management Plan

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

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

Marketing Plan

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

Financial Plan

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

Entrepreneur In Action

Laughing man coffee.

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

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

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

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

What Can You Do?

Textbooks for change.

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

Work It Out

Franchisee set out.

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

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

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

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

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Why should an entrepreneur develop a business plan?

Do you dream of becoming an entrepreneur and starting your own business? While it’s an exciting prospect and you might be eager to get going with your ideas, before you dive in, it’s wise to build solid foundations that will set you up for success.

According to the U.S. Small Business Administration (SBA), only two-thirds of new businesses will last two years , which means one in three new ventures won’t make it. Ensuring you have a well-thought-out business plan in place is one of the best ways to make sure you give your business idea every chance of succeeding.

Let’s take a look at what a business plan is, why writing a business plan is important and why it’s a critical step in helping you realize your dreams of running your own business.

What is a business plan?

A business plan is a detailed document that sets out a company’s purpose, vision, marketing objectives, financial plans, resource needs and how it will achieve its goals. It essentially works as a roadmap or a guide to how the company will function and can be a valuable tool for attracting potential investors too.

A business plan should be a living document and should develop as your business grows and plans change. You won’t simply create a business plan and then file it away, never to be seen again. Think of your business plan as a tool for continually monitoring and analyzing how well you’re achieving your business goals. Refer back to it when you’re making key decisions and adapt it depending on what’s working and not working.

Aside from being a useful business tool, making sure to build in regular reviews and updates to your business plan is great for potential investors too. You’ll show potential lenders, business partners or investors that you’re on top of the business and a sound investment.

What is a business plan for entrepreneurs?

Any business plan should broadly cover the same aspects, but as an entrepreneur, you’ll want to make sure you’re addressing the needs of potential funders and investors for your new venture.

Great entrepreneur business plans should cover the following:

• An executive summary that summarizes your idea and acts as a business pitch.
• A company description that describes your purpose and objectives.
• An outline of your market research and potential so that you and your investors understand your target customers and potential market size.
• Competitive analysis that identifies other competitors in the marketplace and what your unique selling point is.
• Your product or service description outlining the benefits and lifecycle of what you’re selling.
• A marketing strategy that sets out how you’ll launch, attract new business and grow your customer base.
• Your business financials, setting out your budget, financial plan and financial projections.
• The business structure you plan to adopt, the management team you’ll need and the staff you’ll need to employ.
• Realistic funding requests and how any financial partnerships will work – what’s in it for your investors?
• An appendix of official documents that your employees or potential investors might request, like deeds, permits, professional licenses, industry memberships, and key customer contracts.

Why a business plan is important for entrepreneurs

Although business plans can be time-consuming and at times tricky to navigate, they are worth the effort. It helps you as a business owner clearly define your goals, avoid costly mistakes, mitigate risks, define your target market and define a pathway to execute your vision. It also helps others – employees, strategic partners, lenders, or investors – understand your business and how they can add value and benefit from being a part of it.

A good indicator of whether a business plan is beneficial is always to ask others who’ve been there. A recent QuickBooks survey outlined that nearly 70% of business owners, with the benefit of experience and hindsight, recommended writing a business plan before starting out.

But more than the shared wisdom of those who’ve been there, the statistics also back up the benefits of business planning for entrepreneurs:

• Entrepreneurs who create business plans are more likely to create a viable new business.
• Companies with a business plan see growth 30% faster than those without one.
• 71% of fast-growing companies – meaning those with more than 92% growth in annual sales – have business plans.

When is the best time to write a business plan?

So you’ve got your idea for the beginning of an exciting hospitality career , and you know you want to write a business plan, but is there a right time to do it? Writing your plan before you start your business is of course essential, but statistically speaking, there is an optimal time to create a business plan.

According to Harvard Business Review , entrepreneurs who create a business plan within six to twelve months after deciding to start a business increase the probability of a viable venture by 8%. Business owners who spend around three months writing a business plan also increase their chances of having a viable venture by 12%. Any less time spent means there is usually not enough information or attention to detail, and any more time spent usually means the content loses its relevance.

Learn everything you need to know about starting your own hospitality business with Les Roches.

Business plans in entrepreneurship example

Entrepreneurs’ business plans can take different forms and should be tailored to the specific industry you hope to work in, as well as your business concept. To help, we’ve outlined some examples of how you might tackle different aspects of a business plan in diverse hospitality industries:

• Example of hotel business description:

Our mission is to revolutionize the boutique hotel market for budget travelers. Founded in 2022, we have over 20 years of international hotel management experience. Our objectives for the next two years are:

• Solidify our reputation as a customer-first, quality boutique hotel provider.
• Increase revenue from $100,000 in FY2022 to $500,000 in FY2024 based on performance in the last year.
• Example of restaurant market research and potential:

Our ideal customer is an affluent Boomer or Millennial with disposable income, typically aged 35 to 65.

Market research shows the potential for the restaurant industry internationally, in Georgia and Atlanta has never been better:

• According to the National Restaurant Association , the restaurant industry accounts for $800 billion in sales nationwide.
• According to the Georgia Restaurant Association , Georgia restaurants brought in a total of $19.6 billion in 2017.
• Almost 60% of the Georgia restaurant industry is in the Atlanta region.
• The serviceable available market (SAM) is estimated to be approximately $360 million.
• Example of events management service description:

Our events management service has three unique selling points:

• Throughout our careers, we have worked at high-end luxury events management companies for high-profile events and clients. This gives us unique access to world-class vendors.
• We’re the only management company with green, sustainable credentials certified by industry bodies.
• We have a 100% success rate and have been rated 5 out of 5 stars on Google by all of our clients to date.
• Example marketing strategy for a luxury brand:

Reputation is the top influencer in high-end luxury brand marketing. Our marketing plan and strategy will leverage, in order of importance:

• Word of mouth
• Social media
• Direct mail

Our social media strategy will involve using high-caliber brand ambassadors, as well as multiple accounts across Instagram, TikTok, Pinterest and YouTube.

Whether you’re looking to start your entrepreneurial journey in sports, hotel management , events, hospitality consultancy , finance, or any other hospitality management business, putting in place a business plan is a critical first step. Make sure you have an effective business plan, addresses investor needs and is used as an ongoing business tool.

To set yourself up for business success it’s a good idea to invest in a hospitality degree that teaches you all the transferable skills you’ll need to run any business, including finance, leadership styles , problem-solving, and effective communication skills . The best schools also give you unique real-world experience so that you’ll learn the realities of putting business theory into practice — essential when it comes to creating your own business plan and running your own thriving business.

Study at world-class Les Roches to learn all the business essentials you’ll need.

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Do You Really Need a Business Plan?

The art of storytelling, from net margin to sales.

Why is a business plan important?

• Who will the reader be?
• What do you want their response to be?

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

More by this contributor:

• Challenges Become Opportunities
• Discontinuing Healthy Workplace Consultancy
• Financial Planning for the Pandemic

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How to Write a Business Plan for Your Small Business

Why is a business plan important to an entrepreneur?

A business plan is essential and plays a vital role in an entrepreneur’s success. It assists in setting up plain goals and guidelines for how you will operate your business.

WHAT IS A BUSINESS PLAN

A business plan is an important written document that gives a full description and outline of your organization’s future. All companies or businesses should have a business plan. 

The plan should clarify your business procedure and your critical objectives from where you are present to where you will be in the nearest future. 

Business plans are required for all business owners and entrepreneurs. It has an important role in all businesses. 

Related Posts

Systems thinking for online growth, top 10 businesses that make the most money in netherlands, elon musk as proof: 7 key success factors for entrepreneurs, why is a business plan important to an entrepreneur.

A decent business plan not just assists entrepreneurs in focusing on the specific parts essential for them to make business thoughts succeed. However, it likewise assists them in accomplishing short-term and long-term targets.

Many business financing specialists support the possibility that having a decent business plan isn’t sufficient. Even brilliant business thoughts can be useless if you can not figure out, execute and carry out a smart plan to make your business thoughts work. 

If you are hoping to raise funds from loan specialists and investors, remember that having a great business plan is very important. You should intend to have a documented plan that represents itself with no issue. 

It should be clear and simple to read and comprehend. The Important of a business plan are:

To raise money for your business

Lenders or potential investors want a well-composed business plan before giving you cash. A simple description of your business idea is not sufficient. 

Instead, make sure you have a careful business and monetary plan that shows the probability of progress and the amount you will require for your business to find true success in the long term.

To make sound decisions

As a business visionary, having a business plan assists you in characterizing and focusing on your business strategies and ideas. 

You not only focus on monetary issues but also on management matters, innovation, and making value for your client.

To assist you in knowing any potential weaknesses

Having a business plan assists you in knowing the potential fault in your thought. Likewise, you can share the business plan with other people who can offer you their viewpoints and guidance.

Identify specialists and experts who are in a situation to offer you important guidance and offer your plan with them.

To discuss your ideas with stakeholders

A business plan is a discussion device that you can use to get speculation capital from lenders or financial institutions. Likewise, you can utilize it to convince individuals to work for your venture and attract potential clients.

What are the 3 main purposes of a business plan?

If you are getting ready to go into business, you should initially draft a business plan. A decent business plan acts as a unique diagram for running and growing your business.

To compose a business plan, you have to understand the main purpose of a business plan. These purposes are explained below.

TO SECURE FINANCING FOR THE BUSINESS VENTURE.

The first purpose of a business plan is to get financing for the business. In some cases, financial institutions, banks, venture capitalists, and finance businesses assessed a well-written business plan composed by an expert.

A well-composed plan shows them that you have carefully studied each part of starting and working on your proposed business before telling them to fund it.

It additionally shows that you have carefully studied all possible results before making any conclusions about expanding your business.

TO ORGANIZE YOUR BUSINESS AND SET ITS DIRECTION. 

The second purpose behind a business plan is to sort out your thoughts about beginning your new independent venture into a coordinated organization.

So you can set its direction by choosing where it should be heading.

When you compose a business plan, you are pushed to figure out your business that you probably won’t have thought about previously. It

is how you put together your ideas on how you will start, work and develop your business.

TO PROVIDE A WRITTEN RECORD OF YOUR PLANS, GOALS, AND ACHIEVEMENTS. 

Finally, a business plan is a written document of your plans and objectives for your business to assist you with accomplishing those objectives. Composing a business plan assists you with explaining your objectives and coordinating the data about your business so that it’s simple for others to understand.

If you plan to start a new business with others, having a well-composed business plan is useful because it lets everyone know what their responsibilities will be in the activity of the new company.

Your business mentor is there to assist you, and they have your best interests on a basic level. Be 100% open to feedback and be honest with them. why every Successful entrepreneur needs a business mentor

What is the most important part of the business plan?

The executive summary is the most important part of the business plan for entrepreneurship, and perhaps the one, in particular, that will get perused, so make it great! The executive summary has only one goal. Get the lenders and potential investors to read the remaining of your business plan.

4 Types of Business Plans

• Operational Planning.
• Contingency Planning.
• Tactical Planning.
• Strategic Planning.

How does a well-written business plan benefit an entrepreneur?

Whether you’re starting a private venture or investigating ways of extending a current business, a Business Plan is a significant instrument to assist with directing your choices.

A compelling business plan is a guide to progress, giving clarity on all parts of your business, from finance and marketing, products, people, and how you will be outstanding among your competitors.

Your plan should involve explicit goals for recruiting new employees, what structure you will have, what services and products your business will give, how you will develop them, and how you will fund business activities.

These are the benefits of a well-written business plan for an entrepreneur:

1. Increased Clarity

A business plan can attract clarity to the choice-making process regarding main aspects of the business like leases, resourcing, capital investments, and so on. A good Business Plan will assist you with identifying business-basic needs and milestones to base on.

2. Creation of a Marketing Roadmap

Marketing is a significant part of a business plan. It assists in defining your objective market, target clients, and how you will enhance and place your product/service to these markets/clients.

3. Support for Funding

Whether you are looking for capital from investors or credit from a bank, a business plan that answers questions concerning income age and benefit generation is frequently required.

4. Helps to Secure Talent

For a business to succeed, attracting partners and capable workers is important. Part of a business plan’s reason is to assist with getting the right talent at the right time.

Staff wants to know the vision, how the business will accomplish its objectives, and how they can add to this in their roles. 

5. Provides Structure

A business plan gives structure and characterizes business management goals. It turns into a reference device to keep the business on the path with targets, sales, and operational milestones.

When utilized appropriately and counseled regularly, it can assist measure and operating your needed areas of concentration.

Conclusion 

In short, creating a business plan involves a great deal of thought. It would help if you considered what you should do and involved that as a beginning stage. It does not need to be complex.

At its center, your plan should show where you are currently, how you want your business to go, and how you will arrive there. Writing a decent business plan does not ensure a positive outcome, but it can decrease the chance of failure.

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An entrepreneur’s guide to starting a small business

A business plan is a critical and comprehensive planning document that outlines the goals, strategies and operational aspects of a business. It is a blueprint that guides business owners through different aspects of establishing and growing a successful business and includes detailed sections on the business model, market analysis, products and services, marketing and sales strategies, financial planning and the management structure of the business. These plans help business owners approach all crucial aspects of their business critically and ensure that they are well-equipped to handle various challenges that may arise.

Aside from outlining the business objectives and operations, a business plan is important when applying for business funding. Most financial institutions and investors require a detailed business plan before they will commit to funding a venture. An effective business plan demonstrates to potential investors that the business has a well-thought-out strategy, viable market potential and a positive financial forecast.

Business plans also serve as a reference point for decision-making. As businesses evolve, owners can refer back to their plans to ensure they are staying on track with their goals and making informed decisions based on the strategy they initially set out.

Start-up business ideas

• Seven Different Business Model Ideas for Your Startup : When coming up with startup business ideas, it’s important to take into consideration what type of business model will work best. Review seven different models and consider which might best serve your startup and your customers.
• 4 Steps to Brainstorming a Great New Business Idea : Start brainstorming business ideas by applying these four steps to make sure that you’re on the right track and thinking critically as you plan your new venture.
• How Do I Pick the Right Startup Idea? : Choosing the right startup idea can be hard. This article can help guide you toward the most viable startup option.
• How to Find Profitable Business Ideas: Learn about the “Red Ocean” and “Blue Ocean” approach to creating a successful business, as well as internal and external information gathering that can help you make the best business decisions possible.
• A Lesson in Creating New Business Ideas: This lesson plan on entrepreneurship provides activities and group learning opportunities that can benefit business developers of any age.

Business plans for small businesses

• Write Your Business Plan : A business plan is a foundational document to any small business. Learn how to write a business plan using a template from the Small Business Administration.
• Business Modelling : Business modeling is an effective way to approach a new business idea and plan using a proven model of success.
• The Startup Business Plan : No matter the industry, a business plan is an essential piece of the entrepreneurial puzzle when a new business is being formed. Find out why it’s so important.

Communication and outreach

• Outreach and Marketing Ideas for Small Businesses : Small businesses may need to get creative as they work to promote their brand. This resource offers 16 outreach ideas that entrepreneurs can employ to promote their business and drive engagement.
• The Real Reason Small Businesses Can Compete with Anyone : Quality customer service and the ability to follow through with really effective customer communications is something that small businesses may be better at than their larger counterparts, and that could translate into a competitive edge.
• Cold Outreach for Small Business : Cold contacting is one of several outreach methods that business owners can try as they work to get the word out about their products and services, but it’s important that it’s done right.
• What is Business Communications? : Business communication is critical, and understanding the different methods of communication can help entrepreneurs communicate most effectively with their customers and stakeholders.

Marketing plans and marketing best practices for small businesses

• Developing a Plan for Communication : Developing a plan for communication can help to ensure that every effort to market your new business is as productive as possible.
• Seven Low-Cost Marketing Strategies for Small Businesses : Working on low-cost marketing strategies and planning for the cost of marketing your new business are crucial to its success.
• Small Business Startup and Marketing Strategies : This detailed marketing guide has so many good suggestions and marketing strategies that can be employed to make sure your business outreach is successful.
• Marketing Your Small Business : Find information about content and marketing for entrepreneurs looking to engage their audiences in a meaningful way.
• Small Business Marketing Strategies for the First 5 Years : The first five years of a business venture are critical, and many companies don’t make it. Developing an effective marketing strategy is a key part of early business success.
• Social Media for Small Business : Establishing a social media presence is important in engaging potential customers where they are.
• Marketing Strategies to Skyrocket Your Small Business : The Yale Ledger provides this article on small business marketing strategies that can be help you grow and thrive in the current economy.
• Last Minute Marketing Tips for Small Businesses : When you are short on time to plan a marketing strategy, there are still a few last minute marketing tools that you can use to engage your audience quickly and effectively.
• Internet Marketing Tips to Help Small Businesses Grow : The internet is a powerful tool for small businesses. These tips can help you make the most of your internet marketing efforts and reap the benefits.
• Small Business Marketing Resources : This collection of marketing tips includes many different ways that entrepreneurs can get in front of their customers when and where it counts the most.

Small business financing

• A Guide to Getting Your First Business Idea Funded : Getting funding for a new business idea can be tricky, and there are several ways to go about obtaining the funds you need for the business venture to succeed. Learn about the different types of investors you might approach for funding and what not to do during the process.
• What Do Investors Look for in a Partner? : Run through this checklist before you approach potential investors about business funding to position yourself as a good business investment opportunity.
• Need a Small Business Loan? : To set your business up as a good business investment and one that should be approved for funding, make sure you are following the best practices outlined in this resource.
• 5 Tips to Getting Your Small Business Loan Approved : Small business loans can provide much-needed financing for entrepreneurs. Learn how to put your best foot forward when applying for a business loan.
• How Small Business Loans Work : Understanding how to get approved for a small business loan and the different types of loans available to business owners are important to make sure you understand exactly what your fund should be used for.
• Common Mistakes When Applying for Small Business Loans : Arm yourself with information to avoid making these mistakes when you apply for small business funding.
• Types and Sources of Financing for Startup Businesses : Use this resource to get a better understanding of the lending options that may be available to you as you seek to fund a new business venture.
• How Fintech is Helping Small Businesses : Learn how financial technology can help your small business succeed.
• Small Business Financing Resource Guide : Small businesses can access funding in a variety of different ways. Use this guide as a resource to understand options available to you through local, state and federal funds, as well as bank loans, grants and venture capital.

Other resources for small businesses

• How to Start a New Business : This step-by-step guide makes an excellent blueprint for any entrepreneur who is considering starting a new business venture. It walks you through every step from developing your business idea to marketing that new product or service.
• 10 Reasons to Start Your Own Business : The idea of striking out on your own with a new business opportunity can be scary but, in many ways, it is well worth the risk. Don’t forget about all the benefits of being a business owner as you grapple with the hard stuff, too.
• The Dos and Don’ts of Starting a Business : This list of dos and don’ts can help entrepreneurs avoid common mistakes as they start a new business venture.
• The Importance of Community Outreach for Small Businesses : Making a positive impact on your local community has multiple benefits. Learn why community engagement is important for small businesses and the benefits it can bring business owners.
• Tips to Growing Your Business in a Sustainable Way : It can be tempting to get excited about early business success and expand too quickly. These tips can help you manage your growing business sustainably and with the future in mind.

Learn more about how Ooma Office can help your business.

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Diane Balogh, content writer for Ooma, Inc., has worked in media and strategic communications since graduating from the University of Missouri School of Journalism. Throughout her career, she’s written digital content for a Fortune 100 company, responded to media calls at a Level 1 Trauma Center, advocated for civil rights and equality at a non-profit agency and edited two Midwest newspapers.

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

• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
• How to Use Your Business Plan Most Effectively
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 3 Key Things You Need to Know About Financing Your Business
• 12 Ways to Set Realistic Business Goals and Objectives
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• Write Your Business Plan | Part 2 Overview Video
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• Write Your Business Plan | Part 3 Overview Video
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• Write Your Business Plan | Part 4 Overview Video
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

Write Your Business Plan | Part 4 Overview Video Identify viable ideas and get them in front of the right customers and investors.

By Dan Bova May 1, 2024

This is part 1 / 9 of Write Your Business Plan: Section 4: Marketing Your Business Plan series.

Getting to know your customers is one of the most important things an entrepreneur needs to do, and writing a business plan will help you focus on this key component of your business.

Because here's the thing, if you don't understand your customer , then you don't know if your product or service is actually something people will spend money on. You won't know what kind of marketing messages and advertising will work. You'll be dead in the water. So here are four key questions to ask yourself to help you pinpoint who your ideal customer is:

• Who are they? Describe them in terms of their age, income, activities, interests, and opinions.
• What do they buy now? Describe their buying habits related to what you're hoping to sell: How much they buy, their favorite brands, the most popular features, and the price points they're comfortable with.
• Why do they buy? This is a tricky one and requires a little psychology.
• Is it all about value for this buyer? Is high quality the key factor for purchasing decisions? Are they willing to spend more because of the perceived status symbol of certain brands?

Understanding the reasons behind your customer's purchasing decisions will help you create targeted marketing campaigns and even adapt and modify your product to meet their needs. The key question you're looking to answer is this: What specifically will make them buy from you?

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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Is It Really Time to Take the Plunge? 6 Things to Consider Before Going From Employee to Entrepreneur

A s someone who has started their own company , I know how tempting it can be to leave a stable job in pursuit of being your own boss . However, there is no guarantee of success, and it's important to understand both the rewards and challenges of entrepreneurship before making such a major life decision.

Here are a few things to consider:

1. The grass is not always greener on the other side

When you work for a company, you have stability — a regular paycheck, benefits like health insurance and clearly defined job responsibilities. As your own boss, all of those go away. You will be responsible for everything from client acquisition and project delivery to accounting, legal issues and more. There is no safety net if business is slow, and you may find yourself working much longer hours with more stress and uncertainty.

It's easy to idealize being your own boss as all independence and freedom. However, the reality is that it also means being responsible for all aspects of running a business, both exciting and mundane . Before leaving a stable job, seriously evaluate how well you can handle the increased workload and responsibility as well as the financial risks of entrepreneurship. Additionally, consider that with a well-established company, you have the benefit of infrastructure, resources and experience that you don't have on your own yet.

Related: 5 Books Every Entrepreneur Should Read Before Starting a Business

2. Have a clear business idea and plan

Don't quit your job believing that the entrepreneurial spirit alone will lead you to success. You need to have a clear business idea, target industry, and customers in mind. Thoroughly research the viability of your idea by conducting market analysis, creating financial projections, and more. Additionally, determine how your value proposition is differentiated.

A robust business plan will account for your idea, target customers , competition, operations, marketing strategy, financials and milestones. This plan should demonstrate that you have carefully considered all aspects of starting and running the business. Seeking mentorship and feedback on your idea and plan from experienced entrepreneurs is highly recommended prior to leaving stable employment. Being your own boss without guidance or preparation is a risky proposition.

Related: 10 Things I Wish I Knew Before Becoming An Entrepreneur

3. Consider a trial run before taking the leap

Rather than immediately quitting your job, see if you can test your business idea on the side first. Work on it nights and weekends to generate initial sales and client feedback . This allows you to validate key assumptions from your plan in a low-risk way, providing an opportunity for course correction if needed.

If the trial run shows promising early results, you can consider transitioning to it full-time. However, if revenues don't meet projections or you realize the idea isn't as viable as thought, your job provides a safety net. Testing the waters in this low-commitment way reduces risk significantly versus an abrupt career change. Not all great business ideas are meant to be full-time from the start; an initial trial period helps determine that.

Related: 10 Questions to Ask Yourself Before Starting Your Entrepreneurial Journey

4. Know your financial runway

Have a clear understanding of how much runway - or length of time - you have financially to get the business up and running without a steady income. Creating this estimate is key to determining whether now is the right time. Consider your living expenses and any debt obligations, then evaluate your savings. This will dictate how long you can afford to forego a paycheck as you focus on launching the business.

Recognize that it often takes 6-12 months or longer before a new business becomes profitable. Without adequate runway, you may be forced to shut down just as things are taking off due to cash flow issues. Overly optimistic forecasts are common - ensure your projections are conservative. The better sense you have of true costs and your financial capacity, the more informed your decision can be.

5. Seek opportunities that leverage your existing skills and network

Your personal experiences, skills and contacts are potentially big assets for your own company. Look for business ideas that allow you to apply your knowledge, helping reduce the learning curve. This could mean leveraging a technical specialty, industry knowledge or management skills from your current job. Having an existing network of potential customers or partners who understand and trust you is also valuable. The more you can build upon existing strengths, the better positioned you'll be for success immediately.

Related: 8 Things You Need to Know Before Starting a Business

6. Loneliness and isolation can be real risks

When you work for a company, there's always the social interaction with coworkers to look forward to. But as a solo founder, your workdays may be spent mostly in isolation . Especially in the beginning, as you hunt for customers and clients, the lack of colleagues can make you lonely.

You won't have water-cooler chats or team lunches to break up the day. Networking events can help, but it's still not the same as an office community. This isolation can take both an emotional and mental toll if not managed well. Introverts may thrive more easily, while extroverts need to find strategies to mitigate the loneliness of solo entrepreneurship.

Going solo is an ideal next step for go-getters who relish the challenge of wearing multiple hats and owning the outcomes of their careers. Just be sure to realistically assess your financial runway, marketing abilities, tolerance for risk, and capacity for self-discipline before leaping. When done right, the rewards of being your own boss make all that hard work worthwhile. Just know what you're truly signing up for by being in the driver's seat 100%.

More From Forbes

Is Starting A Side Hustle Right For You?

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Starting a side hustle has become a popular choice for many. Whether you want to supplement your income, pursue a passion, or test a new business idea, the allure of a side hustle is strong. The flexibility and low initial investment required make it accessible to a wide range of individuals.

A side hustle can provide valuable experience and skills that can enhance one's main career or even pave the way for a full-time entrepreneurial venture. With easy access to digital platforms, it's easier than ever to turn a hobby or interest into a profitable business, making the side hustle a compelling option for you.

But how to be sure if starting a side hustle is the right move for you?

Here are some tips to help you assess whether starting a side hustle aligns with your goals, capabilities, and lifestyle:

1. assess your motivation.

Understanding why you want to start a side hustle is crucial. Are you looking to earn extra money to pay off debts or save for a big purchase? Or perhaps you're eager to explore a passion that your day job doesn’t fulfill? Your motivation will drive your commitment and how you shape your business plan.

2. Evaluate Your Time Management Skills

A side hustle demands time and balancing it with a full-time job and personal life can be challenging. Assess your current schedule and ask yourself if you have a few hours each week that you can dedicate to your new venture without compromising your well-being or existing responsibilities. Effective time management and organizational skills are essential to ensure your side hustle doesn’t lead to burnout.

When Is ‘The Voice’ Season 25 Finale? All About The Star-Studded Event

Wayfair outdoor furniture sale the best early memorial day deals this week, what’s next for ether prices after today’s sharp gains, 3. analyze your financial situation.

Starting a side hustle often requires you to invest your money, time, or other resources. Before diving in, look at your financial health. Do you have the necessary funds to start your side hustle without jeopardizing your financial stability? Consider how long you can sustain your side hustle if it takes time to become profitable .

4. Identify Your Skills and Interests

Your side hustle should ideally align with your skills and interests. This not only increases your chances of success but also makes the journey enjoyable. List out your strengths, hobbies, and passions. Then, brainstorm business ideas that leverage these elements. A side hustle that taps into your passion and interests will feel less like work and more like a rewarding business.

5. Research Market Demand

Before you start, it’s crucial to understand the market demand for your side hustle idea. Conduct thorough research to see if there’s a viable market for your product or service. Analyze your potential competition, target audience, and market trends. This research will help you refine your business idea and create a strategy that stands out in the market.

6. Test the Waters

Start small and test your side hustle idea before fully committing. This could be through a pilot project, a limited launch, or offering your services to a small group of people. Testing the waters allows you to gather feedback, make improvements, and gauge the potential success of your side hustle without significant risk.

7. Plan for Sustainability

Think long-term. A successful side hustle requires consistent effort and sustainability. Create a realistic business plan that outlines your goals, strategies, and milestones. Consider how your side hustle fits into your long-term career and life goals. Planning for sustainability ensures that your side hustle can grow and evolve over time.

8. Seek Support and Advice

Don’t be afraid to seek advice from others who have successfully managed side hustles. Join entrepreneurial communities, attend workshops, or find a mentor. Networking with like-minded individuals can provide valuable insights, support, and motivation.

9. Evaluate the Risks and Rewards

Don’t forget the important step of weighing the potential risks and rewards. Every business venture comes with its share of uncertainties. Assess the risks involved and determine if you’re comfortable with them. At the same time, consider the rewards – financial gain, personal fulfillment, skill development, and potential career growth.

The bottom line is that starting a side hustle is a significant decision that requires careful consideration. By evaluating your motivation, time management skills, financial situation, skills, market demand, and long-term sustainability, you can make an informed decision. Remember, a successful side hustle should not only provide financial benefits but also enrich your personal and professional life. Take the time to plan, research, and prepare, and you’ll be well on your way to entrepreneurial success.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit , a bookkeeping and financial consultancy firm. As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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