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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.

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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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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

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

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

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

What is a business plan?

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

Why do you need a business plan?

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

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

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

What can you do with your plan?

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

Test an idea

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

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

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

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

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

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

Better manage your business

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

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

What should your business plan include?

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

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

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

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

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

Marketing & sales

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

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

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

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

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

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

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

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

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

Types of business plans explained

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

Traditional business plan

The tried-and-true traditional business plan is a formal document meant to be used for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

Business model canvas

The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

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

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Now, the option that we here at LivePlan recommend is the Lean Plan . This is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

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Martin luenendonk.

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

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

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

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

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

What is a business plan?

Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.

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

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

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These are the following purpose of business plan:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are the benefits of having a business plan?

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

How to write a business plan?

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

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

How to write a business plan step by step?

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

Why do I need a business plan for my startup?

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

What are the key components of a business plan?

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

Can a business plan help secure funding for my business?

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

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Table of Contents

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Every year, thousands of new businesses see the light of the day. One look at the  World Bank's Entrepreneurship Survey and database  shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.   

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several  other statistics  expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all. 

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%)  don't have a formal business plan in place. 

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.  

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.  

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.  

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained. 

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes. 

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

• Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals. 
• Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
• Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
• Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
• Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
• Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest. 

Now let's look at the various types involved in business planning.

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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.  

Here’s an overview of a few fundamental types of business plans. 

• Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
• Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments. 
• Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
• Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
• Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them. 

Here are the key elements of a good business plan:

• Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.  
• Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
• Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
• Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time. 
• Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

• Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

• Create a business plan to determine your company's direction, obtain financing, and attract investors.
• Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
• Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
• You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success. 

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.   

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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Article • 14 min read

Practical Business Planning

Understanding the components of future success.

By the Mind Tools Content Team

Business planning is perhaps the most critical element of a successful business. It is also the element that many business owners neglect, or spend too little time on.

Why? Because it's a whole lot of work, and when you're in the throes of starting a new venture, there are probably far more pressing, or glamorous and exciting, things to be doing.

Yes, finding a great space to rent can be important. And yes, figuring out what to charge customers is essential too. But if you don't do those things within the context of the larger picture – the total business plan – you are likely to miss critical details that have the potential to doom your whole venture to failure.

Some people consider writing a business plan a necessary evil in order to get financing from a banker or investor, but this can be missing the point. A business plan is far more than a fancy sales tool; it is a powerful management tool to help you focus on your goals, set objectives and avoid potential pitfalls. The process of writing a business plan forces you to consider all the aspects of starting your venture, or taking it to the next stage; from identifying opportunities, to exploring risks, to putting figures to ideas.

Bottom line, the business plan makes you think, quantitatively and qualitatively, about why, what and how you are to proceed. It helps you think about the highs and the lows, the advantages and the disadvantages, the potential for success and for failure. While you might have a successful business without a business plan, it is far more likely that if you fail to plan, you will also fail to succeed.

Of course, you may find that when you look at your business idea in this detail, it simply doesn't stack up. Disappointing as this might be, it's far better to find this out on paper than suffer the cost and consequences of finding it out in practice.

Business planning is just as important for new projects as it is for new businesses. In this context, the "business plan" is usually called a "business case". The discipline of justifying what you plan to do in terms of what it will achieve, and how you will do it, will contribute greatly to the chances of your project succeeding.

What Will a Business Plan Show?

A Business Plan will help you examine your business concept and intentions for viability and sustainability. Along the way, you will discover invaluable information that you'll use over and over again. Here are ten of the top discoveries you will make as you write your business plan:

• Exactly what your business will provide.
• Who your customers are, and how able you are to meet their needs.
• Who you competitors are, and what are their strengths and weaknesses are.
• Potential obstacles to your success.
• The capabilities of your core business team.
• A well-defined marketing strategy to capture your share of the market.
• Benchmarks and goals.
• Financial projections and returns on investment.
• How much money you need to start up.
• What your investors will get out of the deal.

What Goes Into a Business Plan?

A good business plan contains dreams and ideas that are backed by facts and figures, and it's usually presented in a fairly standardized format. The following eight items are common sections in a business plan – once you have sufficient detail for each of these elements, you'll have the basis for a comprehensive and complete business plan.

• Executive Summary.
• Business Overview.
• Products and Services.
• Industry/Market Overview.
• Marketing Strategy and Implementation Plan.
• Operational Infrastructure.
• Management Team Summary.
• Financial Plan.

Each of these business plan sections is described briefly in the sections below. (Bear in mind that this is an introduction to business planning: you'll find links to more detailed – and country-specific – information at the end of the article.)

Depending on the nature of your business, and your own areas of expertise, you may need to call on other people's help and expertise to build you business plan, for example in marketing or financial planning. We also provide links to additional resources to help your business planning in more detail.

1. Executive Summary

It's the first thing people read, and it's the last thing you prepare. The aim of this section is to sum up your entire plan in such a way that leaves no doubt as to your business's viability and profitability, and your capability to manage it. An executive summary can be as short as a few paragraphs, and as long as two pages. Regardless of length, it must highlight the key points and conclusions from each of the sections that follow in your Business Plan.

2. Business Overview

The purpose of the Business Overview is to provide readers with an overall feel for what it is you are trying to accomplish and give the reader a more detailed look at your vision. The elements you provide details about are:

• History – what led to your idea and this business concept?
• Mission Statement – what are you in business to achieve?
• Goals and Objectives – what are you striving for within the first year, and longer term horizon?
• Ownership – are you a proprietor, partner, or corporation?
• Location – what facilities will the business use?

3. Products/Services

Most businesses sell products or provide services. In this section your goal is to define clearly what you are providing to your customers, and how your offering is different or unique. It includes:

• Products and/or Services – what are you selling and/or providing?
• Production and/or Service Delivery – how will you acquire or provide those products or services?
• Competitive Comparison – why will customers buy your products, and not that of someone else (this is really important, and we look at it again below.)
• Future Products and Services – how do you expect your products/services to evolve and develop over the next year to five years?

4. Industry/Market Overview

This section is a summary of market research that helps determine if your business idea is profitable and sustainable. It defines your industry, discusses trends, outlines the customer/market needs that exist, examines buyer behavior and also looks at the competitive outlook in your market.

To address these points, you will of course need to conduct some market research. This enables you to back up your proposition with evidence. The marketing issues your research should address are:

• Industry analysis – what's happening and what's changing in you industry? A good way to do this analysis is to use the PEST analysis tool, which looks at Political, Economic, Socio-Cultural and Technological factors. Another is to use Porter's Five Forces Analysis , which helps you think about the balance of power in the industry.
• Market analysis – what are the characteristics of the market you operate in, what customer needs are being fulfillled, and how can this market and these customer needs be sub-divided?
• Trends and outlook – what shift in consumer behavior may affect your business?
• Buying behavior – how are purchases made and what influences buying decisions?
• Industry participants – what are the main characteristics of the key players in your industry? Consider using SWOT Analysis to understand their strengths and weaknesses, and the opportunities and threats they face.
• Competitive analysis – How will you offer a sufficiently different product or service to persuade customers to buy from you, and not from these already-established competitors? Consider using USP Analysis to think about your competitive position.

5. Marketing Strategy

The data from your market analysis can now be used to formulate your marketing strategy, and define how you will sell the product, and to whom.

• Start by using SWOT analysis again, this time focused on yourself. What are the strengths, weakness, opportunities and threats facing the venture? This analysis shows you how you can align your strengths with the opportunities available and what contingencies you should prepare to deal with the weaknesses and threats you've identified.
• Target Market – Who is your ideal customer? What specific need do you fulfilll? And thus what segments of the market will you serve? Is there a specific niche you can exploit?
• Key Competitors – Who else is vying for you target market?
• Competitive Position – How will you best communicate the unique reason that people should buy from you? And where should you communicate this message?
• Pricing Strategy – What price will attract the customers you target? What price will make you the best profit?
• Promotion Strategy – How will you brand and promote your business? Where will market and sell?

6. Operational Infrastructure

In this section you set out details of the equipment and facilities you will use to create your products and serve your customers. Depending on the nature of your business, these will include all or some of:

• Premises – offices, workshops and storage facilities.
• Equipment and machinery.
• IT resources – Software and hardware, including accounting systems.

You should also include details of major suppliers on which you will rely for outsourced services as well as for key raw materials, and the nature of agreements you would make with them.

7. Management Team Summary

Here you explore your talents and ability to manage the business. This section includes an overview of the main people contributing to the day-to-day management of the business:

• How does your background/business experience help you in this business?
• Who will be on the management team? Include an organization chart.
• What is your management philosophy?
• What are your and your team's weaknesses and how can you compensate for them?
• What are their duties? Are these duties clearly defined?
• Do you have any personnel needs? If so, what is your plan for hiring and training?

8. Financial Plan

Don't let the numbers scare you – you don't need to be an accountant to be in business, but you do need to understand what you are reading and where the numbers came from. You financials will tell you whether or not what you intend to do will eventually be profitable. After all, there's not a lot of point to being in business if you can't make money. Make sure you cover:

• Start-up Funds – Do you have enough capital to carry you through until you start achieving a positive cash flow?
• Operating Budget – Where will you spend your money during the first year?
• Financial Assumptions – What are you basing your projected numbers on?
• Cash Flow Projection – Based on your educated assumptions, what income and expenses do you project? How long will it take to achieve a positive cash flow and when will you break even? See our article on Cash Flow Forecasting to find out how to do this.

If you feel a little uneasy about financial planning there are many sources of help available. Invest in one of many great books on starting a business, or consider asking for resources and advice from the small business manager at your local bank. Any new business venture needs good financial planning, and good ongoing financial management, so it's worth investing the time to learn these skills now, or getting someone involved with this expertise.

Business planning is an essential activity when thinking about a new business venture or project. By taking the time to discover all of the key facts and figures described in the seven business planning areas above, you'll gain an excellent grasp of how you're going to implement your ideas, and what financial investment, and gains, you can expect. If your business plan does not stack up, you can refocus your efforts now, on paper, and make the difference between business success and failure.

By learning the skills of business planning, you'll be in a great position to monitor and manage your business plan as your venture moves forward. The plan, and everything in, it is a moving feast, and you'll need to keep revisiting and challenging it as you progress. Your business plan is an essential foundation: keep building on it to ensure your business's success.

[1] Bplans.com. (2016). ‘Free Sample Business Plans’ [online]. (Available here .) [Accessed July 6, 2016.]

[2] Business.gov.au. (2016). ‘Business Plan Template & Guide’ [online]. (Available here .) [Accessed July 6, 2016.]

[3] Canadabusiness.ca. (2016). ‘Sample Business Plans and Templates’ [online]. (Available here .) [Accessed July 6, 2016.]

[4] Cranfield.ac.uk. (n.d.). ‘What Your Business Plan Should Include’ [online]. (Available here .) [Accessed July 6, 2016.]

[5] Gov.uk. (2016). ‘Write a Business Plan’ [online]. (Available here .) [Accessed July 6, 2016.]

[6] Icaew.com. (2011). ‘Writing a Business Plan’ [online]. (Available here .) [Accessed July 6, 2016.]

[7] Princes-trust.org.uk. (2016). ‘Business Plans and Templates’ [online]. (Available here .) [Accessed July 6, 2016.]

[8] Sba.gov. (2016). ‘Starting & Managing a Business’ [online]. (Available here .) [Accessed July 6, 2016.]

[9] Score.org. (2016). ‘Business Planning & Financial Statements Template Gallery’ [online]. (Available here .) [Accessed July 6, 2016.]

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6 essential elements of a good business plan

Entrepreneurs, executives and venture capitalists discuss how to craft a business plan that will impress investors and be a good road map for your company..

Whether you are just starting out and need startup investment or are looking to expand your business and raise capital, a business plan is a must. Indeed, a business plan is not only essential if you want to get people to invest in your idea, it can help you articulate what it is you hope to accomplish with your business – your mission, goal(s) and values – and plot the company’s growth trajectory.

However, to be successful, a business plan cannot just be a bulleted list of an entrepreneur’s thoughts and musings, hopes and dreams. It needs to be a serious business document with the following six elements.

1. Executive summary

“An executive summary is the ‘elevator pitch’ of your business plan,” explains David Mercer, founder, SME Pals , a blog dedicated to helping entrepreneurs. “More often than not, landing a new investor relies on hooking them with a great elevator pitch. Without grabbing their attention, your business plan, no matter how well researched and presented, may not stand out enough.”

The executive summary should, in brief, describe the “problem you are going to solve, and why that problem needs to be solved right now,” by you, says Peter Arvai, CEO, Prezi presentation software. “If you aren’t able to communicate that deeper purpose to others, you will have a very hard time convincing investors to fund your idea and people to join your team.” 

Tip: Write the Executive Summary last, after you’ve done all your research and put everything down on paper.

[ Related: 12 tips for creating a must-read business blog ]

2. Description and bios of your leadership/executive team

“The entrepreneur should clearly demonstrate what they are bringing to this venture – the idea, the technical ability or the passion,” says Hossein Rahnama, founder & CEO, Flybits . “Investors want to understand how you will execute using your personal strength.”

You should also “talk about the leadership team,” says Andrew Witkin, CEO, StickerYou . “If the leadership team has a previous track record of building and delivering businesses, this should be highlighted. Business plans serve multiple purposes, but one of them is to build trust, and the team is as important as the product to potential investors and partners.”

“Investors bet on jockeys, not horses, and knowing about who will execute on an idea is key to an investor making an investment decision,” says Richard J. Foster, president, Foster Management & Holdings. “Very frequently I’ll see multiple companies with the same idea, but the one to invest in is the one with the team who has the experience and the credentials to succeed. Having the best idea with the wrong team is a recipe for failure, but proving that your team is the [right] one to execute [your idea] can make all of the difference.”

3. Description of your product(s) or service(s)

“When developing a business plan, it’s crucial to clearly [explain] the need your product or service is trying to address,” says Elena Filimonova, senior vice president, global marketing and strategy, CGS . “Your business plan should highlight how the product or service will address the need, what is unique about your offering and why it would be difficult to replicate. To do this, you should outline key differentiators, features and why the product or service is something that stands out in the market.”

[ Related: 11 ways to build your online brand ]

4. Market/competitive analysis

“Every business plan should have a section that defines the target sales market – who you are selling to,” says Victor Clarke, owner, Clarke Inc. “This is the part that requires considerable research into areas such as industry sales data related to the service or product you are selling and trends within the industry. You should look at competitors and see who they are targeting, look at your current customer base and create a profile of an ideal customer or client for your product.”

“For a business plan to be effective and attractive to investors and partners, you must be able to provide tangible data and information that supports the notion that your demographic is strong and growing, and that market trends support the continued need for your service or product offering,” says Brock Murray, cofounder & COO, seoplus+ .

[ Related: 7 attributes of a successful CMO in the digital age ]

“Sequoia Capital has a great framework that every business plan should use: separate your Total Addressable Market (everyone who conceivably needs your product category), Serviceable Addressable Market (everyone who needs your specific product or service, limited by factors like where you can do business) and Serviceable Obtainable Market (the portion of the market you can realistically capture),” says Christopher S. Penn, vice president, Marketing Technology, SHIFT Communications . “For example, lots of companies say everyone is a customer, and while that may be a TAM, if the company has only one salesperson, their SOM is significantly smaller. VCs and investors especially want to understand what’s realistically obtainable, and splitting out your addressable markets… shows them you’re not just presenting pipe dreams.”

Also be sure to “include a competitive analysis section,” says Bryan Robertson, founder & chief revenue officer, Mindyra . “Every business has competition, so it’s a good idea to research companies in your industry who are fighting for the same customers. You should include specific details about their strengths and weaknesses. This forces you to become very familiar with your market. It also encourages you to think of ways to differentiate your business [from] the competition.”

5. Financials (how much cash you need and when you’ll pay it back)

“Make sure that the plan goes into exacting detail about how much startup capital will be needed, where it will come from and how it will be paid back,” says Bruce Stetar, executive director, Graduate Business Programs, SNHU .  “Equal importance should be given to how you [plan to] pay back capital as how you acquire it. Investors want to know when they will see a return.  Failing to plan adequately for capital acquisition and payback is one of the chief reasons that new businesses fail.” 

“Whether you’re hoping to receive funding to build a brick-and-mortar shop or a technology venture, you must have your numbers straight,” says Erica Swallow, founder & CEO, Southern Swallow . “For tech entrepreneurs, I’m a big fan of the  startup financial model template  developed by startup investor David Teten, in collaboration with a couple of colleagues. Based in a nearly fully-automated Excel worksheet, it enables early-stage entrepreneurs to map out their financial plan, without being too overwhelming. It’s the best startup financial model I’ve encountered over the past five years.”

6. Marketing plan

“It is critical to have a plan [for] how you are going to spend your marketing budget,” says Deborah Sweeney, CEO, MyCorporation . “Assess different options (paid search, salespeople, flyers, [social media], etc.) and the associated ROI with each.”

“The plan should cover both sales and advertising strategies and costs,” says Stetar, as well as customer acquisition costs. “Be conservative here since you will look good if your over achieve but it will cost you investor confidence if you under achieve.”

A successful business plan is one is easy to read and follow

You need to make your business plan easy to read and follow. “There’s nothing more daunting than to receive an all-text business plan, 30 pages in length,” says Swallow. “Keep your potential investors engaged by including product and user photos, team headshots, colorful headings, financial graphs, charts, tables, anything to make reading more of a pleasure. Even bullet points help.”

Indeed, “don’t underestimate the importance of visuals,” says Arvai. “Researchers have found that presentations using visual aids are, on average,  43 percent more persuasive  than those without.”

Finally, before you go public with your plan, “have trusted mentors and expert peers look over it [and give you] their feedback,” says Sam Lundin, CEO, Vimbly . “Having [someone] review your business plan [before you present it to investors] is crucial.”

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The Business Planning Process: 6 Steps To Creating a New Plan

In this article, we will define and explain the basic business planning process to help your business move in the right direction.

What is Business Planning?

Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.

The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.

The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.

Finish Your Business Plan Today!

The best business planning process is to use our business plan template to streamline the creation of your plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.

The Better Business Planning Process

The business plan process includes 6 steps as follows:

• Do Your Research
• Calculate Your Financial Forecast
• Draft Your Plan
• Revise & Proofread
• Nail the Business Plan Presentation

We’ve provided more detail for each of these key business plan steps below.

1. Do Your Research

Conduct detailed research into the industry, target market, existing customer base,  competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:

• What are your business goals?
• What is the current state of your business?
• What are the current industry trends?
• What is your competition doing?

There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.

You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.

2. Strategize

Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.

This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.

3. Calculate Your Financial Forecast

All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.

Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.

A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.

This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.

4. Draft Your Plan

With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.

If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.

5. Revise & Proofread

Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.

Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.

6. Nail the Business Plan Presentation

The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.

Business Planning Process Conclusion

Every entrepreneur dreams of the day their business becomes wildly successful.

But what does that really mean? How do you know whether your idea is worth pursuing?

And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way. ​

Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.

Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.

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Click here to see how Growthink business plan consultants can create your business plan for you.

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What should a business plan include?

1. the executive summary, 2. a description of the business, 3. the market(s) the business will operate in, 4. a swot analysis.

5. Management team and personnel

6. The products or services offered

7. marketing.

8. A financial plan

The contents of a business plan

This is placed as number one on our list of components of a business plan , but it can easily be the final stage. That's because sometimes it's easiest to write your summary after you've covered all the other details.

A great summary is one of the key features of a business plan. It serves as an overview of your entire business and the elements surrounding it.

Be sure to outline succinctly the 5 "W"s (Who, What, Why, When, Where) as well as the mission statement . Think about why you started the business along with where you would like it to be in the future, how will you get there? Your mission statement is the start of creating a culture that people in your organisation will live and work by.

This section should contain details of things such as your goals and the customers you will service. What are the products and services you will offer to your customers? You'll need to provide an overview of them and how they will address customers' needs and wants?

You've come up with this great business idea , but how will it do in the market? Or, more importantly, what is the market for it? How well do you know the market? What does a typical buyer look like, what is their income level? Does the business have the hallmarks of disruptive innovation ?

This is the time to research and determine who your target market is and ask specific questions that relate to your product or service. Put you idea to the test. What have others done before you and what can you do differently and better? Analyse what information you've uncovered and outline it's potential impact in your plan.

Create a detailed list of your strengths, weaknesses, opportunities and threats. This needs to be done with an open and honest approach, keep emotions out of it, focus on being objective when analysing your business and those of your competitors.

Any strengths you uncover will represent internal, positive factors in your business that are within your control. Weaknesses are also internal, but are negative factors that need to be improved.

Both opportunities and threats are external factors. While opportunities will potentially positively impact on your business, threats represent negative factors beyond your control. For example, are there high barriers to entering the market? Does a competitor have the market cornered due to brand loyal customers? These could harm your enterprise, so you need to strategise for it in your plan.

5. The management team and personnel

Who will run the business, who are the directors in the business? What are the skills of the management team and how do their different responsibilities make maximum use of their abilities. What is the chain of command in terms of decision making?

Also use this section to identify how the management team, and taking on employees will help maximise strengths, while addressing identified weaknesses to help improve the business.

Finally, which of the UK's business structures will you choose to operate through?

• Limited company
• Partnership
• Limited liability partnership

In this section you need to detail what will be produced and how it will be sold. You should  explain how your product or service will meet a particular need in the marketplace, and how you'll get customers returning to make repeat purchases. Repeat custom is after all the lifeblood of many a good business.

Who will you rely on, in terms of suppliers, to help you assemble your products? What intellectual property, patents or copyright do you own, or might you be at risk of potentially infringing?

What is the branding to your business? What are the key messages you want to communicate with your target market and how will you go about reaching them? How will you achieve market share and at what cost in terms of your budget?

8. Let's talk money: A financial plan

Ideas are great, but how will you make them a reality and sustain a viable business. Creating a financial plan will give you the opportunity to address your financial concerns and talk money, think about start-up costs, financial projections , funding and investor pitches.

You'll need to list how much your start-up will cost, everything from stationary to leases should be outlined and balanced against your financial projections.

Don't fear change, your business plan isn't written in stone

It’s important to remember that your business plan isn’t written in stone. This is a document that you and your staff can improve and update as the business grows and changes. Your plan should be reviewed regularly.

Consider implementing a monthly review to track progress or make adjustments to your strategy. Accountability and motivation are key in making sure your goals are met, think about the people involved and what can you do to keep them inspired.

This post was created on 26/06/2018 and updated on 18/02/2022.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.

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10 Qualities of a Good Business Plan Explained

8 min. read

Updated May 10, 2024

What makes a good business plan? 

Results. 

Goals met, milestones achieved, objectives accomplished. 

Forget the old-fashioned thinking of evaluating plans like a college term paper. You don’t get points for writing style, formatting, or completeness. 

A good business plan shows you can get results. But what does that look like in practice? What should you focus on when writing? 

Well, I’ve narrowed it down to 10 key qualities. Qualities I’ve found make for the best business plans and, ultimately, more successful businesses.

• 1. It fits the business need

You have to consider why you need a business plan in the first place. Business plans aren’t one-size-fits-all . Form follows function. 

Not all business plans have to be pretty

Most business plans exist to help run the company , not to be presented to outsiders. They don’t have to be polished and formal; they just need to work for you and be easy to review, revise, and run your business. 

Write it for your audience

A business plan being shown to outside investors does, in fact, have to look good, read well, and be presentation-worthy. It needs good summaries and descriptions to validate the idea, the team, the market, and other key elements. It should also describe how you intend to exit in the future. 

The business plan to support a loan application also needs summaries and descriptions. They need to reassure a lender about risk, usually with assets, often with the owner’s personal financial statements, and past performance on credit ratings and debt repayment. 

2. It’s realistic and can be implemented

The second measure of a good or bad business plan is realism. You don’t get points for ideas that can’t be implemented. Setting unrealistic and unachievable goals is a waste of time.  

For example, a brilliantly written, beautifully formatted, and excellently researched business plan for a product that can’t be built is not a good business plan. A plan that requires millions of dollars of investment but lacks a management team to get that investment is not a good plan. 

A plan that ignores a fatal flaw is not a good plan. Make sure your goals are achievable.

For example, if you share a financial forecast , is it realistic? Based on current revenue, can you realistically achieve your goals? If you’ve brought in $200,000 annually in revenue for the last few years, don’t expect to jump to $400,000 in the next quarter. 

Make a plan for increasing revenue—but in increments that make sense and are achievable.  Look at changes in revenue drivers, such as traffic, web views, sales per store, etc. Get into the details. 

Link your projected increases to actions and events, such as milestones, promotions, a new product launch, or a new location. Think of the power of cause and effect. Increases are more real when they result from activities and events, not just out of the blue. 

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3. It’s specific and measurable

Every business plan should include tasks, deadlines, dates, forecasts, budgets, and metrics. These will make your plan measurable .

Ask yourself: 

• How will we know if we followed the plan?
• How will we track actual results and compare them against the plan? 
• How will we know if we are on track or not?

While high-end strategy can be fun to develop, good planning depends more on what, when, who, and how much. These are the concrete specifics that offer visibility into the real progress toward your goals. 

• 4. It clearly defines responsibilities for implementation

You have to be able to identify a single person who will be responsible for every significant task and function. A task that doesn’t have an owner isn’t likely to be implemented. 

You should be able to review a business plan and recognize who is responsible for implementation at every point. If you don’t, you have a gap and need to fill it.

Avoid sharing responsibilities between different people or groups because this reduces accountability. Match every important task or function with one person in charge and accountable. 

Again, if you don’t have that person right now, don’t just ignore it. Mention in your plan that it’s a known gap, when you intend to address it, and if you have anyone in mind.

• 5. It clearly identifies assumptions

Business plans are always wrong. They’re written by humans who are making guesses about the future. Humans tend to guess wrong. 

So, your business plan must clearly address assumptions upfront. 

Did you assume the company will increase productivity by 10% this year because it did the last few years? Do you assume the market won’t change much? No new competitors? Do you assume that your technology will reduce your direct costs? Do you assume growth in your social media impact? 

Share your thoughts on why this is achievable based on past factors, but also clarify that you’re guessing. 

You may need to update or refine these areas of your plan after a few months. By flagging them as assumptions from the start, you won’t be surprised when you over or underperform and are prepared to revisit and adjust. 

• 6. It defines strategy and tactics

In the real world, a small business can’t do everything, so it has to do the right things. You can’t please everybody, so you need to please the right people. That is the essence of strategy. 

A strategy defines what problem you solve, the solution you offer, the relevant target market, and why you are the one to do it. 

How you treat strategy in a business plan depends on the nature and objective of the plan itself. 

Strategy can be as simple as a bulleted list taking up a page or two of a lean business plan. It could also be one or more slides in a pitch deck or a more detailed formal chapter of a traditional plan. 

The plan defines the strategy so you can refer back to it as often as necessary. It might be there for management value or to explain to outsiders. And who will be using or looking at it will dictate how it needs to be presented. 

Get into the details

Strategy is useless without the key tactics . 

Tactics might be pricing, distribution, marketing, financial plans, sales plans, etc. Make sure the tactics you choose are directly in service of executing your strategic goal. 

You should be able to explain how every action you take relates to your overall business strategy. And don’t leave tactics without developing concrete specifics, milestones, budgets, tasks, responsibility assignments, tracking, and how you’ll follow up. 

• 7. It incorporates a monthly review schedule

Good business plans include timing and schedules for regular updates. You anticipate the need for a regular monthly review . 

You know your plan is not perfect and needs to be revised to accommodate ongoing results. Real business plans need to be kept fresh. 

• 8. It includes essential numbers

Sure, there is a place for a simpler one-page business plan and other shorter plan summaries. Investors, banks, and strategic partners might want that kind of simple summary to quickly understand your business. 

But real business runs on cash, and keeping your business in cash requires thorough financial planning. 

You need budgets and tracking. 

So a real business plan includes essential financial projections , including sales, costs of sales, expenses, profits, and cash flow.  

You track sales, costs, and expenses to monitor related budgets and progress toward goals. You also track cash flow factors such as accounts receivable and inventory to look for indications of change that might require management actions. 

Remember that management is about constant course corrections. This is why you include a regular monthly review of the plan against your actual results. 

9. It’s clear and simple

Keep it simple. 

Most businesses need and will use a lean business plan , which can be just a few pages of bullet point lists (strategy, tactics, milestones, etc.) and tables (sales, costs, expenses, profits, cash flow). 

Don’t use a business plan to show off. 

A business plan is about the business, not the science. Avoid industry jargon and long technical explanations. Investors and bankers will have experts review your details, but they don’t expect to find them all in the plan document.

Related Reading: How long should your business plan be?

• 10. Easy to communicate with the right people

Again, form follows function. 

For example, an internal plan to manage your business is not lengthy and formal. Instead, it links key elements together to make them easy for team members to access and work on. 

If you do have to present the plan, make the text business-appropriate.

Take the time and trouble to avoid typos and spelling errors. Use outlines and summaries to make the more important points easy to find. Make font sizes clean and large enough for older readers. Have somebody else read it before you finish. 

This makes it professional and shows respect for the reader and the business situation. It should also be presented in a format that lends itself to sharing, like a website or PDF document. 

Security is important too. Is the plan safely locked away from the prying eyes of outsiders? Most business plans live online or on local networks where team members can access and manage.  Some are online, and outsiders can see them. In both cases, use security safeguards. 

Ongoing planning process: it’s about the management it causes

U.S. president and military strategist Dwight D. Eisenhower is often quoted as saying: 

The plan is useless, but planning is essential .

The key point is that no clear criteria exists to tell you if a business plan is good or bad. 

What makes a business plan useful (good) is the management that comes out of it. The regular reviews and revisions that help you stay on track. That’s good planning , as opposed to just a good plan.

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

Table of Contents

• 2. It’s realistic and can be implemented
• 3. It’s specific and measurable
• 9. It’s clear and simple
• Ongoing planning process: it’s about the management it causes

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• List of Commerce Articles
• Features And Limitations Of Planning

Features and Limitations of Planning

Planning is firmly correlated with discovery and creativity. However, the manager would first have to set goals. Planning is an essential step what managers at all levels take. It needs holding on to the decisions since it includes selecting a choice from alternative ways of performance.

Scope and nature of Planning

The planning function of management has some special features. These features cast enlightenment on its scope and nature.

• Planning focuses on achieving objectives: Companies are set up with a common goal in view. Explicit purposes are placed out in the projects along with the ventures to be initiated to accomplish the goals. Therefore, planning is helpful.
• Planning is a primary function of management: Planning puts down the foundation for other operations of management. All other managerial duties are conducted within the structure of the ideas outlined. Consequently, planning leads to other operations. This is also mentioned as the supremacy of planning.
• Planning is continuous: Plans are outlined for a particular period of time, perhaps for a period, a quarter or a year. At the completion of that period, there is a requirement for a new policy to be formed on the support of new conditions and future circumstances.
• Planning is futuristic: Planning typically includes looking forward and outlining for the future. The idea of planning is to coincide future results efficiently to the valid advantage of an association. It means glancing into the future, investigating it and foretelling it. Planning is, therefore, perceived as a forward-looking capacity based on predicting.

Also Check: What is the Planning Process? 

Limitations of Planning

The limitations of Planning are furnished below:

(1) Planning Leads to Rigidity

• The plans are rigid in nature and have to be complied with throughout the organisation.
• Such rigidity of plans may be internal as well as external.
• Internal rigidity relates to plans, policies, programs, rules, and methods, etc.
• External rigidity relates to political, industrial, technological, legal and economic changes, etc.
• Example:  A super speciality hospital has fine branches in a city. Whatever the top management of the hospital decides the head of the branch of the hospital and their subordinates have to follow. Though on occasions they know they could have done better on their own but the plan laid out provides rigidity to their approach.

(2) Planning May Not Work in Dynamic Environment

• The environment in which a business survives is dynamic as it keeps on changing.
• It is difficult for an organisation to access future trends, the taste of customers, natural calamity, competitors’ policies and effects of changes in the different components of the environment.
• The organisation has to constantly adapt itself to changes because it is difficult to forecast the future changes with absolute accuracy.
• The dynamic environment may sometimes lead to failure of plans.
• Example:  Nestle, a very successful producer was very proactive in deciding strategies for Maggi noodles. Maggi noodles were in a lot of demand but they were off the shelf due to political and legal dimensions. This was due to the high content of lead in Maggi noodles.

(3) Planning Reduces Creativity

• Planning is mostly done by the top management and other members
• like middle and lower levels of management have to follow these plans.
• They can’t deviate or change the plans made by their seniors.
• Under such circumstances, employees become orders following machines and don’t involve creative thinking from their side.
• Such rigidity to comply with the laid plans kills the creativity of some talented persons.
• Example:  The need for a branch of a renowned shoe manufacturing company sees a lot of scope in customized shoes. The top management is not interested in this idea as the company manufactures standardised shoes.

(4) Planning Involves Huge Cost

• Formulation of plans can be too much costly because there is a lot of time and money is involved.
• Some costs are incidental in nature like- expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the feasibility of the plan.
• Checking the accuracy of facts and scientific calculations may involve lots of time.
• Sometimes, cost incurred may not justify the benefits derived from the plans; it may leave a harmful effect on the enterprise.
• Example:  Companies like IBM spend a lot of research. Many world-class levels give their advice to this company and change their fee. However, without so much of painstaking such a huge company won’t be able to sustain itself. So planning in case of IBM becomes necessary.

(5) Planning is a Time-consuming  Process

• Planning is a very lengthy process as it consumes a lot of time for collection, analysis, and interpretation of data.
• Due to such a lengthy process, sometimes decisions get delayed, opportunities are lost and there is not much time left for the implementation of plans.
• Example:  Health is wealth Ltd. plans to organise 25 health checkup camps on the World Health Day and send a requisition to the top management but management could send its approval just a day before and the sales manager could organise only 5 camps and thus huge opportunity is lost. Here the implementation was delayed.

(6) Planning Does Not Guarantee Success

• The success of an enterprise is possible only when plans are properly drawn up and implemented.
• Plans become meaningless if it is not translated into action.
• Managers have a tendency to rely on previously tried and tested successful plans.
• It is not necessary that a successful plan in the past will bring success in the future also as every business organisation survives in a dynamic and uncertain environment.
• Plans must be implemented in the light of changing environment otherwise it may lead to failure of the business.
• Example:  In a paint manufacturing company, the top management very meticulously chalked out a great plan. The whole company worked out on the plan in a much focused manner. However, with the entrance of a competitor with better paint quality the whole plan failed. The reason for the failure was the dynamic conditions which were not in control of the organisation.

Features of Planning

(1) Primary Function

• Planning precedes other function because it lays down the base for all other functions of management.
• All other management functions like organising, staffing, directing and controlling are performed within the framework of the plans drawn.
• Without planning other functions of management is not possible.
• Planning is the basic function of management and it is also referred to as the “Primacy of Planning”.
• Example : After having set the objective of 2400 refrigerators the company organizes the work, then staffing is done in which the required types of employees are recruited and selected, then they are motivated and supervised through directing and ultimately their performance is controlled leading towards the achievement of the objective. However, we can see that without setting the objective of selling 2400 refrigerators, other functions were not possible.

(2) Achieving Objectives

• When we make plans, we focus on two things, specific goals to be achieved and activities involved to achieve these specific goals.
• These specific activities become objectives to achieve goals and objectives are quantifiable.
• Planning cannot be done in the absence of objectives.
• In the absence of planning, employees would be working in different directions and the organisation would not be able to achieve its desired goals.
• Example: If a firm decides to sell 2400 refrigerators in six months. If sales don’t materialize, the enterprise may think for better ways like sales discount to achieve the final objective. We can see that without the objective of selling 2400 refrigerators no planning is possible or applicable.

(3) Futuristic/ Forward-Looking

• Planning means looking ahead and meeting future events effectively.
• Planning is regarded as a forward-looking function based on forecasting.
• On the basis of forecasting, future conditions and events are anticipated and plans are prepared.
• Example: Ø On the basis of sales forecast, plans are drawn how much to produce, how to market the product, how to make it available in the market, how to make the customer aware about the product, etc. Ø All these steps are directed towards a future that is why they are futuristic. Sales forecast helps a company to look forward.

(4) All Pervasive

• Planning is required in all types of organisations and at all levels of management. However, the scope of planning differs.
• Top-level management plans for the organisational as a whole. They think from the perspective of the whole organisation.
• Middle-level management thinks from the perspective of their departments and are involved in departmental planning.
• Lower level management plans for the day-to-day operations of the concern.

Example:  A student may plan for his monthly test, a husband may plan to give surprise gift to his wife on the occasion of the anniversary, the CEO of a company may plan to launch a new product in the market, a sales manager may plan to achieve his sales target, a worker may plan for his production schedule, etc.

(5) Continuous Process

• Planning is an ongoing process and plans are prepared for a specific period of time.
• These may be prepared for a day, week, a month, a quarter or a year.
• At the end of a specific period, new plans are drawn and revised regularly on the basis of feedback on previous plans, new requirements, and future conditions.

Examples: If plans are prepared during a recession period and during its execution, the market plunges into a boom, then planners need have to make several changes for the period or to work on a different strategy to achieve the desired goals.   A company plans to sell 5000 cars but due to floods, the original plan cannot be implemented. The company will require changing its plans to achieve its sales target. So we can see that in both the above examples planning is not discontinued even for a while.

(6) Decision Making

• Decision making means choosing the best alternative among the alternatives available.
• Planning cannot be imagined in the absence of alternatives.
• If there is no alternative available then there is no need for planning.
• A thorough analysis of all the alternatives helps us choose the best one

and hence the need for planning arises.

• Where there is no alternative – if a firm has to import raw materials and if there is only one agency like State Trading Corporation (STC) to get it, then the firm has no choice but to import the material through STC.
• Where there are alternatives – if an import is free and there is more than one import agency included in this task then the importer has the choice to purchase from any agency at competitive prices.

(7) Planning is Mental Exercise

• Planning is the outcome of a mental process rather than wishful thinking and guesswork.
• Planning is a thinking process and it is separate from organisational activities.
• It is based on logical reasoning, facts, foresight, vision, intelligent imagination, and sound judgment.
• Example: All the great CEOs like Tim Cook of Apple, Mark Zuckerberg of Facebook have an immense capability to imagine. Then these people make sound judgments and help their companies attain phenomenal success.

The above mentioned is the concept, that is elucidated in detail about the ‘Features and Limitations of Planning’ for the class 12 Commerce students. To know more, stay tuned to BYJU’S.

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Human resource management (HRM)

• Human Capital Management
• Human Resource Management

It’s often said that people are an organization’s greatest resource. Yet, until fairly recently, human resource  management was not considered as critical to success as other business operations, like marketing, finance or sales. This notion has been largely altered by new technology, globalized markets and changes in organizational hierarchies. Today, business leaders place great emphasis on hiring the right people and keeping them engaged.

What is human resource management?

Human resource management involves creating personnel policies and procedures that support business objectives and strategic plans. Central to this mission is fostering a culture that reflects core values and empowers employees to be as productive as possible.

What are the functions of human resource management?

HR functions can vary depending on industry, businesses size and the types of workers employed. In most cases, the primary objectives are to acquire and cultivate talent and improve communication and cooperation among workforce members. Other key human resource management functions include:

• Job analysis Determining the skills and experience necessary to perform a job well may make it easier to hire the right people, determine appropriate compensation and create training programs.
• Workforce operations Creating health and safety policies, responding to employee grievances, working with labor unions, etc., can help support regulatory compliance.
• Performance measurement Evaluating performance is important because it not only fosters employee growth through constructive feedback, but also serves as a guide for raises, promotions and dismissals.
• Incentive programs Recognizing achievements and rewarding high performers with bonuses and other perks is a proven way of motivating employees to take ownership of business objectives.
• Professional development From orientation to advanced educational programs, employee training serves to improve productivity, reduce turnover and minimize supervisory needs.

HCM Buyer’s Guide: Evaluating integrated HCM solutions

What are the responsibilities of human resource management.

HR professionals generally are tasked with creating and administering programs that improve workplace efficiency and employer-employee relationships. Within this broad assignment are several different, but critical responsibilities, such as:

• Staffing Staffing a business or an individual department requires a number of key steps. Hiring managers must first determine how many new employees the budget can support, then find and interview qualified candidates, and finally, make selections and negotiate compensation.
• Developing workplace policies If it’s determined that a new or revised policy is needed, HR professionals typically consult with executives and other managers, write the supporting documentation and communicate it to employees. Policies may cover vacations, dress codes, disciplinary actions and other types of workplace protocol.
• Administering pay and benefits In order to attract and retain talent, compensation must meet industry standards and be comparable to what other employees in similar roles are being paid. Creating such a fair pay system requires careful consideration of an employee’s years of service with the business, experience level, education and skills.
• Retaining talent Compensation isn’t the only thing that retains talented employees. HR managers may need to proactively address issues with workplace environments, organizational culture and relationships between employees and supervisors.
• Training employees When employees develop new skills, they tend to be more productive and satisfied with their job. Some of the training programs typically run by HR departments include team-building activities, policy and ethics education, and on-the-job instruction and skills, e.g. how to run a machine or computer program.
• Complying with regulations Laws that affect the workplace – whether they’re related to discrimination, health care or wages and hours  – are constantly evolving. HR professionals are required to keep up with these changes and notify the rest of the organization in support of compliance.
• Maintaining safety Safety in the workplace means protecting not just the physical health of employees, but also their private information. To minimize workers’ compensation claims and data breaches, HR must implement security measures and ensure that all federal, state and union standards are met.

Human resource management and small business

While human resource management is important to all businesses, the stakes may be higher for smaller organizations. For example, one incompetent employee in an office of 10 people can be much more detrimental than one in a workforce numbering in the thousands. To improve their people processes, small business owners generally can:

• Assess current operations to determine if new hires are needed or if existing employees and production methods can be utilized more effectively.
• Take an active role in the recruitment process and write job descriptions that match prospective talent to business needs.
• Create an employee handbook or an official document that clearly outlines company policies.
• Provide continuing education opportunities as needed by the particular industry.
• Maintain a work environment where employees are treated fairly and can be productive.

HRM systems and software

Faced with rising numbers of contract-based workers and increasingly complex regulations, HR professionals have turned to HRM software to help them keep pace with changing workforce environments and people management needs. This technology is available with a variety of options to suit businesses of any size. Basic systems may offer recruitment services , payroll and benefits , while more robust solutions tend to include talent management, international compliance support  and advanced analytics.

Why use a human resource management system (HRMS)?

HRMS are designed to meet the core needs of HR and turn basic administrative functions into critical enablers of business value. With the aid of these people-centric, data powered solutions, HR managers may be able to:

• Improve their hiring processes
• Manage people more effectively
• Optimize workforce productivity
• Engage and retain employees
• Eliminate costly redundancies
• Make data-driven decisions
• Maintain regulatory compliance

How to choose a human resources management solution

Finding the right solution often requires a strategic evaluation process, such as the following:

• Identify what the organization would like to accomplish, change or improve and how technology can help achieve those goals.
• Ensure that the HRMS can keep pace with the rapidly changing regulatory and statutory requirements in all applicable jurisdictions (local, state, federal, international, etc.).
• Prioritize security and know exactly how sensitive data will be stored, transferred and backed up.
• Look for implementation models with a change management strategy  that will get the HRMS up and running efficiently.
• Address stakeholder questions, concerns and objections to drive widespread HRMS support.
• Ask about service plans to manage the hundreds of post-payroll tasks necessary for compliance .
• Inquire into the vendor’s financial history and investments in innovation.
• Get outside-in perspective by looking at peer reviews, industry analyst feedback and product demos.

Examples of HRM software

Business leaders and HR professionals who are looking for software to help them accomplish more with less resources generally have three options available to them:

• Human resource information systems (HRIS) – perform core HR functions , like applicant tracking, payroll and benefits administration
• Human resource management systems (HRMS) – offer the benefits of HRIS, plus talent management services
• Human capital management (HCM) solutions – provide a broad suite of HR capabilities, including global payroll and compliance support and in-depth analytics

Why choose ADP for your human resource management needs?

ADP’s HR management solutions automate and streamline key needs so that HR professionals can focus more time on their people and less on paperwork. We offer basic and customized packages with some of the following features:

• Powerful workforce reporting that turns data into a trusted source of decision-making
• Preconfigured new hire templates for a simplified onboarding process
• Self-service and mobile apps so time-sensitive tasks can be performed quickly
• Industry-recognized security to help safeguard sensitive information

Learn more about ADP Workforce Now® HR Management →

Frequently asked questions about HRM

What is human resource management and its functions.

Human resource management is the strategic approach to nurturing and supporting employees and ensuring a positive workplace environment. Its functions vary across different businesses and industries, but typically include recruitment, compensation and benefits, training and development, and employee relations.

What are the three major roles of human resources management?

The job of an HR manager can be broken out into three major roles:

• Administrator Running payroll , writing job descriptions, creating workplace policies and procuring benefits packages are typical of HR administration.
• Change manager HR professionals must monitor regulations and communicate policy or procedural changes with employees to help support compliance.
• Personnel manager Managing people entails resolving conflicts, overseeing training and development, and fostering employee engagement.

What are the five main areas of HR?

HR professionals perform many activities in the pursuit of employee well-being and organizational stability, but their responsibilities generally lie within five main areas:

• Recruitment and staffing – identifying talent gaps, acquiring applicants, arbitrating contracts, maintaining ethical hiring practices
• Compensation and benefits – determining pay scales, approving raises, negotiating benefits packages
• Training and development – onboarding new hires, making educational opportunities available
• Compliance and safety – monitoring legislative changes, implementing safety measures, processing workers’ compensation claims
• Employee relations – resolving employee conflicts, addressing harassment or abuse allegations, working with union leaders

What are seven functions of HR?

Over the years, HR has evolved from a personnel department engaged largely in administration to a strategic partner that works closely with management teams on organizational development. It’s seven key functions today include:

• Strategic planning
• Recruitment
• Training and development
• Compensation and benefits
• Policy creation
• Employee and labor relations
• Risk management

What is HR compliance?

HR compliance means keeping an organization from violating the growing number of employment laws enacted by federal, state and local governments. This responsibility requires HR professionals to monitor and understand regulatory requirements, enforce policies, classify workers correctly, practice fair hiring practices and provide a safe work environment, among other tasks.

This guide is intended to be used as a starting point in analyzing an employer’s HR obligations and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.

ADP Editorial Team The ADP editorial team is comprised of human resource professionals with extensive experience solving complex HR challenges for businesses of all sizes.

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ZDNET's recommendations are based on many hours of testing, research, and comparison shopping. We gather data from the best available sources, including vendor and retailer listings as well as other relevant and independent reviews sites. And we pore over customer reviews to find out what matters to real people who already own and use the products and services we’re assessing.

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ZDNET's editorial team writes on behalf of you, our reader. Our goal is to deliver the most accurate information and the most knowledgeable advice possible in order to help you make smarter buying decisions on tech gear and a wide array of products and services. Our editors thoroughly review and fact-check every article to ensure that our content meets the highest standards. If we have made an error or published misleading information, we will correct or clarify the article. If you see inaccuracies in our content, please report the mistake via this form .

Microsoft Copilot vs. Copilot Pro: Is the subscription fee worth it?

Microsoft's Copilot tool is already freely available as a dedicated webpage, mobile app, and built-in Windows tool, offering quick and easy access to an AI chatbot that will answer your questions, generate content, and create images. But Microsoft upped its game with a Pro version of Copilot that kicks in more features and better access for $20 per month.

Also: Microsoft adds Copilot Pro support to iPhone and Android apps

The free flavor offers the following features:

• Copilot use on the web and in Windows, MacOS, and iPadOS.
• Access to GPT-4 and GPT-4 Turbo during non-peak times.
• Upcoming access to GPT-4o .
• Use of text, voice, and images in conversational search.
• Ability to create and edit AI images with 15 boosts (15 images) per day with the Designer tool.
• Ability to use plug-ins and shared GPTs.

Also:  How to use Image Creator from Microsoft Designer

The Pro version kicks in several additional benefits:

• Faster performance and priority access to GPT-4 and GPT-4 Turbo during peak times.
• Copilot availability in core Microsoft 365 desktop and web apps (Microsoft account required).
• Faster AI image creation with 100 boosts (100 images) per day using Designer .
• Ability to resize AI-created images between square and landscape formats without leaving Designer.
• Ability to create and share your own custom and tailored Copilot GPTs via a Copilot Builder tool .

Beyond using Copilot Pro at the Copilot website through any browser, you can launch it directly in Windows 10 or 11. Simply click the Copilot icon on the Taskbar. The Pro flavor is also accessible in the iPhone and Android Copilot apps . You can use Copilot Pro with a Microsoft 365 subscription in Windows, MacOS, and iPadOS. And you can even tap into the Pro flavor with the free Microsoft 365 apps on the web .

You should use Copilot free if…

1. you don't use microsoft 365 on the desktop or on the web.

For most people, the main advantage of Copilot Pro is the support for Microsoft 365. This means you're able to use AI to create and edit text and perform other advanced tasks in Word, Excel, and other apps both in the desktop suite and on the web. If you don't use any of the Microsoft 365 apps, then the other benefits by themselves probably aren't enough to justify the $20-per-month price tag.

2. You can get by with GPT-3.5 and non-peak use of GPT-4

GPT-4 offers some clear benefits over GPT-3.5, including faster and more accurate responses, longer prompts, a better understanding of context and nuance, greater creativity, the ability to solve complex problems, and fewer biased responses and hallucinations.

Also: ChatGPT vs ChatGPT Plus: Is it worth the subscription fee?

You can access both GPT models through the free version, though you may not be able to use GPT-4 during peak load times. In that case, Copilot will drop down to GPT-3.5. For many people, however, the sporadic GPT-4 access should suffice.

3. Your image generation needs are modest

Using the built-in Designer tool with DALL-E 3, Copilot is able to generate images based on your text descriptions. The free flavor limits the number of images you can generate, granting you 15 boosts (15 images) per day. If you don't need more, then the free flavor of Copilot will work just fine.

4. You already subscribe to ChatGPT Plus

ChatGPT Plus duplicates some of the benefits of Copilot Pro and throws in extra features such as the GPT Store and the ability to create your own custom chatbots. If you already pay $20 per month to subscribe to ChatGPT Plus , there's not as much reason to also subscribe to Copilot Pro. Save yourself some money and stick with the free Copilot flavor.

You should use Copilot Pro if…

1. you use microsoft 365 and want generative ai assistance for the apps.

With its AI skills, Copilot Pro will help you write and edit text and summarize documents in Word, generate formulas and analyze data in Excel, create presentations in PowerPoint, compose text in OneNote, and draft replies and organize your inbox in Outlook. If you use Microsoft 365 on the desktop or on the web and those AI smarts will help you write, create, and work faster, then Copilot Pro can easily be worth the price.

2. You rely heavily on GPT-4 and GPT-4 Turbo

With the Pro edition of Copilot, you won't get saddled with GPT 3.5, even during peak times. Instead, you can switch between GPT-4 and the latest GPT-4 Turbo model. 

If you use GPT-4 heavily and frequently throughout the day and require fast and reliable access all the time, then Copilot Pro gets the nod over the free version.

3. You need to generate a lot of images

While the free Copilot limits the number of images you can generate to 15 per day, the Pro version allows as many as 100. Plus, the image creation tends to be much faster. If you need to create batches of artwork, logos, and other images as part of your job, then you won't run into as many roadblocks with the Pro version.

Both the free and paid versions of Copilot let you edit your images inline without leaving the Designer tool. Copilot Pro goes a step further by allowing you to resize and regenerate images between square and landscape formats.

Also: The best AI image generators

4. You don't subscribe to other premium AI services

Depending on your job and workload, a paid AI service can help you be more productive. If you don't already subscribe to ChatGPT Plus, Google's Gemini Advanced , or a similar service, then Copilot Pro could be just what you need. And remember, you can always try it for a month and then decide if you want to continue or cancel.

5. You'd like to create your own custom Copilot GPTs

With Copilot Pro, you're able to create and configure your own Copilot GPT chatbots . You might try this if you want to design a niche and unique GPT devoted to a specific skill or resource. Using the Copilot GPT Builder, you can either chat with Copilot for AI-infused assistance or manually give your GPT a name, description, and instructions. When done, you can preview your GPT to make sure it works and then either restrict access just to yourself or make it available to anyone with whom you share the link.

Now, let's look at how and where to access the free and paid editions of Copilot.

Free version access at the website

To access the free version on the web, browse to the Copilot webpage . Choose a conversation style and then type your question or request at the "Ask me anything" prompt. On the right, you should see specific Copilot GPTs, including Designer for image generation, a vacation planner, a cooking assistant, and a fitness trainer. The website also offers access to Copilot plugins, such as Instacart, Kayak, and Open Table.

Free version access in Windows

More easily, click the Copilot icon on the Windows 10 or 11 toolbar. A similar interface appears where you choose the conversation style and then dive into your questions.

Free version access in the mobile apps

To use Copilot on your mobile device, download the app for iOS or Android. Choose your preferred conversation style and then submit your requests.

Paid version access at the website

To sign up for the paid version of Copilot, browse to Microsoft's Copilot Pro webpage . Click the button for Get Copilot Pro. At the subscription page, confirm your payment method, and then click the Subscribe button. 

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After the payment process finishes, click the "Get started" button. You're taken to the Copilot webpage where you'll see Pro as part of the Copilot logo. The Copilot GPTs and plugins are all accessible in the Pro model.

Paid version access in Windows

After subscribing on the website, log back into Windows 10 or 11. Click the Copilot Taskbar icon, and the Pro version will pop up.

Paid version access in the mobile apps

Open the iOS or Android Copilot app and you'll see that Pro is now part of the logo, indicating that you're tapping into your Pro subscription.

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