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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.

Document your strategy and goals

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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What Is a Business Plan and How to Write One

Start writing your business plan today and find out how Chase for Business can help you be successful. Presented by Chase for Business.

If you're planning on starting a business, one of your first steps should be writing a business plan.

The objectives of a business plan are guided by the goals of your business and should leave room for flexibility and future restructuring. Use these tips to help you get started.

What is a business plan?

A business plan is a guide for your company to follow as it scales in size and complexity. Business plans include basic information about your company's operational, financial and marketing goals. Writing a business plan will include several key sections:

• Executive summary: A summary of your business model, your target market, your products and services and basic financial information.
• Company overview: An overview of your business’ mission, location, legal structure and history.
• Products and services: An explanation of the products and services your business offers. This section should cover the problems you solve for customers, intended audiences, and use cases and pricing.
• Market analysis: An analysis of your value proposition, how you plan to reach your target market and where you fit into the competitive landscape.
• Financial plan: An outline of the fiscal details of your business including a balance sheet, cash flow statement and sales forecast. This section should include a profit and loss statement, as well.
• Contact Directory: An introduction of all key team members and an explanation of their roles. If applicable, list the chief executive officer (CEO), chief financial officer (CFO), chief operations officer (COO) and other key management roles.

Why is a business plan important?

The specific steps in writing a business plan can help your company build a strategy for long-term success. When starting a business, you should consider some items including:

• Research your market
• Develop a strategy
• Record existing financial data
• Organize your goals into a cohesive vision

If you're seeking financing or applying for a business loan , a business plan is essential. Banks, private investors and venture capital firms all need to see a business plan to make funding decisions. These institutions want to know how your business plan will achieve its goals and make their investments worthwhile.

Your company doesn't have to follow the same plan in perpetuity — you can and should revise your model as necessary. Reference your business  plan in relation to other major goals and strategy throughout the year.

Types of business plans

Different business plans work for different business cases. Two of the most common business plan types include:

• Traditional business plan: This plan tends to be long and detailed. It includes all of the sections above as well as information on the specific funding and human resources goals you hope to achieve. Traditional investors tend to request traditional business plans.
• Lean business plan: This type of business plan is much shorter and includes only essential information. It should include partnerships, activities, resources, market, value proposition and distribution channels. A lean business plan may also include your cost structure and revenue streams. Lean business plans are ideal for internal use.

5 ways companies use business plans

The following are five ways that companies typically use a business plan to aid in their development and growth.

1. Assess feasibility

Business plans can be used to help examine the feasibility of a business or product idea. As you research your market, create a financial plan and crunch the numbers. By doing this, you’ll develop a better sense of what is needed in order to make a profit.

You should share your business plan with other people for feedback — such as mentors, potential partners or prospective employees. If you can demonstrate you have a plan to succeed, prospective clients or investors may be more confident in working with you.

2. Understand the market

Understanding your customers and marketplace dynamics is key to running a successful business. The market analysis section of your business plan positions your company within the industry and among your competitors. For example, your business plan might explain how you intend to solve a persistent problem in a way that your competitors cannot.

To help know your market better, you should conduct a SWOT analysis, which stands for strengths, weaknesses, opportunities and threats. By digging deep into your business goals, you can discover who your customers are and how you can best serve them. You can also assess where your business is likely to thrive and manage any perceived opportunities upfront.

3. Create milestones

It can be challenging to keep your eye on the big strategic picture while also managing a business. Writing a business plan forces you to set aside your daily tasks and consider your goals. In turn, setting milestones will help guide your business and give it a greater purpose.

The milestones you create should be unique to your business. For example, your milestones might include reaching $1 million in revenue, expanding to a new region, or selling your business to a larger company.

4. Seek funding

Some companies have all the capital they need to launch while others need outside financing. If you request funding from a bank  or a private investor, you will need a clear business plan that allows investors to assess how your company will make money and grow.

Consider these business plan tips for common financial projections:

• Cash-flow statement
• Profit and loss statement
• Break-even projection
• Sales forecast

Reposition the business

Few companies follow the same path the entire time they're in business. Issues like market changes, new technology, and economic growth can force a change in direction.

When you need to reposition your company, referring to your original business plan is essential. This will encourage you to analyze the market, consider different operational models and experiment with new strategies.

Even as you continue to evolve your business strategies and objectives, your business plan can guide your company through major changes and improve your chances for profitability.

Once your business plan is in motion, meet with your local business banker  to manage your available finances or see how a Chase business   checking account  might help.

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Business Plan: What It Is + How to Write One

Discover what a business plan includes and how writing one can foster your business’s development.

What is a business plan?

A business plan is a written document that defines your business goals and the tactics to achieve those goals. A business plan typically explores the competitive landscape of an industry, analyzes a market and different customer segments within it, describes the products and services, lists business strategies for success, and outlines financial planning.  

In your research into business plans, you may come across different formats, and you might be wondering which kind will work best for your purposes. 

Let’s define two main types of business plans—the traditional business plan and the lean start-up business plan. Both types can serve as the basis for developing a thriving business, as well as exploring a competitive market analysis, brand strategy, and content strategy in more depth. 

There are some significant differences to keep in mind [ 1 ]: 

The traditional business plan is a long document that explores each component in depth. You can build a traditional business plan to secure funding from lenders or investors. 

The lean start-up business plan focuses on the key elements of a business’s development and is shorter than the traditional format. If you don’t plan on seeking funding, the lean start-up plan can serve mainly as a document for making business decisions and carrying out tasks. 

Now that you have a clear business plan definition, continue reading to learn how to start writing a detailed plan that will guide your journey as an entrepreneur.  

How to write a business plan 

In the sections below, you’ll build the following components of your business plan:

Executive summary

Business description 

Products and services 

Competitor analysis 

Marketing plan and sales strategies 

Brand strategy

Financial planning

Explore each section to bring fresh inspiration and reveal new possibilities for developing your business. Depending on which format you're using, you may choose to adapt the sections, skip over some, or go deeper into others. Consider your first draft a foundation for your efforts and one that you can revise, as needed, to account for changes in any business area.

1. Executive summary 

This is a short section that introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, your goals for developing it, and why it will be successful. If you are seeking funding, summarize the basics of the financial plan. 

2. Business description 

Use this section to provide detailed information about your company and how it will operate in the marketplace.

Mission statement: What drives your desire to start a business? What purpose are you serving? What do you hope to achieve for your business, the team, and customers? 

Revenue streams: From what sources will your business generate revenue? Examples include product sales, service fees, subscriptions, rental fees, license fees, and more. 

Leadership: Describe the leaders in your business, their roles and responsibilities, and your vision for building teams to perform various functions, such as graphic design, product development, or sales.  

Legal structure: Are you operating as a partnership or a corporation? If you’re registering a specific legal structure within your province or territory, include it here and the rationale behind this choice. 

3. Competitor analysis 

This section will include an assessment of potential competitors, their offers, and marketing and sales efforts. For each competitor, explore the following:

Value proposition: What outcome or experience does this brand promise?

Products and services: How does each one solve customer pain points and fulfil desires? What are the price points? 

Marketing: Which channels do competitors use to promote? What kind of content does this brand publish on these channels? What messaging does this brand use to communicate value to customers?  

Sales: What sales process or buyer’s journey does this brand lead customers through?

4. Products and services

Use this section to describe everything your business offers to its target market. For every product and service, list the following: 

The value proposition or promise to customers, in terms of how they will experience it

How the product serves customers, addresses their pain points, satisfies their desires, and improves their lives.

The features or outcomes that make the product better than those of competitors

Your price points and how these compare to competitors

5. Marketing plan and sales strategies 

In this section, you’ll draw from thorough market research to describe your target market and how you will reach it. 

Who are your ideal customers?   

How can you describe this segment according to their demographics (age, ethnicity, income, location, etc.) and psychographics (beliefs, values, aspirations, lifestyle, etc.)? 

What are their daily lives like? 

What problems and challenges do they experience? 

What words, phrases, ideas, and concepts do consumers in your target market use to describe these problems when posting on social media or engaging with your competitors?  

What messaging will present your products as the best on the market? How will you differentiate messaging from competitors? 

On what marketing channels will you position your products and services?

How will you design a customer journey that delivers a positive experience at every touchpoint and leads customers to a purchase decision?

6. Brand strategy 

In this section, you will describe your business’s design, personality, values, voice, and other details that go into delivering a consistent brand experience. 

What are the values that define your brand?

What visual elements give your brand a distinctive look and feel?

How will your marketing messaging reflect a distinctive brand voice, including tone, diction, and sentence-level stylistic choices? 

How will your brand look and sound throughout the customer journey? 

Define your brand positioning statement. What will inspire your audience to choose your brand over others? What experiences and outcomes will your audience associate with your brand? 

7. Financial planning  

In this section, you will explore your business’s financial future. If you are writing a traditional business plan to seek funding, this section is critical for demonstrating to lenders or investors that you have a strategy for turning your business ideas into profit. For a lean start-up business plan, this section can provide a useful exercise for planning how you will invest resources and generate revenue [ 2 ].  

Use any past financials and other sections of this business plan, such as your price points or sales strategies, to begin your financial planning. 

How many individual products or service packages do you plan to sell over a specific time period?

List your business expenses, such as subscribing to software or other services, hiring contractors or employees, purchasing physical supplies or equipment, etc.

What is your break-even point, or the amount you have to sell to cover all expenses?

Create a sales forecast for the next three to five years: (No. of units to sell X price for each unit) – (cost per unit X No. of units) = sales forecast.

Quantify how much capital you have on hand.

When writing a traditional business plan to secure funding, you may choose to append supporting documents, such as licenses, permits, patents, letters of reference, resumes, product blueprints, brand guidelines, the industry awards you’ve received, and media mentions and appearances.

Business plan key takeaways and best practices

Remember: Creating a business plan is crucial when starting a business. You can use this document to guide your decisions and actions and even seek funding from lenders and investors. 

Keep these best practices in mind:

Your business plan should evolve as your business grows. Return to it periodically, such as every quarter or year, to update individual sections or explore new directions your business can take.

Ensure everyone on your team has a copy of the business plan, and welcome their input as they perform their roles. 

Ask fellow entrepreneurs for feedback on your business plan and look for opportunities to strengthen it, from conducting more market and competitor research to implementing new strategies for success. 

Start your business with Coursera 

Ready to start your business? Watch this video on the lean approach from the Entrepreneurship Specialization :

Article sources

BDC. “ Step 2—Prepare a winning business plan , https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/create-effective-business-plan." Accessed November 13, 2022.

CBDC. " NEW fillable CBDC Business Plan ,   https://www.cbdc.ca/en/new-fillable-cbdc-business-plan." Accessed November 13, 2022.

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This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

What is a Business Plan?

Home › Business Management › What is a Business Plan?

Definition:  A business plan is a detailed written steps and goals defined to guide a business’ course of action from its initial stages. A business plan provides a complete description and projection of the company as well as its core strategies and expected results.

• What Does Business Plan Mean?

The creation of a new organization or a new business requires coherent actions in order to achieve the desired outcomes. Following a business plan allows to link actions and resources to objectives and measurable goals. This plan can be used internally like a roadmap for the owner but also can be a requirement when looking for funding or partners.

A business plan is generally a precise, short document that commonly contains the following sections: executive summary, business description with its products or services, marketing plan, operational plan and financial plan with its forecasted financial statements for the first years of operation, often five to ten years. The initial business plan is later substituted by annual or bi-annual strategic plans.

Mark Tilson is a young professional that wants to start a new business. He has the idea of providing an innovative maintenance service to medium-size manufacturing companies but he needs funds to implement it. Mr. Tilson therefore decided to write a business plan to present the idea to some potential capital partners. He though that the ideas were already clear but soon realized that more analysis and pre-launching work was required.

How many employees the company will have? How the company will market its services? How much money the initial investment requires? How much profit the company is expected to generate at the end of the fifth year of operation? These and other questions must be answered and coherently written in the business plan. Finally, Mr. Tilson improved his ideas, presented the plan and found the required partner.

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Business Plan

By Entrepreneur Staff

Business Plan Definition:

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask. Generally, a business plan has the following components:

Title Page and Contents A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.

Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.

Executive Summary The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front. Are you looking for a $10,000 loan to remodel and refurbish your factory? A loan of $25,000 to expand your product line or buy new equipment? How will you repay your loan, and over what term? Would you like to find a partner to whom you'd sell 25 percent of the business? What's in it for him or her? The questions that pertain to your situation should be addressed here clearly and succinctly.

The summary or statement should be no more than half a page in length and should touch on the following key elements:

• Business concept describes the business, its product, the market it serves and the business' competitive advantage.
• Financial features include financial highlights, such as sales and profits.
• Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
• Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
• Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.

Description of the Business The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Remember that bankers and investors want to know hard facts--they won't risk money on assumptions or conjecture.

When describing your business, say which sector it falls into (wholesale, retail, food service, manufacturing, hospitality and so on), and whether the business is new or established. Then say whether the business is a sole proprietorship, partnership, C or Sub chapter S corporation. Next, list the business' principals and state what they bring to the business. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.

Description of the Product or Service The business description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs.

When you describe your product or service, make sure your reader has a clear idea of what you're talking about. Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors.

Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful. If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Give hard facts, such as "new equipment will create an income stream of $10,000 per year" and briefly describe how.

Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

Market Analysis A thorough market analysis will help you define your prospects as well as help you establish pricing, distribution, and promotional strategies that will allow your company to be successful vis-à-vis your competition, both in the short and long term.

Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain. Keep in mind that no one gets 100 percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections.

You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning." Positioning helps establish your product or service's identity within the eyes of the purchaser. A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP (unique selling proposition) is.

How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas. Many methods of establishing prices are available to you, but these are among the most common.

• Cost-plus pricing is used mainly by manufacturers to assure that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing is used by companies that sell their products through a variety of sources at differing prices based on demand.
• Competitive pricing is used by companies that are entering a market where there's already an established price and it's difficult to differentiate one product from another.
• Markup pricing is used mainly by retailers and is calculated by adding your desired profit to the cost of the product.

You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user. Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services. To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales.

Competitive Analysis The purpose of the competitive analysis is to determine:

• the strengths and weaknesses of the competitors within your market.
• strategies that will provide you with a distinct advantage.
• barriers that can be developed to prevent competition from entering your market.
• any weaknesses that can be exploited in the product development cycle.

The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.

Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.

Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.

The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you'll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.

In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don't need a business plan unless you're trying to borrow money. Of course, it's true that you do need a good plan if you intend to approach a lender--whether a banker, a venture capitalist or any number of other sources--for startup capital. But a business plan is more than a pitch for financing; it's a guide to help you define and meet your business goals.

Just as you wouldn't start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before--and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

More from Business Plans

Financial projections.

Estimates of the future financial performance of a business

Financial Statement

A written report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Executive Summary

A nontechnical summary statement at the beginning of a business plan that's designed to encapsulate your reason for writing the plan

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• Business Glossary
• > Business Plan Definition

Business Plan Definition

A business plan is a written document that outlines a company's goals, strategies, financial projections, and operational details, serving as a roadmap for its future growth and success.

Starts at $0 + state fees and only takes 5-10 minutes

So you have a great business idea that you’ve decided to make a reality, and now you’re planning on filling out all of the paperwork needed to make it a legitimate business. You’ll have to take care of plenty of things first before submitting your paperwork to your state or county. 

Choosing a business name, entity type (corporation, LLC, etc.), a registered agent, and more are just a few things you’ll have to do. One of the most important will be drafting a business plan. This plan is imperative for making your business work and creating its identity. 

If you aren’t sure what a business plan exactly is or need more information about how it works, then we’re here to help! 

A business plan is defined as a guide that lays out what your business’s goals are and how you plan to meet them. This form is something that you’ll need to prove to banks, investors, and other interested parties that your business means business. Getting a bank account , securing loans , and even planning mergers can be easier with a business plan. 

Business Plan Benefits 

Along with the definition that we provided above that briefly touched on the benefits of a business plan, here are a few more.

Shows Determination

Drafting a business plan shows that you’re serious about building your business into a powerhouse. A business plan isn’t something you can do in one sitting in an hour. This is a serious project that can take weeks to put together and hours to research. 

Highlights Clear Business Objectives 

Your business plan highlights measurable objectives like sales, new product or service launches, customer satisfaction goals, marketing efforts , etc. All of these will look good if you’re trying to entice investors . 

Aims for Realistic Milestones

A business plan helps you keep track of realistic milestones along with deadlines you plan to achieve, like how many customers you’d like to reach each month, quarter, or year.  

Helps Know the Competition 

A business plan allows you to research and analyze your competition to see what they’re doing. This way, you can brainstorm to set yourself apart and become a worthy competitor. 

Keeps You Focused

A business plan will help you stay focused. Running a business can be a very distracting responsibility where you focus on multiple things at one. A business plan helps you stay on your strategy. 

Business Plan Considerations

When drafting a business plan, you’ll have to include specific information that will apply to the elements we highlighted in the previous section.

• Executive Summary – This section should be about a page long and will detail the overall contents of the business plan.
• Company Description – This section should detail basic information about the business, like its type ( corporation , LLC , etc.), its industry, and who the company’s leaders are, among other things.
• Market Research – This section will discuss your market, detail your customer demographics, how you’ll get customers, and more. 
• Product/Service Descriptions – This section will detail your products and/or services. Highlight how these services and items can fulfill a customer’s needs.

These are only a few considerations to add to your business plan. Learn what else you should add . 

Other Names for a Business Plan

Although mostly known as business plans, these documents can also be known as:

• Strategic plans
• Operational plans
• Internal plans
• Tactical plans
• Contingency plans

Business Plan Formation Guide

If you’re searching for business plan examples because you’ve never drafted one before, then thinking of how to format it and how long it should be can leave you feeling a bit lost. We have an in-depth guide to help you. 

We Can Help

Creating a business plan is just one of the many responsibilities you’ll have as an up-and-coming entrepreneur and business owner. Luckily, we offer many services to start your business while providing help to run and grow it as well. Take the first step in making your dream business a reality with us! 

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional .

Written by Team ZenBusiness

ZenBusiness has helped people start, run, and grow over 500,000 dream companies . The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.

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What Is A Business Plan (& Do I Really Need One?)

The term "business plan" is a familiar one, often bandied about in entrepreneurial circles. Yet, despite its ubiquity, it's remarkable how much mystery and confusion can surround this essential business tool.

What exactly is a business plan? What purpose does it serve? How is it structured? This article aims to lift the veil, demystifying the business plan and revealing its multifaceted nature.

Business Plan Definition

A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them. It's more than a mere document; it's a structured communication tool designed to articulate the vision of the business, allowing stakeholders to easily find the information they seek.

The business plan is a tangible reflection of the strategic planning that has gone into the business's future. While the plan is a static document, the planning is a dynamic process, capturing the strategic thinking and decision-making that shape the business's direction.

Purposes of a Business Plan

1. attracting funding opportunities.

A well-crafted business plan illustrates the company's potential for growth and profitability. It outlines the company's vision, mission, and strategies, providing a clear roadmap for success. A potential investor, whether venture capitalists or angel investors, can see how capital will be utilized, fostering trust and confidence in the business venture. A bank or financial institution can assess your company's ability to meet debt service obligations and compliance with strict financial accounting to meet underwriting requirements.

2. Aligning Organizational Objectives

A business plan acts as a unifying document that aligns the team with the company's goals and strategies. It ensures that everyone is on the same page, working towards common objectives. This alignment fosters collaboration and efficiency, driving the business towards its targets.

3. Validating the Business Concept

Before launching, a business plan helps in validating the feasibility of the business idea. It's a rigorous process that tests the concept against real-world scenarios, ensuring that the idea is not only innovative but also practical and sustainable. This validation builds credibility and prepares the business for the challenges ahead. For an existing business, a business plan can help address a possible merger and acquisition (M&A), rolling out a new business product or location, or expanding the target market.

4. Facilitating Legal and Regulatory Compliance

Whether it's securing a visa for international operations or meeting other regulatory requirements, a business plan can be an essential tool. It provides the necessary information in a structured format, demonstrating compliance with legal and regulatory standards. This can streamline processes and prevent potential legal hurdles.

5. Articulating and Formalizing the Business Vision

The business plan is more than a set of numbers and projections; it's the embodiment of the business vision. It communicates the essence of the business to stakeholders, turning abstract ideas into a concrete operational plan. It's a vital tool for leadership to articulate and formalize the vision, setting the stage for strategic execution.

Identifying the Right Type of Business Plan

Once you understand who your business plan is for and what specific needs it must address, you can identify the type of plan that best suits your situation. Business plans can be categorized into two main types: traditional and lean, each serveing its own unique purpose.

Traditional Business Plan

The Traditional Business Plan is a detailed and comprehensive document, often used by a new business, especially those seeking significant funding. It provides a complete picture of the company's vision, strategies, and operations. A traditional business plan leaves no stone unturned, offering a robust tool that communicates the business's entire vision and plan to stakeholders.

Lean Business Plan

In contrast, the Lean Business Plan is an abbreviated structure that still emphasizes the key elements of a Traditional Business Plan, but in less detail. It's suitable for early-stage startups, small businesses, or situations where agility and speed are essential. The Lean Business Plan focuses on the essentials, providing a quick overview without overwhelming details. It's a flexible and adaptable tool that can evolve with the business. One of the primary distinctions between it and a Traditional Business Plan is that a Lean Business Plan does not typically include financial planning, or if it does, it's a simple financial forecast or cash burn.

Components of a Business Plan

There are many places online where you can buy a business plan template. Often, those documents are just an outline of the sections of the business plan and what is included in each. If that's what you're looking for, here's a good business plan outline:

Executive Summary

The Executive Summary is the first section read but often the last written, as it encapsulates the entire plan. If the company has a mission statement, it's typically included here. When used for funding, it includes the ask or uses of funds, and for investment, it may contain an investor proposition. It's a concise overview that sets the tone, summarizing each section that follows.

Company Overview

The Company Overview is the foundation of the business, articulating how it operates, generates revenue, and delivers unique value to its customers. This section defines products and/or service the business sells, as well as the company’s business model and unique value proposition. It covers key partners, pricing strategy, revenue model, and other essential business activities. 

Market Analysis Summary

The Market Analysis is the business intelligence portion of the plan. It comprises an industry analysis, market segments, target customers, competitive analysis, competitive advantage. This section provides insights into the market landscape, identifying opportunities, challenges, and how the business positions itself uniquely within the industry.

Strategy & Implementation Summary

Here, the business plan should outline the short-term and long-term objectives, marketing strategy and sales approach. It's a roadmap that details how the business will achieve its goals, including tactical steps, timelines, and resources. In a business plan for investors, the inclusion of an exit strategy can provide a vision for the future, considering various potential outcomes.

Management Summary

The Management Summary offers profiles of key personnel, their qualifications, roles, and plans to fill talent gaps. It's a snapshot of the leadership team, providing assurance that the right people are in place to execute the business plan successfully.

Financial Projections

This section includes standard financial statements like the profit & loss statement (P&L), the balance sheet, and the cash flow statement. It offers a detailed financial blueprint, illustrating the company’s revenue drivers and unit assumptions, income statement, a break-even analysis, and a sensitivity analysis to examine how changes in variables affect outcomes. For businesses with complex structures, framing the revenue in terms of market share can offer additional insight into the viability and feasibility of the financial projections.

The Appendices often include year 1 and year 2 monthly financial statements, intellectual property like patents and trademarks, construction blueprints, and other essential documentation. It's a repository for supporting information that adds depth and context to the main sections of the plan.

Do I Need a Business Plan?

The question "Do I need a business plan?" is one that many entrepreneurs and business leaders grapple with. The answer, however, is not as straightforward as it might seem. While not every business requires a traditional business plan, the strategic planning process is essential for all. 

In some cases, a traditional business plan is required. Applying for a Small Business Administration (SBA) loan , obtaining a entrepreneurship visa , or meeting specific investor requirements may mandate a comprehensive business plan.

However a traditional business plan isn’t always necessary. For example, in early-stage investor funding, particularly in industries like SaaS, a lean business plan accompanied by a pitch deck presentation will often suffice. The focus here is on agility and essential information rather than exhaustive detail.

Every Business Needs Business Planning

Unlike the traditional business plan, which may or may not be required depending on the situation, business planning as a process is indispensable for every business, regardless of size or stage.

Business planning is a dynamic, continuous process. It's not confined to a single document but evolves with the business, adapting to changes, challenges, and opportunities. Effective strategic planning ensures internal alignment with both long-term vision and short-term objectives. It's a holistic approach that guides business goal-setting decision-making, resource allocation, and strategic direction. It often serves as the basis for a fully developed marketing plan.

Every business, from a small startup to a large corporation, benefits from strategic planning. It's a practice that fosters growth, innovation, and resilience, providing a roadmap for success.

Not every business needs a traditional business plan as a document, but all businesses need to engage in business planning as a process. While the traditional business plan serves specific purposes and audiences, business planning is a universal practice that guides and grows the business.

Entrepreneurs and business leaders must assess their specific needs, recognizing that the traditional business plan is just one tool among many. The true value of the business plan lies in continuous planning, adapting, and aligning with the unique vision and goals of the business.

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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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Home » What Is Business Plan and How To Write It? [Template]

What Is Business Plan and How To Write It? [Template]

July 20, 2021 max 7min read.

This article covers:

What Is a Business Plan?

Who is in charge of writing a business plan.

• How To Write a Business Plan?

What Are the Advantages and Disadvantages of Writing a Business Plan?

• What Is the Skeleton of a Business Plan?

Business Plan Definition

A business plan is a document that outlines the strategies and objectives that a startup or organization wants to achieve and how they plan to achieve them.

A business plan is like a map for starting or growing your company. It lays out the essential details of your business and how you plan to succeed.

Simply put, a business plan is a written copy of the business idea, what financial model it will adopt, the product or service, who will be the target audience, their marketing strategies, etc. It is conducive in the initial stages of establishing your enterprise. 

The business plan is essential for the investment process. A detailed plan is crucial to attract stakeholders , venture capitalists, and investors or angel investors to pitch your business idea. In such a case, your business plan becomes your way of convincing them to invest their resources in your plan because it is worth it. 

The core of a good plan tells the story of your business idea – what problem you’re solving and for whom. Are you hoping to start a bakery downtown? Create a new software tool? The plan explains who your potential customers are and why they’ll love what you offer.

It also includes specifics like who’s on your team, what you’re selling or the service you provide, and how you’ll spread the word (marketing). You’ll want to estimate sales projections and costs so folks understand how you’ll make money. This shows profits down the road.

A big part is differentiating from the competition. What makes your approach unique? Why pick you over similar options? The plan convinces potential backers or partners that you’ve thought it through and have a clear path to profits.

Overall, taking time to craft a solid plan is super helpful in the long term. It guides you through launch and growth. Review it yearly to check if your assumptions are still tracked, or if changes are needed. A plan keeps momentum on your side.

Starting or developing a business plan isn’t a science or learned through a degree. Some companies develop through trial and error, while others are drafted from head to toe. 

Hence, the answer is No if we are talking about a particular person responsible for writing a business plan. Similarly, there is no need for an extended, lengthy business plan to be written with each plan elaborated. 

Irrespective of all this, there are still some conditions in which a business increases its chances of becoming successful by drafting a business plan. Such conditions are as follows: 

• For tech startups, a business plan can be a medium to gain long-term funding, especially with no trading history.
• When the market is new, untested, or volatile, a business plan can come in handy and serve as a document to fall back upon, mainly to tackle uncertainties and unclarity.
• If you have an excellent business idea and haven’t given it much thought or put it on paper, drafting a business plan can be a good option. Writing a business plan can help you carefully structure and evaluate your thoughts from different angles to spot risks.

How To Write a Business Plan? 

First and foremost, when writing a business plan, you need to identify the problem your business will aim to solve and the purpose your business serves. 

Once that is sorted, you need to consider who you are trying to attract with it, what kind of customers, and why. Following are some additional key points to consider while drafting your business plan: 

• Note how you plan to secure your funding through private investors, bank loans, etc.
• Write about your business history, the concept, and what products or services you are trying to sell.
• Ensure you are transparent with your investors and do not keep any information from them. Do not exaggerate or bluff about your experience and skills. Gaining trust is crucial.
• Explain the details about your product or service in layperson’s terms. Avoid jargon as much as possible to avoid confusing the reader.
• Focus on the business’s strengths, the problem it aims to solve, and the evidence you have to prove the same.
• Understanding the market you are penetrating is crucial, as is conducting competitor analysis, knowing who your competitors are, learning about your competitive advantage , and finding your unique selling proposition (USP) .
• Last but not least, ensure your business plan is brief. Instead, keep it as short and precise as possible. Your aim through the business plan is to deliver crucial information so the reader can decide.

It’s quite easier to write a business plan if you consider the given points. However, it’s still not a walk in the park. If you still have trouble drafting your plan, consider hiring a writer—an affordable business plan writer  who can help you put the first version of your plan on paper.

If you are still trying to decide whether or not you should dedicate your time to making a business plan, here are a few advantages and disadvantages of a business plan to help you make this decision. 

Advantages of a Business Plan

• A business plan can be your golden document to secure funding for your business . Initially, funding is crucial, especially for tech and SaaS startups.
• The strategic focus of your business is preserved after the first stage. You can read about scope creep and understand how a company occasionally diverges from its goal, which could lead to stagnancy. In such a case, it is essential to understand the success factors in a business and plan exactly to serve the purpose.
• Having a business plan on paper invites other passionate people on board . When you have a trading history, it is easier to get people on board. However, if you have a plan, it convinces potential investors that you are sure about what you are doing. 

Disadvantages of a Business Plan

• A business plan can hamper you from looking forward. This means you may depend too much on your plan without considering other external factors such as market conditions, trends, etc. Such a dependency can lead you to make mistakes and miss potential golden opportunities just because they were not in the plan.
• Analyzing performance can become time-consuming. A business plan can make you dwell on your past mistakes by focusing on the goals and objectives you could not achieve. Analyzing past performance could save time and resources by focusing on moving forward with strength.
• Constant change makes a business plan outdated as soon as it’s written. We know that the world is changing quickly, so your business plan will likely lose its relevance by the time you are ready to launch. A great alternative to the business plan is a strategic project roadmap . This is because a business plan has a lot of essential details, such as the mission statement , which are less likely to change either way. Moreover, a roadmap can help pave the most adaptable and actionable path.

What Is the Skeleton of a Business Plan? 

Since you are still reading, I am sure you’ll want to know what the skeleton of a business plan looks like. 

Remember that it can be frustrating because critical thinking is involved, and there is no hard-fast rule for a business plan. However, the best approach is to look at other business plan templates and write yours in a way that makes sense to any layman. 

Here is what a Business plan constitutes of: 

• Overview: In this section, you summarize your business concept and its execution.
• Detailed Description: In this section, you will describe the kind of product or service you are offering, what the unique selling point is, and how valuable your business is.
• Target audience: In this section, you will explain your market segmentation , the target market , their essential traits, etc., backed up by user research .
• Marketing strategy: Once you know your target audience well, you must document how you will reach them through a marketing strategy. A marketing strategy is often defined within the marketing plan , where primary establishment and engagement strategies are explained in detail. However, as a subsection in a business plan, it need not be as detailed as a market plan.
• Core team: This section will discuss your people and the team behind the development process. If you don’t have a team yet, you must discuss how team members will be selected, what candidates suit you, and the timeline. This section is critical to procure external investments such as passion and enthusiasm.
• Financial Predictions: Remember that investors are mainly concerned about finances because no one wants to invest in a loss-making company. Hence, your financial sedition is going to be scrutinized a lot more than anything else. Therefore, it is crucial to be thorough with the same. Make sure you talk about how much money you need to get started and how you plan to keep the money rolling in. Ensure that your cash flow forecast is realistic and achievable, which will help keep your business floating for the first few years.

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A business plan consists of the overview of your business idea, detailed descriptions of your product or service and its unique selling proposition, your target audience, your marketing strategy, the core team and how to hire it, and the financial model or predictions.

A business plan helps you pitch your business idea to potential investors and secure funding. When your business is on the brink of losing focus after a few initial years, a business plan helps you to stay on track. Lastly, it invites other potential employees, partners, or investors to invest their resources in your business.

A business plan expires fast because of our constantly evolving world. It is not dependable in the long run because of its ignorance towards changing marketing conditions. It can obstruct you from looking forward to external factors and golden opportunities since it compels you to focus on the plan, creating dependency.

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The Fundamental Guide to Account Planning

Key account management is as much a science as it is an art. Create a consistent approach to how you build background information on critical clients, develop a sales approach, and build a relationship based on proactive management and support. 

Without an overhanging, strategic framework, it's hard to develop a playbook of tactics that protect your brand reputation and cultivate long-term business relationships — let alone train your team on how to do the same thing. In this ultimate guide to account planning, you'll learn more about:

• How to create key account and sales account plans
• Best practices for strategic account planning
• The growing role of automation and technology in key account planning and management
• How to find the right key account management software for your organization

Table of Contents

What is a Key Account Plan?

The 4-Step Guide to Creating a Sales Account Plan

The role of automation in strategic account planning, do's and don'ts when creating a key account plan template, why modern businesses are changing their account planning methods, 5 steps to more proactive key account planning, are you utilizing strategic account mapping successfully, how crm integration is changing the strategic account planning process, 5 things to look for in a strategic account planning software, what is a key account plan.

A key account plan is your methodical strategy for ensuring your key client has an enjoyable customer experience throughout the life of the account. It's your roadmap for reaching out to the client to grow the relationship, tracking their deliverables, renewing contracts, or securing more orders. 

In most businesses , approximately 20% of your accounts are responsible for 80% of your business. These high-volume accounts make up your key accounts, though clients with influential ties in your industry can also be key accounts. 

Every business has its own unique approach to crafting key account plans that position its brand favorably and ensure that the relationship is providing value both for the client and the organization.

A key account plan often has these essential elements:

• An overview of the account's business, pain points, and contacts within the client organization
• Long-term objectives for both the client and the sales team
• Action items stretching from day one with the key account to fulfilling and resetting the long-term objectives
• A change management process for assessing the key account over time so the account manager can recognize if they are succeeding with the account or if they need to take additional steps to cultivate or save the relationship

Learn more about what a key account plan is and how it can help grow your revenue here .

Creating a sales account plan is a critical part of ensuring a new client — whether they're a key account or a new business — doesn't fall through the cracks or have a substandard experience.

Create a standard operating procedure you and your account management team can use to consistently create sales account plans for each new account. We recommend following these four steps:

1. Divide the Accounts

Your business will have multiple different types of accounts based on their recurring revenue, strategic value, size, potential, and other factors. Categorize your accounts into key accounts, strategic accounts, and other divisions so you can develop specialized teams devoted to the different types.

2. Assess Their Needs

For each account, take a deep look at their overarching goals, their short-term goals, the opportunity for upsells, and other ways the account manager can satisfy their needs while growing the account.

3. Create the Sales Account Plan

Develop a sales plan of step-by-step actions the account manager can perform to both grow the account relationship and satisfy current orders.

4. Implement the Plan

Now that there is a fleshed-out plan with supporting details and rationales, it's time for the AM to take the first step.

Read our in-depth guide to creating sales account plans to get started.

Businesses are turning to automation for a lot of their revenue and administrative functions. After all, newly developed AI and machine-learning systems can quickly enter, analyze, and compile data. 

Integrations and increasingly sophisticated connections between different business tools can copy data from one platform to another with far fewer errors or manhours than manual systems. As a general rule, automation is making businesses more efficient , faster, and more client-ready.

However, automation and artificial intelligence aren't tools for replacing humans. Instead, they're ways to allow humans to focus on creative or critical thinking-based tasks that manual data entry often interfered with.

In account management, for example, clients still want human interaction and personal attention to ensure their needs are being sufficiently (and proactively!) met. Account managers can use automation to quickly fill data into CRMs and account management software platforms, generate reports that capture trends and insight, and manage repetitive tasks.

In turn, AMs can spend their time developing strategies for each client, focusing on building relationships, and resolving unique challenges and one-offs that automated systems simply can't handle.

Learn more about where automation does and doesn't fit into strategic account management .

Earlier, we discussed the value of creating key account plans. Having a repeatable process can guide your team and new account managers in the future so they can quickly and consistently create sales account plans that meet your business's standards. Another tool for guaranteeing consistent quality and key account management practices is to develop a key account plan template.  

This simple tool will provide a starting point for account managers so they can organize their information and hit the ground running with a time-tested management approach. Key account management software with customized templates can make the approach even easier.

You and your team can develop a gallery of template styles to fit each account type or have different drag and drop elements so KAMs can record their thoughts and account-critical details.

This blend of consistency and personalization allows your team to make each plan their own while still making the plans universal enough for team leads and new AMs to easily understand the documents. 

Key account plan templates should include these standard blocks:

• A simple overview section with business details, contact information, and a brief summary of the relationship.
• A robust objectives section where the account manager can identify short-term and long-term client needs, pain points that the client has experienced before or with other services providers, and their own expectations for service.
• An area for competitive analysis and risk analysis so account managers can strategize on best practices for retaining the account and ensuring your organization is more appealing than competitors.
• A timeline of actionable tasks so AMs can create a to-do list that doesn't rush the client or let them feel ignored.

Read more about the best practices for developing key account plan templates here .

Developing your current clients into key accounts and focusing on recurring business is more predictable and more profitable than chasing after new clients. As a result, more and more organizations are focusing on customer service and account-based relationships to wow clients and ensure a longer-lasting relationship that benefits both sides.

This is a significant change in how businesses are handling their account management, but it's not the only change.

Organizations are also prioritizing technology and strategy development. This includes creating resources for remote work and communications, investing in key account management software with in-depth data and templates for account management, and focusing on collaborative tools that connect all branches of the revenue team. This results in a less siloed, more relationship-driven workplace.

Learn more about how and why modern businesses are changing with technological advances and shifts in account management mindsets here .

Reactive account management is about solving problems, but that still means problems have to occur — and that's bad for business. Instead, more businesses are focusing on proactive key account planning to anticipate changing client needs and resolving problems before they reach the client or become a substantive problem.

This creates a smoother, more positive client experience. Five of the most important steps for incorporating this practice include:

1. Be an Ally

Instead of simply fulfilling sales and attempting to upsell clients at regular intervals, create a long-term success plan with your client. Discuss what their needs are year after year and what their expectations are both for your services and their total growth. Taking an authentic interest in their needs allows you to develop more personalized plans and create upsells that provide them with more value.

2. Assign a Key Account Champion

Instead of simply having key account managers mixed in with your other types of account managers, have a leader who represents and champions key accounts. They should engage with key account managers to ensure they have the resources they need, regularly communicate with business leaders so the value of your key accounts stays visible, and continually educate revenue teams about the needs of these unique accounts.

3. Make Sure the C-Suite Is on Board

Your C-suite team should receive regular updates on how your organization's key accounts are performing and the value they bring to your business. This turns them into opportunities, not just disruptive accounts that seem to require more hand-holding. It's also important to have your C-suite executives engage with key contacts. This allows for better feedback and more authentic connections.

4. Communicate With Your Team

While the key account manager for a key account may know how important a client is, the product delivery team, customer service representatives, and even the marketing team may not be equally informed. Ensure that all of the departments that serve each key account are kept informed of changes and new developments — negative and (even more importantly) positive. This builds more engagement across your revenue team.

5. Give Key Accounts Attention

Don't overwhelm key account managers. Key accounts require more attention than self-service accounts or accounts that fall more in line with your standard business practices. If your AMs have too many clients, things will start to slip through the cracks, and your clients may look elsewhere for service providers.

Learn about each of these strategies in more depth here .

Strategic account mapping is all about identifying critical contacts in a strategic account client's organization. By identifying contacts, decision-makers, and how different agents within the client organization interact, your team can better communicate the value you're providing and anticipate changes in client needs.

Recording all of the client details in an account map helps your team stay on top of shifting contacts due to turnover; it's also a good resource for when your own team has turnover or you need to reach out to a key account while the typical AM is out of the office.

Learn more about how to make your strategic account mapping practices stronger.

Customer relationship management tools (CRMs) and key account management tools (KAMs) need to talk to each other, but they can't replace each other.

CRMs are generally used for cultivating new business and organizing a prospective lead's journey so it's as fulfilling as possible. KAMs help organize account details and long-term strategies to support the account manager over time.

Despite these distinct purposes, the two platforms need to share profile details and sales details so your organization fully understands revenue and can create accurate forecasts.

Read our in-depth article about how your business's CRM fits into how strategic and key account management processes.

Strategic account planning software needs to offer account managers critical resources and organization so they can manage contact details, short-term and long-term goals, and actionable tasks so the account stays as healthy as possible. We recommend looking for strategic account planning software that allows you to achieve all of the account planning fundamentals we discussed in this guide. Five of the most critical elements include:

• Interactive Org Charts
• CRM Integration
• Reporting Functions
• Deliverables Tracking
• Planning Templates 

Explore these 5 specific elements of strategic account planning more in detail here .

Contact Kapta for Account Planning Support

At Kapta, we've created a complete software platform with the resources and organizational tools account managers need to stay on top of key and strategic accounts.

Revenue teams can use our platform to share information, analyze trends, manage deliverables and upsell opportunities, and more. Schedule a demo or contact our team today to see how Kapta can support your organization.

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Account Planning: Defining a Sales Account Plan Strategy

Sales account planning views “closed-won” as an oxymoron—the initial sale is a mere foot in the door to opening a much bigger opportunity that should never be “closed.” 

In some cases, that’s exactly what it is: a foot in the door. And in all cases, that’s exactly what it should be.

So why not leverage your existing relationships to drive more revenue? In this article, you’ll learn why this is a responsibility your team should be embracing and how to build a sales account plan. But first, some foundations: 

What is Account Planning in Sales? 

A sales account plan is a detailed strategy for building upon existing relationships—the account—to uncover the customer’s needs, how to deliver the most value, and subsequently increase their customer lifetime value and likelihood of retention. 

Sales account planning is the process of researching and strategizing the account in question but should be treated as an ongoing process because the landscape can and will change. Think of the account plan as a sailboat’s itinerary, the destination is known and the route decided, but the boat must still tack with unpredictable and ever-changing winds. 

Strategic Account Management

Often confused with account planning, strategic account management is the methodical approach of identifying and prioritizing the accounts that should be given more attention and how to allocate the required, and limited, resources at your disposal.

Often, reps choose their largest revenue accounts, but you should stop and think about the ultimate goal of strategic account management: which accounts have the biggest upside potential? And remember, past performance is not a perfect indicator of future performance. 

When prioritizing which accounts to focus on, you can consider metrics like their TAM (Total Addressable Market or Total Potential Revenue), market share, and growth rate as good determining factors for future account growth potential. These are critical to prioritizing your accounts, but there’s an ocean of metrics out there; we’re here to help you cut through the noise.

Importance of Sales Account Planning: A Double-Sided Coin

When executed properly, account planning is a win-win pursuit for both customer and seller: both parties capture the greatest value and nothing is left on the table; as every great negotiator knows, you never split the difference. That’s why it’s important to incorporate an account plan into your sales process.

Customer Lifetime Value

An account plan is ultimately successful if it enables you to win renewals, increase contract size, or otherwise grow the account. These factors directly impact your customer lifetime value (CLV), or the amount of revenue you’re able to generate from a given account.

An alternative method for increasing CLV is lengthening retention, or contract length, even if the contract size remains unchanged. Many companies front-load their investment in sales and marketing, only to leave their customers in the dark after the sale is won. Companies that provide as good an experience post-sale as they did pre-sale are more likely to retain customers. 

Yet 51% of sales leaders report missing account growth targets due to ineffective account management, in one Gartner study . 

Lifetime Value for Customers

On the flip side, account planning should also help increase the value for customers over the life of the engagement. Since account planning is essentially a structured process for learning how to make your product or service indispensable to the customer, if successful, that’s exactly what you’ll become.

How to do Sales Account Planning

Below we've outlined the elements that should be included in your sales account plan. 

1. Account Overview

Before trying to understand the business needs, it’s helpful to get a sense (or reminder) of what’s previously been closed, attempted, and the strategies that have been successful or not. 

Have we already been successful in cross-selling, upselling, or renewals? What products did we close and who was our primary point of contact in that deal? If any attempts at account expansion have been unsuccessful, take note of the attempts and any detail or insight you can provide as to why the deal fell through. 

2. Company Overview

The company overview is an opportunity to research the company’s foundations, history, mission, and evolution. It’s also a great place for any newcomers to the account to quickly grasp what the customer does at a high level.

If available, you can use this section to include any recent or major news, either positive or negative, or any other signals that might indicate their current north star metric or where the business is ultimately heading. Below are a few examples:

• New C-level hires
• Product launches
• Acquisitions
• Losses to a competitor
• Stagnation/declines in growth

It’s important to note that any information disclosed during your private discussions with the company must remain confidential to preserve trust with the account. 

3. Goals and KPIs

In sales and especially in negotiations, prospects aren’t very forthcoming with information, only giving the minimum amount necessary to get the deal done. Even with a non-disclosure agreement, your counterparts aren’t going to be transparent about the true state of the business, and it’s possible they themselves aren’t fully informed. 

It’s up to you as the relationship grows to identify the north star metric for clients and how you can help them achieve it. It’s also worth noting that in business, unlike in astronomy, the north star metric could move as the business evolves, so your account plan will need to be updated accordingly. 

Below are some questions to ask which may provide insights into a company’s overarching goals and KPIs: 

• What are their top priorities for the next 12 months?
• What efforts have already been made? 
• What is their biggest challenge?
• How will they measure success?
• How will they achieve success?

4. Let’s Competitive Landscape

Understanding the industry your customer plays in and other key players can help you in many ways. One way is to track what is and is not working for competitors and incorporate that into your strategy or advise the customer on strategy as you see it for added value.

Another benefit of conducting a competitive analysis is that you’re able to see for yourself their place in the market, and therefore get a better understanding of their growth potential and opportunity size.

5. Account Landscape

Now that you have a good grasp of the industry, business, and competition, it’s time to look at the company’s organizational structure. How are departments segmented (i.e. geography, product, revenue size, etc.) and who are the key people that make up the hierarchy? Is the company PE-owned and held to strict growth targets?  

You’ll also want a clear understanding of what degree of manager you’re working with, which can help clarify their degree of separation from the ultimate decision-maker. 

Mapping the account and relationships between the account’s key players can plot your course of future introductions and connections. If you want to win the affection (and business) of other departments and persons, you’ll need a firm grasp of the politics, power dynamics, and cross-pollination of ideas between them.  

This is where the relationship map comes in handy and with People.ai, these networks are mapped automatically based on connections and communication with contacts at the account. 

6. Action Plan

Now to the part where you actually plan. 

You’ve got a good grasp on the variables, including the company’s fundamentals, competition, and relationships, and you know the goal, now you need to formulate a solution for achieving it. 

It’s important that your plan be detailed but it doesn’t need overkill. If the company’s goal is to achieve TTM of increasing profitability month-over-month, all of your plans should be in service to that goal, and understand that including someone’s name or title as details in the plan might be unnecessary because chances are, team restructuring will be a byproduct of optimizing for profitability. 

It’s also important that you align your goal of account expansion with the customer’s goals, and not sacrifice their goal in service of your own, or vice versa. To continue with our example, if the customer’s top priority is to increase profit margins, upselling likely won’t be in your account plan, but if you can streamline workflows across the company, cross-selling should be a keystone of the plan. 

Sales Account Planning Best Practices

Although your planning processes may look different and you may modify our template to meet your needs, below are best practices that apply to every sales account planning procedure:

Account Plan Audit

One thing that you should incorporate in your process is a regular check-in on the plan to determine how things are progressing. Many people create a plan and then simply fail to follow their own prescription. It might be because the information gets out of date or it lives where you don’t work. An account plan audit can hold your team accountable for the strategies they initially identified. 

It’s worth noting, however, that plans do change and you can’t hold reps to the book for not executing on the plan word for word. The audit is an opportunity for these plans to be recalibrated and reset moving forward. 

If you have a free tool like PeopleGlass , you can create all the spreadsheets of your heart’s desire and have it automatically maintained by simply being connected to Salesforce. Making that audit painless.

Utilize Account Data

As you navigate your account planning processes, one of the best ways to monitor progress towards your goal of closing more revenue per account is to utilize activity tracking, deal scorecards, account maps, and other signals of leading indicators.

If AEs have not been engaging their accounts on a regular basis, this data will be surfaced, giving you the ability to coach them towards a more involved and effective account plan. People.ai whitespace maps allow you to visualize where you have a foothold in growth opportunities within current accounts.

Lost Account Plans

Many, if not most, sales organizations have too short a time horizon when it comes to their deals. If one ends in closed-lost, they quickly forget and move on to the next deal. Previous leads that were lost are possibly your biggest source of untapped revenue potential. Although this idea is not new , it is underrepresented in practice. 

You should make micro account plans for your lost deals. Take a snapshot of performance at the time the deal was lost and if things have not improved in a few quarters, it might be an even better time to re-engage those accounts. 

Sales Account Planning with People.ai

We’ve provided a few resources and insights into our sales account planning thought process but the real progress in planning is being enabled by generative AI.

If your customer’s spend is exceeding the realized value, you can look to account planning as a good method for digging yourself out of that hole, and People.ai can help. Leverage your team’s previously ignored data to gain a deeper understanding of what drives predictable revenue and growth for your company. 

Get a demo for sales account planning to learn more about how taking an automated, data-driven approach to sales account planning can help your team stay on the fastest path to revenue.

Learn all of the ways people.ai can  drive revenue growth for your business.

Two Successful Approaches to Account Planning [Template]

Updated: August 23, 2022

Published: June 20, 2022

Are you a B2B account manager or sales executive serious about account-based marketing (ABM)? If the answer is “yes,” chances are you understand your customers want partners, not vendors.

To win new business and grow key accounts, account managers and sales executives must become invested in their customer’s challenges, goals, and the competitive landscape in which their business operates.

By using strategic account planning to target your key accounts , you can become your customer’s trusted partner by solving problems instead of selling products.

This article will touch on two viable account planning solutions — account-based marketing software and a manual, template-based approach. Below, we share one of the best templates to begin the account planning process in your sales organization.

Strategic Account Plan Template Layout

If you're reluctant to invest in ABM software or just want a solid starting point to understand ABM strategy better, this strategic account planning template will help you:

• Expand your understanding of your customer’s business, goals, and motivations
• Deliver value through right-fit solutions to their toughest challenges
• Navigate internal politics and target key stakeholders to drive buy-in
• Identify and avoid risks, barriers, and limitations

Featured Resource: Strategic Account Planning Template

Download This Template for Free

Ready to explore what account planning is all about and how it can increase your sales? In this article, we’ll go over the following topics:

• What is account planning?
• Terms related to account planning
• Account planning process: a step-by-step guide
• Account planning templates
• Account-based marketing software

Let’s get started.

What is Account Planning?

Account planning, used primarily in B2B sales, is the process of nurturing and growing your existing customer relationships. When creating an account plan, you seek to understand your customer’s business by identifying their key initiatives, problems, and challenges. Your objective is to deliver value that helps them achieve their goals and increase their sales.

Account planning is about partnering with your customer instead of selling to your customer. It looks at sales not as a transactional process but as the start of a strategic partnership. This term is usually applicable in B2B organizations rather than B2C organizations.

Because account planning is such a thorough process, it allows you to ask your customer highly specific questions related to their business and challenges.

These questions are usually related to the product or service you offer, giving you further insight into how you can solve for them in both the short and long term.

While account planning aims to decrease customer attrition , it can also be a valuable tool for acquisition. Understanding your most profitable customers can help you identify better prospects to target in your future sales efforts.

Account Plan

An account plan is a document that outlines all pertinent information about your customer, including their business goals, challenges, priorities, competitors, decision-making processes, and purchase criteria. You can also detail your strategies for retaining and upselling them.

The information you gather for your account plan will give you valuable insight into your customer's priorities. This constant flow of helpful information makes it easier to be proactive in fulfilling the client's needs.

Efficient implementation takes a lot of trial and error, but when you have the right data as a starting point, the trial period gets shorter and easy to overcome. Knowing what your clients want is a good way to ensure that your account planning efforts will be more effective from the beginning.

Free Account Management Template

A strategic template for your account-based marketing, sales, and management.

• Key Business Initiatives
• Account Competitor Analysis
• Sales Opportunities, Targets & Risks

You're all set!

Click this link to access this resource at any time.

Free Account Planning Worksheet

Fill out the form to access your free template..

In addition, by offering this type of value, customers are happy and more likely to be loyal to your organization. Your objective is to deliver value that helps them achieve their goals and increase sales.

An effective account planning strategy will help your company build a reputation as a solution provider that customers can trust. To build an effective account strategy, account professionals must become invested in their customer’s challenges, goals, and the competitive landscape in which their business operates.

Account Planning and Marketing Strategies

Knowing what your customers appreciate and expect from your services is a strong foundation for your marketing efforts. Marketing is not only about putting your work out there but also about taking your audience’s language and communicating what they actually need to hear. This is where account planning comes in.

Account planning helps any marketing team turn business data into effective creative work that satisfies your customers and leads.

A marketing strategy aimed at transforming pain points into strong assets creates a strong customer relationship based on value and efficiency rather than a plain sales process.

Why is Account Planning important?

87% of marketers say account-based marketing outperforms other marketing activities. As such, it’s vital to learn how it can help your business too.

Here are some of account planning’s most significant benefits.

Reduces Acquisition Costs

Customer acquisition is expensive for several reasons. Some of the major costs are incurred from the resources expended to discover customer drivers and challenges.

Account planning reduces acquisition costs because it allows you to focus more on creating business through existing customers instead of looking for new ones.

Speeds Up Sales

Account planning reduces acquisition costs and makes it easier to close deals faster. In addition, since account planning focuses on existing accounts, sales professionals already know the key decision-makers in the buying process and understand how they prefer to buy.

Furthermore, account planning helps sales professionals observe customer behaviors that can be disruptive to the buying process.

Retains Important Relationships

Since account planning involves frequent communication between clients and representatives, your sales professionals are positioned to get the real-time pulse of clients.

An effective account plan helps businesses nurture existing relationships with customers while also providing a solid base for future marketing efforts. If account planning plays an essential role in client retention outcomes and conversion rates, it affects the company's overall number of clients (and revenue).

Working on your account planning will reduce acquisition costs while making it easier to close deals faster. Since account planning focuses on existing accounts, sales professionals already know the key decision-makers in the buying process and understand how they prefer to buy.

When account planning is optimized, sales strategies will have a new foundation full of valuable data. This will help sales workers ensure that all their efforts are going in the right direction.

By reducing acquisition costs and speeding up sales, account planning can be the first step in successfully using your business resources, especially time and money. It provides the information needed to build solid foundations for your client’s relationships and your sales work.

Account planning can be a great way to level up your business sales and customer satisfaction rates, but it can be difficult to start implementing its steps. Having the right guides and resources is essential for any business process.

Related Account Planning Terms

Now, let’s talk about some of the common terms you’ll find while scrolling through any account planning article.

Sales Account Planning

Sales account planning is an alternative term for account planning. This account planning approach process takes all the information about customer behavior and focuses on improving sales processes. With a special focus on converting users into customers, sales account planning will have a strong lead generation potential. However, customer retention strategies won’t have a special place in this process.

Strategic Account Management

Choosing high-value and high-profit accounts to grow and nurture is called strategic account management. Not all accounts or customers warrant a plan, so strategic account managers typically spearhead these efforts. Thus, account planning and strategic account management can go hand-in-hand.

Key Account Management

Key account management is similar to strategic account management and may also complement the account planning process. Sales leaders and representatives build, maintain, and nurture the business’s most profitable accounts. They do this by offering exclusive resources, recurring meetings, and dedicated key account managers (KAMs).

Account-based Marketing

Account-based marketing is usually carried out after key accounts have been established and account plans have been created. After these high-value customers are identified, the marketing team will create campaigns, assets, and messaging that targets these accounts.

As you can see, account planning can be a huge asset to your business, allowing you to delve in-depth into each customer profile.

By knowing the customer’s challenges, industry, and goals, you can position your product as the solution in a much more specific and targeted way, which can help increase close rates .

Now, it’s time to create a plan that can help you jumpstart your account planning efforts.

How to Start Account Planning at Your Business

Starting an account plan can be time-intensive, but when done right can show good results. There are four basic steps to implement if you want to start account planning at your business. These are:

1. Determine which accounts require account planning.

First, you should develop criteria for determining which accounts need an account plan. Clients who tend to require an account plan include those who are high profile, likely to scale, and can use your product or service in other departments in the company.

2. Discover the needs of these accounts.

Discovering the needs of these strategic accounts requires loads of research. These are some questions that can be a good place to start:

• What are the goals of this client?
• What do they value the most?
• Who is involved in the buying decision process?
• What are their current plans to achieve goals?
• What KPIs do they measure?

3. Create actionable steps.

After doing your research, it’s time to develop actionable steps. These steps vary depending on the account but might include:

• Account analysis
• Short-term steps (e.g., getting them to renew with you)
• Long-term steps (e.g., long-term client growth)

4. Execute the account plan.

Lastly, execute the plan you’ve created by incorporating the specifics of your business and sharing it with your stakeholders.

Account Planning Process

• Use an account planning template.
• Summarize your customer’s business strategy.
• Know your customer’s key business initiatives.
• Understand your customer’s organizational chart and key players.
• Audit your customer’s products and revenue.
• Analyze your customer’s competition.
• Outline the buying process and selling points for prospective contacts.
• Establish a strategy for growing your relationship with your customer.
• Identify sales opportunities, targets, and risks.
• Create an action plan.
• Review your plan with your customer.

Before Starting: Download HubSpot's Account Planning Template

Now you know all the details about account planning, its benefits, and what’s required to implement it effectively. So, with all this information in mind, it’s time to put in the work and start building your account plan.

HubSpot's pre-built Account Planning Template contains prompts for each of the subsequent sections, as well as suggested topics to include in each one. Rather than starting from scratch, we recommend you follow along by downloading the free template.

Section 1: Business Overview

The most effective account managers and sales teams understand their customer’s narratives. They ask value-focused questions to get to the root of their customer’s business objectives, internal and external challenges, and industry landscape.

This questioning and learning must be an ongoing exercise. Objectives and goals are ever-changing, and customers often reposition their value in the face of new technology or market shifts.

In this section, identify the following:

• Your customer’s vision/strategy
• Your customer’s vital numbers
• The year the company was founded
• Your customer's annual revenue
• Number of employees who work for your customer
• Popular target markets in the customer's industry

After creating an account plan and getting to know your customer inside out, here are a few questions your account managers can ask:

• “We noticed that your industry has seen a decline in _______. How has your business fared since this trend started?”
• “Your competitor recently developed a new product. How does leadership plan to tackle this new challenge?”
• “Your initiatives for ________ did well for Q4 of last year, resulting in X% growth in revenue. Do you have any plans to continue those initiatives in Q1? What challenges do you foresee?”
• “I saw that you expanded into the ________ market. How has that been going? Are there any plans to expand into related industries?”

Section 2: Key Business Initiatives

As former FBI hostage negotiator Chris Voss outlines in his book Never Split the Difference , all successful negotiations begin with listening. To develop a value-based action plan, you need to discover what your customer values most.

By focusing on your customer’s value expectations, you create opportunities to grow more strategic customer relationships. This safeguards against competition while increasing customer loyalty.

Ask questions that will reveal your customer’s:

• Short-/medium-/long-term priorities
• Key projects
• Key performance indicators (KPIs)

Section 3: Customer Relationship Landscape

Your customer relationship landscape is, essentially, what you know about your audience based on the connections you’ve been creating with your clients. Knowing what they appreciate, how they want to communicate, and even the aspects of your business they admire most will save time and help them reach new goals.

Which type of clients are you helping the most? Where do you find more growth potential and positive feedback? It’s time to ask these questions and turn them into the customer approach that your account plan will follow.

Section 4: Customer Products and Revenues

Today’s customer desires a strategic partner to deliver value across their organization. In this section, list and describe where you are currently adding value, analyze the ROI of that value, and identify gaps in the value chain.

Don’t forget to include the following information:

• Whitespace analysis
• Current sales performance
• Current margin performance
• Wins or losses over the last 12 months

Section 5: Competitor Analysis

Performing a competitive analysis for your customer may not seem to provide high value to your sales team, but remember: Your goal is to move from a transactional relationship to a strategic partnership. Only when you understand your customer’s challenges can you help them differentiate their products and services.

List your customer’s:

• Competitors
• Competitors’ strengths
• Competitors’ weaknesses

Section 6: Buying Process and Selling Points

Businesses don’t buy products or services — people do. So, expand your organizational chart from section three to include personal motivations and decision criteria, and plot your value-based selling points to specific members of your customer’s organization.

The goal of a trusted advisor should not be to fit a product into an empty slot. Rather, your focus should be to understand how your key selling points match each decision maker’s goal.

Identify each of the following:

• Evaluation criteria
• Key decision criteria
• Key selling points

Section 7: Relationship Goals and Strategy

Before an account manager can move the customer relationship forward, they must establish the status of their current client relationship. Knowing where we’re starting helps us get the right resources to build solid foundations and effectively approach the next steps.

Using the organizational chart from section three and the motivations from section six, determine which relationship target has the greatest opportunity for engagement. Focus on those who can provide the most productive outcomes for the customer’s business and your own.

Expand your relationship landscape to include:

• Current relationship status ( Vendor, Preferred Supplier, Planning Partner, Trusted Advisor )
• Core business partners
• Relationship target (who, what, where, how, why)
• Relationship progression strategy

Section 8: Sales Opportunities, Targets, and Risks

Once you’ve documented your customer’s objectives, motivations, and key relationships, determine the products/services that will help them attain their goals. List revenue goals and identify blockers — internal and external.

List and define:

• Two-year revenue goals
• Customer needs for products/services
• Cross-sell and upsell opportunities
• Risks, barriers, and limitations
• Operational restrictions

It can be easy to gloss over the final bullet — operational restrictions. However, this exercise can illuminate friction in service/product delivery and reveal opportunities for automation and processes that can impact your entire book of business.

Section 9: Action Plan

Although there may be many value-add opportunities, narrow your focus to a small subset. Move the needle one position at a time.

Determine which team members will own which task, what resources will be required to achieve these tasks, and agree upon accountability measures.

Ensure that you do the following in your action plan:

• Identify the top five objectives.
• Create a list of critical resources.
• Assign tasks and key owners.

Section 10: Plan Review

Discuss value co-creation with your customer. Ensure you have correctly defined and prioritized value opportunities and work with them to provide relevant materials or resources to secure buy-in.

Engage the customer in a collaborative role to establish a process, timeline, and next steps.

We’ve collected some of the best strategic account planning templates you can use right now.

1. HubSpot’s Account Planning Template [Google Docs]

HubSpot’s Account Planning Template is useful for account managers who want the freedom to personalize their account plan with a strong marketing basis.

This template includes all the items discussed before, making it a complete resource for startups and big businesses. It can help small and large teams by providing an actionable step-by-step guide for account managers, sales executives, and marketing professionals to collaborate within the account planning process.

2. Databahn Account Plan Template [XLS]

Databahn offers a free Strategic Account Plan template that’s a good option for account management teams trying to streamline their account planning processes. This template is not only easy to use and complete, but it also includes different details like the members of the team, marketing strategies and targets, industry analysis, and annual reports.

Disclaimer: Even when completed, the account planning template needs to be constantly updated to be as effective as possible.

3. Gartner’s Key Account Plan Template

Gartner, the leading information technology research and advisory company, offers a template that includes a comprehensive set of customizable tools to help executive sales leaders construct or enhance their organization’s critical account plan.

4. ForecastEra’s Free Account Planning Template [PDF]

As part of its account planning tools, ForecastEra also offers a free account planning template to help sales executives.

5. Intercom’s Account Plans [XML]

Intercom is a customer success company that works with tools that level up clients relationships.

This company offers an account plan template to help account managers maintain successful customer satisfaction rates by taking advantage of up-to-date information.

6. Unstrategic’s Strategic Account Plan [PDF]

This easy-to-use template is an excellent resource for account managers and sales teams. It offers a detailed solution for companies to work on their account planning without struggling with technical misunderstandings.

This PDF guide offers a user-friendly content display and provides systematic instructions on how to fill out each section. It is great for anyone filling out an account plan for the first time.

7. Revegy’s Account Planning Template

This guide is the best option for sales professionals who want to create effective sales strategies based on customer data.

This tool can help you build consistent account plans that are easy to understand and implement.

8. Avention’s Strategic Account Plan Template [PPT]

Avention made this template to assist the account management team in staying on top of the client’s business objectives and goals. It’s also helping them achieve desired results that will ultimately have a good impact on the customer’s business.

9. Get2Growth Strategic Account Planning Template [PPT]

This company offers a one-page detailed template you can use to build an account plan in a few steps.

With different graphic elements and sections, this template is a good solution for account professionals who want to achieve an innovative account managing approach based on quick solutions.

10. Account Planning Template by AccountTips [XSL]

This template is full of helpful resources for account managers, and they offer clearly labeled Excel tabs to level up your account management work.

Supported by articles and academic resources, this template provides both questions to ask and cells to fill with relevant information. You will find yourself finishing your account plan in a blink of an eye.

Supporting Account Planning with Account-Based Marketing Software

Creating an account-based marketing plan (ABM) is the natural next step after finishing the planning process. But there’s no need to do it manually. Instead, we recommend using ABM software that can help you automate your ABM campaigns.

There are a number of different account-based marketing software platforms that can support your efforts, including HubSpot ABM Software , Terminus , and Demandbase .

A high-quality ABM software generally features tools and resources to help you establish a solid foundation for an account planning strategy. It’s typically rooted in defining and understanding your ideal customer profiles (ICPs).

It might also contain features that cover company and contact information, giving you insight into the businesses you're trying to target and the individual decision-makers you need to reach. Other tools — like workflow templates for building and maintaining your ICPs — can also be a big help for successful account planning.

Image Source

Here's how a workflow looks in HubSpot's ABM software. Specific actions are triggered depending on previous settings, automatically segmenting your ICPs by tier.

Personalization and Engagement

The fundamental basis of ABM, as a concept, is personalization. It's a process rooted in understanding and approaching individual accounts on terms that will specifically resonate with the prospects and customers behind them.

Features designed for compiling lists of target companies with similar characteristics can help you group like-minded companies and contacts for streamlined outreach. Some types of ABM software allow you to send ads to influencers within your targeted accounts across certain platforms — typically LinkedIn.

Resources that allow you to engage with those targeted lists via email can also add value to your account planning efforts. One way or another, it's always in your best interest to reach your target accounts in ways that suit their unique values and characteristics. Finding software to simplify that process can make your outreach more robust without losing focus.

Tracking and Measuring Efforts

Account planning isn't a static process. You need to constantly look for ways to modify your strategy as you interact with more customers. That's why resources to track the efficacy of your efforts are crucial.

Target account reporting libraries can help you keep tabs on target accounts. A solid ABM software often includes resources that let you review internal stakeholders within your target companies, allowing you to see who's supporting, blocking, or influencing your efforts.

It also helps to have visibility into the different interactions your business has with a target company. Some types of ABM software allow you to monitor activity like emails, meetings, and logged calls. Tools like that will enable you to understand where and how to improve your outreach and planning.

How can an ABM support your account plan?

Regardless of the one you choose, ABM software will be a time saver for your sales team, and it will give you the tools to work on your key customer relationships.

You now have all the resources you need to build a successful account plan from scratch, starting with the main questions and all the implementation steps that will help you get there. Are you ready to turn account planning into a valuable asset for your business?

Editor's note: This post was originally published in July 7, 2019 and has been updated for comprehensiveness.

Don't forget to share this post!

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What Is Accounting? Definition and Basics, Explained

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Accounting is the practice of tracking your business's financial data and interpreting it into valuable insights. This allows you to generate crucial financial statements, such as a balance sheet, cash flow statement, and profit and loss report. It sounds simple, but in reality, a lot of behind-the-scenes work goes into accurately reporting on a business's financial state.

Accounting requires meticulous record-keeping and financial transaction tracking year-round. Moreover, keeping accurate records helps ensure your business is prepared to file taxes, present information to investors or even apply for a loan.

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Accounting basics

Recording financial transactions.

For a small business, accounting involves tracking money flow in various forms, including operating expenses (e.g., marketing, utilities, rent), cost of goods sold, accounts receivable and sales. It also takes into account liabilities, such as accounts payable, business loans and taxes, and the value of your assets, such as cash and inventory.

Let's say a client just paid their invoice online, or money was withdrawn from your checking account to pay a utility bill. Each transaction — money in or money out — gets recorded. Most business owners opt for small-business accounting software to help automate the process and reduce the likelihood of error.

Organizing financial transactions

A chart of accounts helps organize and make sense of all of a business's recorded transactions. It's essentially a list of financial accounts, and each time you record a transaction, you classify it under a particular account. Most accounts fall into five overarching account types: assets, liabilities, equity, expenses or revenue. Categorizing transactions accurately is critical for producing financial statements, which each pull information from specific accounts.

After you enter a transaction and categorize it under an account, your accounting software will create a journal entry behind the scenes. Most modern accounting software uses the double-entry accounting system , which requires two book entries — one debit and one credit — for every business transaction. These entries are summarized in the general ledger.

Running accounting reports

After recording and categorizing transactions, you can analyze the results by running reports. There are a few main financial statements that businesses rely on:

Income statement . Also called a profit and loss statement, the income statement consolidates data on revenue and expenses to show how profitable your business was over a specific period. It also shows how much it's paid in expenses and taxes. 

Balance sheet . The balance sheet takes your business's assets (e.g., inventory, equipment and accounts receivable), liabilities (e.g., accounts payable or taxes owed) and equity into account. 

Cash flow statement . As the name implies, this accounting report gives you an overview of your business's cash flow . It breaks down how your business earns cash and what that cash is going toward. Ideally, your cash flow will be positive and indicate that you have enough cash to cover future liabilities. 

The figures in your reports will look different depending on whether you use cash or accrual basis accounting .

Following accounting standards

Gaap accounting.

The Financial Accounting Standards Board, an independent organization recognized by the federal government, established a set of standards called generally accepted accounting principles , or GAAP, that publicly traded companies must comply with. For example, a company has to reference specific time periods in reports and follow the same accounting method across time periods to ensure accurate comparisons. Though small businesses aren't required to follow the same rules, doing so can help ensure a higher level of consistency.

How do small businesses use accounting?

You can use accounting to track cash flow and quantify your company's financial health. In addition, accounting makes it possible to create financial projections to plan for the future and anticipate sales and expenses. Without accounting, it would be incredibly difficult to gauge your business's performance and whether it's on track to meet its goals and obligations.

What do accountants do?

Small businesses hire accountants to advise them on their financial situation and help file taxes. Aside from handling taxes and compliance issues, they can help you optimize budgets, spot opportunities to save, and even apply for business loans.

Whereas you might only periodically consult your accountant, a bookkeeper touches base more frequently and handles daily accounting tasks. Regardless of who you hire, knowing basic accounting principles can help you understand your business better and have more productive conversations with your financial team.

» MORE: Best accounting and bookkeeping apps for small businesses

Accounting consists of tracking financial transactions and analyzing what they mean for your business.

Accounting helps you gauge where your small business stands financially, what it can afford at any given time, and where its money is coming from and going. In addition to this financial overview, proper accounting practices prepare your business to file taxes and produce financial statements needed for potential investors or business loan applications.

When running a small business, you should choose an accounting software product and consider hiring an accountant. Accounting software does a lot of the heavy lifting (such as keeping track of debits and credits) for you. However, it's still important to understand basic accounting principles to know what's happening behind the scenes. Business owners should be able to enter transactions, reconcile accounts and interpret financial statements accurately.

Accountants can help take some of the pressure off tax season by handling the preparation and filing for you. If your business can afford to hire an accountant, doing so could save you time and potentially even tax dollars.

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