a well written business plan should contain quizlet

11.4 The Business Plan

Learning objectives.

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

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

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

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

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

Business Plan Overview

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

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

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

Purposes of a Business Plan

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

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

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

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

Link to Learning

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

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

Types of Business Plans

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

Brief Business Plan or Executive Summary

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

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

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

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

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

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

Are You Ready?

Create a brief business plan.

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

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

Full Business Plan

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

Executive Summary

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

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

Business Description

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

Industry Analysis and Market Strategies

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

Competitive Analysis

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

Operations and Management Plan

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

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

Marketing Plan

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

Financial Plan

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

Entrepreneur In Action

Laughing man coffee.

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

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

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

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

What Can You Do?

Textbooks for change.

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

Work It Out

Franchisee set out.

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

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

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

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

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

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Martin luenendonk.

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

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

How to make a business plan

Table of Contents

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

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

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

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

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

What is a business plan?

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

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

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

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

Business plan vs. business model canvas

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

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

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

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

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

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

Why is a business plan important?

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

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

Helps to define the business goals and objectives

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

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

Guides decision-making

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

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

Attracts investors and secures funding

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

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

Identifies potential challenges and risks

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

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

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

Provides a basis for measuring success

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

Are we where we want to be at this point?

Did we achieve our goals?

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

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

How to make a business plan step by step

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

1. Create an executive summary

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

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

2. Write your company description

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

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

3. Conduct a market analysis

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

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

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

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

4. Describe your products and services

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

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

5. Design a marketing and sales strategy

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

Pricing strategy

Advertising and promotional tactics

Sales channels

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

6. Determine budget and financial projections

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

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

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

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

8. Make an action plan

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

Types of business plans

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

Startup business plan

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

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

Strategic business plan

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

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

Operational business plan

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

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

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

Growth-business plan

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

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

One-page business plan

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

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

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

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

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

Be practical

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

Be specific

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

Be thorough with your research

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

Get input from others

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

Review and revise regularly

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

Create a winning business plan to chart your path to success

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

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

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

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What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

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Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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What Should a Business Plan Include?

A business plan serves as a roadmap to successfully launch a business. It helps you overcome the challenges you might experience in your industry. Learn how to create and use a business plan for your startup.

One of the most fatal mistakes that aspiring entrepreneurs make in launching a startup is forgetting a business plan . You wouldn’t launch a ship at sea without establishing its routes and the direction you’ll steer it to. Without proper planning, your ship will end up adrift or worst, dramatically sink when the tides hit. And in a volatile commercial industry, the tides are constantly changing.

Avoid common startup mistakes by creating a business plan. A business plan not only strengthens your foundation but also helps you navigate the ever-changing field of business. Chances are your customers’ preferences will change over time and you have to keep up with them. Hence, a business plan also changes accordingly.

But how exactly do you create a business plan ? Is there a template to follow? Should you enlist the help of other experts to write it? Today, we’ll look into what should be included in your business plan and how it should be written. The first step is by understanding what it is and what it is for.

What is a business plan?

A business plan is an official company document that breaks down all the goals of a business and how to achieve them. It basically lays out the groundwork for your idea to come alive. It’s often referred to as the “blueprint of the business”, summarizing your goals.

Although there are many ways to write it, its key point usually discusses the financial, marketing, and operational strategies of the business.   

What is it for?

A business plan serves as a guide for a growing company. It’s a consistent reference for business owners and stakeholders to base critical decisions on. It’s especially useful for early-stage startups to attract investors. When a company doesn’t have a proven track record, it can lay out its full potential instead.

Not only is the business plan useful for the initial launching of a business, but it also helps with pivotal changes. Since the market is perpetually changing, it’s crucial that your plan also evolves with it. Hence, the goals and methods of achieving will be updated. In some cases, a whole new plan is created if the company wants to drastically move in a new direction.   

What’s included in a Business Plan

Although there’s no fixed formula for writing a business plan, there are some identifiable key points. These are generally the items factored in its creation:

1.     Executive Summary

The executive summary outlines the whole plan. You start with a clear introduction of who you are, what you sell, and what your ambitions are as a business. This section includes your mission statement, product description, and the basic overview of your company’s structure. It should also include your financial plans.   

2.     Business Description

The business description provides detailed information about your industry. It must describe its current outlook as well as its profit potential. You will go into detail about your target market and other organizations or businesses you cater to. Also, this section briefly discusses what problem the business is trying to solve.  

3.     Market Analysis

A business must have a firm understanding of its target market and should be able to prove its sustainability. The market analysis provides trends and studies about the target consumers—their size, demographics, buying power, and frequent activities. This section also touches briefly on the competitors.

4.     Product Development

Investors need a clear idea of how you would create and maintain your product. The development plan section contains the details of the product’s design; its production methods, lifecycle, marketing, and development budget. This includes the overall strategy of how it will be sold in the market.

5.     Marketing Strategies

The product is only as good as how much it will sell. Therefore, this section describes how you will present your products and services to the market. This will discuss your marketing campaigns, distribution channels, and types of media you’ll tap into. You will summarize how you intend to reach your customers and pitch your products to them.

6.     Operations and Management

Your investors need an overview of how the business functions. The operations plan highlights the logistics of the company such as team responsibilities, division tasks, and operational expenses. This helps track down who is responsible for certain areas of the business.  

7.     Financial Plans

Money mobilizes the idea. Hence, it’s important to keep an accurate record of where it’s going. This section shows the company’s monetary plans and its future projections. This includes financial statements, balance sheets, and third-party business transactions. For startups, it will mostly contain the target profit and estimates of expenses.    

Tips on Writing a Business Plan

Now that we have an idea of the business plan template , it’s time to learn how to write it effectively. 

Here are some things to keep in mind when you’re writing one for your business.

• Keep it concise. It serve as a guide for the company and the investors. It needs to be easy to understand and direct to the point. You can’t afford to waste a reader’s time by creating a 100-page business plan. Instead, aim for a summarized version of your plan, only highlighting the important points and outlining the rest.
• Avoid jargon. Ensure that everyone, especially investors, can understand your business plan. Do not include complex jargon in your content. Save the technicalities for the experts and simplify the terms in explaining your ideas.
• Keep it up-to-date. As previously mentioned, business plans are not static. Over time, a lot of things in the industry will change and might make your original plans obsolete. Frequently update your business plan according to what’s new in the field and with new methods you’re employing. Remember, a business plan is only useful if it’s still relevant.  

Build your Business

Business plans are important when you’re starting your business from scratch. However, the success of your business still heavily relies on their execution. A lot of startups fail because they can’t push through with what was proposed in the business plans.

More than just articulating your ideas, you need to do a lot more to make them come to life. For one, you’ll need the capital to kick things off and make everything operational. Second, you’ll need to hire the best people to run your operations. Lastly, you have to find investors to sustain your business.

One way to ensure that your business plan is properly executed is by enlisting the help of business experts. Full Scale is an offshore software development company that specializes in helping startups.

We can provide the talent and resources needed to begin your operations. Whether you need project managers, marketing specialists, or technical experts; we’ve got them all. We’ll take care of all the processes of recruitment and management so you can focus on your core competencies.

Ready to begin your entrepreneurial journey? Get your FREE consultation today!

Learn More about Offshore Development

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How to Prepare and Write the Perfect Business Plan for Your Company Here's how to write a business plan that will formalize your company's goals and optimize your organization.

By Matthew McCreary • May 5, 2021

Are you preparing to start your own business but uncertain about how to get started? A business plan ought to be one of the first steps in your entrepreneurial journey because it will organize the ideas that have been spinning around in your brain and prepare you to seek funding, partners and more.

What is a business plan?

A business plan is a detailed document that outlines a company's goals and how the business, well, plans to achieve those goals over the next three or more years. It helps define expected profits and challenges, providing a road map that will help you avoid bumps in the road.

Stever Robbins writes in an Entrepreneur article titled, "Why You Must Have a Business Plan," that a business plan "is a tool for understanding how your business is put together…. Writing out your business plan forces you to review everything at once: your value proposition, marketing assumptions, operations plan, financial plan and staffing plan." But, a business plan is about more than just reviewing the past state of your business or even what your business looks like today.

Robbins writes that a well-written business plan will help you drive the future by "laying out targets in all major areas: sales, expense items, hiring positions and financing goals. Once laid out, the targets become performance goals."

The business plan can help your company attract talent and funding, because when prospects ask about your business, you already have an articulated overview to offer them. How they react can allow you to quickly understand how others see your business and pivot if necessary.

What should you do before you write your business plan?

It might sound redundant, but you actually need to plan your business plan. Business plans can be complicated, and you'll be held accountable for the goals you set. For example, if you plan to open five locations of your business within the first two years, your investors might get angry if you only manage to open two.

That's why it's essential that, before writing your business plan, you spend some time determining exactly which objectives are essential to your business. If you're struggling to come up with a list of goals on your own, Entrepreneur article "Plan Your Business Plan" offers some questions you can ask yourself to spark some inspiration.

How determined am I to see this venture succeed?

Am I willing to invest my own money and work long hours for no pay, sacrificing personal time and lifestyle, maybe for years?

What's going to happen to me if this venture doesn't work out?

If it does succeed, how many employees will this company eventually have?

What will be the business's annual revenue in a year? What about in five years?

What will be the company's market share in that amount of time?

Will the business have a niche market, or will it sell a broad spectrum of goods and services?

What are my plans for geographic expansion? Should it be local or national? Can it be global?

Am I going to be a hands-on manager, or will I delegate a large proportion of tasks to others?

If I delegate, what sorts of tasks will I share? Will it be sales, technical work or something else?

How comfortable am I taking direction from others? Can I work with partners or investors who demand input into the company's management?

Is the business going to remain independent and privately owned, or will it eventually be acquired or go public?

It's also essential to consider your financial goals. Your business might not require a massive financial commitment upfront, but it probably will if you're envisioning rapid growth. Unless you're making your product or service from scratch, you'll have to pay your suppliers before your customers can pay you, and as "Plan Your Business Plan" points out, "this cash flow conundrum is the reason so many fast-growing companies have to seek bank financing or equity sales to finance their growth. They are literally growing faster than they can afford."

How much financing will you need to start your business? What will you be willing to accept? If you're desperate for that first influx of cash, you might be tempted to accept any offer, but doing so might force you to either surrender too much control or ask investors for a number that's not quite right for either side.

These eight questions can help you determine a few financial aspects of your planning stages:

What initial investment will the business require?

How much control of the business are you willing to relinquish to investors?

When will the business turn a profit?

When can investors, including you, expect a return on investment?

What are the business's projected profits over time?

Will you be able to devote yourself full-time to the business?

What kind of salary or profit distribution can you expect to take home?

What are the chances the business will fail, and what will happen if it does?

You should also consider who, primarily, is going to be reading your business plan, and how you plan to use it. Is it a means of raising money or attracting employees? Will suppliers see it?

Lastly, you need to assess the likelihood of whether you actually have the time and resources to see your plan through. It might hurt to realize the assumptions you've made so far don't actually make a successful business, but it's best to know early on, before you make further commitments.

Related: Need a Business Plan Template? Here Is Apple's 1981 Plan for the Mac.

How to Write a Business Plan

Once you've worked out all the questions above and you know exactly what goals you have for your business plan, the next step is to actually write the darn thing. A typical business plan runs 15 to 20 pages but can be longer or shorter, depending on the complexity of the business and the needs of your venture. Regardless of whether you intend to use the business plan for self-evaluation or to seek a seven-figure investment, it should include nine key components, many of which are outlined in Entrepreneur 's introduction to business plans:

1. Title page and contents

Presentation is important, and a business plan should be presented in a binder with a cover that lists the business's name, the principals' names and other relevant information like a working address, phone number, email and web address and date. Write the information in a font that's easy to read and include it on the title page inside, too. Add in the company logo and a table of contents that follows the executive summary.

2. Executive summary

Think of the executive summary as the SparkNotes version of your business plan . It should tell the reader in as few words as possible what your business wants and why. The executive summary should address these nine things:

The business idea and why it is necessary. (What problem does it solve?)

How much will it cost, and how much financing are you seeking?

What will the return be to the investor? Over what length of time?

What is the perceived risk level?

Where does your idea fit into the marketplace?

What is the management team?

What are the product and competitive strategies?

What is your marketing plan?

What is your exit strategy?

When writing the executive summary, remember that it should be somewhere between one-half page to a full page. Anything longer, and you risk losing your reader's attention before they can dig into your business plan. Try to answer each of the questions above in two or three sentences, and you'll wind up with an executive summary that's about the right length.

Related: First Steps: Writing the Executive Summary of Your Business Plan

3. Business description

You can fill anywhere from a few paragraphs to a few pages when writing your business description, but try again to keep it short, with the understanding that more sections will follow. The business description typically starts with a short explanation of your chosen industry, including its present outlook and future possibilities. Use data and sources (with proper footnotes) to explain the markets the industry offers, along with the developments that will affect your business. That way, everyone who reads the business description, particularly investors, will see that they can trust the various information contained within your business plan.

When you pivot to speaking of your business, start with its structure. How does your business work? Is it retail, service-oriented or wholesale? Is the business new or established? Is the company a sole proprietorship, partnership or corporation? Who are the principals and who are your customers? What do the distribution channels look like, and how can you support sales?

Next, break down your business's offerings. Are you selling a physical product, SaaS or a service? Explain it in a way that a reader knows what you're planning to sell and how it differentiates itself from the competition (investors call this a Unique Selling Proposition, or USP, and it's important that you find yours). Whether it's a trade secret or a patent, you should be specific about your competitive advantage and why your business is going to be profitable. If you plan to use your business plan for fundraising, you can use the business description section to explain why new investments will help make the business even more profitable.

This, like everything else, can be brief, but you can tell the reader about your business's efficiency or workflow. You can write about other key people within the business or cite industry experts' support of your idea, as well as your base of operations and reasons for starting in the first place.

4. Market strategies

Paint a picture about your market by remembering the four Ps: product, price, place and promotion.

Start this section by defining the market's size, structure and sales potential. What are the market's growth prospects? What do the demographics and trends look like right now?

Next, outline the frequency at which your product or service will be purchased by the target market and the potential annual purchase. What market share can you possibly expect to win? Try to be realistic here, and keep in mind that even a number like 25% might be a dominant share.

Next, break down your business's plan for positioning, which relates to the market niche your product or service can fill. Who is your target market, how will you reach them and what are they buying from you? Who are your competitors, and what is your USP?

The positioning statement within your business plan should be short and to the point, but make sure you answer each of those questions before you move on to, perhaps, the most difficult and important aspect of your market strategy: pricing.

In fact, settling on a price for your product or service is one of the most important decisions you have to make in the entire business plan. Pricing will directly determine essential aspects of your business, like profit margin and sales volume. It will influence all sorts of areas, too, from marketing to target consumer.

There are two primary ways to determine your price: The first is to look inward, adding up the costs of offering your product or service, and then adding in a profit margin to find your number. The second is called competitive pricing, and it involves research into how your competitors will either price their products or services now or in the future. The difficult aspect of this second pricing method is that it often sets a ceiling on pricing, which, in turn, could force you to adjust your costs.

Then, pivot the market strategies section toward your distribution process and how it relates to your competitors' channels. How, exactly, are you going to get your offerings from one place to the next? Walk the reader step by step through your process. Do you want to use the same strategy or something else that might give you an advantage?

Last, explain your promotion strategy. How are you going to communicate with your potential customers? This part should talk about not only marketing or advertising, but also packaging, public relations and sales promotions.

Related: Creating a Winning Startup Business Plan

5. Competitive analysis

The next section in your business plan should be the competitive analysis, which helps explain the differences between you and your competitors … and how you can keep it that way. If you can start with an honest evaluation of your competitors' strengths and weaknesses within the marketplace, you can also provide the reader with clear analysis about your advantage and the barriers that either already exist or can be developed to keep your business ahead of the pack. Are there weaknesses within the marketplace, and if so, how can you exploit them?

Remember to consider both your direct competition and your indirect competition, with both a short-term and long-term view.

6. Design and development plan

If you plan to sell a product, it's smart to add a design and development section to your business plan. This part should help your readers understand the background of that product. How have the production, marketing and company developed over time? What is your developmental budget?

For the sake of organization, consider these three aspects of the design and development plan:

Product development

Market development

Organizational development

Start by establishing your development goals, which should logically follow your evaluation of the market and your competition. Make these goals feasible and quantifiable, and be sure to establish timelines that allow your readers to see your vision. The goals should address both technical and marketing aspects.

Once the reader has a clear idea of your development goals, explain the procedures you'll develop to reach them. How will you allocate your resources, and who is in charge of accomplishing each goal?

The Entrepreneur guide to design and development plans offers this example on the steps of producing a recipe for a premium lager beer:

Gather ingredients.

Determine optimum malting process.

Gauge mashing temperature.

Boil wort and evaluate which hops provide the best flavor.

Determine yeast amounts and fermentation period.

Determine aging period.

Carbonate the beer.

Decide whether or not to pasteurize the beer.

Make sure to also talk about scheduling. What checkpoints will the product need to pass to reach a customer? Establish timeframes for each step of the process. Create a chart with a column for each task, how long that task will take and when the task will start and end.

Next, consider the costs of developing your product, breaking down the costs of these aspects:

General and administrative (G&A) costs

Marketing and sales

Professional services, like lawyers or accountants

Miscellaneous costs

Necessary equipment

The next section should be about the personnel you either have or plan to hire for that development. If you already have the right person in place, this part should be easy. If not, then this part of the business plan can help you create a detailed description of exactly what you need. This process can also help you formalize the hierarchy of your team's positions so that everyone knows their roles and responsibilities.

Finish the development and design section of your business plan by addressing the risks in developing the product and how you're going to address those risks. Could there be technical difficulties? Are you having trouble finding the right person to lead the development? Does your financial situation limit your ability to develop the product? Being honest about your problems and solutions can help answer some of your readers' questions before they ask them.

Related: The Essential Guide to Writing a Business Plan

7. Operations and management plan

Want to learn everything you'll ever need to know about the operations and management section of your business plan, and read a real, actual web article from 1997? Check out our guide titled, "Writing A Business Plan: Operations And Management."

Here, we'll more briefly summarize the two areas that need to be covered within your operations and management plan: the organizational structure is first, and the capital requirement for the operation are second.

The organizational structure detailed within your business plan will establish the basis for your operating expenses, which will provide essential information for the next part of the business plan: your financial statements. Investors will look closely at the financial statements, so it's important to start with a solid foundation and a realistic framework. You can start by dividing your organizational structure into these four sections:

Marketing and sales (including customer relations and service)

Production (including quality assurance)

Research and development

Administration

After you've broken down the organization's operations within your business plan, you can look at the expenses, or overhead. Divide them into fixed expenses, which typically remain constant, and variable, which will change according to the volume of business. Here are some of the examples of overhead expenses:

Maintenance and repair

Equipment leases

Advertising and promotion

Packaging and shipping

Payroll taxes and benefits

Uncollectible receivables

Professional services

Loan payments

Depreciation

Having difficulty calculating what some of those expenses might be for your business? Try using the simple formulas in "Writing A Business Plan: Operations And Management."

8. Financial factors

The last piece of the business plan that you definitely need to have covers the business's finances. Specifically, three financial statements will form the backbone of your business plan: the income statement, the cash-flow statement and balance sheet . Let's go through them one by one.

The income statement explains how the business can make money in a simple way. It draws on financial models already developed and discussed throughout the business plan (revenue, expenses, capital and cost of goods) and combines those numbers with when sales are made and when expenses are incurred. When the reader finishes going through your income statement, they should understand how much money your company makes or loses by subtracting your costs from your revenue, showing either a loss or a profit. If you like, you or a CPA can add a very short analysis at the end to emphasize some important aspects of the statement.

Second is the cash-flow statement, which explains how much cash your business needs to meet its obligations, as well as when you're going to need it and how you're going to get it. This section shows a profit or loss at the end of each month or year that rolls over to the next time period, which can create a cycle. If your business plan shows that you're consistently operating at a loss that gets bigger as time goes on, this can be a major red flag for both you and potential investors. This part of the business plan should be prepared monthly during your first year in business, quarterly in your second year and annually after that.

Our guide on cash-flow statements includes 17 items you'll need to add to your cash-flow statement.

Cash. Cash on hand in the business.

Cash sales . Income from sales paid for by cash.

Receivables. Income from collecting money owed to the business due to sales.

Other income. The liquidation of assets, interest on extended loans or income from investments are examples.

Total income. The sum of the four items above (total cash, cash sales, receivables, other income).

Material/merchandise . This will depend on the structure of your business. If you're manufacturing, this will include your raw materials. If you're in retail, count your inventory of merchandise. If you offer a service, consider which supplies are necessary.

Direct labor . What sort of labor do you need to make your product or complete your service?

Overhead . This includes both the variable expenses and fixed expenses for business operations.

Marketing/sales . All salaries, commissions and other direct costs associated with the marketing and sales departments.

Research and development . Specifically, the labor expenses required for research and development.

General and administrative expenses. Like the research and development costs, this centers on the labor for G&A functions of the business.

Taxes . This excludes payroll taxes but includes everything else.

Capital. Required capital for necessary equipment.

Loan payments. The total of all payments made to reduce any long-term debts.

Total expenses. The sum of items six through 14 (material/merchandise, direct labor, overhead, marketing/sales, research and development, general and administrative expenses, taxes, capital and loan payments).

Cash flow. Subtract total expenses from total income. This is how much cash will roll over to the next period.

Cumulative cash flow . Subtract the previous period's cash flow from your current cash flow.

Just like with the income statement, it's a good idea to briefly summarize the figures at the end. Again, consulting with a CPA is probably a good idea.

The last financial statement is the balance sheet. A balance sheet is, as our encyclopedia says, "a financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business." If you've already started the business, use the balance sheet from your last reporting period. If the business plan you wrote is for a business you hope to start, do your best to project your assets and liabilities over time. If you want to earn investors, you'll also need to include a personal financial statement. Then, as with the other two sections, add a short analysis that hits the main points.

9. Supporting documents

If you have other documents that your readers need to see, like important contracts, letters of reference, a copy of your lease or legal documents, you should add them in this section.

Related: 7 Steps to a Perfectly Written Business Plan

What do I do with my business plan after I've written it?

The simplest reason to create a business plan is to help people unfamiliar with your business understand it quickly. While the most obvious use for a document like this is for financing purposes, a business plan can also help you attract talented employees — and, if you share the business plan internally, help your existing employees understand their roles.

But it's also important to do for your own edification, too. It's like the old saying goes, "The best way to learn something is to teach it." Writing down your plans, your goals and the state of your finances helps clarify the thoughts in your own mind. From there, you can more easily lead your business because you'll know whether the business is reaching the checkpoints you set out to begin with. You'll be able to foresee difficulties before they pop up and be able to pivot quickly.

That's why you should continue to update your business plan when the conditions change, either within your business (you might be entering a new period or undergoing a change in management) or within your market (like a new competitor popping up). The key is to keep your business plan ready so that you don't have to get it ready when opportunity strikes.

Entrepreneur Staff

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