business planning of importance

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

• 3. Having a business plan minimizes your risk

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

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

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

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• 4. Crafts a roadmap to achieve important milestones

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

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

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

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

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

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

You need to verify:

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

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

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

6. You’ll make big spending decisions with confidence

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

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

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

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

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

• 8. Position your brand against the competition

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

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

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

• 9. Determines financial needs and revenue models

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

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

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

• 10. Helps you think through your marketing strategy

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

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

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

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

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

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

• 12. Future-proof your business

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

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

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

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

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

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

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

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

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

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

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

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• Writing your business plan

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

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

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

Table of Contents

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

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Table of Contents

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

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

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

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

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

This isn’t surprising at all. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the key elements of a good business plan:

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

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

• Business Sorter

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

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

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

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

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

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

What Is Meant by Business Planning?

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

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

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

Strategic Planning

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

Tactical Planning

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

Contingency Planning

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

What Are the 7 Steps of a Business Plan?

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

Conduct Research

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

Have a Goal

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

Create a Company Profile

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

Describe the Company in Detail

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

Create a marketing plan ahead of time.

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

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

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

Incorporate Your Motivation

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

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

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

Services and Products

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

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

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

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

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

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The importance of business plan: 5 key reasons.

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

Here’s What We’ll Cover:

What Is a Business Plan?

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

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

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

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

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

1. To Secure Funding

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

2. Set and Communicate Goals

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

3. Prove Viability in the Market

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

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

4. They Help Owners Avoid Failure

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

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

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

5. Business Plans Reduce Risk

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

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

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

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

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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.

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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

Published: June 07, 2023

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

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

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

What is a business plan?

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

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

What is a business plan used for?

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

Business Plan Template [ Download Now ]

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

Purposes of a Business Plan

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

1. Securing financing from investors.

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

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

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

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

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

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

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

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

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

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

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

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

4. Getting an A in your business class.

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

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

What does a business plan need to include?

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

1. Business Plan Subtitle

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

2. Executive Summary

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

3. Company Description

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

4. The Business Opportunity

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

5. Competitive Analysis

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

6. Target Market

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

7. Marketing Plan

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

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

8. Financial Summary

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

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

10. Funding Requirements

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

Types of Business Plans

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

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

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

1. Startup Business Plan

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

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

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

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

2. Feasibility Business Plan

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

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

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

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

3. Internal Business Plan

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

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

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

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

4. Strategic Business Plan

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

These types of business plans may include:

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

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

5. Business Acquisition Plan

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

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

A business plan for an existing company will explain:

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

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

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

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

6. Business Repositioning Plan

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

This plan will:

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

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

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

7. Expansion or Growth Business Plan

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

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

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

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

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

Getting Started With Your Business Plan

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

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

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

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The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

What is the purpose of a business plan?

A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Business plan FAQs

How does having a business plan help small business owners make better decisions.

Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.

What industry-specific issues can business plans help tackle?

Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.

How can small business owners use their business plans to pitch investors or apply for loans?

In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.

Understanding the importance of a business plan

Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.

Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.

Related Posts

Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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Why Is Strategic Planning Important?

• 06 Oct 2020

Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?

If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.

It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .

Here’s a look at what strategic planning is and how it can benefit your organization.

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What Is Strategic Planning?

Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.

It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.

“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”

Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.

Related: 4 Ways to Develop Your Strategic Thinking Skills

Benefits of Strategic Planning

1. create one, forward-focused vision.

Strategy touches every employee and serves as an actionable way to reach your company’s goals.

One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.

This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.

2. Draw Attention to Biases and Flaws in Reasoning

The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.

A few examples of cognitive biases are:

• The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
• Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
• Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways

One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.

If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.

Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.

Related: 3 Group Decision-Making Techniques for Success

3. Track Progress Based on Strategic Goals

Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .

By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.

It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.

Improve Your Strategic Planning Skills

Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.

Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).

Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.

Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

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What is a Business Plan and Why is it Important?

What is a business plan.

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

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

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

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

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

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

Building an asset management business plan

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

Creating a marketing strategy

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

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

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

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

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

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

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

Seeking investment for your business

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

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

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

Hiring the right talent

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

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

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

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

Setting business plan objectives for management

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

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

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

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

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

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

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The Undeniable Importance of a Business Plan

We often hear about business plans in the context of early-stage companies; however, constructing excellent business plans is difficult and time-consuming, so many entrepreneurs avoid them. But, is this a mistake?

While most people may be aware of the “soft” arguments for and against writing a business plan, in this article, a Toptal Finance Expert takes a data-driven approach to addressing the debate. In it, he finds strong evidence to support the notion that writing an excellent business plan is time well spent.

By Sean Heberling

Sean has analyzed 10,000+ companies, built complex models, and helped facilitate $1+ billion in investment transactions.

PREVIOUSLY AT

Executive Summary

• Individuals who write business plans are 2.5x as likely to start businesses.
• Business planning improves corporate executive satisfaction with corporate strategy development.
• Angels and venture capitalists value business plans and their [financial models](https://www.toptal.com/finance/tutorials/what-is-a-financial-model).
• Companies who complete business plans are 2.5x as likely to get funded.
• Even if a small-scale early-stage venture seeking just $250,000 in capital spent almost $40,000 on business planning and another almost $40,000 on capital raising, it should still expect to "break even" on a probability-weighted basis.
• Larger early-stage ventures enjoy extraordinary probability-weighted returns on investment from business planning. Because the target net capital so greatly exceeds the money spent on business planning, the prospective ROI is huge.
• Company Overview: An explanation of why your company is relevant and the need you are addressing.
• Market Overview: A description of the state of your market and its important trends, a detailed description of your customers, and a description of your current competitors and their advantages.
• Product/Service Overview: A description of your product(s), how they compete with other brands, why they are needed, and why customers will pay a fair economic value for it.
• Financial Projections: Three thorough financial plans with conservative, moderate, and optimistic assumptions.
• The process of writing forces the author to ask introspectively how they reached their conclusions and each of the sub-conclusions along the way because they must explain their logic to a cynical reader.
• The written author needs to support all conclusions with facts and logic to prove that they are not "making it up" or relying upon popular "myths."
• Outlined reports and outlined business plans are not generally subject to the same level of reader scrutiny.

We often hear about business plans in the context of early-stage companies , but constructing excellent business plans is difficult and time-consuming, so many entrepreneurs avoid them. That’s a mistake, as there is strong evidence demonstrating that business plans generate positive returns on time and money invested .

The business world has long debated the importance of business plans, and most involved understand the “soft” arguments. However, this article delves into the data to conclude that writing an excellent business plan is time well spent. I developed a similar view over my 20+ year financial career , during which I have analyzed well over 10,000 different types of companies. I have noticed that while a business plan may not be required for a venture to become successful, having one does seem to greatly improve the probability of successful outcomes.

Expert Opinions Support the Value of Business Planning

Expert opinions support the four following conclusions:

• Angels and venture capitalists value business plans and their financial models.

Individuals Who Write Business Plans Are 2.5x More Likely to Become Entrepreneurs

Many people have business ideas over the course of their careers, but often, these ideas never come to fruition, or they get lost amidst our daily obligations. Interestingly, studies support the notion that those who write business plans are far more likely to launch their companies. Data from the Panal Study of Entrepreneurial Dynamics in fact suggests that business planners were 2.5x as likely to get into business . The study, which surveyed more than 800 people across the United States who were in the process of starting businesses, therefore concluded that “writing a plan greatly increased the chances that a person would actually go into business.”

Of course, causation of this phenomenon is hard to pin down. There are several different possible reasons why this correlation between writing business plans and actually starting a business may exist. But William Gartner, Clemson University Entrepreneurship Professor and author of the Panal Study, believes that “‘research shows that business plans are all about walking the walk. People who write business plans also do more stuff.’ And doing more stuff, such as researching markets and preparing projections, increases the chances an entrepreneur will follow through.”

Research shows that business plans are all about walking the walk. People who write business plans also do more stuff. And doing more stuff, such as researching markets and preparing projections, increases the chances an entrepreneur will follow through.

William Bygrave, a professor emeritus at Babson College, reached a similar conclusion despite having previously shown “that entrepreneurs who began with formal plans had no greater success than those who started without them.” Bygrave does admit, however, that “40% of Babson students who have taken the college’s business plan writing course go on to start businesses after graduation, twice the rate of those who didn’t study plan writing.”

Business Planning Improves Corporate Executive Satisfaction

Another important way in which business plans can provide tangible help is by aligning everyone in an organization with the vision and strategy going forward. And this, in turn, has important ramifications on corporate executive satisfaction. A study by McKinsey & Company which surveyed nearly 800 corporate executives across a range of industries confirms this conclusion. In it, McKinsey found that “formal strategic-planning processes play an important role in improving overall satisfaction with strategy development. That role can be seen in the responses of the 79 percent of managers who claimed that the formal planning process played a significant role in developing strategies and were satisfied with the approach of their companies, compared with only 21 percent of the respondents who felt that the process did not play a significant role. Looked at another way, 51% of the respondents whose companies had no formal process were dissatisfied with their approach to the development of strategy, against only 20% of those at companies with a formal process.”

Of course, not all planning is equal. Planning just for the sake of planning doesn’t have the desired effects. As McKinsey itself noted in their study, “Just 45% of the respondents said they were satisfied with the strategic planning process. Moreover, only 23% indicated that major strategic decisions were made within its confines. Given these results, managers might well be tempted to jettison the planning process altogether.” As such, entrepreneurs and business managers should take the time and effort required to put together a well-written and well-researched business plan. Later in the article, I outline some of the elements of a well-written plan.

Business Plans and Their Financial Models Are Valuable to Angels and Venture Capitalists

Many entrepreneurs will eventually need to raise outside capital to grow and develop their businesses. In my experience, a business plan is a crucial tool in maximizing the chances of raising money from external investors. A well-written plan not only helps investors understand your business and your vision, but also shows them that you’ve taken the time to carefully assess and think through the issues your business will face, as well as the more detailed questions surrounding the economics and fundamentals of your business model.

Nathan Beckford, CFA, is the CEO of FounderSuite, the funding stack used by startups in Y Combinator, TechStars, 500s, and more to raise over $750 million. Nathan illustrates the above point nicely in an email he wrote to me recently: “Prior to starting Foundersuite.com, I ran a startup consulting business called VentureArchetypes.com. For the first few years, our primary business was cranking out bold, bullish, beautifully-written business plans for startups to present to investors. Around the mid-2000s, business plans started to go out of favor as the ‘Lean Startup’ methodology became popular. Instead of a written plan, we saw a huge uptick in demand for detailed financial models. Bottom line, I still see value in taking time to be contemplative and strategic before launching a startup. Does that need to be in the form of a 40-page written document? No. But if that’s the format that best works for you, and it can help you model scenarios and ‘see around the corner’ then that’s valuable.”

Nathan and I have frequently interacted, as I maintain a subscription to FounderSuite, software I use when running capital campaigns for early-stage companies on whose boards I sit, or when raising capital for my own firm’s investment projects. Nathan’s feedback is helpful, as he frequently interacts with thousands of entrepreneurs simultaneously running capital campaigns, providing him with a great perspective on which approaches work and which don’t. Clearly, he sees that financial models and business plans in some form help entrepreneurs raise capital.

Companies Who Complete Business Plans Are 2.5x as Likely to Get Funded

Following the section above, naturally, if business plans are useful to outside investors, these are therefore likely to also increase one’s chances of successfully raising capital. A study by Palo Alto Software confirms this hypothesis. The study showed that although 65% of entrepreneurs had NOT completed business plans, the ones who had were twice as likely to have secured funding for their businesses.

This study surveyed 2,877 entrepreneurs. Of those, 995 had completed business plans, with 297 of them (30%) having secured loans, 280 of them (28%) having secured investment capital, and 499 of them (50%) having grown their businesses. Contrast these percentages with the results for the 1,882 entrepreneurs who had not completed business plans, where just 222 of them (12%) had secured loans, 219 of them (12%) had secured investment capital, and 501 of them (27%) had grown their businesses. (Note that the percentages among the business plan population sum to over 100% because of some overlap between each of the sub-categories.) These results led the study authors to conclude that “Except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.”

Calculating the Return on Investment for Business Planning

The data and studies outlined above all serve to prove something that I have come to understand very clearly throughout my career. Nevertheless, I still often find that startups struggle with the idea of having to put together a business plan, and in particular with the option of hiring an outside professional to help them do that. As such, I quantified the ROI of such an activity, using data and numbers based on my many years of business consulting. The results of the exercise are summarized in the table at the end of the section, but there are two overarching conclusions:

• Even a small-scale early-stage company can “afford” to pay a finance expert $191 per hour both to create a business plan and to guide the capital raising process, at worst “breaking even” on the investment.
• Larger early-stage companies can expect significant returns on investments in business planning, perhaps as much as 6,700% (67x the amount of money invested).

Diving into the analysis, my inputs included:

• My professional experience with writing business plans. I have spent 25 - 200 hours apiece creating business plans I feel comfortable sharing with founders, advisors, and investors.
• Data from the Palo Alto study discussed earlier in this article. This study showed that 30% of early-stage ventures with business plans had secured funding, 2.5x as great as the 12% of early-stage ventures without business plans who managed to secure funding despite the absence of such plans.
• The hourly rate for a finance expert x (150 to 200 hours) for one round of financing, OR
• 10% of the amount of capital targeted

My analysis illustrates the following:

• Early-stage companies should expect to spend $4,000 - $40,000 on business planning, including the financial modeling associated with it.
• Early-stage companies should expect to spend $30,000 - $200,000 for an initial round of financing between $250,000 and $2 million in size, resulting in net financing of $200,000 - $1.8 million.
• Even if a small-scale early-stage venture seeking just $250,000 in capital spent almost $40,000 on business planning and another almost $40,000 on capital raising, it should still expect to “break even” on a probability-weighted basis. In other words, because the odds of success with a professional business plan are 2.5x greater than without one, small-scale early-stage ventures can justify such a significant investment. This also assumes NO additional odds for success from engaging a professional to coordinate the fundraising effort. I suspect that doing so may push the odds of success from 12% without a business plan and 30% with a business plan to above 50%. It is also likely that a smaller-scale venture may require significantly fewer hours for business planning and capital raising that what is outlined in the “worst case” below.
• Larger early-stage ventures enjoy extraordinary probability-weighted returns on investment from business planning. Because the target net capital so greatly exceeds the money spent on business planning, the prospective ROI is huge, and this analysis just assumes ONE round of equity financing. Most successful startups will experience several rounds of financing.

Thoughts on Writing an Excellent Business Plan

An extensive overview of how to write an excellent business plan is beyond the scope of this article. However, here are two key thoughts that have emerged from my years of experience with startups.

First, there are four common elements to an excellent business plan. In Alan Hall’s Forbes article, “ How to Build a Billion Dollar Business Plan: 10 Top Points ,” he interviews Thomas Harrison, Chairman of Diversified Agency Services, an Omnicom division that has purchased “a vast number of firms,” to share his views on the key elements of a great business plan. Although each of these ten elements is essential, I reorganized the list into four broad categories:

1. Company Overview

• An explanation of why your company is relevant and the need are you addressing
• A description of corporate priorities and the processes to achieve them.
• An overview of the various resources, including the people that will be needed, to deliver what’s expected by the customer.

2. Market Overview

• A description of the state of your market and its important trends.
• A detailed description of your customers.
• A description of your current competitors and their advantages. Which ones will you displace?

3. Product/Service Overview

• A description of your products, how they compete with other brands, and why they are needed.
• An explanation of why customers will pay a fair economic value for your product or service. This element is conspicuously absent from some of today’s most expensive unicorns. Companies such as Uber and Tesla are losing massive amounts of money on rapidly growing sales because these companies may not be selling their services/products for fair economic value. Of course, sales grow rapidly when customers can buy your services/products for far less than their fair economic values!

4. Financial Projections

• Conservative
• Each scenario should have realistic and achievable sales, margins, expenses, and profits on monthly, quarterly, and annual bases. Again, these elements appear to be conspicuously absent from some of today’s most expensive unicorns.

Second, written business plans are superior to those just “outlined.” As an adjunct professor of finance for Villanova University, I require my students to write research reports prior to developing slide decks to present their findings from a full semester of industry research. The process of writing forces the authors to ask themselves how they reached their conclusions and each of the sub-conclusions along the way because they must explain their logic to cynical readers. The written authors need to support their conclusions with facts and logic to prove that they are not “making it up” or relying upon popular “myths.” Outlined reports and outlined business plans are not generally subject to the same level of reader scrutiny. Therefore, written business plans are superior to those just “outlined.” Outlined plans are often kept on 10-12 slide decks, and the slide deck is an important tool in the capital raising process, but the written business plan that stands behind it will differentiate an entrepreneur from their seemingly infinite competition.

Parting Thoughts

Some argue that many public multi-billion-dollar companies such as Apple or Google never had formal business plans before they started, but this argument is flawed because most of these companies likely developed business plans either during the solicitation of venture capital or during the process of going public. Apple and Google were both funded with venture capital, and soliciting venture capital involves business planning. The founders of Apple and Google likely created financial projections and outlined strategic paths.

Moreover, Apple and Google are both public companies, and going public involves business planning. Underwriters employ research analysts creating financial forecasts based on business plans projected by management at the companies going public. Buy-side firms purchasing and holding shares in newly public companies create forecasts based upon the business plans projected by public company management teams.

Admittedly, you don’t need a written business plan to have a successful company. You may not even need a business plan at all to have a successful company. However, the probability of success without a business plan is much lower. Angels and venture capitalists like to know about your business plan, and public companies need to project business plans to persuade underwriters and investors to purchase their securities.

Further Reading on the Toptal Blog:

• Creating a Narrative from Numbers
• Business Plan Consultants: Who They Are and How They Create Value
• Building a Business Continuity Plan
• Building the Next Big Thing: A Guide to Business Idea Development
• Mission Statements: How Effectively Used Intangible Assets Create Corporate Value

Understanding the basics

Why it is important to have a business plan.

Expert opinions and numerous studies show that business plans improve corporate satisfaction, are useful for angel investors and venture capitalists, and increase a company’s chances of raising capital by 2.5x.

What are the benefits of a business plan?

Individuals who write business plans are 2.5x as likely to start businesses. Moreover, business planning improves corporate executive satisfaction with corporate strategy development. Finally, investors value business plans, making the chances of raising capital 2.5x greater.

What does an investor look for in a business plan?

The four key sections of a business plan are: the company overview, a market overview, your product/service overview, and the financial projections.

• BusinessPlan

Sean Heberling

Bryn Mawr, PA, United States

Member since October 18, 2017

About the author

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Do you REALLY need a business plan?

The top three questions that I get asked most frequently as a professional business plan writer will probably not surprise you:

• What is the purpose of a business plan – why is it really required?
• How is it going to benefit my business if I write a business plan?
• Is a business plan really that important – how can I actually use it?

Keep reading to get my take on what the most essential advantages of preparing a business plan are—and why you may (not) need to prepare one.

The importance, purpose and benefit of a business plan is in that it enables you to validate a business idea, secure funding, set strategic goals – and then take organized action on those goals by making decisions, managing resources, risk and change, while effectively communicating with stakeholders.

Let’s take a closer look at how each of the important business planning benefits can catapult your business forward:

1. Validate Your Business Idea

The process of writing your business plan will force you to ask the difficult questions about the major components of your business, including:

• External: industry, target market of prospective customers, competitive landscape
• Internal: business model, unique selling proposition, operations, marketing, finance

Business planning connects the dots to draw a big picture of the entire business.

And imagine how much time and money you would save if working through a business plan revealed that your business idea is untenable. You would be surprised how often that happens – an idea that once sounded so very promising may easily fall apart after you actually write down all the facts, details and numbers.

While you may be tempted to jump directly into start-up mode, writing a business plan is an essential first step to check the feasibility of a business before investing too much time and money into it. Business plans help to confirm that the idea you are so passionate and convinced about is solid from business point of view.

Take the time to do the necessary research and work through a proper business plan. The more you know, the higher the likelihood that your business will succeed.

2. Set and Track Goals

Successful businesses are dynamic and continuously evolve. And so are good business plans that allow you to:

• Priorities: Regularly set goals, targets (e.g., sales revenues reached), milestones (e.g. number of employees hired), performance indicators and metrics for short, mid and long term
• Accountability: Track your progress toward goals and benchmarks
• Course-correction: make changes to your business as you learn more about your market and what works and what does not
• Mission: Refer to a clear set of values to help steer your business through any times of trouble

Essentially, business plan is a blueprint and an important strategic tool that keeps you focused, motivated and accountable to keep your business on track. When used properly and consulted regularly, it can help you measure and manage what you are working so hard to create – your long-term vision.

As humans, we work better when we have clear goals we can work towards. The everyday business hustle makes it challenging to keep an eye on the strategic priorities. The business planning process serves as a useful reminder.

3. Take Action

A business plan is also a plan of action . At its core, your plan identifies where you are now, where you want your business to go, and how you will get there.

Planning out exactly how you are going to turn your vision into a successful business is perhaps the most important step between an idea and reality. Success comes not only from having a vision but working towards that vision in a systematic and organized way.

A good business plan clearly outlines specific steps necessary to turn the business objectives into reality. Think of it as a roadmap to success. The strategy and tactics need to be in alignment to make sure that your day-to-day activities lead to the achievement of your business goals.

4. Manage Resources

A business plan also provides insight on how resources required for achieving your business goals will be structured and allocated according to their strategic priority. For example:

Large Spending Decisions

• Assets: When and in what amount will the business commit resources to buy/lease new assets, such as computers or vehicles.
• Human Resources: Objectives for hiring new employees, including not only their pay but how they will help the business grow and flourish.
• Business Space: Information on costs of renting/buying space for offices, retail, manufacturing or other operations, for example when expanding to a new location.

Cash Flow It is essential that a business carefully plans and manages cash flows to ensure that there are optimal levels of cash in the bank at all times and avoid situations where the business could run out of cash and could not afford to pay its bills.

Revenues v. Expenses In addition, your business plan will compare your revenue forecasts to the budgeted costs to make sure that your financials are healthy and the business is set up for success.

5. Make Decisions

Whether you are starting a small business or expanding an existing one, a business plan is an important tool to help guide your decisions:

Sound decisions Gathering information for the business plan boosts your knowledge across many important areas of the business:

• Industry, market, customers and competitors
• Financial projections (e.g., revenue, expenses, assets, cash flow)
• Operations, technology and logistics
• Human resources (management and staff)
• Creating value for your customer through products and services

Decision-making skills The business planning process involves thorough research and critical thinking about many intertwined and complex business issues. As a result, it solidifies the decision-making skills of the business owner and builds a solid foundation for strategic planning , prioritization and sound decision making in your business. The more you understand, the better your decisions will be.

Planning Thorough planning allows you to determine the answer to some of the most critical business decisions ahead of time , prepare for anticipate problems before they arise, and ensure that any tactical solutions are in line with the overall strategy and goals.

If you do not take time to plan, you risk becoming overwhelmed by countless options and conflicting directions because you are not unclear about the mission , vision and strategy for your business.

6. Manage Risk

Some level of uncertainty is inherent in every business, but there is a lot you can do to reduce and manage the risk, starting with a business plan to uncover your weak spots.

You will need to take a realistic and pragmatic look at the hard facts and identify:

• Major risks , challenges and obstacles that you can expect on the way – so you can prepare to deal with them.
• Weaknesses in your business idea, business model and strategy – so you can fix them.
• Critical mistakes before they arise – so you can avoid them.

Essentially, the business plan is your safety net . Naturally, business plan cannot entirely eliminate risk, but it can significantly reduce it and prepare you for any challenges you may encounter.

7. Communicate Internally

Attract talent For a business to succeed, attracting talented workers and partners is of vital importance.

A business plan can be used as a communication tool to attract the right talent at all levels, from skilled staff to executive management, to work for your business by explaining the direction and growth potential of the business in a presentable format.

Align performance Sharing your business plan with all team members helps to ensure that everyone is on the same page when it comes to the long-term vision and strategy.

You need their buy-in from the beginning, because aligning your team with your priorities will increase the efficiency of your business as everyone is working towards a common goal .

If everyone on your team understands that their piece of work matters and how it fits into the big picture, they are more invested in achieving the objectives of the business.

It also makes it easier to track and communicate on your progress.

Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

8. Communicate Externally

Alliances If you are interested in partnerships or joint ventures, you may share selected sections of your plan with the potential business partners in order to develop new alliances.

Suppliers A business plan can play a part in attracting reliable suppliers and getting approved for business credit from suppliers. Suppliers who feel confident that your business will succeed (e.g., sales projections) will be much more likely to extend credit.

In addition, suppliers may want to ensure their products are being represented in the right way .

Professional Services Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, including attorneys, accountants, and other professional consultants as needed, to make sure that everyone is on the same page.

Advisors Share the plan with experts and professionals who are in a position to give you valuable advice.

Landlord Some landlords and property managers require businesses to submit a business plan to be considered for a lease to prove that your business will have sufficient cash flows to pay the rent.

Customers The business plan may also function as a prospectus for potential customers, especially when it comes to large corporate accounts and exclusive customer relationships.

9. Secure Funding

If you intend to seek outside financing for your business, you are likely going to need a business plan.

Whether you are seeking debt financing (e.g. loan or credit line) from a lender (e.g., bank or financial institution) or equity capital financing from investors (e.g., venture or angel capital), a business plan can make the difference between whether or not – and how much – someone decides to invest.

Investors and financiers are always looking at the risk of default and the earning potential based on facts and figures. Understandably, anyone who is interested in supporting your business will want to check that you know what you are doing, that their money is in good hands, and that the venture is viable in the long run.

Business plans tend to be the most effective ways of proving that. A presentation may pique their interest , but they will most probably request a well-written document they can study in detail before they will be prepared to make any financial commitment.

That is why a business plan can often be the single most important document you can present to potential investors/financiers that will provide the structure and confidence that they need to make decisions about funding and supporting your company.

Be prepared to have your business plan scrutinized . Investors and financiers will conduct extensive checks and analyses to be certain that what is written in your business plan faithful representation of the truth.

10. Grow and Change

It is a very common misconception that a business plan is a static document that a new business prepares once in the start-up phase and then happily forgets about.

But businesses are not static. And neither are business plans. The business plan for any business will change over time as the company evolves and expands .

In the growth phase, an updated business plan is particularly useful for:

Raising additional capital for expansion

• Seeking financing for new assets , such as equipment or property
• Securing financing to support steady cash flows (e.g., seasonality, market downturns, timing of sale/purchase invoices)
• Forecasting to allocate resources according to strategic priority and operational needs
• Valuation (e.g., mergers & acquisitions, tax issues, transactions related to divorce, inheritance, estate planning)

Keeping the business plan updated gives established businesses better chance of getting the money they need to grow or even keep operating.

Business plan is also an excellent tool for planning an exit as it would include the strategy and timelines for a transfer to new ownership or dissolution of the company.

Also, if you ever make the decision to sell your business or position yourself for a merger or an acquisition , a strong business plan in hand is going to help you to maximize the business valuation.

Valuation is the process of establishing the worth of a business by a valuation expert who will draw on professional experience as well as a business plan that will outline what you have, what it’s worth now and how much will it likely produce in the future.

Your business is likely to be worth more to a buyer if they clearly understand your business model, your market, your assets and your overall potential to grow and scale .

Related Questions

Business plan purpose: what is the purpose of a business plan.

The purpose of a business plan is to articulate a strategy for starting a new business or growing an existing one by identifying where the business is going and how it will get there to test the viability of a business idea and maximize the chances of securing funding and achieving business goals and success.

Business Plan Benefits: What are the benefits of a business plan?

A business plan benefits businesses by serving as a strategic tool outlining the steps and resources required to achieve goals and make business ideas succeed, as well as a communication tool allowing businesses to articulate their strategy to stakeholders that support the business.

Business Plan Importance: Why is business plan important?

The importance of a business plan lies in it being a roadmap that guides the decisions of a business on the road to success, providing clarity on all aspects of its operations. This blueprint outlines the goals of the business and what exactly is needed to achieve them through effective management.

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The Importance Of Business Planning: A Beginner’s Guide

by Mike Vestil  

Business planning is the process of determining the goals and objectives of a business and developing a roadmap to achieve them.

It involves the analysis of current and future market conditions, operational capabilities, financial resources, and other factors that impact business success.

Effective business planning helps entrepreneurs and organizations navigate the complexities of the market and make strategic decisions that increase profitability and longevity.

Whether you are starting a new business or looking to expand an existing one, a well-crafted business plan is critical to your success.

In this article, we will explore the key components of business planning and provide insights on how to create a plan that meets your specific needs.

Introduction To Business Planning

What is business planning.

A business plan can be described as a document that outlines and describes the goals of a business and the strategies that will be employed to achieve these goals.

It typically includes detailed information about the company, such as the products, services, and customers that it intends to target, as well as an analysis of the market and the competition.

A business plan also describes the financial projections and resources needed to achieve these goals, such as the amount of money that will be invested, the sales projections, and the operational costs.

The purpose of a business plan is to provide a roadmap for the business owner and all stakeholders, including investors, employees, and management teams.

The importance of a business plan cannot be overstated as it serves as a guide to identify and address potential challenges that a business owner may encounter along the way.

Starting and running a business can be a daunting task, but having a well-crafted business plan can help alleviate some of the stress associated with the unknowns of business ownership.

A business plan helps to define and communicate the vision of the business, which can be invaluable to gaining traction with potential investors or partners who can assist in the growth and development of the company.

It also serves as a tool for measuring success as it provides specific goals and objectives that can be compared to actual results.

In conclusion, a well-written business plan is essential to the overall success of a business.

It provides a clear road map of what the business hopes to achieve and how it intends to do so. It serves as a guide for all stakeholders and helps to communicate the vision of the business to potential investors, employees, and partners.

Ultimately, a business plan helps to mitigate potential risks and set the business up for success.

Importance Of Business Planning

Business planning is an essential activity that every organization must engage in irrespective of its nature or size. It helps organizations in setting goals, staying focused, and measuring progress.

There are several reasons why business planning is of great importance, such as guiding decision-making, allocating resources, and identifying potential risks and opportunities.

First and foremost, business planning helps organizations in setting realistic goals and determining the best strategies to achieve them. It provides a roadmap for the future that enables executives and managers to make informed decisions based on available data and market trends.

Additionally, business planning is a critical tool for allocating resources and ensuring that they are used efficiently.

By analyzing financial data and identifying areas of potential wastage, organizations can reduce costs and increase profitability.

Furthermore, business planning is an effective means of identifying potential risks and opportunities that an organization may face.

By conducting a thorough analysis of internal and external factors that may impact the business, organizations can develop contingency plans to mitigate risks and capitalize on opportunities.

Another essential aspect of business planning is that it enables organizations to monitor and measure their progress.

Through the use of key performance indicators (KPIs), organizations can track their performance against set objectives and make adjustments where necessary.

This helps to ensure that the organization is on track towards achieving its goals and that everyone within the organization is working towards the same objectives.

Moreover, business planning is a critical tool for securing external funding. Investors and lenders are more likely to invest in organizations that have a well-defined strategy and a clear understanding of their market and industry.

In conclusion, business planning is a critical activity for any organization that wants to thrive in a competitive marketplace.

It provides a framework for decision-making, resource allocation, risk management, and measuring progress. Without a solid business plan, organizations are likely to struggle to achieve their goals, make efficient use of their resources, and identify potential risks and opportunities.

Therefore, it is crucial for organizations to invest time and resources into developing a comprehensive and realistic business plan that reflects their unique strengths, weaknesses, and objectives.

Purpose Of Business Planning

Business planning is a critical aspect of establishing a successful business. The purpose of business planning is to outline the objectives, strategies, and steps necessary to achieve those objectives.

This process involves creating a roadmap for the future of the business, identifying potential obstacles and opportunities, and developing tactics to overcome or leverage them.

Business planning is essential for potential investors, as it provides an overview of the company’s goals and how they plan to achieve them. It also allows for more effective decision-making, as it provides a framework for assessing whether or not certain decisions align with the company’s overall goals.

Similarly, business planning is critical for internal stakeholders, as it helps to establish a shared vision and objective for the company, as well as the roadmap for achieving it.

Ultimately, business planning is a vital tool for any business owner or entrepreneur looking to establish a thriving enterprise in today’s complex and competitive market.

Key Elements Of Business Planning

Executive summary.

The executive summary is a critical component of any business plan, providing a concise yet comprehensive summary of the key elements of the plan.

It should provide a clear and compelling overview of the business, highlighting its unique value proposition, target market, competitive advantages, and key strategies for success.

Key financial projections should also be included, providing investors and other stakeholders with a clear understanding of the anticipated risks and rewards associated with the venture.

The executive summary should be written in a clear and concise manner, using language that is both easy to understand and engaging to the reader.

It should be designed to capture the attention of potential investors, lenders, or other stakeholders, providing them with a clear understanding of the business and its potential for success.

Market Analysis Of Business Planning

The Market Analysis section of a business plan is a crucial component that provides a thorough analysis of the target market, industry trends, competition, and customer base.

This subsection should focus on the target market’s size, demographics, and psychographics, including their purchasing habits, preferences, and behaviors.

The assessment of industry trends involves investigating the direction of the market, identifying opportunities, and assessing the impact of external factors such as economic conditions and government regulations.

The section on competition analysis must provide a detailed analysis of direct and indirect competitors, including their strengths, weaknesses, and market share.

This information can be obtained through the use of surveys, online research, and networking. The subsection should also assess the customer base, including market segmentation, potential growth, and loyalty.

Moreover, the subsection should include a SWOT analysis that examines the strengths, weaknesses, opportunities, and threats of the company.

The analysis should focus on the potential challenges faced by the company as well as the opportunities that can be leveraged to achieve success.

This analysis provides an insight into the company’s competitive position and helps identify areas where the company can improve.

Overall, the Market Analysis section is critical for any business plan as it provides a well-rounded understanding of the target market, industry trends, and competitive landscape.

The information provided in this section can be used to develop a sound business strategy and make informed decisions that drive the company’s success.

Company Description Of A Business Plan

The Company Description subsection of a business plan provides an overview of the company and its history, current status, and future prospects.

It should detail what the company does, what sets it apart from competitors, and how it intends to achieve success. A well-crafted company description should also communicate the company’s core values, mission statement, and vision for the future.

It is important to include any relevant company history and milestones as well as any notable achievements, partnerships, or industry awards.

Additionally, a clear explanation of the management team’s experience and qualifications, including their education, certifications, and industry experience, is essential to demonstrate the company’s capacity to succeed.

Furthermore, the products or services offered by the company and how they meet the needs and desires of customers should also be emphasized.

Overall, a concise and compelling company description sets the foundation for the rest of the business plan and conveys a sense of confidence and expertise to potential investors and stakeholders.

Organization And Management

The Organization and Management subsection is crucial in any business plan as it highlights the structure, roles, and responsibilities of the key personnel who will be at the helm of the organization.

The success of any business is largely dependent on the capabilities of the people managing it.

Therefore, it is essential to outline the experience and expertise of each member of the management team. This subsection should also provide clear information on the ownership structure of the organization, including the distribution of shares or ownership percentages.

It is important to highlight any legal or regulatory requirements that the management needs to fulfill to operate the business effectively.

Additionally, the subsection should explain the key operational and administrative functions, as well as any external professional services that will be necessary to ensure the smooth running of the business.

Service Or Product Line

Service or Product Line is a crucial section of a business plan that outlines the products or services a company intends to offer.

This section must describe the key attributes of the product or service, including its unique features, the target market, and what sets it apart from competitors.

Additionally, this section must touch on the production process and costs, as well as the pricing strategy the company will use to ensure that the product or service is profitable.

A successful business plan must ensure that its offerings add value to the target market and adapt accordingly by conducting market research, understanding the competition, and leveraging innovation to create new and improved products.

Marketing And Sales Of A Business Plan

The Marketing and Sales subsection of a business planning document is designed to outline the strategies that will be used to promote and sell a company’s product or service.

This section should include a market analysis and an explanation of how the company plans to differentiate itself from competitors. The marketing plan should identify target customers, their needs, and the benefits that the product or service will provide.

The sales plan should identify the distribution channels that will be used, as well as the pricing model and the sales team structure.

Additionally, this section should identify any marketing and sales metrics that will be used to measure success, such as conversion rates and lead generation.

It is crucial for companies to have a comprehensive marketing and sales plan in place to ensure that they are able to effectively reach their target audience and drive revenue growth.

Funding Request Of A Business Plan

The Funding Request subsection of a business plan is where the entrepreneur explains their financial needs to potential investors or lenders. This section starts with the amount of money required and how it will be utilized, such as for inventory, facilities, or equipment.

The business owner must provide an accurate estimate of the total costs involved, including monthly expenses and projected revenues.

It is also essential to explain how the funding request will affect the company’s financial position and how it will help achieve the specified goals.

Sometimes, entrepreneurs may need to explain their willingness to give up a portion of their company’s ownership to secure financing.

The funding request should be provided with detailed financial statements and projections to support the proposal.

Moreover, entrepreneurs should also specify the repayment schedule and interest rates if they are looking for loans.

The objective is to persuade potential investors or lenders that the proposed investment is feasible, and the revenue from the company is likely to provide a satisfactory return on investment within an acceptable time frame.

A well-written and researched funding request inspires confidence in potential investors or lenders and increases the entrepreneur’s chance of securing the necessary funds.

Importance Of Financial Projections In Business Plan

The subsection Financial Projections is a crucial aspect of any business plan. It entails forecasting the financial outcomes of the proposed business operations.

Financial projections encompass several critical elements, including income statements, cash flow statements, and balance sheets.

Accurately projecting financial outcomes is vital for securing funding from investors and financial institutions.

Furthermore, it is a critical tool for managing resources, making critical financial decisions, and monitoring day-to-day financial activities.

When preparing financial projections, it is essential to consider various factors that might influence the outcomes, such as market trends, competition, industry regulations, and other economic indicators.

One critical element that should not be overlooked is setting realistic goals and timelines for achieving the forecasted outcomes.

Additionally, it is essential to prepare alternative scenarios to gauge the impact of unforeseen events on the business’s financial health.

Overall, the Financial Projection subsection provides insights into the potential financial performance of the business and enables entrepreneurs to develop a well-informed roadmap for success.

Appendix Section In A Business Plan

The Appendix section is an optional section that can be included in a business plan. This section provides space to include any additional information that investors or lenders may find useful in evaluating the business plan.

The Appendix can be used to include resumes of key personnel, product or service brochures, legal documents, and any other relevant information that supports the business plan.

It is important to remember that the Appendix should not be used to include information that should be in other sections, but rather to include supplementary information that adds value to the overall plan.

Steps In Business Planning

Step 1: research and analysis.

A crucial step in creating a successful business plan is conducting thorough research and analysis. This step involves collecting and analyzing relevant data from various sources, such as industry reports, customer surveys, and competitor analysis.

The purpose of this research is to gain a deep understanding of the market, identify potential customers, and evaluate market trends and changes.

Analyzing the data collected enables entrepreneurs to identify opportunities and potential threats that their business may face.

Additionally, this step involves evaluating the resources required to establish and run the business, including understanding the costs associated with acquiring and retaining customers, product development, and distribution.

One of the essential factors to consider during the research and analysis stage is the target market. It is important to identify the audience who would be interested in the product or service offered by the business.

Identifying the target market helps entrepreneurs to evaluate the size of the market, the preferences of their potential customers, and the most effective marketing strategies.

Moreover, research provides entrepreneurs with an understanding of customer spending habits and the overall demand for the product.

This knowledge enables entrepreneurs to tailor their business plan to meet the needs of the target market and increase the likelihood of success.

Another critical aspect of the research and analysis stage is evaluating the competition. An analysis of the existing businesses in the industry helps entrepreneurs identify potential rivals.

It also provides insights into the strengths and weaknesses of competitors, their marketing strategies, and the types of products or services they offer.

This information empowers entrepreneurs to develop unique value propositions and competitive advantages that will differentiate their business from others in the market.In summary, research and analysis are the foundation of a successful business plan.

It provides entrepreneurs with a clear understanding of the market, target audience, and competition.

This information enables entrepreneurs to create a comprehensive plan that outlines the steps required to establish and run a profitable business.

Conducting thorough research and analysis is essential to increase the chances of success and minimize the risks associated with starting a new business.

Step 2: Develop A Strategic Plan

The second step in the business planning process is to develop a strategic plan. This is a critical step that involves identifying goals and objectives for the company, as well as the strategies and tactics that will be used to achieve them.

A strategic plan should include a detailed analysis of the company’s strengths, weaknesses, opportunities, and threats. This information can be obtained through market research, customer surveys, and other methods.

Once this analysis is complete, the company can begin to develop a plan for achieving its goals. This should include a detailed description of the company’s products or services, its target market, and its competitors.

It should also include a plan for marketing and sales, as well as financial projections for the next few years.

An important component of the strategic plan is the identification of key performance indicators (KPIs) that will be used to measure the success of the plan.

These KPIs should be specific and measurable, and should be reviewed regularly to ensure that the plan is on track.

The strategic plan should also consider the company’s resources, including its human capital, financial resources, and technological infrastructure. It should identify any gaps in these resources and make recommendations for how they can be filled.

Ultimately, the strategic plan should be a living document that is reviewed and updated regularly. As the company grows and changes, the plan should be adjusted accordingly to ensure that it remains relevant and effective.

Step 3: Create A Business Plan

Step 4: implement the plan.

The actual implementation of a business plan involves executing each step of the strategy. The effectiveness of the plan heavily relies on the satisfaction of the plan’s objectives, the use of realistic timelines, and the deployment of adequate resources.

The business’ management will need to generate functional plans to ensure that resources are allocated optimally. Timelines must also be established for every step of the process to monitor progress and adjust the plan if necessary.

Good communication with all stakeholders is essential to successful implementation. The plan must be communicated to all employees, contractors, and vendors.

The resources, including personnel and funding, must be aligned with the plan. Efficient coordination is necessary to ensure that everyone is working towards the same end goal.

Performance measurement is crucial, as adjustment to the plan may be necessary to achieve the intended outcomes.

Technology and software may also be necessary in executing specific strategies, which should be included in the plan.

Addressing challenges and roadblocks along the way may also require flexible thinking and adapting the plan accordingly.

Therefore, the process of implementing a business plan involves evaluating the plan’s success and adaption of the plan to current business operations.

By successfully implementing the plan, the business can achieve its desired outcome and ultimately achieve its end goal.

Step 5: Monitor And Review

After implementing a business plan, monitoring and reviewing are crucial steps to ensure success. This stage is vital because it allows a business owner to determine if their strategies are working effectively or if changes need to be made.

It is an opportunity to observe the strengths and weaknesses of a business, discover any financial or operational problems, and measure progress toward established goals.

Monitoring includes tracking financial performance, sales figures, production levels, and customer satisfaction rates.

Reviewing involves analyzing the data gathered from monitoring activities and implementing changes to improve the business.

Monitoring and reviewing also help with business planning, providing entrepreneurs with a basis for decision-making.

Ongoing tracking and analysis can identify potential areas of growth, new opportunities, and potential risks.

Keeping current with industry trends, competitive analysis, and customer feedback can be included in the monitoring and review process.

By identifying and addressing challenges, a business can stay ahead of the competition and improve operations, products, and services.

Regular reviews act as a preventative measure for changes in the market or industry. Real-time optimization can be applied to marketing campaigns, cost structures, sales techniques, and more.

By consistently monitoring and reviewing, a business owner can take immediate corrective action instead of waiting until it’s too late.

Additionally, reviewing allows for continual improvement by providing insight into potential opportunities for growth and increased profitability.

A monitoring and review system should be established as part of the overall plan. This should include setting benchmarks and metrics, as well as scheduling regular reviews of progress toward established goals.

Once the system is in place, the focus should shift towards utilizing data gathered from monitoring and review activities.

This data should be analyzed, identifying areas that require changes and taking action to implement those changes.

In conclusion, monitoring and reviewing are important elements to ensure the continued success of a business.

Through monitoring and reviewing activities, entrepreneurs can gain a better understanding of their business operations and optimize accordingly.

By utilizing data and implementing changes, businesses can ensure long-term profitability and sustainable growth.

Types Of Business Plans

Startup business plan.

A startup business plan is an essential document that outlines the road map for a new business venture.

It is a comprehensive document that typically includes an executive summary, market analysis, company description, product or service offerings, marketing and sales strategies, financials, and a timeline.

The purpose of the business plan is to help entrepreneurs map out their goals and objectives, identify potential roadblocks, and develop strategies to overcome them.

By creating a startup business plan, entrepreneurs can gain a better understanding of their customers, competitors, and market trends.

In addition, they can use the plan to secure funding from investors or financial institutions, to communicate their vision to potential employees, and to develop a clear and concise strategy for scaling the business.

A well-crafted startup business plan is a crucial component of launching a successful new business venture.

Internal Business Plan

The Internal Business Plan is a critical component of the overall business plan. It outlines the internal strategies and tactics that a company will use to achieve its objectives.

This plan is developed by the management team and guides the day-to-day operations of the company. The Internal Business Plan addresses the company’s marketing, operations, financial, and human resources objectives.

A key part of the plan is developing a clear understanding of the company’s competitive advantage and how it will use this advantage to successfully compete within the marketplace.

The Internal Business Plan is also used to assess the company’s progress toward its goals and to make adjustments to the plan as needed.

This plan is different from the Strategic Business Plan which addresses the direction and overall vision of the company, while the Internal Business Plan is focused on the day-to-day operations.

A successful Internal Business Plan is critical to any start-up business as it provides a roadmap for the company to follow and helps create a culture of accountability and focus on achieving the company’s objectives.

Strategic Business Plan

A strategic business plan is a vital component of any successful business. It outlines a company’s overall direction, goals, and objectives over the long term.

A strategic business plan is not just a document, but rather a roadmap that guides a company’s decision-making processes.

It involves conducting a thorough analysis of a company’s market, competition, resources, and capabilities to create a unique value proposition.

The strategic business plan enables a company to position itself in the market and differentiate itself from competitors. The plan should also outline specific actions that need to be taken to achieve the desired objectives.

The strategic business plan typically includes the mission statement, which defines the company’s purpose, values, and culture.

It should also identify the target market and customer segments, as well as the channels and strategies used to reach them.

The plan should also analyze the competitive landscape, identifying strengths, weaknesses, opportunities, and threats (SWOT) to the business.

One of the critical components of a strategic business plan is setting clear and measurable goals and objectives over the long term.

These should be specific, measurable, achievable, relevant, and time-bound (SMART). The goals and objectives should align with the company’s mission statement and vision, and support the overall strategy.

The strategic plan should also outline the tactics and actions that will be taken to achieve these goals, as well as the timeline and resources required.

Another important element of a strategic business plan is the financial plan. This should include a detailed budget, sales forecast, cost of goods sold, cash flow projection, and profit and loss statement.

The financial plan should also consider contingencies and risk management strategies.

A well-executed strategic business plan can significantly benefit a company’s growth and success.

It provides a clear roadmap for decision-making, enabling a company to make informed and strategic choices.

It also helps to align all stakeholders around a common vision and direction, which can improve employee engagement and motivation.

Finally, a strategic business plan enhances a company’s credibility and reputation, which can attract investors, customers, and partners.

Operations Business Plan

The Operations Business Plan is a crucial component of any business plan, as it details the necessary steps to achieve operational efficiency and success.

This subsection focuses on the day-to-day running of the business, outlining the processes and procedures that will be followed, including production, logistics, inventory management, customer service, and more.

A well-crafted Operations Business Plan should provide clear guidance on how the company will meet its goals, reduce costs, and optimize processes.

One of the key elements of an Operations Business Plan is the production plan, which outlines the processes and resources needed to manufacture products or deliver services to customers.

This plan should include production schedules, quality control measures, and contingency plans in case of unexpected delays or problems.

Additionally, inventory management is crucial to ensure that the business has the appropriate amount of goods on hand, minimizing waste and avoiding shortages.

Another important aspect of an Operations Business Plan is logistics, covering the transport of goods and services from the company to the customers.

Logistics might include shipping, delivery, or other transportation-related activities that can affect the efficiency and effectiveness of the business.

Customer service is also a critical component, ensuring that customers feel valued and satisfied with their interactions with the company.

Efficient operation requires effective management, and an Operations Business Plan should outline the organizational structure of the company, including roles and responsibilities of staff members.

Clear communication and collaboration among team members are essential to ensuring that the business runs smoothly and effectively.

Overall, a well-conceived Operations Business Plan is a fundamental component of an effective business plan.

By addressing the day-to-day operations and processes needed for a business to function, this plan helps ensure that the company can operate effectively, minimize waste, and achieve its goals.

Feasibility Business Plan

One of the most critical components of a successful business launch is creating a feasibility business plan.

This type of plan focuses on determining whether a business idea is practical and worth pursuing.

At its core, a feasibility plan looks at the market demand for a product or service, analyzes the competition, examines potential revenue streams, and evaluates the resources required to bring the idea to fruition.

The plan should also outline the risks and challenges associated with the business, as well as any legal and regulatory considerations that may impact its viability.

During the feasibility analysis, entrepreneurs should identify their target audience and understand their behavior and needs.

This analysis is crucial in determining the market demand for the product or service. At the same time, businesses must determine how they will differentiate themselves from the competition.

It’s important to analyze your competition’s strengths and weaknesses, identify opportunities, and determine how to leverage them to create a competitive advantage.

Another critical aspect of the feasibility analysis is identifying potential revenue streams. Businesses need to consider the various ways they can generate income and determine which ones are the most viable.

They should also consider potential expenses, such as marketing and advertising, rent, utilities, and employee salaries.

Once revenue and expenses have been identified, businesses can create financial projections to determine their profitability and whether their business idea is economically sound.

Resource allocation is another essential consideration in a feasibility business plan. Entrepreneurs need to determine what resources they will require to launch and sustain their business.

This includes financial resources, such as startup capital and ongoing funding, as well as human resources, such as employees and contractors.

Businesses must also consider the resources required for production, such as equipment, raw materials, and supplies.

Finally, it’s essential to identify and understand the risks and challenges associated with launching and running a business.

This includes legal and regulatory concerns, such as permits and licenses, as well as other challenges, such as technological advancements or changes in the market.

By identifying and evaluating these risks, businesses can create contingency plans and ensure they have the resources and expertise needed to overcome potential obstacles.

In conclusion, creating a feasibility business plan is an essential first step in launching a successful business.

It provides a comprehensive overview of the business idea, evaluating its potential and risks, and determines whether it is a sound investment.

By conducting a thorough analysis of the market demand, competition, potential revenue streams, resource allocation, and risk and challenges, entrepreneurs can make an informed decision and pursue their business idea with a greater level of confidence and success.

Growth Business Plan

Growth Business Plan is a vital component for businesses that have survived their initial stages and are looking to scale up their operations.

This type of plan focuses on strategies that can be implemented to facilitate growth and increased profitability.

One of the primary concerns of a Growth Business Plan is identifying new areas for expansion, such as new products, markets, or services.

It also involves assessing current operations to determine how they can be optimized and scaled efficiently.

The first step to creating a Growth Business Plan is conducting a market analysis to gain a comprehensive understanding of industry trends, consumer demands, and emerging opportunities.

This involves collecting and analyzing data from various sources such as industry reports, competitor analysis, and consumer feedback.

The goal is to identify untapped markets, potential partnerships, and new revenue streams that can be leveraged to facilitate growth.

The second step is to assess the existing organizational structure to determine if changes need to be made to support growth.

This includes hiring additional staff, expanding the physical infrastructure, or investing in new technology.

A comprehensive growth strategy must also address potential risks and challenges that may arise during the scaling process, such as changes in consumer behavior, supply chain disruptions, or regulatory changes.

Another critical aspect of a Growth Business Plan is financial planning. This involves conducting a financial analysis of the company’s operations to identify areas where cost savings can be realized and new revenue streams can be generated.

The plan must also include a detailed financial forecast that outlines revenue projections, cash flow forecasts, and budgets for capital expenditures.

Ultimately, a successful Growth Business Plan must articulate a clear and comprehensive strategy that establishes a roadmap for scaling up operations while maintaining profitability.

The plan must be flexible enough to adapt to changes in the market, consumer behavior, or the regulatory environment while also being prudent in managing risks associated with growth.

Clear communication of the plan to all the stakeholders of the business is necessary for flawless execution of the expansion efforts.

Exit Business Plan

One important aspect of business planning that is often overlooked is the Exit Business Plan. This subsection of a business plan outlines the steps that the company will take in the event that it needs to close down or be sold.

This can be an important consideration for investors and stakeholders, as it can help them understand the potential risks and rewards associated with their investment.

The Exit Business Plan should include a thorough analysis of the company’s financials, including any outstanding debts or liabilities, as well as projections for future revenue and expenses.

It should also outline the company’s strategy for selling its assets or winding down its operations, including any legal or regulatory considerations that may come into play.

Another important aspect of the Exit Business Plan is succession planning. This involves identifying key personnel who will be responsible for ensuring a smooth transition in the event of an exit, and outlining their roles and responsibilities.

It may also involve identifying potential buyers or partners who could take over the company, and developing a strategy for negotiating a sale or merger.

Ultimately, the purpose of the Exit Business Plan is to minimize risk and maximize value for all stakeholders involved.

By planning for the possibility of an exit from the outset, companies can be better prepared to handle unforeseen circumstances and minimize the potential impact on their investors and employees.

Summary Of Business Planning

Business planning is an essential component of any successful enterprise. It serves as a roadmap for achieving business objectives, providing a framework for decision-making, and establishing accountability.

Through the process of business planning, a company can identify its strengths and weaknesses, capitalize on opportunities, and mitigate risks.

When developing a business plan, it is essential to consider a variety of factors, such as market trends, competitive analysis, financial projections, and growth strategies.

Although it can be challenging to predict the future, a comprehensive business plan can help a company navigate the uncertainties of the marketplace, establish credibility with stakeholders, and secure funding.

The process of creating a business plan can also reveal gaps in knowledge or resources, providing an opportunity for further research or collaboration.

As businesses continue to evolve and adapt to changing market conditions, a robust business plan can serve as a foundation for future growth and success.

Future Outlook Of Business Planning

The future of business planning is promising and exciting. As technology continues to advance, businesses are able to gather more data and better understand their customers, which can inform their strategic planning.

With the increasing use of artificial intelligence and machine learning, businesses can gather insights faster and with greater accuracy. This allows for more precise forecasting and strategic decision-making.

Another relevant trend is the growing popularity of sustainability-focused business planning. Many companies are recognizing the importance of sustainability, given the impact of climate change and the increasing demand for sustainable products and services.

This approach to planning involves looking beyond short-term profits and considering the long-term impact of a business’s actions on the environment and society.

Moreover, the trend toward remote work and decentralized teams is changing how businesses approach planning. Virtual collaboration tools, such as video conferencing and online project management platforms, have made it easier for teams to work effectively from anywhere in the world.

This allows businesses to tap into talent pools globally, which can lead to more diverse and innovative ideas.

Finally, the future of business planning involves adapting to the changing needs of customers, who are increasingly looking for personalized and convenient experiences. Businesses that can offer this are likely to thrive, while those that fail to adapt may fall behind.

This means incorporating customer feedback into planning and investing in technologies, such as chatbots and personalization engines, that can help businesses provide more targeted and relevant experiences to their customers.

Implementing Recommendations

After conducting a thorough examination of Business Planning, it is clear that several recommendations must be made to ensure successful implementation of a business plan.

Firstly, businesses must ensure that every employee is included in the planning process. All departments within the company must have clear communication channels, as collaboration is essential to the success of the plan.

Secondly, businesses should regularly collect and analyze data relevant to their operations. This data can be used to improve and adjust plans as necessary.

Thirdly, businesses must regularly review their business plans and make necessary alterations to keep their plan relevant and up-to-date.

Finally, businesses should always have contingency plans in place. This will help them prepare for unexpected circumstances and better navigate potential risks.

In conclusion, businesses must remain flexible and adaptable in their planning to achieve success, and implementation of the above recommendations will enable them to do so.

Business Planning: FAQs

1. what is business planning.

Business Planning is the process of creating a roadmap for a business’s future. It comprises various steps, including identifying company objectives, conducting a market analysis, determining financial projections, and outlining strategies to achieve goals.

2. Who Needs A Business Plan?

Business planning is essential for any business, irrespective of its size, stage of operations, or industry. Entrepreneurs, startups, and established businesses that want to scale their operations and increase their profitability require a comprehensive and well-structured business plan.

3. Why Is Business Planning Important?

It ensures that a business has a clear direction and vision, helps identify potential opportunities, mitigates challenges, and reduces risks. Furthermore, it plays a crucial role in securing financing, attracting investors, and keeping the organization focused and accountable for its actions.

4. What Should My Business Plan Include?

A comprehensive business plan should include an executive summary, company overview, market analysis, products and services description, marketing and sales strategy, financial projections, organization structure, and operational plan.

5. How Often Should I Update My Business Plan?

Business plans aren’t static documents and should be updated regularly to reflect changes in the market, business evolution, and goals. A business plan should be reviewed annually and updated as needed to ensure that it remains effective and relevant.

6. Can I Write My Own Business Plan?

Yes, although it may be challenging to develop a comprehensive and effective business plan without prior experience. However, there are several resources and tools available, including templates, guides, software, or seeking the services of a business consultant.

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

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

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

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

What is a business plan?

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

Why do you need a business plan?

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

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

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

What can you do with your plan?

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

Test an idea

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

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

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Document your strategy and goals

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

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

Pursue funding

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

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

Better manage your business

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

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

What should your business plan include?

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

Executive summary

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

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

Products & Services

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

Market analysis

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

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

Marketing & sales

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

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

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

Organization & management

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

Financial projections

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

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

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

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

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

Types of business plans explained

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

Traditional business plan

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

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

Business model canvas

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

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

One-page business plan

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

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

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

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

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

Try the LivePlan Method for Lean Business Planning

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

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

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

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

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What is Business Plan? Importance, Setting Goals & Objective, Process, Format, Fails

• Post last modified: 14 March 2024
• Reading time: 27 mins read
• Post category: Entrepreneurship

What is Business Plan?

A business plan is an operating document that describes the dream of an entrepreneur with the objectives and plans to achieve them. A business plan shows the viability of the business idea from every aspect. A business plan is a crucial document that is utilized by both the company’s external and internal audiences.

A business plan seeks investment and it is reviewed and revised regularly to see whether goals are accomplished. A fresh business plan is sometimes written for an existing company that has opted to take a different path.

Table of Content

• 1 What is Business Plan?
• 2 Importance of Business Plan
• 3.1 Business Goals Vs. Business Objectives
• 3.2 How to Set Short-term Business Goals?
• 4.1.1 Determine Your Strategic Position
• 4.1.2 Prioritise Objectives
• 4.1.3 Develop a Plan
• 4.1.4 Execute and Manage the Plan
• 4.1.5 Review and Revise the Plan
• 5.1 Section 1: Executive Summary
• 5.2 Section 2: Industry Overview
• 5.3 Section 3: Market Analysis and Competition
• 5.4 Section 4: Sales and Marketing Plan
• 5.5 Section 5: Management Plan
• 5.6 Section 6: Operating Plan
• 5.7 Section 7: Financial Plan
• 5.8 Section 8: Appendices and Exhibits
• 6.1 Lack of planning
• 6.2 Leadership failure
• 6.3 No differentiation
• 6.4 Ignoring customer needs
• 6.5 Inability to learn from failure
• 6.6 Poor management
• 6.7 Lack of capital
• 6.8 Premature scaling
• 6.9 Poor location
• 6.10 Lack of profit

Importance of Business Plan

Let us discuss the importance of a business plan.

• It explains the vision and goals of the founder.
• It acts as a guide for the new entrepreneur.
• It serves as a blueprint for a company’s overall operation. Sales, expenditures, periods, and strategic direction can all be used to gauge a company’s success and progress.
• It may also assist an entrepreneur or management in identifying and focusing on possible areas both inside and outside the organization. Proposed remedies and contingency plans can be integrated into the company’s strategy once potentially difficult areas have been identified.
• It covers the marketing opportunities and future funding requirements, which demand managerial attention.
• In certain cases when an entrepreneur decides to transform a cherished pastime into a home-based business, the business plan can be as short as a one- or two-page document. A company’s proposal with substantial intricacy and financial ramifications, on the other hand, should have a far more detailed plan.

Setting Goals and Objectives

Business objectives are an important component of creating priorities and positioning an organization for long-term success. Setting company goals and developing separate targets to assist in achieving each goal will considerably improve the capacity to attain those goals. Here, we look at how to define company goals, the distinction between business goals and objectives, and examples of short- and long-term business goals.

Business objectives may be defined for a whole organization as well as specific departments, employees, managers, and clients. Goals are usually used to symbolize a company’s wider purpose and provide an end goal for personnel to work toward. Business objectives may not need to be precise or have well-defined activities. Business objectives, on the other hand, are broad results that a company aims to attain.

Business objectives are measures taken to achieve a company’s larger goals that are clearly stated and quantifiable. Objectives are particular and they are simple to establish and track. To fulfill their business objectives, companies must set objectives.

Business Goals Vs. Business Objectives

The distinction between business goals and business objectives is as follows:

• Business objectives establish the “how” of a company’s purpose, whereas business goals define the “what.”
• Business objectives specify concrete tasks, whereas business goals often merely give a broad direction for a firm to pursue.
• Business objectives are usually measurable, whereas business goals are not.
• Business objectives are more detailed, whereas business goals are more wide and inclusive.
• Business objectives are usually time-bound, whereas business goals are not.

How to Set Short-term Business Goals?

Short-term business objectives are those that you wish to attain in the next few weeks or months for a firm. When it comes to short-term business goals, you may take the following steps:

• Recognize the Short-term Business Goals of the Company for A Set period : In this step, short-term objectives of the company are established so that the set objective can be accomplished in a specific time frame. Many short-term goals are secondary to the fulfillment of long-term objectives. Consider your long-term objectives as well as what you want to achieve in the coming weeks or months and turn them into short-term objectives that will help your company grow.
• Break Goals Into Actionable Business Objectives: Here, management breaks the goals into specific targets. These goals should be represented by the measures an organization will take to achieve them. For example, the target for Kalyani is to convert 5 leads and get 5 new customers for the business within the next 2 months, objectives will be the job or work done for getting 5 customers’ such as placing a new advertisement in the newspaper, social media and posting three times a week on YouTube and Instagram.
• Objectives Should Be Measurable: The established business goals should be quantifiable or measurable. For example, if an employee has the short-term goal of posting an advertisement or banner on social media then, do not assign responsibility to him/her by just saying “post more and more on social media”. Instead, give him/her a per-day target to make it quantifiable or measurable. For example “Post on Instagram three times a week and Facebook two times a week for eight weeks,”.
• Goal-related Tasks Must Be Assigned to Employees: Once the objectives for each short-term goal have been determined, assign each one to an individual or team of employees who will see it through to completion.
• Check and Keep a Record of Performance regularly: Measure your short-term goals’ progress regularly to verify you are on pace to fulfill them within the timeframe you set. Measure any additional customer/potential customer contact you receive as a result of increasing your social media postings to three times a week as part of a business objective. Keep track of progress and, if necessary, change your targets to better fulfill your objectives.

Process of Writing the Business Plan

Every company should have a strategic plan, but you might be surprised by the number of companies that try to function without one (or at least one that is well expressed). According to Strategy research, 86 percent of executive teams spend less than one hour per month discussing strategy, while 95 percent of the average worker has no idea what their company’s strategy is. Because so many firms fail in these areas, strategic planning can help you get ahead of the game.

The strategic planning process is more comprehensive; it aids in the creation of a roadmap for which strategic objectives you should focus on and which projects will be less beneficial to the company. The phases of the strategic planning process are listed below.

Strategic Planning Process

Determine your strategic position.

This phase of preparation sets the tone for the rest of the project. To figure out where you need to go and how you will get there, you must first figure out where you are. Include the appropriate stakeholders from the start, taking into account both the internal and the external sources.

Identify significant strategic concerns by speaking with corporate management, gathering consumer feedback, and gathering industry and market data to acquire a comprehensive picture of your position in the market and the thoughts of your customers.

It is better to write a good idea, purpose, and vision statement for the company to get a clear picture of what success looks like. Additionally, you should analyze your firm’s basic principles to remind yourself of how your organization will achieve these goals.

To begin, identify the challenges that need to be solved using industry and market data, including consumer insights and current/future requests. Create a list of your company’s internal strengths and weaknesses, as well as external possibilities (ways your company may develop to meet requirements that the market doesn’t currently meet) and threats (your competition).

Use a SWOT diagram as a foundation for your initial analysis. You may easily classify your results as Strengths, Weaknesses, Opportunities, and Threats or SWOT to define your present position with input from executives, customers, and external market data.

Political, Economic, Socio-cultural, and Technological or PEST is a strategic technique for identifying dangers and possibilities for your company.

Prioritise Objectives

After you have determined your present market position, you will need to set targets to assist you reach your objectives. Your goals should be in sync with the mission and vision of your firm.

Ask important questions to help you prioritize your goals, such as:

• Which of these measures will have the biggest impact on attaining our company’s mission/vision and strengthening our market position?
• What are the most critical sorts of effects (e.g., client acquisition vs. revenue)?
• What will the competition’s response be?
• Which projects are the most critical?
• What will we have to do to achieve our objectives?
• How will we track our progress and see if we have met our objectives?

To assist you in achieving your long-term strategic goals and activities stated in step one, objectives should be unique and quantifiable. Updated website content, improved email open rates and new leads in the pipeline are all possible goals.

SMART goals may help you set a schedule and identify the resources you will need to reach your objectives, as well as track your progress with key performance indicators or KPIs.

Develop a Plan

Now is the time to develop a strategic strategy for achieving your objectives. This phase entails deciding the techniques required to achieve your goals, as well as establishing a timeframe and communicating responsibilities.

Strategy maps, which work from the top down, make it straightforward to see company processes and find areas for development.

True strategic decisions generally entail a cost-of-opportunity trade-off. For example, your organization could opt to spend less money on customer service to put more money into producing an intuitive user experience. Prepare to say “no” to efforts that will not improve your long-term strategic position, based on your values, mission statement, and defined priorities.

Execute and Manage the Plan

You are now ready to put your strategy into action. To begin, share necessary material with the organization to convey the plan. After that, the real job begins. By mapping your processes, you can turn your overall strategy into a tangible plan.

To communicate team roles, use KPI dashboards. The completion process and ownership for each stage of the journey are depicted in this detailed method. Establish frequent evaluations with individual contributors and their supervisors, as well as check-in points, to ensure you stay on track.

Review and Revise the Plan

The plan’s last step, review, and revision, allows you to examine your goals and make course corrections based on past successes and failures. Determine the KPIs your team has met and how you can continue to fulfill them every quarter, changing your plan as needed.

It is critical to assess your goals and strategic position every year to ensure that you stay on course for long-term success. Balanced scorecards can help you keep track of your progress and achieve strategic goals by giving you a complete picture of your company’s performance.

Your goal and vision may need to evolve; an annual assessment is an excellent time to examine such changes, draft a new strategy, and re-implement it.

Typical Business Plan Format and Content

Here is a simple template that any company may use to create a business plan:

Section 1: Executive Summary

• Give an overview of the company’s mission.
• Describe the product and/or service offerings of the firm.
• Give a brief overview of the target market’s demographics.
• Explain how the firm will gain a piece of the available market by summarising the industry competition.
• Provide an overview of the operations strategy, including inventory, office and labor requirements, and equipment needs.

Section 2: Industry Overview

• Describe the company’s industry position.
• Describe the industry’s current competitiveness and significant players.
• Provide details on the industry in which the company will operate, projected revenues, industry trends, government influences, and the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their requirements, and their location.
• Describe the market’s size, the number of units of the company’s products that potential consumers might buy, and any market changes that might occur as a result of broader economic developments.
• Give a summary of the projected sales volume in comparison to what your rivals sell.
• Give an outline of how the firm intends to compete with current competitors to achieve and maintain market share.

Section 4: Sales and Marketing Plan

• Describe the company’s items for sale as well as its unique selling proposition.
• List the many advertising outlets that the company will utilize to communicate with clients.
• Describe how the company intends to price its items so that it can earn a profit.
• Give specifics on how the company’s items will be delivered and shipped to the target market.

Section 5: Management Plan

• Describe the company’s organizational structure.
• Make a list of the company’s owners and their ownership percentages.
• Make a list of the top executives, their responsibilities, and their pay.
• List any internal and external professionals the organization intends to recruit, as well as their salaries.
• If available, include a list of the advisory board members.

Section 6: Operating Plan

• Describe the business’s location, including the need for an office and a warehouse.
• Describe the company’s workforce requirements. Outline the number of employees the firm need, their jobs, the skills training that will be required, and the length of time that each person will be with the organization (full-time or part-time).
• Describe the manufacturing process and how long one unit of a product will take to make.
• Describe equipment and machinery requirements, as well as whether the firm will lease or buy the equipment and machinery, as well as the estimated expenses.
• Provide a list of raw material needs, as well as how they will be procured and the primary vendors that will provide the necessary inputs.

Section 7: Financial Plan

• Include the projected income statement, projected cash flow statement, and projected balance sheet projection in your description of the company’s financial predictions.

Section 8: Appendices and Exhibits

• Lease quotes for buildings and machinery
• Plan for offices and warehouses that has been proposed
• An overview of the target market and market research
• The owners’ credit information
• Product and/or service list

Understand Why Business Plans Fail

The saddest aspect of a failing firm is that the owner is frequently completely oblivious to what is going on until it is too late. It makes sense because if the entrepreneur had truly understood what he/she was doing incorrectly, he/she may have been able to rescue the company.

The following is a list of some of the most common causes:

Lack of planning

Businesses fail due to a lack of both short- and long-term planning. The business strategy should address where a company will be in the coming months and years. Quantifiable objectives and outcomes and specific to-do lists with dates and deadlines will be included in the correct plan. Your business will suffer if you do not plan.

Leadership failure

Businesses collapse as a result of poor leadership. Leadership must be capable of making correct judgments the majority of the time. Leadership failures will affect all parts of your firm, from financial management to staff management. To develop their leadership qualities, the most successful entrepreneurs learn, research, and seek out mentors.

No differentiation

Having a fantastic product is not enough. You must also create a distinct value offer; otherwise, you will become lost in the crowd. What distinguishes your company from the competition? What distinguishes your company? Understanding what your rivals do better than you is critical. You won’t be able to develop a brand if you do not separate yourself.

Ignoring customer needs

Every company will tell you that a customer is number one, but only a small fraction of them do so. Failure causes businesses to lose contact with their customers. Keep an eye on your clients’ changing values. Check to see if they still enjoy your products. Are they looking for new features? Therefore, what exactly are they saying? Are you paying attention?

Inability to learn from failure

While we all know that failure is typically a terrible thing, businesses seldom learn from it. Realistically, businesses fail for a variety of reasons. Entrepreneurs are frequently blind to their errors. It is tough to learn from mistakes.

Poor management

Inability to listen, micro-managing – often known as a lack of trust – operating without standards or processes, poor communication, and a lack of feedback are all examples of poor management.

Lack of capital

This might prevent you from attracting investors. A lack of capital is a red flag. It indicates that a company may be unable to pay its payments, loans, and other financial obligations. Lack of finance makes it harder to expand the firm and puts day-to-day operations in jeopardy.

Premature scaling

Scaling is beneficial if done at the appropriate time. To put it another way, if you grow your firm too quickly, it will fail. You may, for example, be recruiting too many staff too rapidly or overspending on marketing. Do not expand your company unless you are ready.

Pets.com collapsed because it attempted to expand too quickly. They opened too many warehouses across the country too soon and it bankrupted them. Even their strong brand equity wasn’t enough to save them. Their stock dropped from $11 to $0.19 in a matter of months.

Poor location

Inconvenient location is a disadvantage that may be difficult to overcome. If your business relies on foot traffic, choosing the right location is crucial. Your client acquisition expenses may be excessively high due to a bad location.

Lack of profit

Revenue is not the same as profit. As an entrepreneur, you must always keep profitability in mind. Profit permits expansion. Only 40% of small firms are successful, 30% are breaking even and 30% are losing money, according to Small Business Trends.

• Pednekar, A. (2010). Entrepreneurship management. Himalaya Pub. House.
• Stutely, R. (2012). The definitive business plan. Pearson.

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The state of customer care in 2022

Customer care leaders are facing a perfect storm of challenges: call volumes are up, employees are leaving and harder to replace, and digital solutions aren’t yet delivering on their full promise. Add rising customer expectations and decades-high inflation  to the mix, and it’s easy to understand why customer care leaders are feeling the pressure.

About the authors

This article is a collaborative effort by Jeff Berg , Eric Buesing , Paul Hurst, Vivian Lai, and Subhrajyoti Mukhopadhyay, representing views of McKinsey’s Customer Care service line.

The stakes couldn’t be higher as teams try to adapt to a postpandemic era of customer care. Over the past two years, leaders have had to quickly adapt systems and ways of working to accommodate the shift to working from home—up to 85 percent of their workforces, in some cases. Contact center employees are harder to hold onto, and nearly half of customer care managers experienced increased attrition in 2021, leading to performance variability.

Over the past two years, customer care leaders have had to quickly adapt systems and ways of working to accommodate the shift to working from home.

While digital solutions and the shift to self-service channels will solve many of these challenges, they aren’t quite reaching the goal. For most organizations, the vast majority of digital customer contacts require assistance, and only 10 percent of newly built digital platforms are fully scaled or adopted by customers.

Not surprisingly, McKinsey’s 2022 State of Customer Care Survey has found that customer care is now a strategic focus for companies. Respondents say their top three priorities over the next 12 to 24 months will be retaining and developing the best people, driving a simplified customer experience (CX)  while reducing call volumes and costs, and building their digital care and advanced analytics ecosystems.

With challenges on all fronts, the question now confronting leaders is how best to prioritize investment across the people, operations, and technology aspects of their customer care strategies. Knowing where to focus or what to do first isn’t easy, and businesses need to move quickly. Companies that don’t invest in this area face the possibility of further talent attrition, customer dissatisfaction, and even loss of market share.

But customer care is also now a major opportunity for businesses. Done well—through a combination of tech and human touch—it is an area where companies can drive loyalty through a more personalized customer journey while unlocking greater productivity, increased revenue, improved job satisfaction, and real-time customer insights.

This article presents the key findings of the 2022 State of Customer Care Survey and how businesses are shifting priorities at this critical time.

Challenges on all fronts

To uncover the latest trends in customer care, McKinsey surveyed more than 160 industry leaders and experts at the director, senior director, vice president, and C-suite levels to find out how their operations have been affected over the past two years of the COVID-19 pandemic.

Care is at an inflection point

The survey findings indicate that customer care is at an inflection point. Call volumes are higher and more complex than before, while companies find themselves struggling to find talent and train them to proficiency at pace.

As customer care increasingly moves online, the distinction between digital and live interactions has also begun to blur. Organizations are looking for new capabilities that will enhance both the customer and employee experience in “moments that matter”—those interactions that may have previously happened face to face or have significant influence on overall CX.

Compared with results of the 2019 State of Customer Care Survey, customer care leaders are now more focused on improving CX, reducing contact volumes, deploying AI assistance, and increasing revenue generation on service calls (Exhibit 1).

Customer care talent is increasingly scarce

Higher call volumes and more complex calls are challenging existing capacity—61 percent of surveyed care leaders report a growth in total calls, with increased contacts per customer and a growing customer base as the key drivers. And 58 percent of care leaders expect call volumes to increase even further over the next 18 months.

While a growing customer base is a positive sign for business, it puts greater pressure on contact centers that are already under strain. More customers mean increased call numbers, and with more complex calls, customers tend to have to phone contact centers over and over again—further affecting capacity and resulting in a more negative CX overall.

To make matters worse, talent attrition is affecting customer care capacity. Employees are leaving faster than they did before the pandemic—a result of the Great Attrition—and are more difficult to replace. Nearly half of surveyed managers report increased employee attrition over the past 12 months.

The top-cited reason for employees leaving is poaching by competitors—58 percent—alongside employee burnout, employee dissatisfaction, lack of advancement opportunities, and poor work–life balance (Exhibit 2).

Retaining talent could prove vital in the race to maintain capacity. New hires require significant staff training, with 41 percent of surveyed leaders reporting that it takes between three and six months to train a new employee for optimal performance and a further 20 percent saying it takes more than six months.

Uniting self-service and live channels

Many companies have made significant investments in digital care capacity in recent years, though cross-channel integration and migration issues continue to hamper progress. For example, 77 percent of survey respondents report that their organizations have built digital platforms, but only 10 percent report that those platforms are fully scaled and adopted by customers. Only 12 percent of digital platforms are highly integrated, and, for most organizations, only 20 percent of digital contacts are unassisted.

In an increasingly digital first environment, however, customer care is fundamental to how organizations interact with their customers. Leaders in this field are asking, “How do we create a better, more personalized experience through digitally enabled services?”

Businesses are investing in three critical areas

Faced with the challenges of a fast-changing and demanding environment, companies can’t afford to refrain from acting on the customer care storm. Over the past two years, customers have flocked to digital channels because of the pandemic, and organizations have had to race to meet their needs with new channels that support remote and digital transactions.

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In a postpandemic future, this pivot to digital is likely to keep growing. And while many companies believe that they have made significant strides in their customer care transformation journey, a significant number remain at a foundational level—they are improving self-service options and automating common requests but haven’t yet moved far enough along the journey to distinguish from their competitors. Meanwhile, those that have the leading edge are leveraging real-time customer behavior insights and conversational AI to deliver proactive customer outreach.

Customer care leaders say their top three priorities over the next 12 to 24 months are to retain and develop the best people, drive a simplified CX while reducing call volumes and costs, and build out their digital care ecosystems.

Retain and develop the best people

Traditionally, customer care talent has been regarded as cheap, easy to replace, and relatively low skilled. But with call volumes growing and calls becoming more complex to resolve, these employees now require more strategic consideration.

With three out of five surveyed leaders citing attracting, training, and retaining talent as a top priority, businesses are looking at ways to build a better organizational culture. Two of the most effective ways to do this—according to customer care leaders—are to find ways to motivate and build trust with employees and to encourage leaders to listen and act on employee feedback (Exhibit 3).

Shift the interactions

Shifting the workload away from transactional, repetitive calls can address a number of the headaches facing customer care leaders. The move can free up capacity to improve CX while offering more rewarding work to employees.

Companies are looking to shift from a transactional to a solution-oriented interaction during the live, complex calls that matter most to customers. Organizations are also turning to self-service channels and tech to resolve high volumes. And the strategy is working. Nearly two-thirds of those surveyed that decreased their call volumes identified improved self-service as a key driver (Exhibit 4).

Organizations are planning to increase digital interactions one and a half times by 2024. The top three areas identified for investment include tech that improves omnichannel and digital capabilities—for example, chatbots and AI tools—automated manual activities in contact centers, and advanced analytics capabilities.

Despite digital tech taking on more of the burden for customer service interactions, human assistance will likely remain an important driver of overall CX, especially in the moments that matter. Customers want fast, efficient service, but they also want personalized customer care, whatever the channel of engagement.

Develop AI-powered customer care ecosystems

The growing challenges around increasing volumes, rising complexity, and limited talent availability are unlikely to be solved at scale without AI and data analytics. Companies can optimize the entire customer operations footprint by using tech to measure performance, identify opportunities, and deploy value-capturing change management, thus delivering critical operations insights and impact at scale.

For customers, AI-driven tools like predictive analytics can deliver a personalized and proactive experience that resolves issues before customers are even aware that they exist—enhancing CX at every point along the customer journey. Tech can also assist in developing a high-performing workforce by identifying optimal work processes and practices using analytics. Automated coaching can potentially be deployed to every individual, supporting efforts to attract, develop, and retain scarce talent.

How CEOs can win the new service game

In the AI-powered care ecosystem, around 65 percent of tasks and 50 to 70 percent of contacts are automated, creating a true omnichannel experience that provides a consistent and seamless experience across interactions. In this way, the potential of contact centers could be unlocked to become loyalty-building revenue generators through greater solutioning and sales excellence.

Putting priorities into practice

CX is fast becoming a key competitive area. Companies that don’t prioritize their strategy and digital transformation journeys are likely to face continued customer dissatisfaction, as well as talent attrition—thus threatening their brand and market competitiveness.

Getting customer care right depends on prioritizing and investing across the people, operations, and tech aspects of the customer care strategy. Companies can consider the following key steps as they look to build out their capabilities and invest in their digital care ecosystems:

• Start by setting out the vision for the customer care organization, capturing what excellence looks like.
• Conduct a rapid but thorough due-diligence-style assessment of people, processes, and capabilities, looking at the customer care operation in a new light to identify not just incremental changes but a reimagined, large-scale transformation.
• Path one follows a traditional design approach, which may take longer but prove less risky, as the entire transformation is considered at the outset.
• Path two involves an interactive and agile design, test, and iterate methodology, which may lead to new solutions quickly.
• Leverage the full suite of available technologies and analytical approaches that are driving successful outcomes in customer care, including natural language processing (NLP) and AI in frontline operations to match work to workers, together with cognitive AI assistance for resolving simpler customer queries.

Personalized digital interaction nowadays is an expectation rather than a luxury or an added perk, and customer care is the issue at the heart of this digital first environment—companies can’t afford to stumble at this juncture. If done well, however, customer care presents a great opportunity to build loyalty and long-term relationships with customers, creating organizational resilience for the future.

Jeff Berg is a partner in McKinsey’s Southern California office; Eric Buesing is a partner in the Stamford, Connecticut, office; Paul Hurst is a consultant in the Charlotte, North Carolina, office, Vivian Lai is a consultant in the New York office, and Subhrajyoti Mukhopadhyay is an expert in the Chicago office.

The authors wish to thank Karunesh Ahuja and Charles-Michael Berg for their contributions to this article.

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