business planning is important

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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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 .

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 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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6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

Starting a busine ss can be a daunting task, especially if you’re starting from square one.

It’s easy to feel stuck in the whirlwind of things you’ll need to do, like registering your company, building a team, advertising, the list goes on. Not to mention, a business idea with no foundation can make the process seem incredibly intimidating.

Thankfully, business plans are an antidote for the new business woes that many entrepreneurs feel. Some may shy away from the idea, as they are lengthy documents that require a significant amount of attention and care.

However, there’s a reason why those who take the time to write out a business plan are 16% more likely to be successful than those who don’t. In other words, business plans work.

What is a business plan, and why does it matter?

In brief, a business plan is a roadmap to success. It's a blueprint for entrepreneurs to follow that helps them outline, understand, and cohesively achieve their goals.

Writing a business plan involves defining critical aspects of your business, like brand messaging, conducting market research, and creating pricing strategies — all before starting the company.

A business plan can also increase your confidence. You’ll get a holistic view of your idea and understand whether it's worth pursuing.

So, why not take the time to create a blueprint that will make your job easier? Let’s take a look at six reasons why you should write a business plan before doing anything else.

Six Reasons You Really Need To Write a Business Plan

Legitimize your business idea.
Give your business a foundation for success.
Obtain funding and investments.
Hire the right people.
Communicate your needs.
It makes it easier to sell your business.

1. Legitimize your business idea.

Pursuing business ideas that stem from passions you’ve had for years can be exciting, but that doesn’t necessarily mean it’s a sound venture.

One of the first things a business plan requires you to do is research your target market. You’ll gain a nuanced understanding of industry trends and what your competitors have done, or not, to succeed. You may find that the idea you have when you start is not likely to be successful.

That may feel disheartening, but you can always modify your original idea to better fit market needs. The more you understand about the industry, your future competitors, and your prospective customers, the greater the likelihood of success. If you identify issues early on, you can develop strategies to deal with them rather than troubleshooting as they happen.

It’s better to know sooner rather than later if your business will be successful before investing time and money.

2. Give your business a foundation for success.

Let's say you’re looking to start a clean beauty company. There are thousands of directions you can go in, so just saying, “I’m starting a clean beauty company!” isn’t enough.

You need to know what specific products you want to make, and why you’re deciding to create them. The Pricing and Product Line style="color: #33475b;"> section of a business plan requires you to identify these elements, making it easier to plan for other components of your business strategy.

You’ll also use your initial market research to outline financial projections, goals, objectives, and operational needs. Identifying these factors ahead of time creates a strong foundation, as you’ll be making critical business decisions early on.

You can refer back to the goals you’ve set within your business plan to track your progress over time and prioritize areas that need extra attention.

All in all, every section of your business plan requires you to go in-depth into your future business strategy before even acting on any of those plans. Having a plan at the ready gives your business a solid foundation for growth.

When you start your company, and your product reaches the market, you’ll spend less time troubleshooting and more time focusing on your target audiences and generating revenue.

3. Obtain funding and investments.

Every new business needs capital to get off the ground. Although it would be nice, banks won’t finance loans just because you request one. They want to know what the money is for, where it’s going, and if you’ll eventually be able to pay it back.

If you want investors to be part of your financing plan, they’ll have questions about your business’ pricing strategies and revenue models. Investors can also back out if they feel like their money isn’t put to fair use. They’ll want something to refer back to track your progress over time and understand if you’re meeting the goals you told them you’d meet. They want to know if their investment was worthwhile.

The Financial Considerations section of a business plan will prompt you to estimate costs ahead of time and establish revenue objectives before applying for loans or speaking to investors.

You’ll secure and finalize your strategy in advance to avoid showing up unprepared for meetings with potential investors.

4. Hire the right people.

After you’ve completed your business plan and you have a clear view of your strategies, goals, and financial needs, there may be milestones you need to meet that require skills you don’t yet have. You may need to hire new people to fill in the gaps.

Having a strategic plan to share with prospective partners and employees can prove that they aren’t signing on to a sinking ship.

If your plans are summarized and feasible, they’ll understand why you want them on your team, and why they should agree to work with you.

5. Communicate your needs.

If you don’t understand how your business will run, it’ll be hard to communicate your business’s legitimacy to all involved parties.

Your plan will give you a well-rounded view of how your business will work, and make it easier for you to communicate this to others.

You may have already secured financing from banks and made deals with investors, but a business’ needs are always changing. While your business grows, you’ll likely need more financial support, more partners, or just expand your services and product offers. Using your business plan as a measure of how you’ve met your goals can make it easier to bring people onto your team at all stages of the process.

6. It makes it easier to sell your business.

A buyer won’t want to purchase a business that will run into the ground after signing the papers. They want a successful, established company.

A business plan that details milestones you can prove you’ve already met can be used to show prospective buyers how you’ve generated success within your market. You can use your accomplishments to negotiate higher price points aligned with your business’ value.

A Business Plan Is Essential

Ultimately, having a business plan can increase your confidence in your new venture. You’ll understand what your business needs to succeed, and outline the tactics you’ll use to achieve those goals.

Some people have a lifetime goal of turning their passions into successful business ventures, and a well-crafted business plan can make those dreams come true.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, 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 outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

A business plan is a document detailing a company's business activities and strategies for achieving its goals.
Startup companies use business plans to launch their venture and to attract outside investors.
For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

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, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

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 : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While 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 ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

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

Harvard Business Review. " How to Write a Winning Business Plan ."

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

SCORE. " When and Why Should You Review Your Business Plan? "

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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 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 graphic showing you a “Business Plan Outline.” There are four sections on the left side: Executive Summary at the top, Company Description below it, followed by Market Analysis, and lastly Organization and Management. There was four sections on the right side. At the top: “Service or Product Line.” Below that, “Marketing and Sales.” Below that, “Funding Request.” And lastly: “Financial Projections.” At the very bottom below the left and right columns is a section that says “Appendix.

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.

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

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

How to Write a Business Plan for a Small Business

Determined female African-American entrepreneur scaling a mountain while wearing a large backpack. Represents the journey to starting and growing a business and needi

Noah Parsons

24 min. read

Updated September 2, 2024

Download Now: Free Business Plan Template →

Writing a business plan doesn’t have to be complicated.

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

The basics of writing a business plan

If you’re reading this guide, then you already know why you need a business plan .

You understand that writing a business plan helps you:

Raise money
Grow strategically
Keep your business on the right track

As you start to write your business plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow.

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals.

After writing your business plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business.

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create.

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan.

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

A summary of the problem you are solving
A description of your product or service
An overview of your target market
A brief description of your team
A summary of your financials
Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

When writing a business plan, the produces and services section is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service.

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business.

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market.

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.”

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market.

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers.

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service.

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics.

The best place to start with a marketing plan is with a positioning statement .

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning.

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy .

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services.

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer.

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process.

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

When writing a business plan, the operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like.

Depending on how your business is structured, your operations plan may include elements of the business like:

Supply chain management
Manufacturing processes
Equipment and technology
Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains.

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

A description of each task
The proposed due date
Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap.

Possible milestones might be:

Website launch date
Store or office opening date
First significant sales
Break even date
Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

Conversion rates
Customer acquisition costs
Profit per customer
Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality.

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before?

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

Sole proprietor
Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided?

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

The last section of your business plan is your financial plan and forecasts.

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast.

A typical financial forecast in a business plan includes the following:

Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business.

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

Company logo
Business name
Value proposition (optional)
Business plan title
Completion and/or update date
Address and contact information
Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI to write a business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity.

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers.

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project.

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure.

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it.

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template.

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses.

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples .

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started.

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality.
Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas.

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

Did you meet your sales goals?
Is spending following your budget?
Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets.

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees.

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of writing a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Writing a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of writing a business plan?

The seven steps to writing a business plan include:

Write a brief executive summary
Describe your products and services.
Conduct market research and compile data into a cohesive market analysis.
Describe your marketing and sales strategy.
Outline your organizational structure and management team.
Develop financial projections for sales, revenue, and cash flow.
Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

1. Not taking the planning process seriously.
Having unrealistic financial projections or incomplete financial information.
Inconsistent information or simple mistakes.
Failing to establish a sound business model.
Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

How will your business make money?
Is there a need for your product or service?
Who are your customers?
How are you different from the competition?
How will you reach your customers?
How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. 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 when applying for funding or pitching to investors. 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.

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.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most 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.

Lean Plan: The Lean Plan 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’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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Why every entrepreneur needs a business plan.

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For many entrepreneurs, especially first-timers, business plans are daunting: Building a 50-page document that details every aspect of a theoretical business is no small task. It can be tempting to skip it, especially if you’re in a line of work like mine in which the path to profit might seem pretty obvious: good legal training = good legal services = paying customers. But I assure you, it’s not that simple.

Planning For Success (And Survival)

Starting a business isn’t like learning to ride a bike. You can’t just hop on, start pedaling and hope for the best. (Well, you can, but you’ll find getting back on the bike is a lot harder when it requires capital.) In business, you do not want to wing it. You want a plan -- a document that lays out the path of your company for the next three to five years so you can see the route to your goals and know objectively if you’re on track. It can be the difference between folding and thriving, especially when times get tough -- and tough times, while hopefully rare and short-lived, are the hallmark of owning a small business.

Your Business, A To Z

Running a business will always require some degree of improvisation, but your best bet is to be as prepared as humanly possible for what you can foresee. The specifics of a business plan can vary by field, but you’re basically looking at six main components:

• Executive summary: The whole story of your business, in short-form -- what field you’re in, how you’ll make money, where you want to be in five years and how you’ll get there.

• Business description: In detail, what your business is all about, what you’ll make or provide to customers, how you’ll make or provide it, and why that product or service is a good thing.

• Market/industry analysis: Why people will buy your product or service -- this includes market research (who your customers are and what they want) and an analysis of the industry and what current businesses are lacking.

• Organization: A description of how your business is structured, from business and tax entities to hierarchies and job descriptions -- who does what, who reports to whom and who is ultimately responsible for each element of your business’s success.

• Financials: Your current financial state, where you want to be financially in five years and how you’ll get from point A to point B -- in cold, hard numbers.

• Funding request: If you’re asking for money, include how much you want and how and when you’ll repay it.

Whether You Need Funding Or Not

While a great business plan is your key to scoring funding, you need a business plan even if you don’t need money. Here’s why: By writing all of this information down and fleshing it out in detailed form, you can see how logical the whole thing looks -- where the holes are, where the reasoning breaks down, which contingencies you haven’t planned for, etc. If there are weak points, you want to address them before you’re knee deep in running a new business and/or you hit one of those tough spots.

Recognizing the weak points is one side of the equation. The other side is inspiration. Immersing yourself in your business plan can spur new and better approaches to reaching your goals, because nothing jumpstarts brainstorming like pouring ideas onto paper.

Don’t Let It Psych You Out

Of course, pouring ideas onto paper isn’t everyone’s thing. Here’s what I recommend: In the beginning, don’t approach your business plan as a 50-page document. Start with a skeleton -- the most basic possible outline of your business and your goals, in note form. Then, fill it in, step by step (which reminds me, include a timeline -- it helps to make it all more concrete), adding details and complete sentences as you go. You don’t have to build the document in order, though it helps to start with the executive summary to see how you intend your business to unfold.

Ideally, once all of the other sections are filled in, you’ll go back to the executive summary and update it because you’ll have ironed out and beefed up your plans as you go through the various sections.

Growing Your Business Plan

Ultimately, your business plan is your key to success, and not just early on. Planning is crucial whether your company is two months old or 10 years old, so check back in and update the document as your company grows. A well-considered plan doesn’t guarantee anything -- in small business, there are no sure things -- but it does put your schemes, strategies and calculations into a form you can accurately and dispassionately assess and improve.

Even the most seasoned entrepreneurs have blind spots. The smartest ones assume their plans have holes and imperfections and go looking for them because surprises are not a business owner’s friend. One of the surest ways to find potential pitfalls -- and refine your whole entrepreneurial approach in the process -- is by building a focused, thorough business plan that lays out a logical path to reaching your goals.

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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.

The Undeniable Importance of a Business Plan

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.”

A chart of what role the formal planning process plays in a company next to a chart showing the percentage of respondents who are dissatisfied with their company's approach to the development of strategy

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.

A chart comparing elements of companies with business plans to companies with no business plan

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.

A table showing calculations on return of investment in business planning

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.

A diagram showing four key elements to an excellent business plan

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.

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.

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12 Reasons You Need a Business Plan In the new book "Write Your Own Business Plan," business expert Eric Butow breaks down how a solid business plan can save your startup during those tough early days.

By Dan Bova Sep 19, 2023

Running a business can be unpredictable, which is why having a solid business plan as a foundation is vital to surviving and thriving in the early days of your startup. Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to write the second edition of our best-selling book Write Your Business Plan , providing you with a roadmap for success.

In the following excerpt, Butow explains how a well-thought-out plan can power your startup and help your vision come to life.

Business plans could be considered cheap insurance. Just as many people don't buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas, intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.

1. A plan helps you set specific objectives for managers.

Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.

2. You can share your strategy, priorities, and plans with your spouse or partner.

People in your personal life intersect with your business life, so shouldn't they know what's supposed to be happening?

Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium

Easy step-by-step business plan generator
Built-in financial c alculators
500+ sample plans and templates

3. Use the plan to explain your displacement.

A short definition of displacement is, "Whatever you do is something else you don't do." Your plan will explain why you're doing what you've decided to do in your business.

4. A plan helps you figure out whether or not to rent or buy new space.

Do your growth prospects and plans justify taking on an increased fixed cost of new space?

5. You can explain your strategy for hiring new people.

How will new people help your business grow and prosper? What exactly are they going to do?

6. A plan helps you decide whether or not to bring on new assets.

How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what's going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.

7. Share your plan with your team.

Explain the business objectives in your plan with your leadership team, employees, and new hires. What's more, make selected portions of your plan part of your new employee training.

8. Share parts of your plan with new allies to bring them aboard.

Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.

9. Use your plan when you deal with professionals.

Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.

Write Your Own Business Plan is available now at Entrepreneur Bookstore | Barnes & Noble | Amazon

10. Have all the information in your plan when you're ready to sell.

Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and why they want it.

11. A plan helps you set the valuation of the business.

Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. Usually, that takes a business plan as well as a professional with experience. The plan tells the valuation expert what your business is doing, when it's doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.

12. You can use information in the plan when you need cash.

Seek investment for a business no matter what stage of growth the business finds itself in. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.

Entrepreneur Staff

VP of Special Projects

Dan Bova is the VP of Special Projects at Entrepreneur.com. He previously worked at Jimmy Kimmel Live, Maxim, and Spy magazine. His latest books for kids include This Day in History , Car and Driver's Trivia Zone , Road & Track Crew's Big & Fast Cars , The Big Little Book of Awesome Stuff , and Wendell the Werewolf .

Read his humor column This Should Be Fun if you want to feel better about yourself.

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Research: Writing a Business Plan Makes Your Startup More Likely to Succeed

by Francis J. Greene and Christian Hopp

Summary .

When asked about an opponent’s plan for their impending fight, former world heavyweight champion Mike Tyson once said: “everyone has a plan until they get punched in the mouth.” It is a school of thought now fashionable in entrepreneurship circles. The truth, though, is that we just don’t know if it pays to plan. For every study that shows that it does, another study comes along and says that start-ups should just learn by doing. We wanted to study entrepreneurial planning, but with more context than previous efforts. We found that it pays to plan. Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. More than that, we were also able to see what makes people write business plans in the first place.

When asked about an opponent’s plan for their impending fight, former world heavyweight champion Mike Tyson once said: “Everyone has a plan until they get punched in the mouth.”

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Nine reasons why you need a business plan

Building a great business plan helps you plan, strategize and succeed. Presented by Chase for Business .

Making the decision to create a new business is an exciting yet stressful experience. Starting a business involves many tasks and obstacles, so it’s important to focus before you take action. A solid business plan can provide direction, help you attract investors and ensure you maintain momentum.

No matter what industry you plan on going into, a business plan is the first step for any successful enterprise. Building your business plan helps you figure out where you want your business to go and identify the necessary steps to get you there. This is a key document for your company to both guide your actions and track your progress.

What is the purpose of a business plan?

Think of a business plan like a roadmap. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis and logistics and operations plans.

It can also help you organize your thoughts and goals, as well as give you a better idea of how your company will work. Good planning is often the difference between success and failure.

Here are nine reasons your company needs a business plan.

1. Prove your idea is viable

Through the process of writing a business plan, you can assess whether your company will be successful. Understanding market dynamics, as well as competitors, will help determine if your idea is viable.

This is also the time to develop financial projections for your business plan, like estimated startup costs, a profit and loss forecast, a break-even analysis and a cash flow statement . By taking time to investigate the viability of your idea, you can build goals and strategies to support your path to success.

A proper business plan proves to all interested parties—including potential investors, customers, employees, partners and most importantly yourself — that you are serious about your business.

2. Set important goals

As a business owner, the bulk of your time will mostly likely be spent managing day-to-day tasks. As a result, it might be hard to find time after you launch your business to set goals and milestones. Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals.

3. Reduce potential risks

Prevent your business from falling victim to unexpected dangers by researching before you break ground. A business plan opens your eyes to potential risks that your business could face. Don’t be afraid to ask yourself the hard questions that may need research and analysis to answer. This is also good practice in how your business would actually manage issues when they arise. Incorporate a contingency plan that identifies risks and how you would respond to them effectively.

The most common reasons businesses fail include:

Lack of capital
Lack of market impact or need
Unresearched pricing (too high or low)
Explosive growth that drains all your capital
Stiff competition

Lack of capital is the most prevalent reason why businesses fail. To best alleviate this problem, take time to determine how your business will generate revenue. Build a comprehensive model to help mitigate future risks and long-term pain points. This can be turned into a tool to manage growth and expansion.

4. Secure investments

Whether you’re planning to apply for an SBA loan , build a relationship with angel investors or seek venture capital funding, you need more than just an elevator pitch to get funding. All credible investors will want to review your business plan. Although investors will focus on the financial aspects of the plan, they will also want to see if you’ve spent time researching your industry, developed a viable product or service and created a strong marketing strategy.

While building your business plan, think about how much raised capital you need to get your idea off the ground. Determine exactly how much funding you’ll need and what you will use it for. This is essential for raising and employing capital.

5. Allot resources and plan purchases

You will have many investments to make at the launch of your business, such as product and services development, new technology, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. It gives you an idea of how much you’ll need to spend on resources and it ensures your business will manage those resources effectively.

A business plan provides clarity about necessary assets and investment for each item. A good business plan can also determine when it is feasible to expand to a larger store or workspace.

In your plan, include research on new products and services, where you can buy reliable equipment and what technologies you may need. Allocate capital and plan how you’ll fund major purchases, such as with a Chase small business checking account or business credit card .

6. Build your team

From seasoned executives to skilled labor, a compelling business plan can help you attract top-tier talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your executive team as well as the different roles you need filled immediately and further down the line.

Small businesses often employ specialized consultants, contractors and freelancers for individual tasks such as marketing, accounting and legal assistance. Sharing a business plan helps the larger team work collectively in the same direction.

This will also come into play when you begin working with any new partners. As a new business, a potential partner may ask to see your business plan. Building partnerships takes time and money, and with a solid business plan you have the opportunity to attract and work with the type of partners your new business needs.

7. Share your vision

When you start a business, it's easy to assume you'll be available to guide your team. A business plan helps your team and investors understand your vision for the company. Your plan will outline your goals and can help your team make decisions or take action on your behalf. Share your business plan with employees to align your full staff toward a collective goal or objective for the company. Consider employee and stakeholder ownership as a compelling and motivating force.

8. Develop a marketing strategy

A marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.

Important questions to consider as you build your marketing strategy include:

What industry segments are we pursuing?
What is the value proposition of the products or services we plan to offer?
Who are our customers?
How will we retain our customers and keep them engaged with our products or services and marketing?
What is our advertising budget?
What price will we charge?
What is the overall look and feel of our brand? What are our brand guidelines?
Will we need to hire marketing experts to help us create our brand?
Who are our competitors? What marketing strategies have worked (or not worked) for them?

With a thoughtful marketing strategy integrated into your business plan, your company goals are significantly more in reach.

9. Focus your energy

Your business plan determines which areas of your business to focus on while also avoiding possible distractions. It provides a roadmap for critical tradeoffs and resource allocation.

As a business owner, you will feel the urge to solve all of your internal and customers’ problems, but it is important to maintain focus. Keep your priorities at the top of your mind as you set off to build your company.

As a small business owner, writing a business plan should be one of your first priorities. Read our checklist for starting a business, and learn how to take your business from a plan to reality. When you’re ready to get started, talk with a Chase business banker to open a Chase business checking or savings account today.

For Informational/Educational Purposes Only: The views expressed in this article may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.

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The art of storytelling, from net margin to sales.

Why is a business plan important?

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

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

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How to Write a Business Plan for Your Small Business

A better way to drive your business

Managing the availability of supply to meet volatile demand has never been easy. Even before the unprecedented challenges created by the COVID-19 pandemic and the war in Ukraine, synchronizing supply and demand was a perennial struggle for most businesses. In a survey of 54 senior executives, only about one in four believed that the processes of their companies balanced cross-functional trade-offs effectively or facilitated decision making to help the P&L of the full business.

That’s not because of a lack of effort. Most companies have made strides to strengthen their planning capabilities in recent years. Many have replaced their processes for sales and operations planning (S&OP) with the more sophisticated approach of integrated business planning (IBP), which shows great promise, a conclusion based on an in-depth view of the processes used by many leading companies around the world (see sidebar “Understanding IBP”). Assessments of more than 170 companies, collected over five years, provide insights into the value created by IBP implementations that work well—and the reasons many IBP implementations don’t.

Understanding IBP

Integrated business planning is a powerful process that could become central to how a company runs its business. It is one generation beyond sales and operations planning. Three essential differentiators add up to a unique business-steering capability:

Full business scope. Beyond balancing sales and operations planning, integrated business planning (IBP) synchronizes all of a company’s mid- and long-term plans, including the management of revenues, product pipelines and portfolios, strategic projects and capital investments, inventory policies and deployment, procurement strategies, and joint capacity plans with external partners. It does this in all relevant parts of the organization, from the site level through regions and business units and often up to a corporate-level plan for the full business.
Risk management, alongside strategy and performance reviews. Best-practice IBP uses scenario planning to drive decisions. In every stage of the process, there are varying degrees of confidence about how the future will play out—how much revenue is reasonably certain as a result of consistent consumption patterns, how much additional demand might emerge if certain events happen, and how much unusual or extreme occurrences might affect that additional demand. These layers are assessed against business targets, and options for mitigating actions and potential gap closures are evaluated and chosen.
Real-time financials. To ensure consistency between volume-based planning and financial projections (that is, value-based planning), IBP promotes strong links between operational and financial planning. This helps to eliminate surprises that may otherwise become apparent only in quarterly or year-end reviews.

An effective IBP process consists of five essential building blocks: a business-backed design; high-quality process management, including inputs and outputs; accountability and performance management; the effective use of data, analytics, and technology; and specialized organizational roles and capabilities (Exhibit 1). Our research finds that mature IBP processes can significantly improve coordination and reduce the number of surprises. Compared with companies that lack a well-functioning IBP process, the average mature IBP practitioner realizes one or two additional percentage points in EBIT. Service levels are five to 20 percentage points higher. Freight costs and capital intensity are 10 to 15 percent lower—and customer delivery penalties and missed sales are 40 to 50 percent lower. IBP technology and process discipline can also make planners 10 to 20 percent more productive.

When IBP processes are set up correctly, they help companies to make and execute plans and to monitor, simulate, and adapt their strategic assumptions and choices to succeed in their markets. However, leaders must treat IBP not just as a planning-process upgrade but also as a company-wide business initiative (see sidebar “IBP in action” for a best-in-class example).

IBP in action

One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function. Beyond S&OP, the sales function forecast demand in aggregate dollar value at the category level and over short time horizons. Finance did its own projections of the quarterly P&L, and data from day-by-day execution fed back into S&OP only at the start of a new monthly cycle.

The CEO endorsed a new way of running regional P&Ls and rolling up plans to the global level. The company designed its IBP process so that all regional general managers owned the regional IBP by sponsoring the integrated decision cycles (following a global design) and by ensuring functional ownership of the decision meetings. At the global level, the COO served as tiebreaker whenever decisions—such as procurement strategies for global commodities, investments in new facilities for global product launches, or the reconfiguration of a product’s supply chain—cut across regional interests.

To enable IBP to deliver its impact, the company conducted a structured process assessment to evaluate the maturity of all inputs into IBP. It then set out to redesign, in detail, its processes for planning demand and supply, inventory strategies, parametrization, and target setting, so that IBP would work with best-practice inputs. To encourage collaboration, leaders also started to redefine the performance management system so that it included clear accountability for not only the metrics that each function controlled but also shared metrics. Finally, digital dashboards were developed to track and monitor the realization of benefits for individual functions, regional leaders, and the global IBP team.

A critical component of the IBP rollout was creating a company-wide awareness of its benefits and the leaders’ expectations for the quality of managers’ contributions and decision-making discipline. To educate and show commitment from the CEO down, this information was rolled out in a campaign of town halls and media communications to all employees. The company also set up a formal capability-building program for the leaders and participants in the IBP decision cycle.

Rolled out in every region, the new training helps people learn how to run an effective IBP cycle, to recognize the signs of good process management, and to internalize decision authority, thresholds, and escalation paths. Within a few months, the new process, led by a confident and motivated leadership team, enabled closer company-wide collaboration during tumultuous market conditions. That offset price inflation for materials (which adversely affected peers) and maintained the company’s EBITDA performance.

Our research shows that these high-maturity IBP examples are in the minority. In practice, few companies use the IBP process to support effective decision making (Exhibit 2). For two-thirds of the organizations in our data set, IBP meetings are periodic business reviews rather than an integral part of the continuous cycle of decisions and adjustments needed to keep organizations aligned with their strategic and tactical goals. Some companies delegate IBP to junior staff. The frequency of meetings averages one a month. That can make these processes especially ineffective—lacking either the senior-level participation for making consequential strategic decisions or the frequency for timely operational reactions.

Finally, most companies struggle to turn their plans into effective actions: critical metrics and responsibilities are not aligned across functions, so it’s hard to steer the business in a collaborative way. Who is responsible for the accuracy of forecasts? What steps will be taken to improve it? How about adherence to the plan? Are functions incentivized to hold excess inventory? Less than 10 percent of all companies have a performance management system that encourages the right behavior across the organization.

By contrast, at the most effective organizations, IBP meetings are all about decisions and their impact on the P&L—an impact enabled by focused metrics and incentives for collaboration. Relevant inputs (data, insights, and decision scenarios) are diligently prepared and syndicated before meetings to help decision makers make the right choices quickly and effectively. These companies support IBP by managing their short-term planning decisions prescriptively, specifying thresholds to distinguish changes immediately integrated into existing plans from day-to-day noise. Within such boundaries, real-time daily decisions are made in accordance with the objectives of the entire business, not siloed frontline functions. This responsive execution is tightly linked with the IBP process, so that the fact base is always up-to-date for the next planning iteration.

A better plan for IBP

In our experience, integrated business planning can help a business succeed in a sustainable way if three conditions are met. First, the process must be designed for the P&L owner, not individual functions in the business. Second, processes are built for purpose, not from generic best-practice templates. Finally, the people involved in the process have the authority, skills, and confidence to make relevant, consequential decisions.

Design for the P&L owner

IBP gives leaders a systematic opportunity to unlock P&L performance by coordinating strategies and tactics across traditional business functions. This doesn’t mean that IBP won’t function as a business review process, but it is more effective when focused on decisions in the interest of the whole business. An IBP process designed to help P&L owners make effective decisions as they run the company creates requirements different from those of a process owned by individual functions, such as supply chain or manufacturing.

One fundamental requirement is senior-level participation from all stakeholder functions and business areas, so that decisions can be made in every meeting. The design of the IBP cycle, including preparatory work preceding decision-making meetings, should help leaders make general decisions or resolve minor issues outside of formal milestone meetings. It should also focus the attention of P&L leaders on the most important and pressing issues. These goals can be achieved with disciplined approaches to evaluating the impact of decisions and with financial thresholds that determine what is brought to the attention of the P&L leader.

The aggregated output of the IBP process would be a full, risk-evaluated business plan covering a midterm planning horizon. This plan then becomes the only accepted and executed plan across the organization. The objective isn’t a single hard number. It is an accepted, unified view of which new products will come online and when, and how they will affect the performance of the overall portfolio. The plan will also take into account the variabilities and uncertainties of the business: demand expectations, how the company will respond to supply constraints, and so on. Layered risks and opportunities and aligned actions across stakeholders indicate how to execute the plan.

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Trade-offs arising from risks and opportunities in realizing revenues, margins, or cost objectives are determined by the P&L owner at the level where those trade-offs arise—local for local, global for global. To make this possible, data visible in real time and support for decision making in meetings are essential. This approach works best in companies with strong data governance processes and tools, which increase confidence in the objectivity of the IBP process and support for implementing the resulting decisions. In addition, senior leaders can demonstrate their commitment to the value and the standards of IBP by participating in the process, sponsoring capability-building efforts for the teams that contribute inputs to the IBP, and owning decisions and outcomes.

Fit-for-purpose process design and frequency

To make IBP a value-adding capability, the business will probably need to redesign its planning processes from a clean sheet.

First, clean sheeting IBP means that it should be considered and designed from the decision maker’s perspective. What information does a P&L owner need to make a decision on a given topic? What possible scenarios should that leader consider, and what would be their monetary and nonmonetary impact? The IBP process can standardize this information—for example, by summarizing it in templates so that the responsible parties know, up front, which data, analytics, and impact information to provide.

Second, essential inputs into IBP determine its quality. These inputs include consistency in the way planners use data, methods, and systems to make accurate forecasts, manage constraints, simulate scenarios, and close the loop from planning to the production shopfloor by optimizing schedules, monitoring adherence, and using incentives to manufacture according to plan.

Determining the frequency of the IBP cycle, and its timely integration with tactical execution processes, would also be part of this redesign. Big items—such as capacity investments and divestments, new-product introductions, and line extensions—should be reviewed regularly. Monthly reviews are typical, but a quarterly cadence may also be appropriate in situations with less frequent changes. Weekly iterations then optimize the plan in response to confirmed orders, short-term capacity constraints, or other unpredictable events. The bidirectional link between planning and execution must be strong, and investments in technology may be required to better connect them, so that they use the same data repository and have continuous-feedback loops.

Authorize consequential decision making

Finally, every IBP process step needs autonomous decision making for the problems in its scope, as well as a clear path to escalate, if necessary. The design of the process must therefore include decision-type authority, decision thresholds, and escalation paths. Capability-building interventions should support teams to ensure disciplined and effective decision making—and that means enforcing participation discipline, as well. The failure of a few key stakeholders to prioritize participation can undermine the whole process.

Decision-making autonomy is also relevant for short-term planning and execution. Success in tactical execution depends on how early a problem is identified and how quickly and effectively it is resolved. A good execution framework includes, for example, a classification of possible events, along with resolution guidelines based on root cause methodology. It should also specify the thresholds, in scope and scale of impact, for operational decision making and the escalation path if those thresholds are met.

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In addition to guidelines for decision making, the cross-functional team in charge of executing the plan needs autonomy to decide on a course of action for events outside the original plan, as well as the authority to see those actions implemented. Clear integration points between tactical execution and the IBP process protect the latter’s focus on midterm decision making and help tactical teams execute in response to immediate market needs.

An opportunity, but no ‘silver bullet’

With all the elements described above, IBP has a solid foundation to create value for a business. But IBP is no silver bullet. To achieve a top-performing supply chain combining timely and complete customer service with optimal cost and capital expenditures, companies also need mature planning and fulfillment processes using advanced systems and tools. That would include robust planning discipline and a collaboration culture covering all time horizons with appropriate processes while integrating commercial, planning, manufacturing, logistics, and sourcing organizations at all relevant levels.

As more companies implement advanced planning systems and nerve centers , the typical monthly IBP frequency might no longer be appropriate. Some companies may need to spend more time on short-term execution by increasing the frequency of planning and replanning. Others may be able to retain a quarterly IBP process, along with a robust autonomous-planning or exception engine. Already, advanced planning systems not only direct the valuable time of experts to the most critical demand and supply imbalances but also aggregate and disaggregate large volumes of data on the back end. These targeted reactions are part of a critical learning mechanism for the supply chain.

Over time, with root cause analyses and cross-functional collaboration on systemic fixes, the supply chain’s nerve center can get smarter at executing plans, separating noise from real issues, and proactively managing deviations. All this can eventually shorten IBP cycles, without the risk of overreacting to noise, and give P&L owners real-time transparency into how their decisions might affect performance.

P&L owners thinking about upgrading their S&OP or IBP processes can’t rely on textbook checklists. Instead, they can assume leadership of IBP and help their organizations turn strategies and plans into effective actions. To do so, they must sponsor IBP as a cross-functional driver of business decisions, fed by thoughtfully designed processes and aligned decision rights, as well as a performance management and capability-building system that encourages the right behavior and learning mechanisms across the organization. As integrated planning matures, supported by appropriate technology and maturing supply chain–management practices, it could shorten decision times and accelerate its impact on the business.

Elena Dumitrescu is a senior knowledge expert in McKinsey’s Toronto office, Matt Jochim is a partner in the London office, and Ali Sankur is a senior expert and associate partner in the Chicago office, where Ketan Shah is a partner.

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Why You Need a SWOT Analysis for Your Business

A SWOT analysis helps you make smart, informed business decisions.

Understanding your company’s position within your market or industry and knowing how and where you can grow is critical for any business owner. The knowledge allows you to develop your company strategically rather than wasting your efforts trying to expand into a market that doesn’t align with your business or being steamrolled by a surprise competitor. This is why it is helpful to perform a strengths, weaknesses, opportunities and threats (SWOT) analysis to assess where you are now and how you can improve.

What is a SWOT analysis?

A SWOT analysis is a type of analysis that helps you develop your business strategy by comparing internal factors (strengths and weaknesses) against external factors (opportunities and threats). Examples of internal factors include things that you have control over and can change, such as your staff or your intellectual property. External factors are things that you cannot control, such as consumer trends or competitors.

A SWOT analysis has four quadrants:

The analysis provides you with an accurate picture of what your business is currently doing well and how it can improve.

“[A SWOT analysis] gives you a firm grasp of what is affecting your business internally and externally,” said Lynne Pratt, creative content expert. “By carefully evaluating the analysis, a business can find new ways of progressing and achieving growth .”

Why should you do a SWOT analysis?

Every company, no matter its size, should do a SWOT analysis periodically. It is a crucial strategic tool that will reveal problems that need to be fixed, strengths that need to be capitalized on, potential threats that need to be mitigated and opportunities for growth.

Unbiased, big-picture look at the company

Sometimes, it’s hard to see the big picture when you are involved in the day-to-day operations of a company. A SWOT analysis gives you a detailed, unbiased overview of your business as a whole or a specific product or campaign. By involving a variety of stakeholders, you get a perspective that you might not have gotten as an individual or small group of executives.

Help with overall company direction or project feasibility

It can also help train your brain to consider every factor that could affect your project or business. When you’re facing a tough issue or if you’re just unsure of your current strategy, a SWOT analysis illuminates details so you can formulate actionable plans based on each of the four quadrants.

For example, if you were considering opening a new location for your business, you could run a SWOT analysis to see if you are in a good position to do so. You could also use it to identify outside factors that you will need to plan for.

Preparation for the future

The threats portions, in particular, can help you see and overcome any possible problems, either competitive or market-based, so that you can prepare a proactive initiative. For example, if you find out that a competitor has improved its technology, you can work on similarly upgrading your own. In the early stages of the pandemic, restaurants that did a SWOT analysis could identify the threat of fewer customers opting to dine in and change their strategy to focus on takeout and delivery sooner.

“A SWOT analysis is useful so that you don’t get caught entirely off-guard,” said David LaVine, founder of RocLogic Marketing. “You [should] do a SWOT analysis for each application area you’re considering operating in.”

“We conduct [analyses] every six months as a rule in our business,” said Alistair Dodds, marketing director and co-founder of Ever Increasing Circles. “They act as a great check on how the competition has evolved in that time period.” [Discover seven effective ways to differentiate your product .]

Marketing and sales focus

Although many of your company’s strengths should be known, you may discover one you hadn’t considered before or even something that might be new. Perhaps you have reached some threshold in revenue, sales, five-star reviews or customers that you can now use in your sales and marketing efforts. For example, a customer threshold might result in a marketing campaign with a headline of, “1 million customers have trusted Company X. Won’t you?”

Who should conduct a SWOT analysis?

A SWOT analysis should be a collaborative effort between several levels of employment within your company. Founders and leaders should be the most closely involved but, to gain a true picture of your business, gather input from a group of people that can contribute several perspectives.

“It’s vital to go through your analysis with key stakeholders,” said Dodds. “When you identify weaknesses, it’s a great time to get other department heads and staff to suggest solutions — you’ll be amazed at the creativity and problem-solving inherent in your team if they are given the opportunity [for] input.”

If you’re a solo operation, ask close friends or related professionals, such as your accountant, lawyer or advisor, for input. Having plenty of outside perspectives helps make your analysis as well-rounded and objective as possible.

How to do a SWOT analysis

The first step of a SWOT analysis is to create your grid. Start with strengths in the upper left corner, then weaknesses in the upper right corner, opportunities in the bottom left and threats at the bottom right of the grid.

Next, fill in each quadrant. An easy way to do this is to ask yourself questions that apply to each box. Here are some suggestions.

What do you do well?
What unique skills or services do you have?
What experiences do you have that can help you achieve your goal?
What expertise, knowledge or other intellectual property do you have?
What do you do better than your competitors?
Where are you most profitable? Why?
What aspects of your business could hinder your progress?
What skills or resources are you lacking?
What is costing you money?
Is there anything you feel like you’re failing at?

Opportunities

What can you improve?
What external conditions can help you achieve your business goals? [Related article: Tips for Setting Better Business Goals ]
Are there new audiences you could potentially reach?
Is there technology you could use to enhance your business?
Can you do more for your existing customers?
Where or how could you expand your business?
What external conditions could damage your progress or performance?
What do your competitors do well?
What are your competitors doing that you are not?
What is going on in your industry?
What is happening (or could happen) in the economy that could harm your business?
Are there new competitors in your market?
Is your target audience shrinking?

Here are some additional points to consider as you fill in your quadrants:

Your quadrants do not have to be perfect — you can always create multiple drafts of your analysis, editing what you have filled in as you go. Host a brainstorming meeting to complete your first draft.

After you have filled in the quadrants, review each quadrant and evaluate your results.

In preparation for these conversations, review some of the most important terms for business owners to enhance your ability to assess each area of the SWOT analysis and brainstorm solutions.

How to evaluate your results

Once you complete your SWOT grid, you need to analyze the information you’ve collected. Here are a few things to consider.

Capitalize on your strengths

To evaluate your SWOT analysis effectively, start with your strengths and don’t brush them off, said Pratt. “You might feel that because you’ve got these nailed down that you don’t need to do anything with them, but this is wrong,” she said. “There is always room for improvement and working on your strengths, as well as [with] the [other quadrants], will help them remain your strengths”:

Rank your strengths from strongest to weakest.
Focus on using your strongest points to drive marketing and sales.
Bolster your weaker strengths by implementing improvements.

Address your weaknesses

Next, look at your weaknesses and identify which aspects of your business each weakness is related to. For example, do you need to boost customer retention by better training your staff? Or is location and/or competition the problem? “Identify where the problem is coming from so you can begin to plan to address it,” said Pratt.

Identify the sources of each weakness.
Change of policy
Improve company culture and leadership
Increase investment
Hire/fire employees
Improve marketing or sales messages
Secure business capital from investment or lender
Change your suppliers or renegotiate terms with them

Pivot to defeat threats

You can also see which of your threats are related to your weaknesses and if any of them are caused by something you can change. Try to connect your strengths to ways you can combat threats:

Competitors are gaining market share : Determine why this is happening. Do they have a more compelling message, a lower price or better product? Then, take steps to combat whatever issue is occurring. [Related article: Ahead of the Pack: 8 Ways to Keep Your Business Competitive ]
Competitors are bigger or have more money : Look to find additional funding to grow your company or position your small business as a place that provides better quality or customer service. You can also invest in clever guerilla marketing to attract attention.
Economy is getting worse : Find ways to lower your prices, introduce a lower-priced version of your current product or shift marketing to higher-income customers.
Product is becoming obsolete : Improve or change your product to fulfill customers’ changing needs.
Material cost is increasing : Look for new suppliers or new materials and raise prices if necessary.
New government regulations : Assess any additional costs and possibly raise prices, change processes or pressure suppliers to comply.

Take advantage of opportunities

Finally, consider whether there are time constraints that could impact your opportunities. Are any of them short-term or seasonal? If so, make it a priority to hit those opportunities first and create an action plan for taking advantage of them.

Nathan Thompson, e-commerce and growth lead at The Others Beauty Co., said his company splits their business opportunities into short-, mid- and long-term goals. They set deadlines for each goal to ensure it gets done. “SWOT results should be analyzed and evaluated in order of actionability,” he said. “Having deadlines set for each milestone ensures accountability for all parties.”

Organize opportunities by timeliness and budget.
Identify the opportunities that will have the biggest positive impact on the company.
Use this criterion to decide where to focus your resources first.

A sample of SWOT in action

To see how SWOT analysis works, consider this example:

Soft-Touch makes pads that attach by Velcro to the plastic face mask worn by sleep apnea sufferers to help them breathe while they sleep. The company founder herself has sleep apnea and she developed the product to increase the comfort of wearing the mask and to eliminate the marks it left on her face the following morning.

The company has largely grown its sales through word-of-mouth. A major sleep apnea equipment maker wants Soft-Touch to supply the pads for all of its masks. To satisfy the increased demand, Soft-Touch would have to outsource its manufacturing.

Here is a sample SWOT analysis for Soft-Touch as they consider this opportunity:

Notice that the SWOT analysis doesn’t provide an answer. Instead, it provides a framework to help formulate an answer and allows you to see exactly what the opportunities are (an expanded market share and increased revenue), what weaknesses currently limit the company (lack of funding and marketing expertise, limited manufacturing capacity), its current strengths (unique proposition and trusted brand) and the threats it could face if it takes the opportunity (less control and need for financing).

“Taking time to think strategically will lead to ways you can streamline to get more done as well as take your business into new directions that can benefit (or even save) the company,” said Joshua Ladick, president and founder of GSA Focus.

Remember that your SWOT analysis is only a starting point, not an actionable plan. “Don’t confuse SWOT for strategy,” said Greg Githens, executive and leadership coach at Catalyst & Cadre. You are still responsible for developing a strategy that will take you from where you are to where you want to be, and SWOT provides a roadmap for that strategy.

Jennifer Dublino and Sean Peek contributed to this article. Source interviews were conducted for a previous version of this article.

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The importance of succession planning and legacy in your family business

Family businesses and their legacies are established on hard work and family values. In most cases, building the family business is about more than just making money; it’s about creating a long lasting impact within their industry and their communities.

In Australia, only 12 per cent of family businesses make it to the third generation. This tells us work is required in facilitating family business conversations and educating the people within the business to ensure sustainable business continuity with the intention of positively impacting their communities.

The Grant Thornton Australia family business survey showcased a real shift in mindset from the second to third generation. Often, first and second-generation family businesses consider themselves owners, but once the business shifts to third and fourth generation, the mindset shifts to stewardship. In the third generation, the family expresses a desire to contribute to the community, while in the fourth generation, they are focused on establishing a sustainable legacy, lasting many generations.

Taking the first steps

When you’re undertaking the daily tasks in your family business, sometimes thinking about the future and generational success can be the last thing on your mind. But what if you could take small steps to ensure your family business will continue and grow for generations to come?

Identify future leaders

It’s critical to identify your future leaders in the business. Successful leaders can come in every form; they are visionary, strategic, adaptable, resilient and have a strong commitment to the family values and effective governance within the business.

Clear, concise and open communication

The key to sustainable business continuity in family business is communication. It’s important to communicate clearly and openly. Sometimes in a family business you must deliver difficult news, but that’s not a reason to shy away from having the conversation. If people aren’t communicated with clearly, there is a risk of making assumptions and creating distrust amongst family members.

Sometimes family communication can be emotional. It’s different to business communication observed in conversations with customers or suppliers. Maintaining professional communication is crucial due to the stakeholders involved. It is important family members have the same conversations when family and business overlaps.

Engaging an external facilitator

An external facilitator can help with taking those first steps when it comes to having insightful and constructive conversations amongst family members. They assist to navigate sensitive topics, mediate conflicts, and ensure all voices are heard. By fostering open communication, facilitators aid in aligning family members on shared goals and values.

Align Estate Planning

Aligning your estate plan and succession plan is critical for long lasting success. Often, family businesses will have both, but they’re not created in synergy. Not only does it ensure continuity and reduces conflict within the business, but covers tax efficiency, protection of assets and legal compliance. Both plans should reflect the same goals and clear vision for the business now and into the future.

So, how do you create legacy after taking the first steps?

In the journey of sustaining a family business across generations, it's essential to have a guiding framework to encapsulate the core principles and strategies that contribute to its longevity and success.

The LEGACY acronym provides a structured approach to ensure your family business not only thrives in the present but also preserves its essence for the future generations. Exploration of the LEGACY elements that are pivotal for enduring family business continuity.

An aligned family vision is crucial to business sustainability.

The setting of family values are essential to providing the family ethical guideline in their decision making.

An independent facilitator adds enormous value to family meetings.

A sustainable business plans to be in business for the long-term, so they need to be able to adapt to new situations and changing conditions.

Clear and concise communication between the generations is key.

The future of any family business is in the Rising Generation.

Subscribe now to be kept up-to-date with timely and relevant insights, unique to the nature of your business, your areas of interest and the industry in which you operate.

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Business, Academic & Research Continuity (BARC)

Knowing what to do when something goes wrong that could affect the ability to hold classes, provide services or conduct research is the heart of Business, Academic & Research continuity at the University of Washington.

Through the process of continuity planning, your unit can explore the key responsibilities you have, what you rely on to meet those responsibilities and how to plan workarounds.

Plans help prepare departments for a variety of challenges — from building flooding caused by a broken pipe to a cyberattack and challenges we haven’t even thought of yet.

Contact BARC

Jim Tritten Continuity & Resiliency Program Manager [email protected]

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Current Husky Ready users: Login to Husky Ready

At this time, BARC is not adding additional users to Husky Ready because the platform will be updated to a newer version. To request access when the new version of Husky Ready is available, email [email protected]

This Is What Harris and Trump Are Promising to Do to Help Small Businesses

One of the most important issues to voters in this election cycle is the economy. One aspect of that is the small business sector. These are the plans of the two candidates for small businesses. When comparing the two economic plans, Alex Beene, the Financial Literacy teacher at the University of Tennessee at Martin said, “When it comes to encouraging small business growth, both campaigns are making significant attempts to gain the votes of those who have either recently started or plan to start a business.”

#1 Kamala’s Plan

Kamala Harris | Sen. Kamala Harris Speaks At Her Alma Mater Howard University

On her economic strategy, Vice President Kamala Harris said, “As President, one of my highest priorities will be to strengthen America’s small business. So first, we’re gonna help more small businesses and innovators get off the ground.” Vice President Harris has a goal to receive 25 million new small business applications over the course of her first term. That is a lofty goal, and she has specific plans to achieve that.

#2 Kamala’s Tax Deduction

According to Shavon J. Smith, a Washington-based business attorney, it costs the average small business owner around $40,000 to launch and support that business in the first year. This is a large hurdle for many potential entrepreneurs. To combat this issue, Vice President Harris wants to increase the tax deduction for small businesses to $50,000, rather than the current tax deduction of $5,000. Businesses would be able to claim this deduction until they turn a profit. She also plans to provide zero-interest and low-interest loans to established small businesses that want to expand.

#3 On the Tax Credit

“Expanding this tax credit would make [ starting a small business] more affordable, helping get more businesses started and making it more likely to survive that crucial first year,” Mark Zandi, the Chief Economist at Moody’s Analytics, told USA Today. This plan is estimated to increase America’s debt by $1.4 trillion over the next 10 years.

#4 Increasing Small Business Support

Vice President Harris also wants the federal government to increase directly supporting small businesses by spending 1/3rd (33.33%) of all contract dollars employing them rather than the current 27.2%. Another expense for business owners, small and large, is inflation on materials and other goods. Vice President Harris says she is going to crack down on corporate price gouging to address artificial inflation on goods.

#5 Trump’s Economic Plan

Former President Donald Trump doesn’t have a plan specific to small businesses. Rather, he has a general economic plan that would affect all businesses . Of Trump’s plan, Gene Marks of the small-business consulting firm, The Marks Group said, “Will a Trump presidency be good for a typical small business? It depends on the business, its industry, and its location; we live in a big country with a giant economy, so one can’t always generalize.”

#6 Increasing Tariffs

Former President Trump wants to increase tariffs on imports. He says that he will increase tariffs by as much as 10–20% on foreign countries that he says have been, “ripping us off for years.” For China specifically, he wants to increase the tariffs as high as 60 percent on imported goods. Zandi believes that these higher tariffs could drive up costs for both consumers and companies.

#7 The Impact of Tariffs

Marks also told The Hill, “Businesses that rely on overseas suppliers, particularly those in China are going to struggle. Trump will move to further increase tariffs on many Chinese imports and probably will do the same for other countries where he perceives that America is on the short end (or countries he just doesn’t like- sorry, Canada).”He went on to say that many studies have shown that the tariff increases during Trump’s first term were detrimental to several industries. This would increase core material costs for a ton of industries.

#8 General Tax Cuts

Trump also plans to implement an across-the-board tax cut. He wants to reduce the tax rate for companies that produce within the United States to 12% from 15%. These tax cuts are estimated to add $3.6 trillion to the national debt over the next 10 years. In regards to Trump’s broad sweeping tax cuts, Kevin Thompson, Founder and Finance Expert at 9i Capital Group said, “Trump tax cuts will help corporations and support business, while likely making the USA more alluring for business. Yet, this does nothing to help offset major government issues such as deficit spending. This will ultimately create a larger deficit due to bringing in less money.”

#9 Immigration Crackdown

Another point in his plan is to crack down on Immigration and conduct a mass deportation of undocumented workers, including employed skilled workers. It is the opinion of most economists that this would do a lot of damage to businesses and production in America. Many companies in most sectors rely on undocumented skilled workers.

#10 Trump’s Inflation Plan

In regards to reducing inflation, Former President Trump says he will, “sign an executive order directing every cabinet secretary and agency head to use every tool and authority at their disposal to defeat inflation and bring consumer prices rapidly down.” In response to this strategy, Mark Zandi said, “Trump’s plan would increase inflation.” He explains that it would lead to a diminished economy with slower growth, higher unemployment rates, higher inflation rates, and ultimately higher deficits and debts.

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A guide to fleet route optimization: how it helps businesses

Published : September 18, 2024

If you’ve ever missed a turn at the end of a long day and had to take the long way home, you know how important the right route is. Ending up on a longer or slower route can be bad enough when it’s just one trip. For businesses with a whole fleet of drivers to manage , the stakes of choosing the right route for each one every time are much higher. That makes fleet route optimization an important strategic concern.

What is route optimization?

Route optimization is the practice of finding the most efficient, cost-effective route by considering a variety of factors like distance, traffic conditions, weather predictions, and fuel use. Individuals practice route optimization every day when they open Waze or Google Maps, and businesses use it on a wider scale with fleets of vehicles and drivers to optimize routes for.

The importance of route optimization for businesses

For businesses with many drivers and trips to manage, route optimization is much more complicated than determining the best way to get from point A to point B. You may be planning routes for dozens of drivers who each make multiple stops a day.

In that context, route optimization only becomes more valuable. Investing in fleet route optimization can produce a few main benefits:

Saving money : When you optimize routes, you can cut down on unnecessary driving and reduce how often vehicles sit stalled in traffic. That can substantially lower fuel costs and reduce wear and tear on vehicles.

Saving time : Efficient routes can help drivers get where they’re going faster. That saves them time, which saves the company even more money in labor costs.

Improving the driver experience : Commercial driving is hard work. Better routes that involve fewer stressors (like construction and traffic) make the job easier, which can considerably improve the experience of driving.

Improving the customer experience : For e-commerce businesses, route optimization can help provide more accurate ETAs (estimated times of arrival) and get deliveries out faster. The delivery experience is directly related to customer satisfaction—a recent Uber Eats report found that 94% of consumers are more likely to order again from a brand after a good delivery experience.

Reducing your environmental impact : Route efficiency helps minimize fuel consumption, shrinking your environmental footprint and aiding in any sustainability goals your company has made.

Route optimization software: an overview

With all the complex considerations that go into route optimization, trying to map out routes manually is an uphill battle. Route optimization software can simplify the work of route optimization while improving results.

What is route optimization software?

Route optimization software is a type of technology product specifically designed to help businesses identify the best route. The technology can analyze the many factors—from road conditions to weather concerns and current construction projects to a city’s rush hour—that you want to weigh when mapping out the best routes for the day.

The benefits of route optimization software

For small and big businesses alike, route optimization software has a lot to offer. The right product:

Works fast, even at scale : A person analyzing conditions and mapping out routes will need a lot of time for the task. And the more drivers and stops they have to factor in, the longer route planning will take. Software can tackle the same challenge much more quickly, even when optimizing routes for large fleets.
Enables flexible planning : That speed comes in handy when something changes suddenly. When a driver calls in sick, new deliveries get added to the schedule at the last minute, or an unexpected traffic jam forms, the software can quickly and easily make updates. Some route monitoring products can even recognize these challenges and make updates in real time, when a driver is already on the road.
Offers real-time monitoring : Some route optimization products will let you track drivers on a map as they move. That keeps dispatchers and managers in the loop, and it helps make sure you can step in quicker if something goes wrong.

Features to look for in a route optimization software product

Businesses interested in fleet route optimization will want software that offers powerful enough features for your needs. Some of the top functionalities to search for include:

Scalability and customization

Part of what makes business route optimization so complex is the number of drivers and stops you’ll need to manage. Look for a software product that can handle route planning for not just the number of drivers you have now but also the number you may grow to have in the months and years to come.

Also consider the variables that are most important to you in route optimization and make sure the product can satisfy your needs. Some businesses may consider their top priority getting deliveries out within a specific time window, while others may want to weigh sustainability factors higher. Make sure the product you choose can accommodate your priorities.

Real-time traffic and weather updates

The best-laid plans (or best-planned routes, in this case) are always at risk of going awry due to unforeseen circumstances. Many route optimization products can track traffic and weather conditions in real time and update routes accordingly. Live updates can make a huge difference in how often drivers no longer get stuck in traffic jams or surprise storms—improving their experience and reducing your costs and environmental impact.

Real-time monitoring

Monitoring in real time helps you not only adjust routes dynamically, based on current traffic conditions and other delays, but also keep your dispatchers and logistics team informed about where your drivers are at all times. Whenever a driver falls behind schedule, the team can take steps to address it right away to avoid disruptions. And for deliveries to customers, real-time monitoring helps you improve their experience by keeping them in the loop as well. In the Uber Eats report , 82% of consumers said they wish they could track their orders in real time better.

Integration capabilities

Anytime you add new software to your tech stack, you want to make sure it will work well with the products you already depend on. For a fleet route optimization tool, you’ll especially want to confirm that it will integrate with your fleet management system (if you have one now or plan to get one).

Fleet management software helps monitor vehicles and provide guidance and analytics on vehicle needs and driver performance. When the 2 product types are integrated, you can gain a fuller picture of how route options affect things like fuel use, vehicle conditions, and driver behavior. That can help you make more strategic decisions moving forward.

Strategies to reduce idle time

The moments when your cars aren’t moving are the bane of fleet efficiency , wasting valuable fuel and time and worsening a driver’s experience. Combining route optimization with these other tips can help you cut down on all that inefficiency:

Schedule efficiently : Route optimization software can help you schedule trips for times when drivers are less likely to get stuck in traffic or spend much idle time at lights.
Monitor in real time : Technology that collects live data can help you adjust routes and schedules dynamically as road and weather conditions change.
Offer driver training and incentives : Driver behavior has a key role to play here. Provide drivers ample training on best practices for safely reducing idle time, and consider incentives for maintaining efficient routes and driving habits.
Partner up : When it comes to commercial driving, balancing efficiency with safety can be tricky. You want to ensure that your drivers can get enough rest to do their jobs effectively without putting themselves (and your vehicles and others on the road) at risk. Partnering with Central from Uber to supplement some of your transportation needs and/or help get your drivers home at the end of a long day can reduce their time behind the wheel. That’s safer for them and helps you further improve the driver experience.

Optimizing fuel consumption

In a survey of fleet managers, Expert Market recently found the cost of fuel to be the biggest operational challenge facing fleets. On top of the financial cost, using fuel is also a factor in meeting corporate sustainability goals . Below are some tips to consider to keep fuel usage down.

Use eco driving practices : Train and incentivize your drivers to practice behaviors that reduce fuel consumption, such as smooth acceleration, keeping a steady speed, and minimizing braking. You can also reduce fuel use by using smaller vehicles for trips that don’t require large ones. For instance, drivers may need to use a big truck for deliveries, but you could hire them a ride in a small car to get home afterward.
Maintain vehicles : Proactive maintenance isn’t just useful to help avoid a vehicle breaking down in the middle of a trip; it can also improve fuel efficiency. Aim to stay on top of maintaining tire pressure and oil levels and performing regular tune-ups.
Plan routes for fuel efficiency : Strategic route planning to help avoid unnecessary driving, congestion, and detours can reduce fuel usage and save time and money.

Incorporate Central for enhanced efficiency

Taking an efficient, strategic approach to fleet route planning can reduce costs, improve your environmental impact, and boost driver job satisfaction. You can take those efforts one step further by partnering with Central .

This dashboard from Uber can help you supplement your current fleet with easy, eco-friendly local rides. For those whose main job is driving, giving them a break from having to drive themselves to and from their main workplace, home, training sessions, and/or lodgings is a meaningful benefit. It helps them get the rest they need to drive more safely and efficiently when on the clock. Plus, Central helps you tap into an additional network of cars and drivers you can use to supplement your own fleet. When your drivers are overwhelmed, outsourcing some rides and deliveries can help reduce the pressure on them.

Central makes it easy to schedule rides in advance, monitor trips in real time, and keep track of the environmental impact of your rides. Explore how to expand your fleet management options with Central today.

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IMAGES

The Importance of a Business Plan
Why is Strategic Planning Important for Your Business?
How important is planning?
12 Key Elements of a Business Plan (Top Components Explained)
10 Reasons Why a Business Plan important in your business?
Why Business Planning Is Important?

VIDEO

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What is business planning and how to plan it// business
Business Planning Is Important
Planning
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COMMENTS

14 Critical Reasons Why You Need a Business Plan
Build a strategy. 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.
What is a Business Plan? Definition, Tips, and Templates
Purposes of a Business Plan. In an era where 48% of businesses survive half a decade on, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success. Here's why I think a business plan is important: 1. Securing Financing From Investors
Business Planning: It's Importance, Types and Key Elements
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.
11 Important Business Plan Benefits & Purposes
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 ...
The Importance of Business Plan: 5 Key Reasons
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.
6 Reasons You Really Need to Write A Business Plan
Six Reasons You Really Need To Write a Business Plan. Legitimize your business idea. Give your business a foundation for success. Obtain funding and investments. Hire the right people. Communicate your needs. It makes it easier to sell your business. 1. Legitimize your business idea.
What is a Business Plan? Definition + Resources
A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. But the reality can be more nuanced - it depends on the stage a business is in, or the type of business plan being written. Ideal times to write a business plan include: When you have an idea for a ...
How To Write A Business Plan (2024 Guide)
The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit in the current market or are ...
Write your business plan
A good business plan guides you through each stage of starting and managing your business. You'll use your business plan as a roadmap for how to structure, run, and grow your new business. It's a way to think through the key elements of your business. Business plans can help you get funding or bring on new business partners.
Business Plan: What It Is, What's Included, and How to Write One
Key Takeaways. A business plan is a document detailing a company's business activities and strategies for achieving its goals. Startup companies use business plans to launch their venture and to ...
What is a Business Plan and Why is it Important?
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 ...
The importance of a business plan
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 ...
Why Your Business-Planning Process Is More Important Than The ...
Wait another three months for your meeting with the CFO, and maybe you can get it approved.". I believe the most important part of writing a business plan is the process, not the plan itself ...
How to Write a Business Plan for a Small Business
A simple, step-by-step guide to write a business plan for small businesses with real-world examples and a free downloadable business plan template. ... Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans. The longer your plan is, the less likely people are to read it.
Why Every Entrepreneur Needs A Business Plan
In business, you do not want to wing it. You want a plan -- a document that lays out the path of your company for the next three to five years so you can see the route to your goals and know ...
The Undeniable Importance of a Business Plan
Expert opinions support the four following conclusions: 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.
5 reasons you need a business plan
While these are all very important steps to take, a business plan will be central to how you start, grow and develop your business. Here are 5 reasons why you need a business plan: 1. It will help you steer your business as you start and grow. Think of a business plan as a GPS to get your business going. A good business plan guides you through ...
12 Reasons You Need a Business Plan
10. Have all the information in your plan when you're ready to sell. Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and ...
Research: Writing a Business Plan Makes Your Startup More Likely to Succeed
Research: Writing a Business Plan Makes Your Startup More Likely to Succeed. Summary. When asked about an opponent's plan for their impending fight, former world heavyweight champion Mike Tyson ...
The Importance of a Business Plan for Entrepreneurs: 18 ...
A business plan is essential as an entrepreneur. It helps you set clear goals and guidelines for how you will manage your business. A business plan may also be needed to set employee goals, obtain funding or even to sell your business one day. In this article, we discuss the importance of a business plan for entrepreneurs, as well as a few main ...
Nine reasons why you need a business plan
Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals. 3. Reduce potential risks. Prevent your business from falling victim to unexpected dangers by researching before you break ground.
Do You Really Need a Business Plan?
A business plan is a very important and strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed, but it also helps them to achieve short-term and long-term objectives. Benjamin Franklin once said, "If you fail to plan, you are planning to ...
The transformative power of integrated business planning
One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function.
Why SWOT Analysis Is Important for Small Businesses
In preparation for these conversations, review some of the most important terms for business owners to enhance your ability to assess each area of the SWOT analysis and brainstorm solutions. Tip ... Your Guide to Creating a Small Business Marketing Plan. Marketing Fail: 5 Customers Who Want to Destroy Your Business. The Shocking Truth: Why ...
The importance of succession planning and legacy in your family business
Aligning your estate plan and succession plan is critical for long lasting success. Often, family businesses will have both, but they're not created in synergy. Not only does it ensure continuity and reduces conflict within the business, but covers tax efficiency, protection of assets and legal compliance.
Business, Academic & Research Continuity (BARC)
Through the process of continuity planning, your unit can explore the key responsibilities you have, what you rely on to meet those responsibilities and how to plan workarounds. Plans help prepare departments for a variety of challenges — from building flooding caused by a broken pipe to a cyberattack and challenges we haven't even thought ...
This Is What Harris and Trump Are Promising to Do to Help Small
One of the most important issues to voters in this election cycle is the economy. One aspect of that is the small business sector. These are the plans of the two candidates for small businesses.
A Guide to Fleet Route Optimization
The importance of route optimization for businesses. For businesses with many drivers and trips to manage, route optimization is much more complicated than determining the best way to get from point A to point B. You may be planning routes for dozens of drivers who each make multiple stops a day.

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What Is Meant by Business Planning?

What Are the 4 Types of Business Plans?

Operational Planning

Strategic Planning

Tactical Planning

Contingency Planning

What Are the 7 Steps of a Business Plan?

Conduct Research

Have a Goal

Create a Company Profile

Describe the Company in Detail

Create a marketing plan ahead of time.

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

Incorporate Your Motivation

What Are the Basic Steps in Business Planning?

Summary and Objectives

Services and Products

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1. Validate Your Business Idea

2. Set and Track Goals

3. Take Action

4. Manage Resources

5. Make Decisions

6. Manage Risk

7. Communicate Internally

8. Communicate Externally

9. Secure Funding

10. Grow and Change

Related Questions

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

Business Plan Importance: Why is business plan important?

Resources for Your Growing Business

What Is a Business Plan?

1. To Secure Funding

2. Set and Communicate Goals

3. Prove Viability in the Market

4. They Help Owners Avoid Failure

5. Business Plans Reduce Risk

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6 Reasons You Really Need to Write A Business Plan

What is a business plan, and why does it matter?

Six Reasons You Really Need To Write a Business Plan

1. Legitimize your business idea.

2. Give your business a foundation for success.

3. Obtain funding and investments.

4. Hire the right people.

5. Communicate your needs.

6. It makes it easier to sell your business.

A Business Plan Is Essential

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What Is a Business Plan?

Key Takeaways

2 Types of Business Plans

Why Do Business Plans Fail?

How Often Should a Business Plan Be Updated?

What Does a Lean Startup Business Plan Include?

What is a Business Plan and Why is it Important?

Building an asset management business plan

Creating a marketing strategy