why business plan is not important

A business journal from the Wharton School of the University of Pennsylvania

Knowledge at Wharton Podcast

Why creating a business plan is a ‘waste of time’, may 24, 2018 • 23 min listen.

What entrepreneurs need is flexibility and innovation -- not a traditional business plan -- says economist and author Carl Schramm.

Economist and author Carl Schramm discusses his new book, 'Burn the Business Plan.'

The following is an edited transcript of the conversation.

Knowledge at Wharton: Why is a business plan unnecessary?

Carl Schramm: It’s the basis of much of the teaching about how to start a business, and so much of what’s taught is basically conjecture. My book is developed off 10 years of research that we did at the Kauffman Foundation. If you look at all our older major corporations  — U.S. Steel, General Electric, IBM, American Airlines — and then you look at our newer companies like Amazon, Apple, Facebook, Microsoft, none of these companies ever had a business plan before they got started. Empirically, it appears as if you don’t need a business plan.

Second, the business planning process is largely generated as a preview for venture capital. As I show in my book, from empirical studies, much less than 1% of all new startups ever see a venture capitalist. Much less than 1% of all new companies every year have venture backing of any kind. So, I largely view the creation of a business plan as something of a waste of time.

The third problem is that it seems to make starting a business somewhat like a cookbook. If you do this, and then you do this, and then you do this, the cake will come out okay. And that’s really not how it happens.

“Empirically, it appears as if you don’t need a business plan.”

Knowledge at Wharton: Let’s talk about age because many entrepreneurs are in their late 30s or 40s. These are people who made a shift in their career paths.

Schramm: Precisely. It goes to this question of, “What are we doing when we’re trying to teach high school kids?” Even grammar school children get courses and exposure to entrepreneurship. At the university level, it’s now a major in probably 3,000 colleges and universities. And the whole schema, including the notion of a business plan as the formal way to teach how to start a business in a college classroom, is geared to 20-year-olds.

Much of our mythology is that unicorn companies are started by people, like Mark Zuckerberg, who are in their 20s. But the reality is, the vast majority of people who start businesses are middle-career people who have been surprised by the fact that they actually had an idea, and their idea was good enough to build a business around.

Another thing wrong with how we write about entrepreneurship, how it’s taught, is that somehow people set out to be entrepreneurs as if they set out to be a dentist or an accountant. The vast majority of entrepreneurs were really amazed to find out that they became an entrepreneur. In my case, I was a professor at Johns Hopkins for 15 years, and then one day my research sort of slapped me in the face. I said, “Holy smokes, if I want to really make this work and actually change the world, I can’t do it by writing an academic paper. I have to start a business.”

Knowledge at Wharton: How should we teach our kids about entrepreneurship?

Schramm: I don’t think [the current curriculum] can be tweaked. I think it should be abandoned. I think it should be overthrown. Because if you look empirically at where entrepreneurs come from, if they have formal training, it’s not in entrepreneurship. It’s in engineering or the STEM subjects, the technical subjects.

Many, many more entrepreneurs come out of MIT because it’s an engineering and a technical school. Same thing for Caltech. Caltech doesn’t even teach entrepreneurship. At MIT, there’s one professor in the business program there who teaches entrepreneurship. But it doesn’t matter because if they didn’t teach it at all, these schools would be producing many, many new businesses all the time.

Knowledge at Wharton: You said not much funding comes from venture capitalists or angel investors. How are entrepreneurs getting the money they need to execute their ideas?

Schramm: One reason people can become entrepreneurs at midlife is they turn to their own savings, their own assets, to friends and families for loans. By the time you’re 40, which is the average age at which people start businesses, you’ve settled your student debt. You’ve got a house. You’re likely to have a spouse who has a job, which is a huge protection if you start a new company because she or he has health insurance and other benefits. So, most companies are self-funded.

Knowledge at Wharton: In the book, you also talk about the incubator. But you think the incubator isn’t having the desired effect that a lot of people are hoping for. Can you explain?

Schramm: Again, empirically, very few companies come out of these incubators. I was trained as a labor economist. I’m in the middle of writing an essay about incubators, and the premise is that as we turn towards 3% and 4% GDP, and much lower rates of unemployment and much higher demand for well-trained people, no one is going to want to spend time in an incubator. They can get a job. And that’s a really important part of the drama of becoming an entrepreneur.

In the book, I make the case that the most effective place to learn how to be entrepreneurial is to go into a big company. That’s where you see innovation happen. More innovation happens in big companies than, for example, university laboratories. It’s also where you learn all the skills that make a business work, where you’re exposed to what scale looks like in a business. This is critical and this is experiential knowledge. You can’t teach scale in a classroom. It has to be felt. You have to see it, to experience it.

“The vast majority of people who start businesses are middle-career people.”

Knowledge at Wharton: You give real-world examples in the book, including the story about vacuum cleaning company Dyson.

Schramm: Yes, Dyson is a fantastic story. James Dyson was an industrial designer by background, and he came to the view that vacuum cleaners had been a technology that hadn’t moved very far. He was using a vacuum cleaner and noticed that the more you used it, and the dirtier the dustbin got, the less power it had. This became the question that triggered his search.

Dyson built over 1,000 prototypes. He quit his job. His wife was a teacher, and he lived off a much more modest income. His wife did all the money-earning in the family. When he began to push his product out, no companies in the United States or England wanted any part of it. They resisted it because they were making a lot of money on selling paper bags for conventional, old-fashioned vacuum cleaners. He had to take it to Japan. When it became successful in Japan, American and British companies tried to steal his design. He successfully defended against that.

The best part of Dyson’s story is he never had outside investors. [Dyson] never wanted to be a public company. It’s a huge company now. He’s like most entrepreneurs. If your idea clicks and you can make it work, and you haven’t taken your company public — that is, you still control it — you’re going to work there for the rest of your life. They become places where your own creativity works, and you can keep at it. You can keep designing. Really, it becomes your life.

It’s an important point, particularly for people who are in higher education. Students in universities are programmed to think that somehow people who work in the government or in nonprofit or NGOs are somehow more creative. They’re like the people who take art and art history and design in college, or people who write music. They’re a different breed, and they’re really geniuses.

The reality is that 95% of kids graduating from college this year are going to work in companies. They’re not not creative. Look at our huge economy. That all happens because of people who are creative and gifted in business and the invention of things that help other people. And [taking] these things to market [requires] very, very creative skills.

Knowledge at Wharton: Would you say that passion and determination are two of the great qualities that a lot of entrepreneurs have?

Schramm: Yes, it’s true. Students in college are told to follow your passion and start a company. But a lot of times, the passion doesn’t make any sense. I’ve seen students who are passionate about having a web app for frying pans. I sort of make fun of it in the book. I’ve judged business plan competitions at the college level and seen the same idea come up five times. Invent a sensor for a frying pan, and it tells you on your phone when your eggs are cooked. Kids are passionate about that, but it’s not an idea that’s ever going to work. They’re making the simplicity of cooking an egg into a complex technical project.

Passion really clicks when you’ve got an idea and it starts to have market feedback. The thrill of it is when other people are saying, “What you came up with is valuable.” What they’re telling you is, “You created something out of your head that makes my life easier, and I value it. So, I’ll give my money to you for your idea.”

Knowledge at Wharton: Is Yeti one of those great ideas?

Schramm: Yeti is a fabulous story. It’s one of those things where those guys didn’t expect to be entrepreneurs. The idea snuck up on then. They love to go fishing, and they fell through regular Igloo boxes because they’re not all that well made. One of the two brothers said, “You know, what we ought to do is make a cooler that’s so sturdy, you could stand on it.” Yeti cooler came out of something just that simple.

Knowledge at Wharton: What are 20-somethings missing to be able to build that great company?

Schramm: They’re missing experience. If you really want to be an entrepreneur and you don’t have a really great idea when you’re 21, getting out of school, don’t fret. Just wait. What shall you do while you wait? Go learn stuff. The stuff you should learn is easiest learned in big businesses because you’ll go out there and watch the innovation process work.

I consult at several companies, and what I’m watching all time is these companies constantly trying to renew themselves with new, better products. They spend a lot of money on research and development. Anybody who’s working in one of these companies can see the constant iterative change that’s taking place. You actually get innovation into your normal daily routine. I think that’s one of the greatest things that you can learn.

The book points to the fact that many new companies come out of old companies. The entrepreneurs see stuff, and two routes are the way this happens. The companies decide that they’re going to stick to their core competency and reject a brand new idea. They often say to people, “if you love this idea so much, go do it with our blessing. You can have the intellectual property.” In some cases, like IBM, they actually finance the startups. That was the case with Cerner, the health care data company.

“More innovation happens in big companies than, for example, university laboratories.”

The other thing is a much more difficult problem. That is, people who go to management and say, “This is the better way to do it,” or “Here’s a new application or a new market, and we have all the technology. If we configure it differently, we can own and capture this market.” MBA-type managers often say, “no, we’re going to stick to our core competency. We don’t know how to do that. It’s not our karma, it’s not our destiny.” And frustrated employees walk out. I interview people like that in the book. They say again and again, “I could have made all this money for my old employer, but they just wouldn’t listen to me.”

Knowledge at Wharton: Are companies wasting their human capital?

Schramm: It’s happening in every single company. You’ve got creative people in there. They might be running a machine. They might be on the production line. They could be any place in your company. They could be at the loading dock. They see things, and they could do things differently.

One of my favorite examples that’s not in the book is container boxes. It’s one of the great logistics revolutions that permits all of our prices for consumer goods to be much, much lower than they would have been. The boxes on the back of a trailer that come off the trailer, go right on a ship.

That was developed by a truck driver in Newark, N.J., In the old days, when trailer trucks were inflexible, they were fixed. Every time you went into a yard or a loading dock, people had to go on the dock, take the stuff off and reload it. He said, “You know, it’s a big steel box. Why don’t you just take the whole box, the whole back end of the truck, and put it on a ship?” This is a truck driver who saw that. He gave us the container revolution that made a world revolution in logistics.

Knowledge at Wharton: There are some very well-known companies like Microsoft and Apple and Facebook that didn’t have a plan at the outset. But now they are working through a variety of plans.

Schramm: That’s right. They went and tried it. We have this drive in our society. I think it’s in human nature. We don’t think that important things happen by chaotic means. If you look around, there are academics and experts who are struggling constantly to make the process of starting a business somehow logical, planned, orderly. These are sort of cookbook approaches.

You don’t have the right answer at the beginning. You never have the right answer. The market changes, technology changes. Your customers’ tastes are changing. Price points change. Your competitors change. You’ve got to be at this all the time. And a lot of times, that’s a hidden assumption in all the advice that’s given to entrepreneurs. If you crack it once, you can go right to the bank. You buy a jet. You’re over with. You do a public offering, and you’re rich and out by 30.

That’s not the case at all. You start a business, that’s only the beginning. And it’s the beginning of trying to make it big because growth is what’s important. Scale is the critical issue. The only way you can get there is constantly reacting to the market and all the signals it’s sending as to what it needs.

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When Is it Not Necessary to Write a Business Plan?

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Crisis Management Theory

The advantages & disadvantages of top-down planning, problems in setting up a business.

• Weakness of Hierarchical Organizational Structures
• Improvisation vs. Planning

Nobody in their right mind will tell you that a business plan is a bad idea. The process of planning helps entrepreneurs sort through the various issues of their businesses and develop a set or organized steps toward achieving a goal. However, not everyone does better with a business plan. Some business concepts take time to develop and evolve into things that are different and far better than anyone would have imagined at the beginning. Creative people with some patience and risk tolerance might find themselves with a freer, stronger hand without a business plan.

People who invent new technologies and concepts sometimes don't fully understand their business applications at first. It can take time to figure out exactly what the optimal business model might be for an invention. The inventors of Facebook, for example, didn't know how to make money off their invention for more than a year, even though they knew it had tremendous potential.

Banks, investors and financiers like business plans. Before they put their money on the line, they want to know as much as possible about what you'll do with it and the likelihood of success. However, if you are able to self-fund your business and you want to keep things flexible and fluid, you have no obligation to create a business plan. As your business succeeds and grows, however, you eventually might need a business plan. Government agencies in the position to approve or deny important permits or zoning might require a business plan for their review. But as long as the business doesn't involve anyone else's money or approval, you can avoid a formal plan.

Early Stages

According to a November 2010 article in Business Insider magazine, "business plans are the leading cause of startup death." Conventional small business startups' business models are very much academic until they first get put to the test with customers or clients. Most entrepreneurs have to experiment with different products and services before nailing down a model that works. For example, an import export business might try bringing in three or four different varieties of goods ranging from fabrics to auto parts to plastic baby toys before they find a receptive market. Each of these lines of good means a different sales approach, different buying system and perhaps different financial and organizational structures. Businesses experiment through trial and error, so a business plan might just be an impediment to success.

Businesses take time to establish. Industries and companies which need particularly long setup times -- particularly those needing significant technology or capital to really launch -- might face changing market conditions in the meantime. Good organization and a detailed business plan might be the enemy to a business which requires significant development time. A Nov. 1, 2010 article in "Business Insider" magazine provides an example of how satellite technology pioneer Iridium filed for bankruptcy only nine months after it launched a state-of-the-art satellite technology it spent years developing.

The problem, claims "Business Insider," was that Iridium developed a solution to a problem that was no longer an issue by the time Iridium launched. In this case, a company which did everything by the book failed because its very professional plans constrained it from considering changing market forces.

Inc. magazine, citing a Wells Fargo/Gallup survey in 2006, reported that only 31 percent of small business owners surveyed used a business plan. The same survey also showed that a majority of small businesses started from the owners' personal savings. According to Inc., a lot of successful small business entrepreneurs figure it out as they go along.

• Inc. magazine: "Most Entrepreneurs Start with Limited Funds, No Business Plans"
• Business Insider: "No Business Plan Survives First Contact with a Customer – The $5.2 Billion Mistake"
• Harvard Business Review: "Why Not Having a Plan Can Be the Best Plan of All"
• Entrepreneur magazine: "No Business Plan, No Problem?"
• San Bernardino County Fire Department: "CUPA"

Eric Feigenbaum started his career in print journalism, becoming editor-in-chief of "The Daily" of the University of Washington during college and afterward working at two major newspapers. He later did many print and Web projects including re-brandings for major companies and catalog production.

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10 Reasons Not to Write a Business Plan Writing a business plan isn't for everyone. Here are ten strategies you might be better off trying first.

By Martin Zwilling • Nov 6, 2013

Opinions expressed by Entrepreneur contributors are their own.

If you are one of the new age of entrepreneurs who hates the thought of doing a business plan as a first step in starting your new venture, you will love this message. More and more professionals agree that a better strategy is to explore and fine tune your assumptions before declaring a specific plan with financial projections based only on your dream and passion .

In the process, you may save yourself considerable re-work and money , or even decide that your dream needs more time to mature, before you commit your limited resources, or sign up with investors to a painful and unsatisfying plan.

I just finished a new book on this approach, Beyond the Business Plan , by Simon Bridge and Cecilia Hegarty, which outlines tradeoffs and recommends ten principles for every new venture explorer. Here is my edited summary of their ten principles, which might just convince you that you don't need a business plan at all, or at the very least, will help you write a better one later:

1. A new venture is a means, not an end. A new enterprise should be pursued primarily to help you achieve your goals , like providing a better life for others, satisfying a passion of yours, or enjoying the benefits of a technology you have invented. In that context, it could be a social enterprise, or even a hobby, in which case a business plan may not be beneficial.

2. Don't start by committing more than you can afford to lose. New ventures are usually exploratory and risky by nature, so don't let any business plan process convince you to commit more than you can risk as a person, should your exploration fail. Start with an effectual approach, which evaluates risk tolerance, and suggests a more affordable means to an end.

3. Pick a domain where you have some experience and expertise. Don't handicap yourself by starting something for which you have to build or acquire knowledge, skills and connections from scratch. No business plan will save you if you are just picking ideas at random or copying others, just because the story sounds attractive.

4. Carry out reality checks and make appropriate plans. Before a business plan has any validity, some work is required to validate that your technology works, a real market exists and your assumptions for cost and price are reasonable. Don't be totally driven by your own passions, the emotional enthusiasm of friends or even third-party research.

5. The only reliable test is a real one. Market research techniques for trying to predict the market's response to a new venture can be costly and are often unreliable. Testing for real is the assumption behind approaches such as Lean Startup . It is also what explorers do -- they go and look, instead of trying to predict from a distance what they will find.

6. Get started and build momentum. Too much hesitation will kill any new venture, as markets move quickly and difficulties mount. Getting started helps generate momentum and creates a sense of accomplishment, which can carry your startup through many obstacles. Early perseverance pays off.

7. Accept uncertainty as the norm. You will never remove all uncertainties, so accept them, and plan your activities in an incremental fashion. Too often, a business plan is seen as a mechanism for eliminating uncertainty, lulling the founder into complacency. Eliminate major uncertainties before the plan and update any plan as you learn.

8. Look for new opportunities. Many useful opportunities are either created by what you do early, or are only revealed once you have started and can see out there. So keep your eyes open and respond to new customers, markets and partnerships. You will also find that looking hard helps eliminate opportunities that are not right for you.

9. Build and use social capital. Social capital is people and connections. No entrepreneur can survive as an island. Social capital is as important as financial capital for all ventures. As with all capital, you can use only as much as you have acquired to-date. If you have no social capital, no business plan will likely get you the financial capital you need.

10. Acquire the relevant skills. Three basic skill sets are required for successful delivery of almost every venture. These are financial management, production capabilities and marketing and sales. If you don't have the relevant skills and knowledge, take time to build them or find someone to partner with, before you attempt any business plan.

If you decide to continue building a conventional business after exploring these principles, especially with investors and employees other than yourself, I'm still convinced a business plan is a valuable exercise. You should do it yourself to make sure you understand all the elements of the plan and facilitate communication of the specifics to your team and investors.

In essence, building a complete and credible plan is the final test of whether your venture has legs. The entrepreneur lifestyle is all about doing something you enjoy without undue stress, uncertainty and risk. Are you having fun in your venture yet?

Veteran startup mentor, executive, blogger, author, tech professional, and Angel investor.

Martin Zwilling is the founder and CEO of  Startup Professionals , a company that provides products and services to startup founders and small business owners. The author of  Do You Have What It Takes to Be an Entrepreneur?  and  Attracting an Angel, he writes a daily  blog  for entrepreneurs and dispenses advice on the subject of startups.

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Do You Really Need a Business Plan?

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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• Discontinuing Healthy Workplace Consultancy
• Financial Planning for the Pandemic

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Business Plan

Who should write a business plan, pros and cons of a business plan, the anatomy of a business plan, .css-uphcpb{position:absolute;left:0;top:-87px;} what is a business plan, definition of a business plan.

A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them.

In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and which tactics you plan to use to reach commercial success.

Whilst every enterprise should have a plan of some sort, a business plan is of particular importance during the investment process. Banks, venture capitalists, and angel investors alike will need to see a detailed plan in order to make sound investment decisions — think of your plan as a way of convincing them your idea is worth their resources.

Roadmapping From A to Z

Business plans can also be useful as a guide to keeping a new business on track, especially in the first few months or years when the road ahead isn’t too clear.

Starting a business isn’t an exact science. Some companies organically develop out of trial and error, while others are plotted out from start to finish.

So if you’re asking whether your company needs a lengthy business plan, the answer would be ‘no’. That said, there are definitely a few situations in which writing a plan makes sense and can help increase the chances of a business becoming successful:

In situations when the market is new and untested — or simply volatile — it can be very helpful to have a business plan to refer back to when the road ahead isn’t clear.

For those who have an exciting business idea but haven’t necessarily distilled it down into black-and-white. Writing a business plan is a great way to look at a concept from all angles and spot any potential pitfalls.

How to write a business plan?

The most important step in writing a business plan is to identify its purpose.

Who are you trying to attract with it, and why?

Here are a few key pointers for writing a business plan:

Are you looking to secure a bank loan, get funding from private investors, or to lure skilled professionals to join you?

Include a brief history of your business, the concept, and the products or services. Keep it professional and transparent.

Don’t exaggerate your experience or skills, and definitely don’t leave out information investors need to know. They’ll find out at some point, and if they discover you lied, they could break off their involvement. Trust is crucial.

Explain what the product or service your business offers in simplistic terms.

Watch out for complex language and do whatever you can to prevent readers from becoming confused.

Focus on the benefits the business offers, how it solves the core audience’s problem(s), and what evidence you have to prove that there is a space in the market for your idea. It’s important to touch on the market your business will operate in, and who your main competitors are.

Another essential aspect of writing an effective business plan is to keep it short and sweet. Just focus on delivering the crucial information the reader has to know in order to make a decision. They can always ask you to elaborate on certain points later.

Still, deciding whether or not a business plan will benefit you at this stage of your venture?

Let’s look at a few reasons why you might (or might not) want to write a business plan.

A business plan will help you to secure funding even when you have no trading history. At the seed stage, funding is all-important — especially for tech and SaaS companies. It’s here that a business plan can become an absolute lifesaver.

Your business plan will maintain a strategic focus as time goes on. If you’ve ever heard of “mission creep”, you’ll know how important an agreed can be — and your business plan serves exactly that purpose.

Having a plan down in black and white will help you get other people on board . Again, with no trading history, it can be hard to convince new partners that you know what you’re doing. A business plan elegantly solves this problem.

Your business plan can cause you to stop looking outward. Sometimes, especially in business, you need to be reactive to market conditions. If you focus too much on your original business plan, you might make mistakes that can be costly or miss golden opportunities because they weren’t in the plan.

 A lot of time can be wasted analyzing performance. It’s easy to become too focused on the goals and objectives in your business plan — especially when you’re not achieving them. By spending too much time analyzing past performance and looking back, you may miss out on other ways to push the business forward.

A business plan is out of date as soon as it’s written. We all know how quickly market conditions change. And, unfortunately, certain elements in your business plan may have lost relevance by the time you’re ready to launch. But there is another way — by transferring your strategic plan into an actionable roadmap , you can get the best of both worlds. The business plan contains important detail that is less likely to change, such as your mission statement and target audience, and the roadmap clarifies a flexible, adaptable, route forward.

So, you’ve decided to write a business plan — a great choice! 

But now comes the tricky task of actually writing it. 

This part can be a little frustrating because there is no one-size-fits-all template appropriate for all business plans. The best approach, in fact, is to look at common ingredients of a business plan and pick out the ones that make sense for your venture.

The key elements of a great business plan include:

An overview of the business concept . This is sometimes referred to as an executive summary and it’s essentially the elevator pitch for your business.

A detailed description of the product or service. It’s here that you’ll describe exactly what your core offering will be — what’s your USP , and what value do you deliver?

An explanation of the target audience. You need a good understanding of who you’ll be selling your product or service to, backed up by recent market research.

Your sales and marketing strategy. Now that you know who you’re targeting, how do you plan to reach them? Here you can list primary tactics for finding and maintaining an engaged client base.

Your core team . This section is all about people: do you have a team behind you already? If not, how will you build this team and what will the timeline be? Why are you the right group of people to bring this idea to the market? This section is incredibly important when seeking external investment — in most cases, passion can get you much further than professional experience.

Financial forecasts . Some investors will skim the executive summary and skip straight to the finances — so expect your forecasts to be scrutinized in a lot of detail. Writing a business plan for your eyes only? That’s fine, but you should still take time to map out your financial requirements: how much money do you need to start? How do you plan to keep money coming in? How long will it take to break even ? Remember, cash is king. So you need a cash flow forecast that is realistic, achievable and keeps your business afloat, especially in the tricky first few years.

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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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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

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Understanding the importance of a business plan

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

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

Related Posts

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

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

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? Definition and Resources

9 min. read

Updated March 4, 2024

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan — or at least the very basic components of one.

The origin of formal business plans is murky. But they certainly go back centuries. And when you consider that 20% of new businesses fail in year 1 , and half fail within 5 years, the importance of thorough planning and research should be clear.

But just what is a business plan? And what’s required to move from a series of ideas to a formal plan? Here we’ll answer that question and explain why you need one to be a successful business owner.

• What is a business plan?

A business plan lays out a strategic roadmap for any new or growing business.

Any entrepreneur with a great idea for a business needs to conduct market research , analyze their competitors , validate their idea by talking to potential customers, and define their unique value proposition .

The business plan captures that opportunity you see for your company: it describes your product or service and business model , and the target market you’ll serve. 

It also includes details on how you’ll execute your plan: how you’ll price and market your solution and your financial projections .

Reasons for writing a business plan

If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact: 

Companies that commit to planning grow 30% faster than those that don’t.

Creating a business plan is crucial for businesses of any size or stage. 

If you plan to raise funds for your business through a traditional bank loan or SBA loan , none of them will want to move forward without seeing your business plan. Venture capital firms may or may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes them want to invest.

But it’s more than just a means of getting your business funded . The plan is also your roadmap to identify and address potential risks. 

It’s not a one-time document. Your business plan is a living guide to ensure your business stays on course.

Related: 14 of the top reasons why you need a business plan

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What research shows about business plans

Numerous studies have established that planning improves business performance:

• 71% of fast-growing companies have business plans that include budgets, sales goals, and marketing and sales strategies.
• Companies that clearly define their value proposition are more successful than those that can’t.
• Companies or startups with a business plan are more likely to get funding than those without one.
• Starting the business planning process before investing in marketing reduces the likelihood of business failure.

The planning process significantly impacts business growth for existing companies and startups alike.

Read More: Research-backed reasons why writing a business plan matters

When should you write a business plan?

No two business plans are alike. 

Yet there are similar questions for anyone considering writing a plan to answer. One basic but important question is when to start writing it.

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 business
• When you’re starting a business
• When you’re preparing to buy (or sell)
• When you’re trying to get funding
• When business conditions change
• When you’re growing or scaling your business

Read More: The best times to write or update your business plan

How often should you update your business plan?

As is often the case, how often a business plan should be updated depends on your circumstances.

A business plan isn’t a homework assignment to complete and forget about. At the same time, no one wants to get so bogged down in the details that they lose sight of day-to-day goals. 

But it should cover new opportunities and threats that a business owner surfaces, and incorporate feedback they get from customers. So it can’t be a static document.

For an entrepreneur at the ideation stage, writing and checking back on their business plan will help them determine if they can turn that idea into a profitable business .

And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them respond to market shifts they wouldn’t be prepared for otherwise. 

It also lets them compare their forecasts and budgets to actual financial results. This invaluable process surfaces where a business might be out-performing expectations and where weak performance may require a prompt strategy change. 

The planning process is what uncovers those insights.

Related Reading: 10 prompts to help you write a business plan with AI

• How long should your business plan be?

Thinking about a business plan strictly in terms of page length can risk overlooking more important factors, like the level of detail or clarity in the plan. 

Not all of the plan consists of writing – there are also financial tables, graphs, and product illustrations to include.

But there are a few general rules to consider about a plan’s length:

• Your business plan shouldn’t take more than 15 minutes to skim.
• Business plans for internal use (not for a bank loan or outside investment) can be as short as 5 to 10 pages.

A good practice is to write your business plan to match the expectations of your audience. 

If you’re walking into a bank looking for a loan, your plan should match the formal, professional style that a loan officer would expect . But if you’re writing it for stakeholders on your own team—shorter and less formal (even just a few pages) could be the better way to go.

The length of your plan may also depend on the stage your business is in. 

For instance, a startup plan won’t have nearly as much financial information to include as a plan written for an established company will.

Read More: How long should your business plan be?  

What information is included in a business plan?

The contents of a plan business plan will vary depending on the industry the business is in. 

After all, someone opening a new restaurant will have different customers, inventory needs, and marketing tactics to consider than someone bringing a new medical device to the market. 

But there are some common elements that most business plans include:

• Executive summary: An overview of the business operation, strategy, and goals. The executive summary should be written last, despite being the first thing anyone will read.
• Products and services: A description of the solution that a business is bringing to the market, emphasizing how it solves the problem customers are facing.
• Market analysis: An examination of the demographic and psychographic attributes of likely customers, resulting in the profile of an ideal customer for the business.
• Competitive analysis: Documenting the competitors a business will face in the market, and their strengths and weaknesses relative to those competitors.
• Marketing and sales plan: Summarizing a business’s tactics to position their product or service favorably in the market, attract customers, and generate revenue.
• Operational plan: Detailing the requirements to run the business day-to-day, including staffing, equipment, inventory, and facility needs.
• Organization and management structure: A listing of the departments and position breakdown of the business, as well as descriptions of the backgrounds and qualifications of the leadership team.
• Key milestones: Laying out the key dates that a business is projected to reach certain milestones , such as revenue, break-even, or customer acquisition goals.
• Financial plan: Balance sheets, cash flow forecast , and sales and expense forecasts with forward-looking financial projections, listing assumptions and potential risks that could affect the accuracy of the plan.
• Appendix: All of the supporting information that doesn’t fit into specific sections of the business plan, such as data and charts.

Read More: Use this business plan outline to organize your plan

• Different types of business plans

A business plan isn’t a one-size-fits-all document. There are numerous ways to create an effective business plan that fits entrepreneurs’ or established business owners’ needs. 

Here are a few of the most common types of business plans for small businesses:

• One-page plan : Outlining all of the most important information about a business into an adaptable one-page plan.
• Growth plan : An ongoing business management plan that ensures business tactics and strategies are aligned as a business scales up.
• Internal plan : A shorter version of a full business plan to be shared with internal stakeholders – ideal for established companies considering strategic shifts.

Business plan vs. operational plan vs. strategic plan

• What questions are you trying to answer? 
• Are you trying to lay out a plan for the actual running of your business?
• Is your focus on how you will meet short or long-term goals? 

Since your objective will ultimately inform your plan, you need to know what you’re trying to accomplish before you start writing.

While a business plan provides the foundation for a business, other types of plans support this guiding document.

An operational plan sets short-term goals for the business by laying out where it plans to focus energy and investments and when it plans to hit key milestones.

Then there is the strategic plan , which examines longer-range opportunities for the business, and how to meet those larger goals over time.

Read More: How to use a business plan for strategic development and operations

• Business plan vs. business model

If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the business model represents how they will make money. 

The difference may seem subtle, but it’s important. 

Think of a business plan as the roadmap for how to exploit market opportunities and reach a state of sustainable growth. By contrast, the business model lays out how a business will operate and what it will look like once it has reached that growth phase.

Learn More: The differences between a business model and business plan

• Moving from idea to business plan

Now that you understand what a business plan is, the next step is to start writing your business plan . 

If you’re stuck, start with a one-page business plan and check out our collection of over 550 business plan examples for inspiration. They’re broken out over dozens of industries—you can even copy and paste sections into your plan and rewrite them with information specific to your business.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

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

Table of Contents

• Reasons to write a business plan
• Business planning research
• When to write a business plan
• When to update a business plan
• Information to include
• Business vs. operational vs. strategic plans

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Table of Contents

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

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

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

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

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

This isn’t surprising at all. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the key elements of a good business plan:

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

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

• Business Sorter

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

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

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

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

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

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

What Is Meant by Business Planning?

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

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

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

Strategic Planning

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

Tactical Planning

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

Contingency Planning

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

What Are the 7 Steps of a Business Plan?

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

Conduct Research

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

Have a Goal

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

Create a Company Profile

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

Describe the Company in Detail

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

Create a marketing plan ahead of time.

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

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

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

Incorporate Your Motivation

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

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

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

Services and Products

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

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

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

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

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

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The importance of business plan: 5 key reasons.

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

Here’s What We’ll Cover:

What Is a Business Plan?

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

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

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

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

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

1. To Secure Funding

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

2. Set and Communicate Goals

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

3. Prove Viability in the Market

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

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

4. They Help Owners Avoid Failure

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

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

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

5. Business Plans Reduce Risk

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

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

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

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

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Why Is a Business Plan Important? (+ How to Create One)

June 21st, 2022 |  Small Business Resources

A business plan is not something you create just for the sake of creating it—it’s a key factor in your company’s success. According to a SCORE survey , the next biggest source of support for small business owners just starting out—behind their friends and family—is having a solid business plan in place.

Aside box: What is a business plan?

A business plan is a written document that outlines what your business objectives are and how you will go about achieving them. Refresh your business plan regularly to reflect with your evolving business objectives.

Business plans can be both internal and external documents. If you’re looking to secure funding from an investor or get a loan from a bank, they will certainly want to evaluate your business plan first.

Why is this plan so important? Because entrepreneurship without a business plan is like traveling without a roadmap. You might reach your destination eventually without it, but the journey will be tough, if not impossible.

Know the location of your destination and what roads you’ll need to travel, and you’ll significantly increase your chances of success.

12 reasons why having a business plan is important

The process of creating your business plan encourages you to take a deep dive into every aspect of your company—helping you spot flaws and take steps to improve.

Beyond highlighting weaknesses, a strong business plan positively shapes a company’s reputation. It shows investors, partners, and even potential hires that your business is working toward clear objectives and is on a reliable growth path.

1. It helps confirm the viability of your business idea

The research that goes into creating your business plan will help you gauge whether your idea is a viable one. You’ll learn the size of your potential market, who your competitors are, who your target customers are, and what problem you’re solving for them.

With this information, you can evaluate your chances of creating a profitable and sustainable business.

2. It helps you make financial projections

According to CB Insights , almost 40% of startups ran out of cash or failed to raise new capital. Business plans require you to evaluate your current financials and projects in detail, so you can steer clear of draining your bank account.

3. It helps you protect your business from common risks

Very few companies and individuals are willing to work in any capacity with businesses that don’t protect their partners with professional liability policies. To form your business plan, you’ll need to learn about the business risks your company faces and put together an insurance plan that helps mitigate them.

4. It helps you form partnerships

Regardless of the type of partners you have—contractors, freelancers, vendors, manufacturers—you need to establish trust. Partners want to know the specifics of your proposed cooperation before they commit.

Successful partnerships depend on well-defined roles and responsibilities and clearly specified incentives and key performance indicators (KPIs).

Business plans clearly define what cooperation and success look like for partnerships, so external parties feel comfortable working with your company.

5. It helps you hire and retain top talent

You can’t hire good people if they don’t believe your business is viable. A business plan shows top talent that your company has potential and is a good place to work.

A clear business plan is also helpful when you’re seeking hiring advice from more experienced peers. Approaching them with a business plan in hand makes that process easier as well.

“Merely telling a friend or potential business mentor you’re aiming to start with ten employees, for example, is not an exceptionally detailed statement,” said Admir Salcinovic, co-founder and marketing manager of PriceListo . “Showing a business plan that outlines the exact duties, salaries, and expectations you have for employees gives far more information for people to provide advice about.”

6. It provides you with competitor analysis

Market analysis is one of the cornerstones of a business plan. This process involves identifying and researching your main competitors and their business models. This data can provide insights into how you should position your business on the market in order to be competitive and carve out a market share for yourself.

7. It helps you understand customer pain points

Along with highlighting competitors, your market research helps you pin down the problem you’re solving for customers and how you plan on helping them. This research often involves surveying customers to understand their pain points.

8. It helps you assemble the right executive team

According to CB Insights , 15% of new businesses failed because the team they had in place wasn’t right. A strong and experienced leadership team can help navigate the many bumps in the road that new business experience, like structural and personal problem solving, risk assessment, and dips in team morale.

Business plans must include a detailed analysis of your management—who they are, and what they bring to the table to evaluate your leadership internally and externally. Startups also commonly dedicate a section of their business plans to the type of culture they are looking to build.

9. It makes you more attractive to lenders/investors

Real talk—most investors and banks won’t even talk to you if you don’t have a business plan. Harvard Business Review research from 2017 showed that writing a business plan increases the chances of your team receiving funding, noting that having a business plan “builds legitimacy and confidence among investors that the entrepreneur is serious.” “When I went to banks to ask for loans, every one of them asked for my business plan,” said Marina Vaamonde, owner and founder of off-market house marketplace HouseCashin . “If I didn’t have mine ready at the time, I would have wasted time during a crucial growth phase of my business when I needed employees.”

Investors and banks will use your business plan to understand your revenue model, cash flow, and, most importantly, how you plan on using funding.

“No matter how great your idea, angel investors won’t invest without a formal business plan,” said Calloway Cook, president of Illuminate Labs . “It doesn’t need to be 50-pages long, but they want to see that you’ve done the work to validate your concept, both informally with customer interviews and formally with market research.”

Cook, whose team was able to raise a pre-seed round of slightly over $100,000, also recommends including directly sourced customer data in your business plan to attract investors.

“Get feedback from real users. This is what sways the minds of investors,” said Cook. “Anyone can create a hypothetical profitable scenario using market size and demographic information, but if investors can see real people interested in your product or service, they’ll be more likely to invest.”

10. It helps you create a marketing strategy

To form a business plan, you’ll need to research on customer demographics and preferences. This data can inform and strengthen your marketing and branding strategies—helping you target your ideal customer.

New companies often have a limited budget to work with and need to adopt strategies that can spark greater growth and cost less than traditional marketing channels. The market research you’re doing for your business plan makes it a perfect starting point for developing these strategies.

11. It helps you set your pricing

The market analysis you perform while writing your business plan will inform how you set your pricing. Your competitor pricing models, your cost of goods sold , and your break-even point are some of the valuable data points you’ll need to acquire to start shaping your pricing model and your sales strategy.

12. It helps you establish the right KPIs

You can’t report on the progress of your business without first establishing what metrics are important to track.

Business plans show what metrics are important to track, given your financial projections, sales goals, marketing plans, and budgets. When you know which metrics to track, everyone in your organization can report on the progress of your business.

KPIs are not just financial goals. They can include trackable data like customer count, the quality of customer service (first response time, customer service satisfaction), and staff-related data like attendance, quality of work, retention, and satisfaction levels.

How to write a business plan: What are the core components?

To provide a big-picture view of vital company insights that gives both your team and third parties an easy way to gauge your financial health and projected growth, a good business plan must include the following components:

Executive summary

The executive summary serves as a high-level synopsis of your business plan—like the Cliff Notes for a book. It gives a general overview of the topics that your business plan will cover.

An executive summary should always be fairly brief. But when presenting your plan to third parties, it’s also important to write a summary that’s compelling enough to intrigue them and make them want to read on.

Even though this summary appears first in a business plan, we recommend writing this section last. That way, you’ll be familiar enough with all of the business plan’s main sections to be able to write a concise and accurate summary to kick it off.

Business summary

The business summary covers how the products and services your company offers serve the market. This section of your business plan should focus on your value proposition—defining what pain points you solve for your customers and how.

Explain what differentiates your brand from competitors by showing customer reviews and listing success stories and accomplishments. Readers of the business summary should come away from it convinced that your business is a viable one.

It’s also a good idea to wait until you’ve written the market analysis section before writing this section. Your business summary should consist of condensed takeaways sourced from market research.

Market analysis

This component of your business plan answers questions about the market in which your company is competing, such as:

• How big are your target market segments?
• Where does your business fit within these segments?
• Who are the main competitors?
• Who are your customers?

Performing market research is difficult work, especially for less experienced business owners. If you have the funds to do so, hiring a market research/competitive analysis agency to perform the analysis for you is definitely worth it.

The good news is that there are plenty of available resources for those who want to perform their own research, especially online, such as:

• U.S. census data tools : These tools and free industry research reports can help you determine your market size and gain insight into potential customer demographics data.
• Statista : One of the best research data websites, Statista covers hundreds of industries, constantly performing market research and providing hard business data. The website also uses graphs and charts to make their data more understandable for those who might be new to market research.
• Google Trends : Google Trends can help you understand what potential customers are most interested in, allowing you to see into the minds of consumers and audiences. The tool offers robust filter options to create detailed reports about what the trending stories and most searched terms are in a particular demographic.

If you’d rather find mentors and learn about your market through personal interactions, you can look to join local business organizations such as your local chamber of commerce , the National Federation of Independent Business (NFIB) , or Business Network International (BNI) .

Your market research helps you nail down your ideal customer segments. Uncover key customer demographics: where they live, how much money they make, how old they are, what their level of education is, what their buying habits look like, and more.

Market analysis will help you uncover who your direct competitors are, what their strengths and weakness are, and how your offer differs from theirs.

“Going in blind, without understanding who my competitors were, as well as their core strengths and weaknesses, would have decimated any chances of me establishing a worthwhile competitive strategy,” said Lisa Richards, CEO of the health website the Candida Diet . “Knowing who my competition was made it possible for me to develop a differentiation strategy that set me apart from them in terms of brand perception, allowing me to capture a large share of the market from the very beginning,” she added.

Marketing and sales plan

Along with identifying your target market, a business plan should outline how you plan on reaching this audience and selling your product or service to them.

This section of your business plan should detail your branding and marketing strategy. You should also cover any promotional strategies you plan to implement and a description of the current and future strategic partnerships you plan on installing. For example, if your business sells homemade soap, you could list the brick-and-mortar and online shops you plan on partnering with to increase the reach of your sales.

It should also include pricing strategy—the methodology and process behind how you plan on setting prices for your product or services. Set your prices too low, and you could struggle to turn a profit. Set the price too high, and customers could turn to your more affordable competition.

“After creating our initial business plan, we immediately saw how our business is not profitable enough given the current pricing ranges we have and the target market,” said Sherry Morgan, founder of animal content hub Petsolino . “After further investigation, we found out the holes in our initial plan. From there, we adjusted our pricing and selling strategies.”

The management-related part of your business plan should explain your company hierarchy and introduce your business’s leaders by providing information about their professional backgrounds, education, and achievements.

If you’ve received funding, be sure to highlight your investors, shareholders, and any professional advisors. If you have imminent hiring needs within management, detail them in this section.

Financial plan

The three statements that are integral to your financial plan section are your cash flow statement, income statement, and balance sheet. You should include a short explanation or analysis of all three in your business plan. Don’t hesitate to ask for expert help here, especially if you don’t currently have an in-house accountant.

This section of your business plan is particularly important if you’re looking to attract potential investors or you want to take out a business loan. If that’s the case, in addition to the three mandatory financial statements, you must also provide a detailed list of what you need the money for (marketing, equipment, labor expenses, insurance costs, rent, etc.).

As you grow, your financial plan will help you develop a model for tracking your income and expenses that will enable you to allocate your resources more effectively.

Revisit and revise your business plan regularly

Business plans are never set in stone. They must evolve and change as your business grows and reaches new milestones. Set a regular review schedule to revisit your business plan and tweak it when necessary.

“Creating and evaluating your business plan on a regular basis is a wonderful approach to identify weaknesses, gaps, and assumptions you’ve made to establish contingency plans,” said Matthew Paxton, founder and owner of gaming website Hypernia .

As you make adjustments, don’t hesitate to pick the brains of more experienced business people and mentors to gain different perspectives on areas of improvement for your business plan.

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Does your business plan need a push?

Writting a business plan can be a springboard exercise for your business, and it's not as difficult as people think. All it takes is a bit of method, and some efficient tools. The good news our free articles and paid course have you covered!

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An article of the Accelerated MBA written by:

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In this article:

Why is a business plan important to your business (it’s not what you think).

Writing a business plan is typically one of the most challenging exercises an entrepreneur has to face in their entrepreneurial life. Not so much because the exercise is challenging to handle – it isn’t that difficult if you know where to start. But because it stands in a grey area and requires much digging, thinking, planning, and writing that most entrepreneurs see as a hassle.

The exercise has a fundamental role in developing your business, though, so you should give it some attention. I’m saying ‘some’ attention here because if a business plan is an essential tool you should be using, it isn’t a finality. In fact, it tends to be a trap for entrepreneurs who focus on it so much that they lose track of what’s even more important: their business.

So, in this article, I will clarify a few points. First, why is a business plan important? For your business, of course. But also for you as the entrepreneur in charge, from a financial and message standpoint. And, well, when is a business plan a trap you should be avoiding.

Before we dig into the topic, though, please keep in mind two things!

One, this article is part of a very comprehensive series of blog posts on business plan writing available on Impactified . We’re trying to make your life easier with these, so give them a look!

Two – we have also designed our best-selling Business Plan Builder Module for those who want to stop losing their time and get the thing done, easy as 1, 2, 3.

The module includes:

• a complete business plan template
• two designer-made decks
• a working tool to get you started and tell you what to write (and how)
• the automated financial tables you’ve been dreaming of
• and over two hours of videos designed to take you by the hand!

So if writing a business plan is a topic for you, you have no excuse!

Having said this – let’s get back to our topic: Why is a business plan important to your business? Hint: it’s not what you think!

Why is a business plan important?

A business plan is one of those elements that keep coming up when you build a business and want to scale it. Bankers, potential investors, and potential partners ask for it from the earliest stages to open your bank account, put money on your account, or grant you a line of credit.

But is a business plan necessary to run a successful business? Not necessarily.

Some do everything instinctively and get results, that’s undeniable. Still, they remain a minority and, sooner or later, the absence of planning is the beginning of the end. More on this later…

In reality, the reason why people ask for a business plan is straightforward: while your business idea might be the best, it is usually a lot more evident to you than it is to whoever you are pitching to. Hence, formalizing your thoughts into an agreed and codified framework makes sense.

These potential partners ask for a business plan because a formalized version of your thoughts is the only way they have to grasp the core of what you have in mind. Plus, they also know that unless your idea has been formalized in some way, it simply cannot be clear for you either. And that’s an absolute red flag.

Like it or not, what usually happens is that entrepreneurs have an idea and go for it as fast as they can, to give it a try and see. However, they rarely have a clear ‘big picture’ of their business. Hence, topics like financial planning and cash flow prévision tend to be very foggy, not to say inexistent.

No goals. No target market. No go-to-market strategy. No marketing plans. No financial statements.

Tell me. How does that sound to you?

I know, right?

Also, while ideas might seem innovative to those who have them in the first place, they aren’t necessarily new on the market. Or, said differently, what appears to be a sexy investment for the founder is rarely that sexy for the banker, investor, or potential partner. And that sucks because it means that somewhere, the entrepreneur probably got something wrong.

At the end of the day, the business plan becomes the indicator people look for when they want to know where you stand and how clear you are on where you want to get your business.

Will your business be a safe bait or a lost cause?

Will you make them money, or are you lost on the financial side of things?

Can you deliver on the promises you make?

Are you just living in a fantasy without being aware of it?

You get my point here. The business plan writing exercise is often the first opportunity an entrepreneur has to think about their business from a holistic perspective. And it shows where you stand to those who read it.

Let’s get deeper. What is a business plan? And why is it important for your business beyond making investors feel safe?

Now, we explained why people ask for a business plan, taking an emotional angle. But, let’s be pragmatic, there is a lot more to it than just making people feel safe.

First point – definition – what exactly is a business plan?

We previously discussed the definition of a business plan, the purpose of a business plan, and what they are used for in a dedicated article, so I’m not going to go through everything again.

Long things short, though, we at Impactified usually say that a business plan is a convincing story you need to tell about your business . For that reason, it has to show (i) that the business is going somewhere inspiring and (ii) that you are in control.

Or, said differently, the critical point in business plans is not the pdf you are trying to produce.

Instead, it is your ability to use the drafting work as a simple business planning exercise that’s going to clarify what you are planning to achieve, how you are going to get there, with what g-to-market and marketing strategy, with who, with what money, and with what results down the road – social impact, environmental impact, financial profit, you name it.

All of this, of course,  in a way that catches people’s attention and makes them relate to what you have to say.

Second point, a business plan is important to your business beyond making investors and partners feel safe, because it gives you a very unique opportunity (i) to look at what makes your business worth investing in, (ii) to determine how you are going to make ends meet, (iii) to decide how YOU, as the entrepreneur in charge, will manage the whole thing, and (iv) to figure out how to build a message around your business that people will want to listen and remember.

When a business plan is important (and when it’s not)

Now, hold on a minute. Before I get into each of the points I just listed, there’s something I want to clarify right now, because it has cost me a fortune in time, effort, and money when I started my first businesses.

Yeah…

Business plans are important, but they can also be a trap if you don’t focus on them at the right time. Trap, trap, trap!

Here’s the thing: as I said in the article I mentioned previously on what a business plan is for , nobody gives a damn about your business plan if it’s just a pdf document without substance.

Or, said differently, working on a business plan because they ask for it is a loss of time. People want to see that you have a business and a plan for that business . Period.

They want to see that you have a business

One, you have a business. That’s super important because the time when people would pour money in your pocket because you had a damn good idea and a “.com” behind it is over.

Startups are everywhere nowadays, but most fail, so investors are more careful than ever with their investment choices.

More than the idea of the century? They want to see that you have started your activity. They want to know that you are matching a demand, that people are willing to pay for what you do, and that you can create a form of traction around the business.

When I started my second business, I made the mistake of listening to what people said and doing what they asked. They wanted a business plan, so I spent a lot of time making a market analysis and marketing strategies of all sorts. I was trying to write something to match their expectations. Still, in the meantime, the business wasn’t growing. The thing went nowhere because a damn pdf will never be as inspiring as a working business.

They want to see you have a plan for that business

Having a business is a start. Still, whoever asks for a business plan wants to see that you are on top of things.

They know that the typical entrepreneur has their nose to the grindstone and their head under the water, so they want to see that you are different.

They want to see that you will use their money to boost growth, not pay your salary and bills.

They want to see that you are the right person to lead the business somewhere they also want to get.

They want you to have a business and a plan for that business. Period.

The one-million-dollar piece of advice

So? Focus on the right thing. Before you dig into writing a business plan, start things up. Build an MVP, make sure your business model and offering are desirable, feasible, and viable . Create traction, make the business inspiring, and then come up with a plan to get it to the next step. Period.

Just saying.

Key role #1: a business plan is important to show there is a direction

Now. A business plan has a few roles to play.

Top on the list, a business plan is critical to show that your business is going in one particular and deliberate direction.

If you remember what we said earlier, your business plan is a storytelling tool. It must convey an unequivocal message that your business follows is aligned with a vision people can adhere to and that you have a target to achieve down the road.

You can show that direction with words (spoken or written) and storytelling. For instance, we will change the world by ending single-use paper cups. We will finally make electricity eco-friendly. Or to copy a famous apple-branded company, we will put computers in every home.

You can also talk about market targets: we will be the industry number one and present in seven countries.

Or about and financial targets – we will save companies xx million in administrative management fees and make xx millions in profit.

Again, the point of the business plan exercise is not to write a pdf, it is to focus on business planning very seriously, to show that the business exists, has potential, and will reach a destination.

A business that progresses randomly without any end goal, in contrast, won’t be relevant to anyone because it will be haphazard at best and destined to fail at worst. So the question is, where do you stand?

Me? Oh, come on… Not my style.

Key role #2: a business plan is important from a financial perspective

My next point flows from the previous: a business plan is naturally important financially. And there are many reasons for saying that.

Reason number one, anyone seasoned with business plan-reading will expect you to provide them with financial projections. So, building the financial plan part of your business plan seriously is utterly essential. The risk, of course, is to seem disconnected from reality and to miss an opportunity to onboard people.

Reason number two, the financial projections you will make can significantly impact your growth capacity. A client of ours, for example, went to discuss fundraising with a very conservative accountant who told him to raise about USD150.000 tops to start with.

That perspective, however, omitted the fact that such a low amount would force the entrepreneur to raise again in six months, plus it sent the message that the company wasn’t worth much. Hence, the entrepreneur looked at multiplying the target by two to three.

His first investor committed to investing USD 150.000 and offered to bring more investors into the discussion. Can you see the difference?

Reason number three? You, as the entrepreneur in charge, need to know where your business is standing from a financial perspective.

Think about it for a second.

Can you tell exactly what your break-even point is right now? Without thinking? Probably not.

Can you tell exactly what your turnover is for the year? Or what it will be like next year, and the year after?

What is your operational margin on that, by the way? Hmm.

Can you tell what the company is worth now and what it will be worth three to five years from now?

What do you mean, “ahem”?

At the end of the day, storytelling is super important. But, your business plan should also be a matter of financial planning. And that part is crucial for your business.

It will tell you what you can hope to achieve and what you can afford to put into place with what you have. It will also tell you what money your need to raise with investors , and what money you need to find from banks to make things happen. In sum? Everything you should think of!

Key role #3: a business plan is important for you, as the entrepreneur in charge

Again, my next point will flow naturally from the previous ones – a business plan is important because it helps turn you into the entrepreneur in charge. Instead of being the business owner who runs and struggle, I mean.

I’m a bit direct here, I know. But I’m not sorry because I know exactly what I’m talking about.

Look. My job as an entrepreneur is simple. Sort of. I work on building a brand. That brand sells business coaching services for entrepreneurs who need a push . And that brand develops self-coaching products for the entrepreneurs who want to work on their business on their own . That takes a lot of time, but we (with the team) do it because we have to do it.

As business coaches, though, we also know that routines and time-consuming tasks are a problem. We know that managing emergencies is a permanent worry. And we know that having your head under the water is complicated and typical.

We also know that most entrepreneurs who call us for help do it because their head is under the water. And because, somehow, doing everything they can isn’t sufficient to structure their business, plan their growth, raise funding, and scale the activity.

Said differently? Entrepreneurs and business owners struggle because they don’t focus on business planning and strategic thinking enough. They work into their business, not ON their business . And they deal with the company by “running” after time instead of “building” something that can work increasingly by itself.

Or, in a more illustrated way:

See my point? Great. So here is the thing.

Your business plan is essential for you because it forces you to be the entrepreneur in charge and because it gives you the priorities you need to work on as soon as your planning work has been done .

That implies that you need to work on business planning – beyond your business plan – yourself (or internally with your team) instead of letting an expensive external consultant do the work . But, considering that most entrepreneurs run instead of planning and building, can you see the unfair advantage that gives you?

Key role #4: a business plan is important from a message standpoint

The last major point on our list is that having a business plan is essential from a message standpoint.

It forces you to clarify many things that can then be structured and distilled in a clear and intelligible way. And it allows you to build a story people will want to listen to, understand, and remember.

If you have followed everything we’ve said so far, this point should once again be logical!

Business planning gives you a vision. It gives you a financial perspective and a set of priorities you will have to work on to develop the business – that makes a story investors will understand and listen to.

For them to understand it, though, you’ll want to make sure that the business plan story you tell them follows a rather specific code and structure. I am talking about this in another article on business plan outlines and in The Business Plan Builder videos . You will find them on our Self-Coaching toolbox. Please give them a look!

Oh, and there’s also an article to read on the role and efficiency of one-page business plans . Again I’m not getting into the details here. Just follow the link if the topic is relevant to you.

4 reasons why a business plan is important.

• It clarifies what makes your business worth it
• It clarifies how you will make ends meet
• It clarifies how *you* will make things happen
• It builds a message people want to listen to & remember

Wrap up: what is a business plan and why is it important?

All right! Time to wrap up.

Writing a business plan is a big thing, and the answer to the question “why is a business plan important to your business” is both straightforward and tricky.

It’s straightforward because a business plan helps in many aspects.

It gives you a unique opportunity to turn a business you ‘run’ into a business you are ‘building’ to reach a destination. It gives you a perspective from a financial standpoint. It gives you some priorities you’ll be able to focus on as the entrepreneur in charge. And it gives you a clear and intelligible message people around you will understand and listen to.

It is tricky because the point of a business plan is not to come up with a pdf nobody gives a damn about. It is to do some serious business planning to have a plan for a company that already has a market and, hopefully, traction.

If you can recognize yourself in this description, you should definitely start your own business planning. Small business, large business, who cares? Just do it!

Our articles and resources on how to write a business plan will certainly give you some basics, but if you want to save some time, our Business Plan Builder is a best-selling and entrepreneur-proof tool you can’t afford to ignore!

The Business Plan Builder: 2 hours of tutorial videos and the tools you need to get started

If you are looking for a push to get started with your business plan, we – at Impactified – have built The Business Plan Builder – THE tool you have been dreaming of.

The Builder comes very handily, in the shape of a Module built around over 2 hours of explanatory videos and a package you’ll be able to use to

• Figure out what you need to figure out – powerful, uh?
• Understand the business plan code
• Write your business plan – with just the right amount of words and pages
• Build your financial estimates – with an automated table
• Create a visually appealing (designer-made!) document, and deck people will want to read

If you want to stop wasting your time, this is THE most simple business plan template, and you can’t afford to miss it!

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Topics related to Why is a business plan important to your business? (It’s not what you think!):

What is a business plan and why is it important?

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More Insights on Business Plan Writing

Financial Projections: How to write the financial plan in business plan

Hey coach! I’m writing a business plan and I’m wondering how to build the financial projections part of the document. What’s the importance of financial projections exactly – I mean, isn’t it absolute BS? How do I write the financial plan in business plan, and even more importantly, how can I make sense of all those messy tables? Can you help me understand this? Thanks in advance!

Do I Need a Business Plan Consultant? No, You Don’t!

Hey there Coach! I’m a small business owner and I need to find some support with my business plan. People suggested that I find a business plan consultant near me, but that’s a big cost and I’m not too sure about what to expect from that. What’s your opinion about business plan consultants in general? Is there any alternative you would highly recommend? Thanks!

How Much Does a Business Plan Cost? Just Under $100!

Hey coach! I was wondering – how much does a business plan cost? I need one, and I’m thinking about having it written for me, so I’d love your insights. Also, I’ve heard business plan writers cost a lot of money, so I’m interested if you have tips for writing a low-cost business plan! Thanks!

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Why is a business plan important? Five reasons why you need one

Table of Contents

1) Plan for viability and growth

2) setting milestones and objectives, 3) supporting critical decisions and avoiding mistakes, 4) securing investors and financing, 5) minimise risk, making informed business decisions.

Why is a business plan important? A business plan is like a roadmap: you can start driving without one, but you’ll be more likely to get lost on the way.

To save yourself driving in circles, prepare a business plan from day one. This will help you focus on the details of your venture and give you the chance to do important groundwork before you begin trading.  

Typically, a business plan will include detailed insights such as market analysis, competitor research, audience profiles, marketing goals, logistics and operations plans, cash flow information, and an overall strategy on how they will grow. 

This guide will demonstrate why a business plan is important, including:

• Planning for viability and growth
• Setting milestones and objectives
• Supporting decision making and avoiding mistakes
• Securing finance and investors
• Minimising risk

If you have a business idea brewing or want to turn your passion, hobby, or side project into a full-time job, first do your research to understand if your business will be viable. A business plan can help you confirm that your business idea is sustainable in the current market.

To do this, carry out market research. Considering answers to the following questions will start to give you a more detailed picture of where your business belongs in the sector:

• Who are your customers? 
• What do you offer them? 
• What problems are you solving for them?
• Why would they buy from you over your competitors?
• Who are your competitors? What are you doing differently? Are you cheaper?
• Who dominates the industry? How can you improve on what is already out there?

Answering these questions will highlight gaps in the market that your business can occupy and give your company a better chance at survival long-term.

You may have in mind some future milestones that you would like to hit. In your business plan, it’s important to plot some top-level goals, then plan what objectives will get you there.

As an example, for an artisan craft business, one goal might be to sell 1,000 handmade products in the first year. Setting an objective such as ‘ Use social media advertising to drive half of the sales ’ will help you focus on the activity you need to achieve the goal. 

Or if you offer professional services, like marketing support or a financial advisor, you might want to grow your client base by 50%. In order to grow this number consistently, you must also keep your existing clients on board. Therefore, an objective might be to improve customer relations to retain clients for longer. Then you can begin to research strategies to support your overall business goals.

By checking in regularly on your business plan, you will be able to track your progress toward important growth milestones and change tactics as you learn more about your customers. By having your plan in writing, you are setting yourself up to grow at a faster rate than businesses that don’t create a business plan .

Your aims and objectives will keep you accountable when making decisions for your business. As you grow, you will encounter chances to invest back into the business. Consulting the long-term vision you set for yourself will help you separate the ‘needs’ from the ‘wants’. 

Including financial information such as cash flow and forecast reports in your business plan will make it easier to make informed decisions when it comes to major spending, growth or expansion. You will be able to know with confidence whether an idea aligns with what you have set out to achieve.

Consulting a detailed plan will also help you avoid common pitfalls of start-ups. You will have already done your research and spotted any gaps in your knowledge or strategy before it becomes an issue. Some mistakes that unprepared businesses make include:

• Not enough demand for what you’re selling
• Cash flow issues due to poor forecasting .
• Too much competition in the marketplace, when you don’t have a marked difference to them.
• Setting your price mark too high or too low for the industry.

Business plans are typically a requirement if you are looking to secure finance. Whether it comes from a bank, an outside venture capital firm, or a friend who wants to go into business with you. They will want to see the forecasts that prove your business is viable in the long run. 

Also, if you ever consider selling your business in the future, a business plan will be needed to pitch for a higher valuation.

Another exercise to include in your business plan is a SWOT analysis. This is a process of identifying Strengths, Weaknesses, Opportunities and Threats that face your business. By doing this activity you are reducing risk by highlighting areas that may need contingency plans, and a thorough SWOT analysis will allow you to plan in advance for potential difficulties.

With all the data you’ve pulled together on your market, operational plans, finances and sales projections, you will have reduced any potential risks that arise from being uninformed. In doing your research, you can spot potential issues before they arise in real life, and create contingency plans as a safety net. 

As the saying goes “if you fail to prepare, you prepare to fail”. Revisiting your business plan regularly will help you avoid as much risk as possible when you start trading. It will also keep your mind focused on the bigger picture instead of the daily trials and tribulations of running a  business.

Now that you are equipped with answers to ‘why is a business plan important’, you can start preparing a business plan to set your new venture up for success. 

When you’re starting a business, it’s important to keep on top of your financial admin from day one. Countingup offers a business current account and an app with built-in accounting software, that will save you time and money when it comes to your bookkeeping. Find out more here .

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AT&T informs users of data breach and resets millions of passcodes

March 30, 2024 / 2:51 PM EDT / CBS/AP

AT&T said it has begun notifying millions of customers about the theft of personal data recently discovered online.

The telecommunications giant said Saturday that a dataset found on the "dark web" contains information such as Social Security numbers for about 7.6 million current AT&T account holders and 65.4 million former account holders.

The company said it has already reset the passcodes of current users and will be communicating with account holders whose sensitive personal information was compromised.

It is not known if the data "originated from AT&T or one of its vendors," the company said in a statement. The compromised data is from 2019 or earlier and does not appear to include financial information or call history, it said. In addition to passcodes and Social Security numbers, it may include email and mailing addresses, phone numbers and birth dates.

It is not the first crisis this year for the Dallas-based company. 

New York prosecutors said they are opening an investigation into a wireless network outage in February that left  thousands of AT&T customers  across the U.S. without cellphone service for roughly 12 hours.

The outage, which also affected some Consumer Cellular, T-Mobile, UScellular and Verizon subscribers, led to widespread frustration by phone users and briefly disrupted 911 service in some communities. 

AT&T apologized for the network disruption and offered a  $5 credit to customers .

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Thousands of student-loan borrowers got their debt wiped through a new repayment reform. 11 GOP states just filed a lawsuit to block that relief.

• Eleven GOP state attorneys general filed a lawsuit to block the SAVE income-driven repayment plan.
• They argued that the shortened timeline for debt relief through the plan is unconstitutional.
• An Education Department official said Congress allows the authority to set terms for income-driven repayment. 

The lawsuits to block President Joe Biden's student-debt relief efforts are back.

On Thursday, 11 state attorneys general — led by Kansas' Kris Kobach — filed a lawsuit to block Biden's SAVE income-driven repayment plan , implemented over the summer to give borrowers cheaper monthly payments with a shorter timeline for relief.

The lawsuit, filed in Kansas' district court against Biden and Education Secretary Miguel Cardona, stated that the "lawsuit is now necessary to prevent Defendants from continuing to flout the law, which includes ignoring Supreme Court decisions," referring to the high court's decision at the end of June to strike down Biden's first attempt at broad student-loan forgiveness using the HEROES Act of 2003.

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"Once again, the Biden administration has decided to steal from the poor and give to the rich," Kobach said during a Thursday press conference. "He is forcing people who did not go to college, or who worked their way through college, to pay for the loans of those who ran up exorbitant student debt. This coalition of Republican attorneys general will stand in the gap and stop Biden."

Last month, the Education Department implemented a provision of the SAVE plan ahead of schedule: $1.2 billion in debt relief for 153,000 borrowers who originally borrowed $12,000 or less and made as few as 10 years of qualifying payments. The lawsuit argued that the relief was "in defiance of the Supreme Court" and asked the federal court to declare the SAVE plan unconstitutional and require borrowers to make payments.

An Education Department official told Business Insider that while the department does not comment on pending litigation, "Congress gave the US Department of Education the authority to define the terms of income-driven repayment plans in 1993, and the SAVE plan is the fourth time the Department has used that authority."

"From day one, the Biden-Harris Administration has been fighting to fix a broken student loan system, and part of that is creating the most affordable student loan repayment plan ever that is lowering monthly payments, protecting millions of borrowers from runaway interest and getting borrowers closer to debt forgiveness faster," the official said. "The Biden-Harris Administration won't stop fighting to provide support and relief to borrowers across the country — no matter how many times Republican elected officials try to stop us." 

While the lawsuit makes several comparisons to the debt relief plan the Supreme Court struck down, the legal basis for the two plans differ. Biden's first attempt at broad student-loan forgiveness would have canceled up to $20,000 in debt for borrowers making under $125,000 a year using the HEROES Act — a law that allows the education secretary to waive or modify borrowers' balances in connection with a national emergency, like a pandemic.

The SAVE plan, on the other hand, went through a process mandated by the Higher Education Act known as negotiated rulemaking, which requires negotiations with stakeholders and public comment before its final implementation. The Education Department is currently undergoing the negotiated rulemaking process for its second attempt at a broader form of debt relief .

The Education Department has not yet filed its response to the lawsuit. For now, borrowers who received relief through SAVE are not impacted, and enrollment in the plan can continue.

Watch: Why student loans aren't canceled, and what Biden's going to do about it

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Biden announces plans to address Baltimore port closure and help workers after deadly bridge collapse

After visiting the site of the deadly Francis Scott Key Bridge collapse on Friday, President Joe Biden said that his administration is taking swift action to try to ease the disruption at Baltimore's port and help workers and small businesses affected by the port closure.

After an aerial tour of the site, Biden said that the federal government will provide more than $8 million in grant funds to make infrastructure improvements to the port at Baltimore's Sparrows Point — an area unaffected by the bridge collapse — so it can take on more ships.

The president also announced that his administration would provide grants to workers affected by the pause in port operations and said the Small Business Administration would offer low-interest loans for small businesses impacted by the incident last week.

"I’m here to say your nation has your back," Biden said. "The damage is devastating and our hearts are still breaking," he continued, noting that six workers who were fixing potholes on the bridge lost their lives.

"I’ve come here to grieve with you," he said, flanked by Transportation Secretary Pete Buttigieg, Maryland Gov. Wes Moore and other Maryland and Baltimore officials. "It’s not the same, but I know a little bit about what it’s like to lose a piece of your soul."

Biden reiterated that he wants Congress to pass funding to cover the entire cost of constructing a new bridge. He also said that, so far, two small channels have been cleared for ships helping to clear the wreckage and noted the tentative timeline for reopening the port announced Thursday by the Army Corps of Engineers.

The Army Corps of Engineers expects “to open a limited access channel for barge container service and some vessels that move automobiles and farm equipment by the end of April” and “restore the port to normal capacity by the end of May,” the White House said.

In addition to the aerial tour, Biden received an operational update on response efforts from the Coast Guard and Army Corps of Engineers and was expected to meet personally with the families of the six workers who died.

The Francis Scott Key Bridge collapsed early on the morning of March 26 when a cargo ship crashed into a support pillar. The remains of two people who were killed have been recovered, four others are presumed dead and two people who fell into the water survived.

Biden addressed the disaster during remarks in the hours following the collapse, saying that the White House would send “all the federal resources they need” and that they would rebuild the port. He also said that he intended for the federal government to pay the entire cost of reconstructing the bridge.

Director of the Office of Management and Budget Shalanda Young sent a letter to congressional leaders on Friday asking them to authorize "a 100 percent Federal cost share for rebuilding the bridge."

“To the people of Baltimore, I want to say: We’re with you. We’re going to stay with you as long as takes. And like [Moore] said, you’re Maryland tough, you’re Baltimore strong, and we’re going to get through this together,” Biden said during his remarks last week. “And I promise: We’re not leaving.”

The National Economic Council has also convened the administration's Supply Chain Disruptions Task Force to coordinate federal efforts to support affected industries in the aftermath of the collapse, the White House announced last week.

“We are much better equipped to mitigate supply chain disruptions than we were just a few years ago, thanks to increased coordination across the supply chain and new efforts to strengthen both our physical and digital infrastructure,” Buttigieg said in a statement.

Also last week, the Department of Transportation announced $60 million in emergency relief funds to go toward rebuilding the bridge. The White House said it would serve as a "down payment" for initial costs.

In 2023, the Baltimore port near the bridge, a key shipping hub and source of jobs, “handled a record 52.3 million tons of foreign cargo, worth $80 billion,” Moore announced in February. The port also generated more than 15,000 direct jobs, “with nearly 140,000 jobs linked to port activities,” he said in the statement.

Megan Lebowitz is a politics reporter for NBC News.

Rebecca Shabad is a politics reporter for NBC News based in Washington.

This airline updated its premium economy service: How that impacts your next long-haul trip

Singapore Airlines unveiled an overhauled cabin service for its premium economy passengers earlier this month, and it’s part of a broader trend. 

Long-haul premium economy is becoming increasingly important to airlines. That’s partly because leisure travelers have been willing to splurge more on vacations in recent years and business travel still hasn’t fully recovered to its pre-pandemic demand levels. 

Demand for premium economy is increasing as travelers become more familiar with what to expect, which makes competition for those midmarket dollars more intense. Carriers around the globe are aware of the growing interest and are increasingly investing in the cabin class.

What is premium economy?

In this case, premium economy refers to the long-haul airline product that sits between standard economy and business class. Confusingly, many airlines also call economy seats that have extra legroom “premium economy” on domestic flights, but here, the term refers to a separate cabin with larger seats and often elevated service. 

“Premium economy is the 21st-century version of business class. Business class emerged in the 1980s as an interim cabin between standard economy and first class, and now premium economy is an interim cabin between standard economy and business class,” Henry Harteveldt, president of Atmosphere Research, a travel industry analytics firm, told USA TODAY. “It’s available to travelers at a much lower cost than business class may be.”

What travelers should expect when flying premium economy

Joe Lai, a physician in Charlotte, North Carolina, and American Airlines frequent flyer, told USA TODAY that he finds premium economy is often a better overall experience than flying in coach.

“Generally better seats, that’s kind of the biggest plus of that, just being able to relax, throw my feet up – with shoes on preferably,” he said. “Sometimes upgraded food options, alcohol, things like that.” 

Premium economy on long-haul flights usually has larger seats than economy as Lai mentioned, with more legroom, possibly more padding, and often a more elaborate cabin service compared to the standard economy offering.

Singapore Airlines, for example, serves its premium economy meals in porcelain dishware with metal cutlery. 

But as Harteveldt said, premium economy is meant to be a bridge between standard economy and business class, not a competing product for the fancier cabins.

“It is definitely better, tangibly better than standard coach,” he said, but “passengers should not expect a luxury experience in premium economy. It does not offer the same level of comfort, privacy, or attention that you find in business class.” 

For airlines, it can be tricky to find the right balance between expanding comfort and service without pirating their own more premium demand.

“How do they create a product that is good enough to tempt people to trade up from economy but not so good that people trade down from business class?” Harteveldt said. “When airlines introduced lie-flat seats in business class, they made first class almost irrelevant.” 

He added that different airlines think of their premium economy cabins differently, even as the seats most carriers use are becoming more or less standardized across the industry.

“It’s interesting to see where airlines place the emphasis: is it on the economy side or the premium side?” Harteveldt said. “Some airlines are going to offer above-average legroom in their premium economy seating, they could have fewer seats across the cabin than they otherwise might. Some airlines are going to say, ‘look this is certainly better than economy, but we’re not going to have a dedicated restroom for you, we’re not going to have flight attendants that are dedicated to your cabin.’ ”

For those perks, Harteveldt said, travelers can typically expect to pay about 50% more than the regular economy fare on the same flight. 

Lai said he often seeks opportunities to upgrade to premium economy, especially on longer flights.

On a recent trip to New Zealand, he paid just $250 to upgrade to premium economy from extra-legroom economy seats. He said the cost was “absolutely worth it,” especially because the extra legroom and bigger seats allowed him to sleep more easily. 

Why premium economy matters to airlines

Premium economy has become increasingly important to airlines’ bottom lines coming out of the pandemic.

“A lot of people have been booking the premium cabins pretty quickly as well, so we’ve seen a lot of demand for the premium cabins coming out of COVID,” Siva Govindasamy, Singapore Airlines’ divisional vice president of public affairs said at a press event unveiling the carrier’s new premium economy service concept in Singapore earlier this month. “Premium economy, specifically, has been quite popular with our customers since we launched it in 2015.” 

For Singapore and other airlines, that popularity means spending more on attracting customers to buy premium economy seats.

“There is an increase in the premium economy investment, the budget that we have, as a result of this. We think that’s a good investment to make because that will ultimately ensure that the premium economy remains competitive and provides excellent value for our customers,” Govindasamy said. “You’ve got added amenities, more comfort, more space; now you’ve got even better meals, even better drinks and champagne. When we look at our customers’ feedback it’s about the value premium economy brings.”

Harteveldt said long-haul airlines that don’t offer competitive premium economy products risk falling behind their peer companies.

“When a critical mass of airlines start to do something the airlines that don’t offer it stand out and often in a negative way,” he said. “The fact that some airlines are expanding premium economy, adding more seats to the cabin, shows that it has been financially successful for airlines.”

Zach Wichter is a travel reporter for USA TODAY based in New York. You can reach him at [email protected]