what business plan contains

• Search Search Please fill out this field.

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 ."

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How to Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

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

Published: June 07, 2023

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

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

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

What is a business plan?

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

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

What is a business plan used for?

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

Business Plan Template [ Download Now ]

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

Purposes of a Business Plan

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

1. Securing financing from investors.

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

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

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

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

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

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

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

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

You're all set!

Click this link to access this resource at any time.

Free Business Plan [Template]

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

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

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

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

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

4. Getting an A in your business class.

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

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

What does a business plan need to include?

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

1. Business Plan Subtitle

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

2. Executive Summary

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

3. Company Description

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

4. The Business Opportunity

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

5. Competitive Analysis

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

6. Target Market

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

7. Marketing Plan

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

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

8. Financial Summary

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

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

10. Funding Requirements

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

Types of Business Plans

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

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

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

1. Startup Business Plan

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

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

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

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

2. Feasibility Business Plan

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

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

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

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

3. Internal Business Plan

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

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

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

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

4. Strategic Business Plan

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

These types of business plans may include:

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

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

5. Business Acquisition Plan

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

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

A business plan for an existing company will explain:

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

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

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

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

6. Business Repositioning Plan

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

This plan will:

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

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

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

7. Expansion or Growth Business Plan

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

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

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

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

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

Getting Started With Your Business Plan

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

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

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

Don't forget to share this post!

Related articles.

24 of My Favorite Sample Business Plans & Examples For Your Inspiration

How to Write a Powerful Executive Summary [+4 Top Examples]

19 Best Sample Business Plans & Examples to Help You Write Your Own

Maximizing Your Social Media Strategy: The Top Aggregator Tools to Use

The Content Aggregator Guide for 2023

7 Gantt Chart Examples You'll Want to Copy [+ 5 Steps to Make One]

The 8 Best Free Flowchart Templates [+ Examples]

16 Best Screen Recorders to Use for Collaboration

The 25 Best Google Chrome Extensions for SEO

Professional Invoice Design: 28 Samples & Templates to Inspire You

2 Essential Templates For Starting Your Business

Marketing software that helps you drive revenue, save time and resources, and measure and optimize your investments — all on one easy-to-use platform

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

How to Write a Business Plan, Step by Step

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

What is a business plan?

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

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

ZenBusiness

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

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

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

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

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

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

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

Your business’s registered name.

Address of your business location .

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

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

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

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

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

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

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

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

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

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

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

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

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

Licenses and permits.

Equipment leases.

Bank statements.

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

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

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

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

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

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

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

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

On a similar note...

Find small-business financing

Compare multiple lenders that fit your business

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

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

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

Related Articles

8 Min. Read

How to Conduct an Industry Analysis

6 Min. Read

Do This One Thing Before You Write Your Business Plan

11 Min. Read

How to Create a Sales Forecast

5 Min. Read

How to Write a Growth-Oriented Business Plan

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

Tax Season Savings

Get 40% off LivePlan

The #1 rated business plan software

Transform Tax Season into Growth Season

Discover the world’s #1 plan building software

Contents of a Business Plan: Everything You Need to Know

The contents of a business plan consist of a detailed description of what, when, why, where, and how the business's operations will be accomplished. 3 min read updated on January 01, 2024

Overview of a Business Plan

A business plan includes the cost of organizing the business, the anticipated sources of revenue, how the products and services are customer oriented, and anticipated profit margins. Business plans serve two main purposes. First, they are a guide business owners use to streamline management and planning/organization of the business. Second, they show potential venture capitalists, bankers, and other lenders a comprehensive plan to encourage them to invest in the business.

Sublevels of a business plan include:

• Marketing plan
• Financial plan
• Human resource plan
• Production plan

Elements of a Business Plan

A well-written business plan will include the following:

• Cover letter

Table of Contents

Executive Summary

• Mission statement
• Company background
• Products and services
• Competitive analysis

Marketing/Realization

• Location/Production/Administrative
• Management and international organization
• Risk analysis
• Financial planning

Summary/Conclusion

Cover Letter

The business plan's cover letter has the same purpose as a cover letter for a resume. The point is to engage prospective investors using the cover letter so they'll look at the entire plan. The cover letter should include the recipient's address, the date, and your address. Begin the cover letter with "Dear" followed by the person's name.

In the body of the cover letter, let the recipient know you're submitting a business plan with a short one-sentence description of the business and what the recipient can expect when reading the plan. In the next paragraph, indicate that you look forward to hearing from them and provide a phone number they can call at their convenience.

Thank them for their time. Sign off. Include your name in typewritten form along with your signature.

Keep this page short and to the point. Include your business logo, business name, if there is a founder, and the name. Add "Business Plan," an image (optional), and the date.

The table of contents is a roadmap to help the recipient peruse the list and easily find each section. Some people may choose to read sections one after the other while others may choose to skip around. Include every section and subsection that may be of interest to a potential investor.

This is an important section. Because you're targeting executives, the overview of your business should be top-quality information to entice them to read the complete plan. The focus should be a summary of the main facets of your business plan.

Mission Statement

This section is a short statement about your business's goal and what you plan to create through the enterprise.

Company Background

This is a short statement including the date the business was developed, its founders, stages of development, the date it was incorporated, and, for existing businesses, the level of success.

Also, include the key figures in the business and the ownership and legal structure.

Products and Services

Under this section, provide a detailed description of your customer needs, benefits to customers, marketing services, and advantages and disadvantages of any competitor services or products.

Marketing Plan

This will include an overview of the market in general with an emphasis on purchase incentives, market analysis, and customer structure. It will also include the position your business holds in the market using information from target customer groups, canvassed market segments, and sale channels.

Competitive Analysis

Provide information about your main competitors' names, locations, market positions, weaknesses, strengths, and target markets.

This section covers details about product range, services, and pricing strategies. Sales targets for the next five years should also be included.

Location/Production/Administration

Include the location of the business and the advantages and disadvantages of its location. The production should discuss in-house and/or outsourced production and material costs. The administration portion will discuss the office infrastructure, such as accounting and technical support.

Management and International Organization

This section could work written as an organizational chart outlining member functions and responsibilities, special skills, and salaries.

Risk Analysis

Provide information on anticipated internal risks such as marketing, production, management, and financing. External risks would include information on ecological, economic, social, and legal areas.

Financial Planning

Lay out your plan for short- and long-term financial planning.

This is a final wrap up of the business plan that binds the everything together.

If you need help with outlining the contents of a business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Creating a Business Plan
• Business Plan Contents Page
• How to Make a Business Plan Format
• Business Description Outline
• Service Business Plan
• LLC Business Plan Template
• Business Plan for Existing Company
• Parts of Business Plan and Definition
• IT Company Business Plan
• Business Plan Format: Everything you Need to Know

How to Write a Business Plan

Last Updated: February 16, 2024, 12:05 pm by  TRUiC Team

Writing a business plan can be an intimidating endeavor. Whether you’ve decided to start a business , or you already have a business and need to write a business plan to apply for a loan or to pitch to investors , we cover the process in-depth.

Recommended: Our business plan generator walks you through topics like marketing and financial projections so that your business is prepared to succeed.

What Is a Business Plan?

The traditional business plan is typically a 20 to 40-page formal document that describes what your business does, what your objectives are, and how you plan to achieve them.

It lays out your plans for operating, marketing, and managing your business, along with your goals and financial projections.

There are many different types of business plans, depending on the stage of your venture and the purpose of your business plan. In the earliest stages of your business idea, you may want to start small with a three-sentence business plan , or perhaps by sketching out a lean canvas or business model canvas .

Once your business idea has been developed, you’ll be ready to begin writing your business plan .

Why Do You Need a Business Plan?

Writing a business plan requires you to think through all of the key elements of your business. This gives you insights into the challenges you’ll face and the strengths you bring.

A business plan is also often requested by lenders or investors when you are ready to seek financing.

While many companies do not need a formal business plan unless they are planning on seeking investors or applying for a business loan , writing a business plan has extensive benefits.

The process of writing your business plan allows you to take an in-depth look at your industry , market , and competitive position . It helps you set goals , determine your keys to success , and plan your strategies . It also allows you to explore your financial projections and manage cash. So, even if you do not need a formal business plan, the process of planning may still reap huge rewards.

Your Audience

You need to think carefully about who is going to read your business plan.

Although you might begin writing a business plan only to convince yourself, there are a number of stakeholders who may end up reading your business plan.

Your plan might be read by your:

• Partners or potential partners
• Board of directors
• Senior management team
• Current employees
• Employment candidates

Outside the organization , the following stakeholders may want to read your business plan before they decide to do business with you:

• Distributors
• And independent contractors

Think about your primary audience when you are writing your business plan. What are the aspects that are most important to them? This is where you will want to put the majority of your focus.

For example, lenders will be most interested in your financial projections — your cash flow statement and balance sheet.

Investors might be most interested in your business model, the uniqueness of your product or service, and your competitive advantage.

Partners, your senior management team, and current employees might be most interested in your strategic plans- your vision, your operational plan, and your organizational plan.

Find Sample Business Plans in Your Industry

One great resource you should check out before sitting down to write your business plan are sample business plans in your industry.

Not only will you have the opportunity to gain insights on your industry and your competitors, you also might be able to find troves of industry and market research that will make conducting your own analysis of the industry and market much easier.

To find example business plans in your industry, try searching the web for “ your industry business plan example.”

Writing Your Business Plan

Once you have spent some time looking at sample business plans in your industry, it is now time to start writing your business plan . An easy place to begin is by outlining the major sections you will need in your plan.

What you need to include in your business plan will depend on the type of business you are creating, your business model, and who your intended audience is.

Common business plan sections include:

• Executive Summary — a high-level overview of your business or business idea
• Venture Overview — a description of your company, vision, mission, and goals
• Product or Service Description — a detailed description of your product or service
• Industry and Market Analysis — an analysis of the industry and market you compete in
• Marketing Plan — your overall strategy and specific plans to capture market share
• Organizational Plan — the legal form of the business and the key players
• Operational Plan — how you will operate the business and your key resources
• Goals, Milestones, and Risks — short and long-term goals, milestones, and risks
• Financial Statements — Financial statements or the projected financials of your business

Not every type of venture will require every one of these sections to be included in their business plans. However, most business plans will at least include an executive summary, venture overview, a description of the products and services, and some form of financial projections.

Executive Summary

As suggested in its name, an executive summary is a summary of the key points in your business plan . This is your first chance to convey to readers the what, why, who, and how of your business or business idea.

Although there is no set structure for an executive summary, a good executive summary should summarize :

• The problem you are solving
• Your solution
• Your target market
• Any competitive advantages
• The team you’ll build
• Goals and objectives
• An overview of your financials or financial forecast

If you are writing your business plan for the purpose of acquiring funding , you will also need to discuss the amount of funding required, the purpose of the funds, as well as how your investors will get paid back.

The executive summary should be clear and concise . Ideally, this section should be one to two pages and typically follows either a synopsis or story approach, depending on the intended audience.

In the synopsis approach, you would provide a brief summary of each of the key sections of your business plan. In the story approach, your executive summary reads like a narrative, allowing you to tell the “story” of your business or idea.

With either approach to writing the executive summary, the information you want to convey remains the same. The executive summary needs to provide an overall picture of your current business or business idea.

The executive summary should include:

• A brief description of you and your venture,
• The problem your product or service is solving,
• Some information on your target market, including size, potential, & competition, and
• The solution you are offering.

The executive summary should also include:

• A statement of where you are now,
• A statement of your objectives and future plans,
• A list of what you see as keys to your success, and (if you are seeking investors)
• Any relevant financial information such as start-up costs, funding required, and how you will use investor funding.

Although the executive summary is the first section in the business plan, because it is a summary of the rest of your business plan, it is often written last.

Venture Overview

The venture overview is a top-level depiction of your company.

It contains the:

Description of the Venture

• Vision Statement
• Mission Statement
• Goals & Objectives
• Keys to Your Success

The first part of your venture overview is a description of your venture.

The description of your venture should include what you do (a brief description of your products or services), the value you provide to customers, your current operating status or a brief history of the venture, and a short description of the industry or niche in which you compete.

How to Write a Vision Statement

After describing your venture, a vision statement is a very simple, 5 to 10 word sentence or tagline that expresses the fundamental goals of your firm. Good vision statements reflect your company’s long term passion and purpose, often in a way that evokes emotion.

Take a look at the vision statements below for some inspiration:

Disney —  To make people happy. Oxfam —  A world without poverty. Stanford —  To become the Harvard of the West. Marriott —  To be the #1 hospitality company in the world. Microsoft —  A computer on every desk and in every home; all running Microsoft software.

How to Write a Mission Statement

After having crafted your vision statement, you should also create a mission statement. A mission statement explains your company's goals in terms of what you do for your customers. A good mission statement should tell your reader what your company does, who you do it for, and why you do what you do.

Check out these excellent examples of compelling mission statements:

Patagonia —  “Our Reason For Being: Build the best products, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Trader Joes —  “Our mission is to give our customers the best food and beverage values that they can find anywhere and to provide them with the information required to make informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit.” Facebook —  "Founded in 2004, Facebook's mission is to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them."

Goals and Objectives

In this section of the business plan, break down your most important short-term and long-term goals and objectives.

Aim for five to seven of your most important short and long term goals.

This subsection of your venture description should be kept short. You will come back to your goals at the end of your business plan.

However, your key short-term and long-term goals should be highlighted early on in your business plan as well. The rest of your business plan will act as evidence of how you plan on achieving your goals.

Keys to Success

Your keys to success are your insights into what it takes to be successful in your industry, market, or niche.

Your keys to success can include several of the most important milestones that you will need to accomplish in order to achieve your goals.

These may include providing high quality products and services, your ability to attract customers or users and gain market share, or even your ability to develop the technology to deliver your products or services.

Your keys to success may also include the major milestones that you will need to reach along the way in order to achieve your vision. You will come back to your milestones and objectives at the end of your business plan.

Product or Service Description

The product or service description section is where you will go into detail in describing your products or services.

Not only will you describe your product in more detail, you should also discuss the uniqueness of your product, and what gives you an advantage over your competitors.

These are the three main parts of the Product (or Service) Description:

Description of Products or Services

Uniqueness of product, competitive advantage.

In this subsection of your business plan, describe the products or services you will provide, why they are a fit in the market, and how you will compete with similar products and services.

Begin by clearly describing the products or services you will provide. Make sure to explain the features and characteristics of your products and services. Your product or service description does not have to be highly technical. Rather, in addition to describing the features, focus on highlighting the advantages and benefits associated with your products or services.

Also, let your reader know why your product or service is needed. How does your product or service differ from those offered by your competitors? How does it better fill your customers wants and needs?

This is where you tell your reader why your solution is unique. Is it different from everything else out there? How is it different? Why would potential users choose your product or service over your competitors? In order to stand out, you need to distinguish yourself in some way.

To describe your product or service’s uniqueness, you may want to come up with a unique value proposition (or unique selling point). A value proposition is a short description of what you do, who you do it for, and how this benefits them.

A value proposition is similar to a mission statement. However, it differs in that a mission statement is written from the perspective of the company, while a value proposition is written from the perspective of the customer.

Your value proposition should be the center of your customer messaging. It should be front and center on your website, in your marketing materials, and in your advertising.

Here a few examples of great value propositions:

Dollar Shave Club —  A Great Shave for a Few Bucks a Month. No Commitment. No Fees. No B.S. Unbounce —  Build, Publish, & A/B Test Landing Pages Without IT Freshbooks —  Small Business Accounting Software Built for You, the Non-Accountant Skype —  Skype Keeps the World Talking, for Free. Share, Message, and Call - Now with Group Video on Mobile and Tablet Too.

What makes you better than competitors?

Does your competitive advantage come from superior products and services, customer service, technical support, logistics, price? What are the factors that give you an advantage over your competitors?

Clearly defining your competitive advantage is important.

Your competitive advantage is not just some abstract concept. It is at the core of how you deliver value to your customers. Your competitive advantage lays the foundation for your business model and should be a key component of your strategic plans.

Common areas where businesses find competitive advantages include:

• Intellectual Property
• Resources/Capital
• Economies of Scale
• Knowledge/Experience
• Connections and Network
• Customer Service
• Technical Support
• Customization
• Brand Recognition/Loyalty

Industry and Market Analyses

The industry and market analysis is the “big picture” view of your industry and market.

Conducting an industry and market analysis is going to take a good deal of research. You will likely need to research your industry, your competitors, and your customers. But do not rush through this section of your business plan.

A good understanding of your industry and market is critical to your success. By understanding the forces at play within your industry, you will be better able to find additional ways to create value that will allow you to succeed in the current and anticipated competitive environment.

Conducting an industry and market analysis can be intimidating, especially if you do not know what to look for or how to find the information you need. In the next section, we will discuss what should be included in your industry analysis. Then, we will tell you where to begin looking.

Industry Analysis

The industry analysis is a big picture analysis of the industry you will compete in. What does your overall industry look like today? There are a number of insights that will help you assess the attractiveness of your idea and form a big picture view of the industry and segment you are considering competing in.

Key insights to be alert for include:

• The dominant economic features of the industry
• The industry’s driving forces
• The industry’s competitive environment
• The competitive position of major players and key competitors
• Key industry success factors

To arrive at meaningful insights from your industry analysis, try to find answers to the following questions:

• What primary products or services are provided by your industry?
• What is the size and trajectory of the industry?
• What was the annual growth rate of the industry over the past year? Three years? Five years? Ten years?
• What is the forecasted annual growth rate over the next three years? Five years? Ten years?
• What is the average profitability of firms in your industry?
• What trends are affecting your industry?
• Who are the major customer segments served by your industry?
• Who are the major players in your industry?
• Who will be your key competitors in your industry?
• What key factors determine success or failure?

Industry Research

Now that you have a better idea of what to look for, you will need to know where to begin your search. There are a number of great free resources to begin looking for industry research. However, the first step is to determine the industry you are in.

While by this point, you should have some idea of the industry you are in, it is not always so clear. You could try an internet search to see what information you can find on your industry, but you will also want to find the NAICS code. You can do a NAICS Code Lookup and find the NAICS Code for LLC that matches your industry.

Here, you use the NAICS identification tool to drill-down through a list of industries to find the appropriate NAICS code for your business.

Once you know your industry, you can begin collecting more information about the industry trends and trajectory.

www.Bizstats.com provides free industry statistics including industry averages for income statement revenues and expenses, balance sheets, and key financial ratios. This is very helpful in making financial forecasts and setting benchmarks.

The US Census Bureau also provides several tools to help you conduct industry research:

• The Economic Census provides information on employer businesses, including data sorted by industry, state, region, and more.
• Statistics of US Businesses (SUSB) provides additional data on US businesses by enterprise size and industry. Both of these tools may help in conducting your industry analysis.

Target Market Analysis

Once you have a better understanding of the industry, you can begin to narrow down to your target market. In this section of the business plan you describe who your target market is and what you know about them.

What is a target market? Your target market is the specific group of customers to whom your product is intended. And no, it is not everyone. Although many new venture founders would like to sell their product or service to everyone, you should focus your efforts on your most likely customers.

Narrowing your target market requires understanding the three types of markets for your products or services. Your venture’s market can be narrowed down into three categories, the TAM, the SAM, and the SOM.

The total available market (TAM) is the total market for your products and services. Everyone in the universe who might be your customer.

The serviceable available market (SAM) is the subset of the total market that you can actually reach. Although anyone in your universe might be your customer, you are limited in your ability to reach them all.

The share of market (SOM) is the subset of the serviceable available market that you will actually reach. These are your most likely customers. Your target market.

Target markets can be segmented in many different ways. The idea is to narrow down to your most likely customers. This is where your focus should be.

Ways you can segment the market include:

• Demographic (e.g., age, gender, family size, education, income)
• Geographic (e.g., country, state, region, city, neighborhood)
• Psychographic (e.g., benefits sought, personality, social class, lifestyle)
• Behavioral (e.g., benefits sought, usage, attitude, loyalty)

Once you understand who your target market segments are, you will be able to start determining how you can reach them. To do this, consider:

• Where does your target market get information to make purchasing decisions?
• What is it they are looking for when considering buying this product/service?
• What will your target market pay attention to?

Market Research

To determine your target market and conduct a market analysis, you will most likely have to do market research.

Market research is the collection, analysis, and interpretation of data related to your target market and target customer to support strategic decision making.

There are two types of market research : secondary market research, and primary market research.

Secondary market research is the collection, analysis, and interpretation of data that has already been collected for other purposes. Secondary market research may include the collection of data from a number of sources such as the U.S. Census Bureau, consumer agencies, and for-profit organizations.

Primary market research is the collection of new information to gain a further understanding of the problem at hand. Primary market research involves you collecting the data or hiring a market research firm to collect data for you. This is you going out and actually collecting the opinions of your potential customers.

Common methods of primary market research include customer observation, focus groups, customer surveys, and customer interviews .

Because primary market research typically takes more time to complete and may incur significant costs , secondary market research is often conducted before conducting primary market research. This allows you to gather enough insights that you can narrow your primary market research to those more likely to be your customers.

To begin conducting secondary market research, consider these sources:

Think with Google provides a number of free tools and resources to help you find and understand your target market. From tools like Find My Audience and an Insights Library to a wealth of information on customer trends and the consumer journey, Think with Google is a valuable tool in conducting your market analysis.

City Town Info provides free statistics on people and places, colleges and universities, and jobs and careers. You can search for data on more than 20,000 U.S. communities at the city and state levels.

Google Trends is another useful tool for conducting market research. Google Trends allows you to explore what people are searching on the internet. You can examine trending topics, see trends by year, or search your own topic to discover interest over time, by region, or by related queries.

Social Mention allows you to conduct a real-time social media search for topics across more than 100 social media platforms. Social Mention provides you with information on the sentiment behind topic mentions, top keywords, top hashtags, and the social media platforms where these topics are being discussed.

Needless to say, there are several other great sources for both industry and market research. The key is to get creative to find the data and information to both guide your strategy as well as justify your business opportunity.

Competitive Analysis

Once you understand your industry and market, you should also include an analysis of your major competitors.

Your competitors may include anyone offering alternatives to your solution that people are using now to solve the same problem.

You will want to understand and explain who your competitors are along with their market share , price, major competitive advantages and disadvantages, and what makes your product unique from theirs.

Start by identifying the major competitors within your industry. You should focus on your closest competitors. Those that compete with you directly.

Next, for each competitor, describe their strategies, their strengths, and their weaknesses. In doing so, try to answer the following questions:

• What are their primary products and or services?
• Who are their target customers?
• What differentiates your product or service from theirs?
• What is their pricing strategy?
• What is their marketing strategy?
• What is their main message or value proposition?
• What are their strengths and weaknesses?
• What are their competitive advantages?

You should complete a competitive analysis for your top three to five competitors. Doing so will allow you to gain a much better perspective on the competitive landscape and may provide insight into how you can distinguish yourself from your competitors and even how you can take advantage of areas where your competitors fall short.

Marketing Plan

The marketing plan depicts the overall strategy your venture pursues to capture market share.

The marketing plan describes all aspects of marketing for your venture, including the product, price, place, and promotion . This includes a big picture view of your marketing strategy, your planned marketing mix, as well as your pricing strategy, sales strategy, and advertising strategy.

The marketing plan should be well informed by your industry and market analysis. By now, you have a plethora of knowledge about who your target customer is, the problem and pain points that you are alleviating for them, and how your competitors are positioned. All of this knowledge allows you to hone your marketing plan to reach your target market with the right message in the channels they turn to for information.

Marketing Strategy

The first section of your marketing plan is your marketing strategy. Your marketing strategy refers to your overall strategy of how you will market your product. How will you get your message out to your potential customers?

Your marketing strategy should consider the four essential elements of marketing:

The 4 Ps of Marketing:

The product is everything the customer gets, whether it be a physical product, a service, or an experience.

It is what you deliver. This includes the product or service itself, along with its branding, packaging, labeling, and even benefits.

The price is what you charge. What the customer gives you. Your business plan should discuss your pricing strategy and where this fits in your marketing mix.

Are you competing on price and thus offer low pricing? Or are you focusing on value at a medium price point? Or maybe you are positioned as a luxury label or item, and compete at a high price point? Why did you choose this strategy? Does it fit with your target market and within your marketing mix?

Location refers to where your customers find you, or where you find them.

While much of today’s marketing is done online, location is still as important as ever. Once you understand the place, you will have a much better idea on how to deploy your marketing mix. Where do your ideal customers get their information? Where do they shop? What forms of social media do they use?

Promotion is how you tell customers about your products and services.

Simply put, promotion is how you raise awareness of your products, services, or brand. Promotion strategies may include public relations, content creation and curation, marketing, and advertising.

But, keep in mind, your promotional strategies should be focused on one thing: your target customer and the strategies and messaging that works for them.

Your Marketing Mix

Your marketing mix is how you allocate resources to the marketing channels that you plan to pursue. In this section of your marketing plan, you will describe the marketing messaging and channels that you plan to use, and why these are appropriate for your target market.

Inbound Marketing

Inbound marketing, or content marketing, is a form of marketing designed to draw traffic to your website by providing valuable content to your target market. This is often achieved by posting useful web content, content, videos, and blogs.

The idea behind inbound marketing is pretty simple- by providing knowledge and information on your products, services, and other information that is valuable to your customers, you generate more leads and, hopefully, more sales.

Social Media Marketing

With over 3.5 billion people around the world using social media, social media marketing is another powerful tool to reach potential customers.

Social media marketing has many advantages, including allowing you to get your message in front of your specified target audience at little to no cost.

Although there is an overabundance of social media channels to choose from. Focus on the ones that your target market uses to get their information.

For instance, if your target market is middle age or older people, you may want to focus on platforms that are more popular with these demographics such as Facebook, Twitter, and Pinterest. However, if your target market is teen agers and young adults, you are more likely to find them on platforms such as Instagram and TikTok.

The Power of Video Marketing

Do not forget to discuss the use of video marketing in your marketing mix.

In both inbound and social media marketing, video has begun to play an increasingly important role. Video marketing can be employed in inbound marketing, email marketing, and social media marketing to serve a variety of purposes. The most common uses of video marketing include explainer videos, presentation videos, testimonial videos, sales videos, and video ads.

Not only can video marketing be used in a variety of methods and contexts, it is a highly consumed type of advertising. In fact, in 2020, 96% of consumers watched an explainer video to find out more about a product or service. Video works. And marketers believe this too. 92% of marketers who utilize video marketing say that it is a key part of their marketing strategy.

Email Marketing

Depending on the type of venture your company is, email marketing may also be an important element in your marketing mix. A good email marketing strategy balances gaining new customers with keeping your existing customers engaged with your company.

Although you do not want to overdo it, and a lot of email marketing seems “spammy”, email marketing can be very effective in the right form. Welcome notes, confirmation emails, informational emails, newsletters, digital magazines, promotional emails, and seasonal and birthday campaigns are just a few of the many types of email marketing.

Referral Marketing

Another common type of marketing in a company's marketing mix is referral or recommendation marketing. Referral or recommendation marketing can take many forms. Referral marketing might include good old organic word-of-mouth marketing wherein you ask customers for referrals, or even a formal system for rewarding customers who refer new clients.

Pricing Strategy

The Marketing Plan section of the business plan should also describe your pricing strategy. How are you going to price your products and services?

There are a number of ways you can approach pricing:

Markup Pricing —  Markup pricing is pricing based on your costs, plus a predetermined markup. The amount you mark up your product or service is usually expressed as a percentage, known as the gross margin. Markup pricing is most often found in high volume manufacturing industries where manufacturers must cover the cost of the products they are making.

Competitive Pricing —  Competitive pricing is pricing based on your competitors prices for similar products or services. Competitive pricing is most often seen in products or services where there are numerous competitors or substitutes.

Value Pricing —  Value pricing is pricing based on the value or perceived value that you deliver to your customers. In value-based pricing, you set the prices of your products and services in line with what the customer believes your product or service is worth. Value-based pricing is most often seen in higher value products and services, those that cater to self-image, or those that are niche or unique.

Penetration Pricing —  Penetration pricing is setting a low initial price, and then raising it as demand increases. Penetration pricing is designed to capture market share. It is a strategy often used by a new business or in launching new products and services. The idea is to set the price low enough to draw customers from your competition.

Price skimming —  Price skimming pricing is setting a high initial price and then reducing this price as the market evolves. Price skimming is most often used on new or trendy products and services. As initial demand slows and alternatives or competitors emerge, the high initial pricing must then be lowered to stay competitive in the market.

Sales Strategy

A sales strategy is how you plan on selling your products or services to your target market. This includes your sales channels (where will your product or service be available for sale) as well as how you will sell your product or service.

Your sales strategy depends on your business model and the nature of your business. If your business involves retailing, food services, or personal services where your customers come to you to make a purchase, your sales strategy may be quite simple (or even unnecessary to income). However, if your business involves personal selling, you may need a more thought-out sales strategy.

Some questions to ask to determine and document your sales strategy in your business plan:

• Will your products or services be available on your website?
• On a third-party website?
• In retail locations?
• In your own stores?
• In other retail stores?
• Directly to consumers? (Business to Consumer or B2C)
• To businesses? (Business to Business or B2B)
• Cold calling?
• Networking?
• Inside salespeople?
• Outside sales representatives?
• Sales through strategic partners?

Advertising Strategy

An advertising strategy is how you plan to use sponsored, non-personal messaging to reach and inform potential customers of your product, service, or brand.

Your advertising plan should describe the mediums you are going to advertise in , who you are targeting advertising in these mediums, your advertising message(s), and your advertising budget. A good advertising plan is also measurable, so be sure to consider how you are going to measure the effect of your advertising strategy to see if it is working.

Advertising Mediums

The most common advertising mediums typically fall into the categories of traditional advertising and digital advertising.

Traditional advertising includes print advertising such as newspapers, magazines, flyers, direct mail, and even billboards, as well as radio and tv advertising.

Digital advertising includes email advertising, search engine advertising, website advertising, social media advertising, influencer advertising, among many, many more.

The secret to finding the right advertising strategy and advertising mediums for your business is knowing where to find your most likely customers. Where is your target market, and where do they go to get their information?

Organizational Plan

The organizational (or management) plan describes:

• The legal form of the business
• Its organizational structure
• The background and roles of the leadership team
• Key personnel that are already in place or you will need to fill.

Organizational Type and Structure

The first part of your organizational plan describes your organizational type and structure . Who owns your company? And what is its legal business structure?

There are four primary types of organizational structures:

Sole Proprietorships

Partnerships.

• Limited Liability Companies (LLCs)

Corporations

Sole Proprietorships and Partnerships are informal business structures , while LLCs and Corporations are more formal business structures .

The best type of structure for your business will depend on your business’s particular characteristics and needs. A partnership structure may be the best choice for some businesses, while an LLC or a corporation might work better for others.

Sole proprietorships are an informal type of business structure. While many businesses start out as sole proprietorships because they are an informal business structure the owner is liable for 100% of the business's liabilities and risks. Thus sole proprietorships are typically not the preferred ownership structure for small businesses.

Similar to a sole proprietorship, a partnership is also an informal type of business structure. While a sole proprietorship involves only one owner, a partnership is a business structure with two or more partners where there is still no legal distinction between the owners of a partnership and their business.

An LLC is a formal business structure that distinguishes the owners from the business itself.

LLCs offer the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.

It is the simplest way of structuring your business to protect your personal assets in the event your business is sued.

LLCs can be owned by one or more people, who are known as LLC “members.” An LLC with one owner is known as a single-member LLC, and an LLC with more than one owner is a multi-member LLC.

LLCs require operating agreements . Operating agreements are legal documents that outline the ownership and member duties of your LLC. This agreement allows you to set out the financial and working relations among business owners ("members") and between members and managers.

Recommended: Learn how to form an LLC in your state using our free guides.

A corporation is a legal business entity that is owned by shareholders, run by a board of directors, and created through registration with the state.

Corporations offer limited liability and tax benefits but are required to follow more complex operating procedures than their counterpart, the limited liability company (LLC).

Ownership and Executive Team

Now it’s time to sell the single most important element in your business plan. You!

This subsection of your business plan tells readers who is in your ownership and executive team and outlines the accomplishments of your team.

You should include a short profile on each member of your ownership and executive team that will play a role in company decision making.

Who is on your ownership and executive team? What roles will each perform? What knowledge, experience, and accomplishments do you and your team bring to the table? What roles do you still need to fill, and how and when do you plan on filling them?

It is well known that many investors consider the experience and ability of the ownership and management team to be just as important as the idea itself. Do not pass over this opportunity to highlight how your knowledge, experience, and accomplishments set you up to succeed.

Also, remember that when you are writing your descriptions of your ownership team, talk about your accomplishments- as opposed to experience. Accomplishments signify that you have a track record and can get things done.

Key Personnel

This section of the business plan highlights the key personnel associated with the business . This may include members of the management team outside of the owners and executive management, the board of directors, and any outside advisors.

Here, include profiles on each key figure associated with your company, focusing on their accomplishments and the knowledge and skill they bring to the business.

Operational Plan

The operational plan describes how you will operate. The processes, strategies, and resources that you will use to operate your business on a daily basis.

This includes descriptions of production (if you produce a product) or the process you will use to carry out your service. The operational plan may also include, as necessary, descriptions of your logistics and supply chain, physical resources and needs, human resources and needs, technological resources and needs, and timetables for carrying out your plan.

Production Plan or Service Description

The production plan or service description explains how you are going to make and deliver your product(s) or provide your service(s). Although the production plans for products and services may look slightly different, both describe how your company will operate in the day-to-day.

If you are making a product , the production plan is where you will describe the process for making the product. What are your methods of production? What are the steps in your processes? How will you ensure quality? Maintain inventory? Handle Logistics?

If you are providing a service , the production plan is where you can describe the process you go through providing that service. What are your service methods? What will your sales and customer service look like? What is the customer experience like?

Most importantly, which of these might give you an advantage over your competitors? If you have any superior methods, processes, or other advantages, make sure to highlight them in your production plan or service description.

Logistics and Supply Chain

This section of the business plan describes your logistics and where you fall within the supply chain in your industry.

If you produce a product , you should discuss how you source materials, where your materials come from, and who your suppliers are. You will also need to discuss how you handle inventory, how you warehouse, and how you distribute your product(s).

If you are a service business , you may still have to discuss how you source materials used in your service, who your suppliers are, and how you handle inventory.

Physical Resources

In this section of the operational plan, you describe the physical resources that you have and the physical resources that you need to acquire. Think through everything you might need. This will become important when it is time to make financial projections.

• What facilities, machinery, equipment, and supplies do you require?
• Do you require raw materials?
• Who will be your primary suppliers?
• Secondary suppliers?
• Do you have back up suppliers and contingency plans if you cannot acquire raw materials?

Technological Resources

You should discuss the technological resources that you are developing, have, or need to create or acquire. Technological resources may include any software, applications, or websites that you have or will need to create, outsource, or purchase.

• What hardware or machinery will you require?
• What software or applications will you require?
• Can you purchase the software and applications you need?
• Are the software and applications you will need off-the-shelf or specialty?
• Will you have to create the software and applications you need?
• Do you need a website?
• Will you create and maintain your website inside the company or have it created and maintained by someone else?

Human Resources

Here, you describe the people that are a part of your team, and the human resources that you need to add to your team, hire, or outsource. Since you have already described the ownership and management team as well as key personnel, this section is more focused on production level workers and lower management.

• How much staffing will you need?
• What skills will your staff require?
• What will your staffing typically look like?
• How will you recruit, train, and retain employees?

Goals, Milestone, and Risk

The goals, milestones, and risks section of your business plan is the place to outline your goals, set key milestones, and explore and explain your preparation for the risks you will face.

Goals lay the foundation of where you intend to take your company and how you are going to get there. It is important to ascertain the short and long-term goals for your company.

Your goals should be connected to your mission and vision, your business model, and your strategic plans. They should also reflect your ambition to move the company forward and are often reflected in key performance indicators (KPIs) , such as numbers of users and customers, revenues, expenses, retention, satisfaction, and other indicators of performance.

Here are some questions to help you develop the goals for your company:

• When do you expect to break even?
• What do you expect your revenue to be in one year? Three years? Five years?
• What market share do you expect to capture in the next year? Three years? Five years?
• Where do you plan to expand from here?
• What KPIs do you need to achieve or improve?
• When do you expect to implement major objectives?
• What level of customer satisfaction do you hope to achieve?

When developing your goals, in addition to defining what your goals are, you also need to consider the how , the when , and the who . First, consider how your goals will get accomplished? What actions need to be taken to achieve your goals? What milestones do you need to accomplish along the way?

Your goals should also include your plan on when you plan on attaining each goal . Not only will your readers be curious about when you plan to achieve your goals, due dates and deadlines make for really powerful motivators.

Finally, you should also determine who is going to be responsible for working toward each goal. In a sole-proprietorship or startup it may be you, the business owner, or your founding team. However, as your organization grows, it will become more and more important to define who is responsible for pushing toward and achieving each goal.

SMART Goals

Your goals should be SMART: S pecific, M easurable, A ttainable, R ealistic, and T imely.

• Specific —  Your goals should be clear and specific. They should be narrow enough that you can determine the appropriate steps to attain them. In addition to what , in planning your goals, do not forget to be specific about how , when , and who . How will your goals be attained? When do you anticipate achieving them? Who is going to be responsible?
• Measurable —  Your goals should be measurable. There should be some objective metric or performance indicator by which you can tell if you have met your goals? How are you going to measure your goals? What metrics or performance indicators will you use? How will you know if you achieve your goals?
• Attainable —  Your goals must also be realistic and attainable. For a goal to be attainable you must be able to achieve it. Do not be afraid to push yourself, but setting unrealistic goals will cast doubt on your entire business plan. Ask yourself, can your goals be accomplished? By you? What will it take to attain them?
• Relevant —  Your goals also need to be relevant. To be relevant, they should contribute to the mission, vision, and success of your venture. Do your goals align with your company’s values? Are they within the scope of and aligned with your operational plan? Your marketing plan? Are they within the budget?
• Timely —  Your goals should also be timely and time-bound. Their process and progress should be clearly defined and they should have a starting and ending date. Without a timeframe, there is no sense of urgency, or motivation to get started. Make your goals time-bound. How long do you expect it to take? When do you plan on getting started? When do you anticipate achieving each goal?

Milestones are important events in your venture’s growth that mark significant change or stage of development.

Creating a list of milestones can act as a checklist of what you need to accomplish for your venture to reach its goals. They tell the story of how you are going to get from where you are to where you are going.

Milestones might include major events and accomplishments, such as:

• Forming an LLC
• Writing a Business Plan
• Securing Seed Capital
• Develop a Prototype
• Begin Production
• First Major Sale
• Reach 10,000 Downloads
• Achieve 1,000 Paying Customers

It is alright to list a few milestones that you have already completed. Or to leave them in your business plan once you complete them. Accomplished milestones show that you are making traction.

Milestones act as a signal to potential investors and other stakeholders what to expect from your venture and when to expect it. They also signal whether the venture is progressing and growing as expected.

Implementation Timeline

The implementation timeline is where you describe where your company is in its lifespan . You should set a timeline to reach your goals and milestones. This should include a short-term timeframe as well as where you anticipate being in the long term.

This section of the business plan should not be long. A simple chart will do. You can find several free timeline templates online to plug in your milestones and the time frame you expect to achieve them.

You will also want to include a section in your business plan showing that you understand the critical risks that your business may be subject to . The risks you will face in your business include both internal and external risks. These are any areas that expose your venture to any kind of loss- assets, customers, sales, profits, and reputation, among others.

By exploring your assumptions and identifying possible risks in those assumptions, you can show that you have assessed and are prepared to handle risks and threats that may arise. There are several tools available to analyze business risks, including SWOT Analysis and contingency planning .

SWOT Analysis

You may want to conduct a SWOT analysis or even include it in your business plan. A SWOT analysis is an analysis of your strengths, weaknesses, opportunities, and threats.

A SWOT analysis can help you understand your industry and market, your venture, and the strategies that you should pursue.

To conduct a SWOT analysis, you will need to assess factors both inside and outside your venture.

Here is how to conduct your own:

• What does your company do well?
• What are your company’s advantages?
• What do you do better than your competitors?
• What unique or low-cost assets do you have access to?
• What does your company not do well?
• What are your company’s disadvantages?
• What do your competitors do better than you?
• What needs to be improved?
• Where can you improve?
• Where can you grow?
• How can you turn your strengths into opportunities?
• How can you turn your weaknesses into opportunities?
• Do the trends of the industry or market represent a threat?
• Is the number of competitors growing?
• Do changes in technology or regulation threaten your success?
• Do your weaknesses represent a threat?

Contingency Plans

After assessing your risks and your SWOT analysis, you should address any major threats or risks that your venture faces with contingency plans.

Contingency plans are plans to help mitigate these risks by establishing a plan of action should an adverse event happen.

Contingency plans show that you understand the threats and risks to your venture, and you have a plan in place to lessen the damage should these risks emerge. There are various ways to prepare for adverse events. One is through planning- identifying alternatives and determining the best course of action. Another is business insurance.

Business Insurance

Business insurance protects against risk from several sources. The type of business insurance you will need varies greatly depending on the nature of your business.

While there are standard types of coverage like general liability insurance , professional liability insurance , workers’ compensation , insurance for commercial property and commercial auto insurance , there are also insurance policies that cover specific business activities and specialized equipment.

You can bundle most of these into what is called a Business Owner’s Policy (BOP) by a trusted insurance provider to get you started doing business.

Financial Statements

Your financial statements should include detailed projections of your income statement , cash flow statement, and balance sheet for the first year. You should also provide quarterly projections for the first three (or preferably five) years as well.

You also will likely need to include some sort of financial statement in your business plan. If you are a new venture, you will supply pro forma financial statements. Pro forma financial statements are simply financial projections.

Financial statements can help you to evaluate the cash needs of your venture, determine whether your venture is feasible and desirable, compare your expected returns with the alternatives, identify milestones and benchmarks, and demonstrate the value of your venture to investors.

Financial Assumptions

Before you begin completing your financial statements, you should first sit down and list the assumptions you will rely on to project your financial statements .

These should include projections concerning your:

• Initial revenue level per month
• Your growth and factors affecting growth
• Your inventory and inventory turnover
• And your operating expenses.

One of the biggest mistakes new ventures make is in making unrealistic assumptions .

Remember, revenue assumptions are key assumptions in determining whether your business will be viable. However, many entrepreneurs are overly optimistic about their revenue assumptions and tend to underestimate their expenses.

In order to make more accurate financial assumptions, back up your assumptions with data whenever possible. To find data to back up your assumptions, look for things like industry averages, market trends, and comparisons with similar ventures. You should already have a substantial amount of this data from your industry and market research.

Pro Forma Income Statements

The income statement , also known as the profit and loss statement , is a statement that shows the projections of your venture’s income and expenses over a fiscal year. On the income statement, you will detail your revenue and sources of revenue based on the assumptions you have made. You will also detail your anticipated expenses and use these to estimate your net income.

The typical income statement includes:

• Revenue —  the total amount of sales, or revenue, projected to be brought in by your business.
• Cost of Goods Sold —  the total direct cost of producing your product or delivering your service.
• Gross Margin —  the difference between revenue and cost of goods sold.
• Operating Expenses —  this section of your income statement details all of the expenses associated with operating your business. Common operating expenses might include rent, utilities, office
• expenses, salary expenses, and marketing and advertising expenses, among others.
• Total Operating Expenses —  the total of your operating expenses, excluding interest, depreciation, and taxes.
• Operating Income —  the difference between your gross margin and operating expenses.
• Interest, Depreciation, and Taxes —  this section of your income statement lists your non-operating expenses- expenses such as interest, depreciation, amortization, and taxes.
• Net Profit —  the total of how much you actually made. This is calculated by subtracting interest, depreciation, and taxes from your operating income.

Pro Forma Cash Flow Statements

The cash flow statement is a financial statement that shows when and where cash (and cash equivalents) flow in and out of your venture. This tells you how much cash you will have on hand at any single point in time.

• Cash from Operating —  Cash flowing into and out of your venture from operating, beginning with “cash on hand.” Cash flowing into your venture from operating includes cash from sales, payments from credit sales, investment income, and any other types of cash income related to operations. Cash flowing out of your venture from operations, your expenses, includes costs of raw goods, materials, inventory, salary expenses, office expenses, marketing and advertising expenses, rent, interest, taxes, insurance, or any other expenses that are paid by the venture.
• Capital Cash Flow —  Cash flow, in or out of the venture, for capital assets such as the purchase or sale of fixed assets.
• Cash from Financing —  Cash flow from financing includes cash flowing in or out of your venture relating to venture financing activities. Inflows of cash from financing include the investments by founders or owners, any loans taken out during the period, or the issuance of any equity. The outflow of cash from financing may include the payment of the principal of any loans, along with the repurchase of any outstanding equity.

Pro Forma Balance Sheet

The balance sheet is a financial statement that balances a venture's finances at a specific point in time. It describes how much the company is worth. The balance sheet uses the accounting equation: assets = liabilities + equity . In fact, these are the main components of the balance sheet:

• Assets —  Resources that hold economic value. A business's assets include current assets and fixed assets. Current assets are resources that can be accessed in the short term. These include cash, accounts receivable, inventory, and other currently available resources. Fixed assets are resources that are intended for long-term use but hold economic value. These include land and buildings, machinery and equipment, furniture and fixtures, vehicles, and other fixed resources.
• Liabilities —  What the business owes. Like assets, a business’s liabilities are also current liabilities and long-term liabilities. Current liabilities are liabilities that are due within 12 months. Current liabilities include accounts payable, loans, and taxes. Long-term liabilities are liabilities that are due after one year. These include long-term loans, notes, and other long-term debts.
• Equity —  What the owners or shareholders own. Equity is also composed of two parts: Capital and Retained Earnings. Retained earnings is the amount of profit that has been retained by the company over the life of the venture. Capital earnings , then, is what’s left. It is what has been invested. For new ventures, this may be the founder’s or early investors’ initial investments. For larger corporations, this would be the value of their shares of stock.

Break-Even Analysis

The break-even analysis shows you how much you have to sell before you break even. The break-even analysis uses fixed and variable costs in order to determine the sales volume you have to attain to reach a break-even point. This is the point where your sales volume covers both your fixed costs and your variable costs.

The break-even point is most often expressed as a number of units. You can calculate the break-even point by dividing fixed cost by the average profit per unit (average price per unit minus the variable cost).

Break-Even Point = Fixed Costs/ Profit Per Unit (Avg. Price - Avg. Variable Costs)

You can also calculate the break-even point in terms of $ of sales. To calculate the break-even point in $ of sales, you can divide total fixed costs for the period by the contribution margin ratio (net sales minus total variable cost / net sales).

Break-Even Point ($ of Sales) = Fixed Costs / Contribution Margin Ratio Contribution Margin Ratio = (Net Sales - Total Variable Cost) / Net Sales

Startup/Funds Required

If you are writing your business plan for the purpose of seeking funding, you should conclude your business plan by describing the investment opportunity.

With your financial projections in place, you will now be able to determine the amount of startup capital or investment you require.

This is because the funding you need is highly dependent on your profit and loss, cash flow, and break-even point. With well-researched assumptions and the evidence to back them up, you are ready to make the case that your business is worth the investment and will be able to pay it back or reward investors in the future.

In this section of the business plan, you will need to explain the amount of funding you are requesting as well as describe what those funds will be used for. The startup funding request will need to cover all expenses (maybe even your own personal expenses) at least until you reach your break-even point.

Business Plan Appendices (Optional)

If you have additional evidence to support your business idea, your business model, or your ability to achieve your goals and meet your financial objectives, you may want to consider including it as an appendix to your business plan.

Additional / Optional Evidence

Owners’ Resumes —  One thing you may want to consider including in your business plan is the resume for each owner. Investors often invest as much in the startup team as they do in the idea itself. Illustrations of Product —  Another helpful appendix is pictures or illustrations of your product. These are especially helpful for new products or those which are difficult to depict with words. Storyboard of Customer Experience — If your business is a service business, you could also consider including a storyboard depicting your customer’s experience. Customer Survey Results — You can also include any market research that you have conducted in an appendix. Showing that you have solicited feedback from real customers or potential customers provides further credence to your venture and venture idea.

Develop Your Business Idea

Before writing your business plan, it is important to take some time to develop your business idea .

If you are starting a new company, there are likely many details of the venture that have not been fully worked through. If you already have an existing venture, the following tools can also be useful in evaluating your business model:

• A three-sentence business plan

The Lean Canvas

The business model canvas, three-sentence business plan.

An easy place to start is with a three-sentence business plan . The three-sentence business plan is easy to construct, and consists of three parts:

• your product or service
• your market and marketing
• your revenue model.

Your Product or Service

The first sentence of your business plan clearly yet simply states your business's primary product or service. This includes the what and the where.

Example: “CoffeeMe is an upscale bakery and coffee shop specializing in imported coffees and international delicacies that will be located in downtown Atlanta.”

Your Market(ing)

The second sentence of your three-sentence business plan describes who your target market is and how you will promote to them.

Example: “CoffeeMe’s target market is urban professionals living and working in downtown Atlanta, marketed and promoted through traditional advertising, company partnerships, and social media.”

Your Revenue Model

The third sentence of your three-sentence business plan explains your revenue model. How will you make money?

Example: “CoffeeMe’s revenue model includes one-time retail sales as well as a unique subscription model featuring all-you-can-drink coffee for subscribers.”

Put it all together, and you have your three-sentence business plan:

Example: “CoffeeMe is an upscale bakery and coffee shop specializing in imported coffees and international delicacies that will be located in downtown Atlanta. CoffeeMe’s target market is urban professionals living and working in downtown Atlanta, marketed and promoted through traditional advertising, company partnerships, and social media. Our revenue model includes one-time retail sales as well as a unique subscription model featuring all-you-can-drink coffee for subscribers.”

Another useful tool for developing your business idea is the Lean Canvas . The Lean Canvas takes a problem-solution approach to helping you plan your business, focusing on the problems you are solving for your customers.

The Lean Canvas helps you describe and visualize your problem, solution, customers, value proposition, key performance indicators, and competitive advantage.

The steps to complete the Lean Canvas are:

• Define your target customers or users
• List the problems you are solving for them and how they are currently solving those problems today
• Describe your solution
• Explain your unique value proposition
• Describe your revenue streams
• Depict how you will reach customers
• Define the key metrics that will tell if you are doing well
• Detail your cost structure
• Explain your unfair advantage

The Lean Canvas, created by Ash Maurya, and licensed under Creative Commons Attribution-Share Alike 3.0 Unported License: https://leanstack.com/lean-canvas

The Business Model Canvas helps you describe and visualize the key aspects of your venture including your customers, value proposition, infrastructure, and revenue and cost models.

If you have already completed a Lean Canvas, you will already have several of the central parts of the Business Model Canvas complete.

The steps to complete the Business Model Canvas are:

• Explain your value proposition
• Describe how you interact with customers
• List the key activities that you will need to do to deliver on your value proposition
• List the key assets that you will need to deliver on your value proposition
• Describe the key partnerships that you will need to put in place to deliver on your value proposition

Related Articles

Best llc services.

How to Build a Website

Small Business Credit Cards

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• Subscribers For Subscribers
• ELN Write for Entrepreneur
• Store Entrepreneur Store
• Spotlight Spotlight
• United States
• Asia Pacific
• Middle East
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

What to Include in Your Business Plan Here's what your business plan should contain, how long it should be and what it should look like.

By The Staff of Entrepreneur Media, Inc. • Dec 9, 2014

In their book Write Your Business Plan , the staff of Entrepreneur Media offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors briefly describe just what your business plan should contain, how long it should be and how to know if it's time to write it.

A business plan is a written description of the future of your business. It's a document that tells the story of what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan.

But there are some generally accepted conventions about what a full-blown business plan should include and how it should be presented. A plan should cover all the important matters that will contribute to making your business a success. These include the following:

1. Your basic business concept. This is where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.

2. Your strategy and the specific actions you plan to take to implement it. What goals do you have for your business? When and how will you reach your goals?

3. Your products and services and their competitive advantages. Here's your chance to dazzle the readers with good, solid information about your products or services and why customers will want to purchase your products and services and not those of your competitors.

4. The markets you'll pursue. Now you have to lay out your marketing plan. Who will your customers be? What is your demographic audience? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience? What sets your business apart from the competition?

5. The background of your management team and key employees. Having information about key personnel is an important but often misrepresented portion of a business plan. It's not a long and detailed biography of each person involved but an accurate account of what they've done and what they bring to the table for this specific business opportunity.

6. Your financing needs. These will be based on your projected financial statements. These statements provide a model of how your ideas about the company, its markets and its strategies will play out.

As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth. Facts—checkable, demonstrable facts—will invest your plan with the most important component of all: credibility.

How long should your plan be?

A useful business plan can be any length, from that scrawl on the back of an envelope to more than 100 pages for an especially detailed plan describing a complex enterprise. A typical business plan runs 15 to 25 pages.

Miniplans of five to 10 pages are the popular concise models that may stand on their own for smaller businesses. Larger businesses seeking major funding will often have miniplans as well, but the full business plan will be waiting in the wings. It's to your advantage to run long when creating your plan, then narrow it down for presentation purposes.

The size of the plan will also depend on the nature of your business and your reason for writing it. If you have a simple concept, you may be able to express it in very few words. On the other hand, if you're proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across.

The purpose of your plan also determines its length. If you're looking for millions of dollars in seed capital to start a risky venture, you'll usually (although not always) have to do a lot of explaining and convincing. If you already have relationships with potential investors, they may simply want a miniplan. If you're just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version may suffice.

Many business plan presentations are made with PowerPoint decks, using 10 to 12 slides to tell your story. That's a great starting point, but you should have at least a miniplan available, especially if you're seeking millions of dollars.

When should you write it?

Still not sure if it's time to write a business plan? Here are a few clues that it's time to start writing:

• A business plan is a good way to explore the feasibility of a new business without actually having to start it and run it. A good plan can help you see serious flaws in your business concept. You may uncover tough competition when researching the market section, or you may find that your financial projections simply aren't realistic.
• Any venture that faces major changes (and that means almost all businesses) needs a business plan. If the demographics of your market are rapidly changing, strong new competitive products challenge your profitability, you expect your business to grow or shrink dramatically, or the economic climate is improving or slipping rapidly, you'll need a business plan. This will allow you to make changes accordingly.
• If you're contemplating buying or selling a business, your business plan can provide you with a handy tool to establish a value—and to support that value if challenged.
• You'll need a business plan if you're seeking financing. Your business plan is the backbone of your financing proposal. Bankers, venture capitalists and other financiers rarely provide money without seeing a plan. Less sophisticated investors or friends and family may not require a business plan, but they deserve one. Even if you're funding the business with your own savings, you owe it to yourself to plan how you'll expend the resources you're committing.

Entrepreneur Staff

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick Red Arrow

• 'The IRS is Coming in Hot': Jason Tartick Says All Business Owners Should Do This 1 Thing Before Filing Taxes — Or Risk a Potentially Pricey Audit
• Lock What Is a 'Dry Promotion' — and Has It Happened to You? Employees in This Specific Group May Be the Most Likely Victims .
• I Was a 25-Year-Old Nurse When I Started a Side Hustle to Combat Anxiety. It Made $1 Million in 7 Months — Then Sold for a Life-Changing Amount.
• Lock 2 Phrases I Learned From a Senior CIA Officer That Changed My Leadership Style
• The U.S. Justice Department Is Suing Apple in a Groundbreaking iPhone Monopoly Lawsuit — Here's Why
• Lock I Built My Company to 23 Profitable Stores. Here's My Advice to Small Business Owners Who Want to Grow Their Retail Presence.

Most Popular Red Arrow

Karlie kloss, josh kushner announce plans to relaunch life magazine, 16 years after its last print issue.

Kloss is the CEO of Bedford Media.

'Wildly Inappropriate': Woman Says She Was Denied a Job Because She Didn't Wear Makeup During the Interview

Melissa Weaver was applying for a VP of HR job at a tech company via video.

Popular Appetite Suppressant Ozempic Can Be Made For Less Than $5 a Month, New Research Suggests

The $5 includes a profit margin.

From Tom Brady to Kevin O'Leary – See Who Lost Big in the Wake of the FTX Crypto Collapse

The crash exposed an $8 billion hole in FTX's accounts, leaving investors and customers scrambling to recoup their funds.

Kevin O'Leary Says 'Do Not' Merge Finances, Bank Accounts With Your Spouse: 'I Forbid It in My Own Family'

The "Shark Tank" star stressed the importance of keeping your "own financial identity" in a relationship.

This Highly-Debated Piece of Cinematic History Just Sold For Over $700,000 at Auction

The wood panel from "Titanic" is often mistaken as a door. Either way, he couldn't have fit. (Sorry.)

Successfully copied link

• Sources of Business Finance
• Small Business Loans
• Small Business Grants
• Crowdfunding Sites
• How to Get a Business Loan
• Small Business Insurance Providers
• Best Factoring Companies
• Types of Bank Accounts
• Best Banks for Small Business
• Best Business Bank Accounts
• Open a Business Bank Account
• Bank Accounts for Small Businesses
• Free Business Checking Accounts
• Best Business Credit Cards
• Get a Business Credit Card
• Business Credit Cards for Bad Credit
• Build Business Credit Fast
• Business Loan Eligibility Criteria
• Small-Business Bookkeeping Basics
• How to Set Financial Goals
• Business Loan Calculators
• How to Calculate ROI
• Calculate Net Income
• Calculate Working Capital
• Calculate Operating Income
• Calculate Net Present Value (NPV)
• Calculate Payroll Tax

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

Was This Article Helpful?

Martin luenendonk.

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

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

What Should a Business Plan Include?

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

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

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

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

What is a business plan?

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

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

What is it for?

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

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

What’s included in a Business Plan

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

1.     Executive Summary

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

2.     Business Description

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

3.     Market Analysis

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

4.     Product Development

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

5.     Marketing Strategies

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

6.     Operations and Management

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

7.     Financial Plans

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

Tips on Writing a Business Plan

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

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

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

Build your Business

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

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

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

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

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

Learn More about Offshore Development

Copyright 2024 © Full Scale

• HR & Payroll

Business Plan: A Beginner’s Guide with Types and Templates

Setting up your own company, business, or startup could be an overwhelming process. It involves a variety of operations that need to be carried out in areas such as legal, financial, sales, among others. All these operations are a part of the Business Plan. The question here is what is a business plan and how do you go about writing it?

This article takes you on a detailed journey of writing a business plan apart from the following points:

• Understanding a business plan
• Elements of a business plan
• Types of business plans
• We also see why making a business plan is important
• How to write a step-by-step business plan?
• We also look into why some business plans fail.
• Business plans FAQ

What Is a Business Plan?

The startup of a company requires knowing and addressing many problems — legal issues, finance, sales and commercialization, protection of intellectual property, protection of liability, and more.

A business plan is defined as a written document that comprises business details, the company’s goals, and methods to achieve these goals. A business plan contains a comprehensive framework for the company in terms of marketing, finance, and operations.

Business plans serve a significant purpose. They are documents that can assist in inviting potential investment before a substantiated record of success has been ascertained. It helps create a good platform for businesses to continue to pursue targets.

Drafting a business plan is specifically useful for a startup or new enterprise. Optimally, the plan will be periodically restructured to see if objectives have been achieved or changed throughout the years. The companies may also decide after some time to redraw and upgrade the business plan to give a new direction after establishment.

Understanding Business Plans

Fundamentally, a business plan is a key document that must be put in place before start-up activities. Therefore, before new companies can provide their capital, banks and risk-capital companies often make a viable business plan a necessary precondition.

It is highly advisable to define a business plan before commencing any operations of the business. There have been examples of companies not lasting long without a competent business plan. It helps the businesses take decisions on matters of investments, learn about potential risks and adapt to new trends.

A strong business plan defines a company's identity, what it does, how it does it, and where it's headed. It is easier to grasp a company plan if you keep this history in mind. The core team or the people in a company's internal dynamics shapes its policies and objectives, or participates in the capital budgeting process must be able to comprehend a business plan.

Here’s a step-by-step guide to understanding the complicated and detailed document.

Executive Summary

Being the first section in a business plan, it comprises the summary of the entire strategy of the company. This 2 to 3-page summary presents the vision statement and brings into perspective the rest of the strategy.

Table of Contents

This comes after the executive summary. This should be looked into carefully to know if there are any particular aspects you would want to know the details about.

The next few sections can tell you a lot about who the adversaries are and what sort of products and services does the company offer. Any kind of issues that the company faces or even its capabilities are mentioned in this section.

Look for Management Capabilities

Within these sections, there would be information about the people playing key roles in the company. You can know about their qualifications and expertise from the document. These spaces will also consist of the description of the location of the company. It would be good to know about it to assess if it is strategically situated.

Operations Section

This section comprehensively describes the manufacturing, marketing, selling of products carried out by the business. Its customer support and other services can be assessed from this section.

Finances and Forecast Section

This could be helpful in understanding the revenue, expenditure, and other critical financial aspects of the organization. A complete chart of costs, risk analyses, and earnings estimates can be accessed through this section. This space also provides details about how these important digits were arrived at.

Final Section

This helps you understand the company’s targets and projections and the measures they wish to take for accomplishing the same. This will also share a glimpse of the ways in which the resources or funds from the investors will be used.

Elements of a Business Plan

Typically, a 20-25 page document, business plan varies hugely based on the type and size of the business. The details or the depth of the plan could be diverse and entail different kinds of elements. However, there are some crucial elements that come under the main plan and are also a part of the appendices.

Although, business plans are different, here are some common critical elements that are included in all the plans. Let’s look at them one by one:

This is the point that elaborately explains the mission of the company. Besides, it also includes information about the company’s management leaders, employees, functions.

Products and Services

This point includes all the products or services that the company is offering. Apart from the names of these products, services, it also comprises the details pertaining to the product such as the pricing, longevity, and benefits that the customers can avail of from its services.

Other information that could be a part of this point, includes production and manufacturing processes. It may also showcase any patents or proprietary technology that the company has acquired. A research and development report is also a part of this element.

Market Analysis

A company must have a thorough understanding of its sector as well as its intended audience. A market analysis will show you the expected demand for the products that the company sells. It will also help you know what difficulties you could face from the competitors. This will also assist you with an insight into the expertise of the contemporaries along with their strengths and drawbacks.

Marketing Strategy

This section explains how the organization plans to recruit and retain customers, as well as how it plans to reach out to them. This necessitates the creation of a distinct distribution channel. It will also detail branding, brand awareness and email marketing campaign plans , as well as the forms of media via which such efforts will be carried out.

Financial Planning

The organization should incorporate its financial planning and future estimates in order to persuade the other parties to review its business plan. The established companies may include income statements , balance sheets, and so on; On the other hand, new enterprises will include objectives and projections for the initial years of operation, as well as venture capitalists.

Every good business should have a budget in place. This comprises expenses such as employment, innovation, production, advertising, and any other business-related expenditure.

Types of Business Plans

The company management and investors can use business plans to help them start and grow their company. A company prepares a business plan to describe the objectives that will forecast and organize for expansion and to understand each area of the firm. A business plan is written by competent entrepreneurs to direct management and attract investment funds.

Business plans are drawn based on the requirements of the company. With this in mind, there are the following types of business plans:

Business Plans for Startups

A start-up business plan should outline the actions necessary to launch a new firm. It also includes a financial study with spreadsheets that describe financial concepts such as income, profit, and cash flow estimates. This may also be used by potential investors to gain an insight into the financial status of the startup. The startup business plans give clarity on market analysis, the product or service that the startup will provide besides the set goals.

Internal Business Plans

Internal plans detail project marketing, staffing, and technology costs. This document will summarise the company's present situation, including administrative performance and profitability, before determining whether and how the company would repay any project-related cash. These are written for a limited audience within the company, such as the marketing team evaluating a proposed initiative. They usually comprise a market study that shows the intended audience, competitive landscape, and the market's beneficial impact on corporate profits.

Business Plans for Strategic Business Development

A strategic business plan lays out a structural plan by providing a high-level picture of the company's objectives and how it moves to achieve them. While the framework of a strategic business plan varies per firm, typically contain five elements:

• The vision statement
• The mission statement
• Defining the key performance factors
• tactics for accomplishing objectives
• Timeframe for implementation

A strategic business plan engages personnel at all levels of the organization in the big picture, motivating them to collaborate to achieve the company's objectives

Business Plans for Scalability

A feasibility or scalability business plan considers two key issues regarding a planned business endeavor:

• If there will be buyers for the products or services that the company intends to sell.
• Whether or not the enterprise will be profitable.

This plan highlights the details of the demand of the product or service and the associated target audience for the said product. A feasibility study typically concludes by providing recommendations for the future.

Business Plans for Operations

These include features regarding the operations of the company and hence, the name. The plan specifies the deployment benchmarks and timelines for the future year. It also entails employee responsibilities.

Business Plans for Growth

These are also known as the plans for expansion and are created for both, internal as well as external use. This plan features the details around the following points:

• Detailed and specific highlights about the company
• Details of officials as the company

It is important to chalk out this plan and give the relevant corporate details to convince the potential investors.

The Importance of Making a Business Plan

Entrepreneurs frequently utilize business plans. It is doable to travel without a business strategy, but doing so will simply raise the chances of wandering aimlessly along the trip. This helps them to steer clear of any potential problems and putting themselves in a situation where they may have to keep asking for directions.

Therefore, business plans are necessary to help business owners in observing the broader picture, planning for the future, making critical decisions, and increasing their overall chances of success.

Defining organizational goals

A small business, a startup, an established business; all need a business plan. When it comes to small businesses, the business plans can be helpful in structuring the goals of the organization. It can allow you to monitor and govern everything you've strived to produce if you use it correctly and use it on a frequent basis. Finally, it can serve as a reliable tool for management to stay on track with administrative milestones.

To assist you in making important decision

The fundamental objective of a good business plan is to assist business owners in making better decisions. Companies don't always have the opportunity to take time and analyzing all of the implications of a decision. A company plan can help with this. Management frequently deals with a never-ending exercise in making decisions and dealing with crises. Developing a business plan involves estimating the outcome with some of the most important company actions.

Minimize Risks

Handling the operations of a business can involve risky steps, but it tends to become much more sustainable with a well-thought business strategy. Developing accounting period predictions, logistics planning, and a thorough knowledge of the future outlook can assist with mitigating the risk of a job that is intrinsically insecure.

A business plan makes it easier to find better solutions, leads to better decisions, and see a clearer picture of the organizational future.

Obtain Funding

While there are multiple activities for which a business plan is required, a major reason why you may need it is to secure funding from venture capitalists. The most effective means of demonstrating your competence is through a business plan, which is usually a prerequisite for anyone seeking outside funding. And anyway, anyone considering investing in your company will want to know it's in fantastic form and will be profitable in the long run.

To serve as a resource for service providers

Contractors, freelancers, and other experts are commonly a part of an organization. They are important people as they help with some of the crucial duties such as bookkeeping, legal aid, consulting, and so on. Having a business plan in place will help them get a fair idea of the key portions of areas where they are required.

To prevent unnecessary blunders

A business plan can help understand the reasons and avoid potential mistakes and blunders. Some of the most commonly observed mistakes could be:

• Capital troubles: Cash flow troubles or just running out of money are both examples of a lack of capital.
• No Appreciation: Nobody buys what you're selling since there isn't a market for it.
• Insufficient team: This emphasizes the significance of employing the correct personnel to assist you in running your company.
• Excessive competition: It's difficult to make a consistent profit when there's huge competition.

5 Quick and Easy Ways to Create an Excellent Business Plan

Let's speak about certain guidelines that will make the entire company planning process more efficient before you start writing your business plan. We have put together the following points to direct you towards writing a goal-oriented business plan.

Keep it concise

A long business plan which has over 50 pages will not only consume a lot of time in drafting but may not essentially be efficient in the long run. The foundation of writing a business plan is to quickly write it and move on with the tasks defined in it.

Moreover, it is a tool to help the company grow; it will require to be fine-tuned continuously, and therefore, it is best to keep it short and precise.

Audience-centric

Make your business plan by keeping in mind the audience who would be referring to it for accomplishing their goals. An example is if the business plan is aimed at readers that consist of investors as the primary audience, it would be wise to draft it in a language that would be comprehended by them.

Test viability of your business

The more tests you conduct for the elements mentioned in your plan, the better the business plan. Elements of a business plan, as we know now, could include anything from mission and vision statement to products and services. It is recommended you get approval or feedback on the elements included in your business plan.

Determine your aims and objectives

You should have a clear idea of what you want to obtain out of your company from the start. Determine if you are looking for a complete overhaul of your business?  Or if you are aiming to expand your employee base?  Knowing what you want to achieve can help you design a company plan that is tailored to these objectives.

Don’t Get Discouraged

You might be a new entrepreneur who has just started to look for setting up a business plan. No matter, how daunting this may seem in the beginning, it is good you do not get intimidated by the process.

Although initially writing a business plan may seem difficult, all you need is to be confident and expert in your field. If you're an expert in your field and know everything there is to know about it, then this is all that takes to establish a business strategy.

With this information, we move on to the main section of this article which explains a step-by-step process to write a business plan.

Download Business Plan Template

How to write a business plan, step by step.

While writing a business plan, there could be two scenarios that could be considered:

• Traditional Business Plan
• Lean Startup Plan

Let’s look at each of these in detail:

Traditional Business Plan Format

If you're particularly looking for specifics, want a complete plan, or plan to seek funding from conventional sources, you could choose a typical business plan structure. Instead of following the conventional model, focus on the portions that are most relevant to your business and needs. You could use a combination of the sections in the conventional plan to describe how your company can benefit the reader.

Executive Summary: Points that can go here are:

• Mission statement
• Talk about your products and services
• Information regarding the key personnel, employees
• Location of the company
• Also, some high-level plans for growth, in case you wish to seek funds.

Company Details: This includes all the minute details of your company. Talk about what kind of solutions your company provides. Points to be included here are:

• Problems that you can solve
• Enlist your consumers or businesses you wish to serve
• Mention the distinguishing feature or the USP of your company
• Mention the expertise held by the key people involved
• Include a complete overview of the strengths of your company

Market Analysis: You must closely understand your business perspective and the target market. Through thorough competitive analysis, you could assess the market trends and seek answers to the following questions:

• What are the current trends in the market?
• What are the success mantras of other companies?
• Will you be able to achieve what they are doing?
• Do you need more expertise to do it better?

Company and Management: This section is about informing your audience about how and who is in charge of the business. This would be an apt space to describe the points mentioned:

• Company’s legal structure.
• Declare of your company is a general or limited partnership.
• Determine if you want your business to be a C or S corporation
• Also, state if you are the only proprietor or a Limited Liability company.

Products and Services: This section explain the products and services that you wish to sell. Include these under this section:

• Let your audience know of your planning to get a patent, intellectual property, or copyright fr your products.
• Explain the R&D process undertaken with regards to a particular product or service.
• Also, describe the product lifecycle and the benefits of your product.

Marketing and Sales: With the varying requirements per company, the marketing strategies can be unique to all. Based on your domain and industry, you must explain the following points in this section:

• Describe the appeal and retention of customers
• How a sale really is going to take place
• Make revenue projections and forecasts

Funding Application/Request: This area will explain your funding requirements in case you apply for funding. You should also make these points clear:

• How often and how much funding you shall require
• Explain how you plan to use it over the years (providing the number of years would be appropriate)
• Mention the terms and conditions agreeable by you
• If you would want to take a debt or an equity
• Explain your expenses like your bills, employee salaries, purchase of new equipment, etc.
• Always mention your debt repayment strategies.

Financial/Revenue Projections: This goes hand-in-hand with your funding request. It brings forth your company’s stability, sustainability, and growth prospects. Here’s what should go in this section:

• All the revenue reports, balance, and income statements for the past 5 years in case yours is an established company.
• Enlist any guarantees you can levy against a loan
• Explain your financial growth plan for the next 5 years.
• Income forecasts, expenditures, and budgets
• Present a graphical analysis through charts to depict your monthly/quarterly growth plan.

Appendix: This section could be used to attach other essential documents such as:

• Legal documents
• Product pictures, if demanded.
• Credit history
• Licenses, etc.

Let’s look at the startup business plan and its design.

Startup Business Plan

Although all the business plans comprise of the nice segments, the startup business plan can touch upon each one of those without going much into the details. Moreover, as compared to the traditional plan, this one provides you a lot more agility in terms of making amendments. This would be beneficial as a startup frequently undergoes a lot of changes in its initial years.

Let’s look at the components you’ll be adding to your startup business plan:

Customer Segment: This section explains who your target customers or audience will be. While there could be numerous segments enlisted in this section, it would be wise to identify the ones that your business will most appeal to. Identifying them and naming them here is crucial.

Value Proposition: This is intended for the different audiences your business wishes to serve, The value your business holds or offers to them can be different. In this section, you describe how and what value proposition you will be making for each of those businesses/customers. It is important to figure this out and write it down here as that indicates the value-add your company holds.

Channels: This displays the communication channels you will be using to covey your propositions to your customers.

Customer Relationships: This will highlight your ways of maintaining communication with your customers. You can list down the ways through which you shall be communicating: whether they will be informed through automated emails or will you be connecting with them personally, all goes in here.

Revenue Streams: This point elaborates on where your revenue or income is coming from. An already established business may have multiple sources of income but if yours is a startup, then it may have only one. Nevertheless, you must identify and mention it here.

Key Resources: The resources in your company need to be mentioned here; this includes but is not limited to your employees, key personnel, infrastructure, among others.

Activities: Details of all the crucial activities that strengthen your business or lead it to a meritorious milestone need to go in here.

Important Partnerships: Most of the new businesses invite partnerships and have shared resources. There are certainly some other entities or businesses involved and they must find a mention in this section. These include all your vendors, suppliers, manufacturers, or other people you are working with.

Cost Structure: Once you have identified and defined your business’s requirements and infrastructure, it is time to get the details of the costs of your business. You can also give away the plans or strategies you have to optimize those associated costs.

Why do Business Plans Fail?

While there are numerous business plans drafted each year, only a few of these companies make it to the success ladder. While such business plans can include good suggestions, they fall short. The company’s projects also tend to meet the same fate; despite the brilliant ideas, the project collapses. The reasons for this failure could be many. Wouldn’t it be great if we could foresee them and avoid them before they cause failure?

Here are some reasons that could lead to a failed business plan:

Unreal objectives and ambitions

It may not always be a great idea to reach out for the highest goals in the realm of the business plan. Although high goals are important, the path to reach these goals must be realistic and achievable. You might aspire to make a grand sale of say, thousands of your products in a month but that may not always be attainable. It s, therefore, important to work out a business plan to make it realistic to avoid failures in the future.

Lack of Motivation

Businesses are driven on tonnes of motivation, which in turn is effective on the productivity of the company. The entrepreneurs with a solid determination and motivated team have been great examples of turning their ventures into grand success stories in a relatively short time. Not only does the leader need to be motivated, but the motivation also needs to flow on to his team and all employees to make a difference to the overall output. A company where the leaders lack motivation could be walking slowly towards failure.

Lack of Proper Budgeting

Budgeting is a vital aspect of a business, and a lack of real-world budgeting is a factor to avoid. It is not advisable to always go for a loan to launch the company every time. Unless you can get your theory to move in the right direction, your financial support may evaporate. Therefore, the cost of building a company must be determined and maintained through the first year. All the cost factors should be worked out much in advance to keep away disappointments in the later stages of development.

Inadequate Market Research

Market research is all about acquiring enough information and understanding the current trends in the market. Your plan should be aligned with the kind of market research you have done. Being a vital part of a new company’s business plan, market research needs to provide you a competent data to battle out the odds that you may face. Sufficient information in this regard will help you establish a plan that’s effective. Not doing so may lead you to scrap it and restart the work with greater amounts of time and effort.

Business Plans FAQ

Now that you have a fair idea of how to go about writing a business plan, let’s look around at some of the frequently asked questions:

Do I have to include all the sections?

A clear answer is No. You need not include all the sections, but work out only those that are relevant to your company and business. With the nine sections, you are trying to give away maximum relevant information in the plan; however, not all of the sections would need to be addressed.

How long should the plan be?

Your plan only needs to have all the information composed well into one document. There is no specific length or the number of pages that it should have. When you are sure that it mentions all the required information, you are good to go.

Would be a good idea to start a business in an economically challenged scenario?

Although economic ups and downs could be dissuading, especially while starting a new business. Our take is that any business that can compete well with the existing prices and offers great value to customers can make it big.

How can Deskera Help You with Your Business Plan?

Deskera offers you to learn the concepts of business and get acquainted with the top software applications for startups and can also help with accounting for startups . You may refer to Deskera’s blogs to get a better grip over business topics such as How to understand a balance sheet , Main financial statements , Why are income statements important .

Besides, you may also learn a lot from the Best Marketing Blogs 2020 and the user-friendly CRM , Business Expense , Accounting Cycles .

Take your business to the next level with Deskera All-in-One . It is a platform that offers Invoicing, Accounting, Inventory, CRM, HR & Payroll all under one roof. With Deskera Books , you can avail of online invoicing, accounting & inventory software to boost your business. It covers all the significant aspects of business such as billing, payments, warehouse management, Credit &Debit Notes, financial reports, an elaborate business dashboard apart from many other features.

Key Takeaways

Let’s look at the key points from the document:

• A business plan is a written document that describes the functional areas, goals, and the way in which a company aims to address its objectives.
• In order to attract external investors startups utilize business plans.
• Companies can develop a longer traditional business plan or a shorter startup or small business plan.
• Executive summaries, distribution channels, promotional strategies, and analytical information, wealth management, and budget should include good business plans.
• Business plans could be drafted for Startups, internal business, strategic business development, scalability, and operations.
• There are 2 major types of business plans: Traditional business plans and startup business plans.
• Unreal objectives, lack of motivation, and market research could be the reasons for the failure of a business plan

Related Links

10 Tips for CFOs to Navigate Growth Complexities

Total Quality Management: A Comprehensive Guide to Quality Control Techniques

How can Firms Manage Quality Control while Scaling?

Hey! Try Deskera Now!

Everything to Run Your Business

Get Accounting, CRM & Payroll in one integrated package with Deskera All-in-One .

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

What Is a Business Plan?

Definition and Examples of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Morsa Images / Getty Images

A business plan is a document that summarizes the operational and financial objectives of a business. It is a business's road map to success with detailed plans and budgets that show how the objectives will be realized.

Keep reading to learn the basic components of a business plan, why they're useful , and how they differ from an investment plan.

A business plan is a guide for how a company will achieve its goals. For anyone starting a business , crafting a business plan is a vital first step. Having these concrete milestones will help track the business's success (or lack thereof). There are different business plans for different purposes, and the best business plans are living documents that respond to real-world factors as quickly as possible.

In a nutshell, a business plan is a practice in due diligence. When it's done well, it will prevent entrepreneurs from wasting time and money on a venture that won't work.

How Does a Business Plan Work?

If you have an idea for starting a new venture, a business plan can help you determine if your business idea is viable. There's no point in starting a business if there is little or no chance that the business will be profitable, and a business plan helps to figure out your chances of success.

In many cases, people starting new businesses don't have the money they need to start the business they want to start. If start-up financing is required, you must have an investor-ready business plan to show potential investors that demonstrates how the proposed business will be profitable.

Since the business plan contains detailed financial projections, forecasts about your business's performance, and a marketing plan, it's an incredibly useful tool for everyday business planning. To be as effective as possible, it should be reviewed regularly and updated as required.

Business owners have leeway when crafting their business plan outline. They can be short or long, and they can include whatever detail you think will be useful. There are basic templates you can work from, and you'll likely notice some common elements if you look up examples of business plans.

Market Analysis

The market analysis will reveal whether there is sufficient demand for your product or service in your target market . If the market is already saturated, your business model will need to be changed (or scrapped).

Competitive Analysis

The competitive analysis will examine the strengths and weaknesses of the competition and help direct your strategy for garnering a share of the market in your marketing plan . If the existing market is dominated by established competitors, for instance, you will have to come up with a marketing plan to lure customers from the competition (lower prices, better service, etc.).

Management Plan

The management plan outlines your business structure, management, and staffing requirements. If your business requires specific employee and management expertise, you will need a strategy for finding and hiring qualified staff and retaining them.

Operating Plan

The operating plan describes your facilities, equipment, inventory, and supply requirements. Business location and accessibility are critical for many businesses. If this is the case for your business, you will need to scout potential sites. If your proposed business requires parts or raw materials to produce goods to be sold to customers, you will need to investigate potential supply chains.

Financial Plan

The financial plan is the determining factor as to whether your proposed business idea is likely to be a success. If financing is required, your financial plan will determine how likely you are to obtain start-up funding in the form of equity or debt financing from banks, angel investors , or venture capitalists . You can have a great idea for a business, along with excellent marketing, management, and operational plans, but if the financial plan shows that the business will not be profitable enough, then the business model is not viable and there's no point in starting that venture.

Business Plan vs. Investment Proposal

A business plan is similar to an investment proposal. In fact, investment proposals are sometimes called investor-ready business plans . Generally speaking, they both have the same contents. You can think of an investment proposal as a business plan with a different audience.

The business plan is largely an internal document, intended to guide the decisions of executives, managers, and employees. The investment proposal, on the other hand, is designed to be presented to external agencies.

Key Takeaways

• A business plan is a detailed road map that explains what the company's goals are and how it will achieve them.
• The exact details of a business plan will depend on the intended audience and the nature of the business.
• It's a good idea to regularly revisit your business plan so you know it's as accurate, realistic, and detailed as possible.

BUSINESS STRATEGIES

7 types of business plans every entrepreneur should know

• Amanda Bellucco Chatham
• Aug 3, 2023

What’s the difference between a small business that achieves breakthrough growth and one that fizzles quickly after launch? Oftentimes, it’s having a solid business plan.

Business plans provide you with a roadmap that will take you from wantrepreneur to entrepreneur. It will guide nearly every decision you make, from the people you hire and the products or services you offer, to the look and feel of the business website you create.

But did you know that there are many different types of business plans? Some types are best for new businesses looking to attract funding. Others help to define the way your company will operate day-to-day. You can even create a plan that prepares your business for the unexpected.

Read on to learn the seven most common types of business plans and determine which one fits your immediate needs.

What is a business plan?

A business plan is a written document that defines your company’s goals and explains how you will achieve them. Putting this information down on paper brings valuable benefits. It gives you insight into your competitors, helps you develop a unique value proposition and lets you set metrics that will guide you to profitability. It’s also a necessity to obtain funding through banks or investors.

Keep in mind that a business plan isn’t a one-and-done exercise. It’s a living document that you should update regularly as your company evolves. But which type of plan is right for your business?

7 common types of business plans

Startup business plan

Feasibility business plan

One-page business plan

What-if business plan

Growth business plan

Operations business plan

Strategic business plan

01. Startup business plan

The startup business plan is a comprehensive document that will set the foundation for your company’s success. It covers all aspects of a business, including a situation analysis, detailed financial information and a strategic marketing plan.

Startup plans serve two purposes: internally, they provide a step-by-step guide that you and your team can use to start a business and generate results on day one. Externally, they prove the validity of your business concept to banks and investors, whose capital you’ll likely need to make your entrepreneurial dreams a reality.

Elements of a startup business plan should include the following steps:

Executive summary : Write a brief synopsis of your company’s concept, potential audience, product or services, and the amount of funding required.

Company overview: Go into detail about your company’s location and its business goals. Be sure to include your company’s mission statement , which explains the “why” behind your business idea.

Products or services: Explain exactly what your business will offer to its customers. Include detailed descriptions and pricing.

Situation analysis: Use market research to explain the competitive landscape, key demographics and the current status of your industry.

Marketing plan: Discuss the strategies you’ll use to build awareness for your business and attract new customers or clients.

Management bios: Introduce the people who will lead your company. Include bios that detail their industry-specific background.

Financial projections: Be transparent about startup costs, cash flow projections and profit expectations.

Don’t be afraid to go into too much detail—a startup business plan can often run multiple pages long. Investors will expect and appreciate your thoroughness. However, if you have a hot new product idea and need to move fast, you can consider a lean business plan. It’s a popular type of business plan in the tech industry that focuses on creating a minimum viable product first, then scaling the business from there.

02. Feasibility business plan

Let’s say you started a boat rental company five years ago. You’ve steadily grown your business. Now, you want to explore expanding your inventory by renting out jet skis, kayaks and other water sports equipment. Will it be profitable? A feasibility business plan will let you know.

Often called a decision-making plan, a feasibility business plan will help you understand the viability of offering a new product or launching into a new market. These business plans are typically internal and focus on answering two questions: Does the market exist, and will you make a profit from it? You might use a feasibility plan externally, too, if you need funding to support your new product or service.

Because you don’t need to include high-level, strategic information about your company, your feasibility business plan will be much shorter and more focused than a startup business plan. Feasibility plans typically include:

A description of the new product or service you wish to launch

A market analysis using third-party data

The target market , or your ideal customer profile

Any additional technology or personnel needs required

Required capital or funding sources

Predicted return on investment

Standards to objectively measure feasibility

A conclusion that includes recommendations on whether or not to move forward

03. One-page business plan

Imagine you’re a software developer looking to launch a tech startup around an app that you created from scratch. You’ve already written a detailed business plan, but you’re not sure if your strategy is 100% right. How can you get feedback from potential partners, customers or friends without making them slog through all 32 pages of the complete plan?

That’s where a one-page business plan comes in handy. It compresses your full business plan into a brief summary. Think of it as a cross between a business plan and an elevator pitch—an ideal format if you’re still fine-tuning your business plan. It’s also a great way to test whether investors will embrace your company, its mission or its goals.

Ideally, a one-page business plan should give someone a snapshot of your company in just a few minutes. But while brevity is important, your plan should still hit all the high points from your startup business plan. To accomplish this, structure a one-page plan similar to an outline. Consider including:

A short situation analysis that shows the need for your product or service

Your unique value proposition

Your mission statement and vision statement

Your target market

Your management team

The funding you’ll need

Financial projections

Expected results

Because a one-page plan is primarily used to gather feedback, make sure the format you choose is easy to update. That way, you can keep it fresh for new audiences.

04. What-if business plan

Pretend that you’re an accountant who started their own financial consulting business. You’re rapidly signing clients and growing your business when, 18 months into your new venture, you’re given the opportunity to buy another established firm in a nearby town. Is it a risk worth taking?

The what-if business plan will help you find an answer. It’s perfect for entrepreneurs who are looking to take big risks, such as acquiring or merging with another company, testing a new pricing model or adding an influx of new staff.

A what-if plan is additionally a great way to test out a worst-case scenario. For example, if you’re in the restaurant business, you can create a plan that explores the potential business repercussions of a public health emergency (like the COVID-19 pandemic), and then develop strategies to mitigate its effects.

You can share your what-if plan internally to prepare your leadership team and staff. You can also share it externally with bankers and partners so that they know your business is built to withstand any hard times. Include in your plan:

A detailed description of the business risk or other scenario

The impact it will have on your business

Specific actions you’ll take in a worst-case scenario

Risk management strategies you’ll employ

05. Growth business plan

Let’s say you’re operating a hair salon (see how to create a hair salon business plan ). You see an opportunity to expand your business and make it a full-fledged beauty bar by adding skin care, massage and other sought-after services. By creating a growth business plan, you’ll have a blueprint that will take you from your current state to your future state.

Sometimes called an expansion plan, a growth business plan is something like a crystal ball. It will help you see one to two years into the future. Creating a growth plan lets you see how far—and how fast—you can scale your business. It lets you know what you’ll need to get there, whether it’s funding, materials, people or property.

The audience for your growth plan will depend on your expected sources of capital. If you’re funding your expansion from within, then the audience is internal. If you need to attract the attention of outside investors, then the audience is external.

Much like a startup plan, your growth business plan should be rather comprehensive, especially if the people reviewing it aren’t familiar with your company. Include items specific to your potential new venture, including:

A brief assessment of your business’s current state

Information about your management team

A thorough analysis of the growth opportunity you’re seeking

The target audience for your new venture

The current competitive landscape

Resources you’ll need to achieve growth

Detailed financial forecasts

A funding request

Specific action steps your company will take

A timeline for completing those action steps

Another helpful thing to include in a growth business plan is a SWOT analysis . SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis will help you evaluate your performance, and that of your competitors. Including this type of in-depth review will show your investors that you’re making an objective, data-driven decision to expand your business, helping to build confidence and trust.

06. Operations business plan

You’ve always had a knack for accessories and have chosen to start your own online jewelry store. Even better, you already have your eCommerce business plan written. Now, it’s time to create a plan for how your company will implement its business model on a day-to-day basis.

An operations business plan will help you do just that. This internal-focused document will explain how your leadership team and your employees will propel your company forward. It should include specific responsibilities for each department, such as human resources, finance and marketing.

When you sit down to write an operations plan, you should use your company’s overall goals as your guide. Then, consider how each area of your business will contribute to those goals. Be sure to include:

A high-level overview of your business and its goals

A clear layout of key employees, departments and reporting lines

Processes you’ll use (i.e., how you’ll source products and fulfill orders)

Facilities and equipment you’ll need to conduct business effectively

Departmental budgets required

Risk management strategies that will ensure business continuity

Compliance and legal considerations

Clear metrics for each department to achieve

Timelines to help you reach those metrics

A measurement process to keep your teams on track

07. Strategic business plan

Say you open a coffee shop, but you know that one store is just the start. Eventually, you want to open multiple locations throughout your region. A strategic business plan will serve as your guide, helping define your company’s direction and decision-making over the next three to five years.

You should use a strategic business plan to align all of your internal stakeholders and employees around your company’s mission, vision and future goals. Your strategic plan should be high-level enough to create a clear vision of future success, yet also detailed enough to ensure you reach your eventual destination.

Be sure to include:

An executive summary

A company overview

Your mission and vision statements

Market research

A SWOT analysis

Specific, measurable goals you wish to achieve

Strategies to meet those goals

Financial projections based on those goals

Timelines for goal attainment

Related Posts

What is a target market and how to define yours

21 powerful mission statement examples that stand out

Free business plan template for small businesses

Was this article helpful?

• Election 2024
• Entertainment
• Newsletters
• Photography
• Personal Finance
• AP Buyline Personal Finance
• Press Releases
• Israel-Hamas War
• Russia-Ukraine War
• Global elections
• Asia Pacific
• Latin America
• Middle East
• Election Results
• Delegate Tracker
• AP & Elections
• March Madness
• AP Top 25 Poll
• Movie reviews
• Book reviews
• Personal finance
• Financial Markets
• Business Highlights
• Financial wellness
• Artificial Intelligence
• Social Media

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

FILE - An AT&T sign is seen at a store in Pittsburgh, Monday, Jan. 30, 2023. AT&T said, Saturday, March 30, 2024, it has begun notifying millions of customers about the theft of personal data recently discovered online. (AP Photo/Gene J. Puskar, File)

• Copy Link copied

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.

While the data surfaced on a hacking forum nearly two weeks ago, it closely resembles a similar data breach that surfaced in 2021 but which AT&T never acknowledged, said cybersecurity researcher Troy Hunt .

“If they assess this and they made the wrong call on it, and we’ve had a course of years pass without them being able to notify impacted customers,” then it’s likely the company will soon face class action lawsuits, said Hunt, founder of an Australia-based website for warning people when their personal information has been exposed.

An AT&T spokesperson didn’t immediately return a request for comment Saturday.

It is not the first crisis this year for the Dallas-based company. An outage in February temporarily knocked out cellphone service for thousands of U.S. users. AT&T at the time blamed the incident on a technical coding error, not a malicious attack.

• Back to stores
• Find a Verizon Store
• Request a Store Appointment
• Australia (eng)
• Deutschland (de)
• France (fr)
• Great Britain (eng)
• Netherlands (eng)
• Singapore (eng)

Mobile plans for business

Get the domestic mobile plans, international services, device protection and more that fit your business needs.

Get started

• Explore more

Business devices

Affordability.

Get pricing that works for your business, with mobile plans as low as $30/mo. Per line with 5 lines on Business Unlimited Start 5G smartphone plan. Select customer agreement required. Includes Auto Pay and paper-free billing discount. Taxes, fees and Economic Adjustment Charge apply.

Keep teams connected with coverage virtually anywhere you do business.

Reliability

Keep work flowing with mobile devices your business can rely on. On the network America relies on.

Take advantage of value-added security services to help defend against cyber threats.

Business Unlimited

Switch and get truly unlimited data, plus double the premium hotspot data with select plans. Compared to Business Unlimited 2.0 plans.

Bring your own device

Have a device you love? Save $600 when you switch to Verizon 
and bring your compatible smartphone and number. New line w/month-to-month agmt & Business Unlimited Plus 5G or Unlimited Pro 5G plan req’d. Cust must transfer smartphone & number to VZ; new line activation & number transfer must be completed in one transaction. Smartphone must be compatible w/VZ network. $600 credit applied to acct. over 24 mos; promo credit ends when eligibility requirements are no longer met. Credits begin in 1-2 bills, will include appropriate credit amounts from order date & do not appear in Biz Unlimited 5G plan fee section of your bill. Biz Unlimited 5G plan fee increases in month 25. Cust must retain smartphone & remain on selected plan in order to receive credit(s). Cannot be combined with other device offers. Business Unlimited 5G plan terms apply. Limited time offer.

You may also be interested in

Device protection.

Don’t let a lost, stolen or damaged device destroy productivity. Because your business can’t wait. Verizon device protection options are available for eligible Verizon business wireless lines and devices. You must enroll within 30 days of device activation or during another qualifying event. Certain benefits are available with select plans. Claims limitations, line limits, deductibles, taxes, fees and terms apply.

International services

Whether you're traveling outside the U.S. for business or calling a vendor in another country, our international business plans are built to meet your needs.

Smartphones

Choose from a range of cutting-edge smartphones from top brands, and give your business a boost.

Help your teams stay productive where work takes them with lightweight, portable tablets and 2-in-1s.

Explore a variety of devices designed to meet your business needs.

Get a 5G phone on us. When you switch.

Taxes & fees apply. New line w/device payment purchase agmt & Business Unlimited Pro plan req’d. 0% APR. Up to $1,000 (iPhone 15 Pro Max, Pixel Fold, Galaxy S24 Ultra or Galaxy Z Fold5) credit, varying by smartphone trade-in, applied to acct over the term of your agmt (up to 36 mos); promo credit ends when eligibility requirements are no longer met. Credit will not exceed device price. Monthly credits begin 2-3 bills after trade-in is received by VZ. Smartphone trade-in must be received by VZ w/in 90 days & meet program requirements. Most trade-in device conditions accepted; exclusions apply. 10-line trade-in limit per order. Cannot be combined with other device offers. Limited time offer.

New Verizon customers can get $100 off a new smartphone.

New line w/device payment agmt & $34.99 or higher price plan req’d. 0% APR. $100 credit applied to acct after 2-3 bills. Can be combined with select offers. VZ reserves the right to charge back to your acct all or a portion of the value of any promotional credit you received as part of this offer in the event you no longer meet the eligibility requirements. Any such charge back may be subject to the terms of your VZ agmt. Offer available online only for a limited time.

Switch with your phone and number. Save $600.

New line w/month-to-month agmt & Business Unlimited Plus 5G or Unlimited Pro 5G plan req’d. Cust must transfer smartphone & number to VZ; new line activation & number transfer must be completed in one transaction. Smartphone must be compatible w/VZ network. $600 credit applied to acct. over 24 mos; promo credit ends when eligibility requirements are no longer met. Credits begin in 1-2 bills, will include appropriate credit amounts from order date & do not appear in Biz Unlimited 5G plan fee section of your bill. Biz Unlimited 5G plan fee increases in month 25. Cust must retain smartphone & remain on selected plan in order to receive credit(s). Cannot be combined with other device offers. Business Unlimited 5G plan terms apply. Limited time offer.

Let’s connect.

Ready to buy Shop devices

Chat with us Start live chat

Call if you need 10+ devices 800-526-3178

Have us contact you Request a call

Already have an account?    Log in Explore support

• Share full article

For more audio journalism and storytelling, download New York Times Audio , a new iOS app available for news subscribers.

The Accidental Tax Cutter in Chief

President biden says he wants to rake in more money from corporations and high earners. but so far, he has cut more taxes than he’s raised..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

[THEME MUSIC]

Today, in his campaign for re-election, President Biden says that raising taxes is at the heart of his agenda. But as it turns out so far, he’s done the opposite as president. My colleague Jim Tankersley explains.

It’s Wednesday, April 3.

Jim, welcome back. We haven’t seen you since the State of the Union. Always a pleasure.

So, so great to be here. And yeah, I finally recovered from staying up all night with you guys.

Yeah, you don’t even know all night. You stopped and we kept going.

That’s true. I did. I got a robust three hours that night. You’re right.

[LAUGHS]:: So Jim, in your capacity as really the chief economic thinker covering this president, you recently came across something very surprising.

Yeah, it started with a pretty basic question for me. I like to do this crazy thing, Michael, where I like to take candidates’ promises and see if they’ve come true.

It’s a little bit wild, but it’s what I do for fun. And in this case, I wanted to look at a very central promise of President Biden’s campaign in 2020, which he has repeated while in office.

I promise you, I guarantee you we can build back, and build back better with an economy that rewards work, not wealth.

The promise was he was going to raise taxes.

But I tell you what I’m going to do, and I make no apologies for it. I’m going to ask the wealthiest Americans and the biggest corporations of the Fortune 500 companies, 91 making a collective billions of dollars, didn’t pay a single solitary penny in federal tax!

Not taxes on the middle class, not taxes on low income workers, but he was going to raise taxes on corporations and the rich.

But I’m going to make sure they pay their fair share!

He was going to make them pay their fair share. And he leaned into it.

Guess what? You’re going to start paying your fair share. I’m going to ask them to finally begin to pay the fair share. It’s not a punishment. Pay your fair share.

He said it over and over.

Fair share? Translation — it’s back to the failed policies of the 1970s.

Republicans loved this. They repeated it too. They told voters that the president was going to raise taxes.

Joe Biden bragging about raising taxes on corporations. That means less money for those very employers to hire people back.

They talked about all the ways in which corporate tax increases could rebound on workers.

Joe Biden will shut down your economy, raise taxes, wants a $4 trillion tax increase. He’s the only politician I’ve ever seen who said, we will raise your taxes. You’re supposed —

It was a very big part of the economic debate for the campaign.

And I wanted to know, is that true? Has that actually played out in the policy agenda the president has had?

So I asked some economists at the Tax Policy Center in Washington to run an analysis and just say, let’s look at all of the ways Biden has changed the tax code in all of those laws he’s signed, and ask, has he raised taxes as president? And it turns out the answer is he has not raised taxes.

On net, he has cut more taxes than he’s raised.

How much more has he cut taxes than raised them?

So by the math that economists use when they look at budgets, the traditional way of scoring tax changes, he has cut taxes by $600 billion on net.

Hmm. A lot of money, a lot of tax cuts.

It’s a lot of tax cuts. The president has been a net tax cutter.

So Jim, why and how did Biden end up cutting taxes, especially if his stated intent was to raise taxes?

Well, there’s two sides of this equation and two complementary explanations for what’s happened here. The first side is the tax increases that Biden ran on, he’s only done a couple of them. He has trillions of dollars of ideas for how to raise taxes on rich people and corporations. The Treasury Department publishes an entire book full of them every year called “The Green Book.”

But in the actual legislation he signed, there’s only been a couple, really. There was a tax on stock buybacks that companies do and then a new minimum tax for certain multinational corporations that have very low tax rates. Those add up to real money, but they are not, in the grand scheme of Biden’s tax increases, a really large amount of the agenda he’s proposed.

So explanation number one, he just hasn’t been that successful in passing tax increases, and there’s a lot of reasons for that. The biggest one is just the simplest one is that he’s just had a really hard time persuading members of Congress, including Democrats, to back some of his favorite tax increases. He wants to raise the corporate income tax rate, which President Trump cut in his 2017 tax bill. Biden wants to raise it to 28 percent from 21 percent. Congress has not had any appetite to go along with that.

He wanted to get rid of what’s called the carried interest loophole, a long-time white whale of Democratic policy making. But he could not get even 50 Democrats to go along with that. Senator Kyrsten Sinema of Arizona was opposed to it, and so it didn’t get included.

And he did some pieces of legislation on a bipartisan basis. And in those cases, Republicans were just not going to pay for anything by raising taxes, and so he had to take those off the table there. So it’s all added up to just not very much activity in Congress to raise taxes on what Biden wants to do.

Got it. So that’s the side of a ledger where Biden simply fails to increase taxes because he can’t get Congress to increase taxes.

Right. But there’s another side, which is also that Biden has signed into law a decent number of tax cuts.

And that starts from the very beginning. Just a couple of months into his presidency, if you’ll recall, we’re still in the depths of the COVID-19 pandemic, the economy is wobbling after it had started to rebound. Biden proposes what is essentially a stimulus bill.

And he includes some tax cuts in there, a tax cut for families, a child tax credit. And it also includes — you remember those direct checks that people got as part of that bill?

Yes, $1,400. I remember them.

Yes, those were technically tax cuts.

So the stimulus bill starts with that. The next year, he passes this bill that is trying to accelerate manufacturing of things like semiconductors in the United States. That’s the CHIPS Act. And that includes some corporate tax cuts for companies that invest in the kind of manufacturing that Biden wants. This is industrial policy via carrots for corporations. And Biden is handing them out as part of this bill.

So tax cuts there. And then finally the Inflation Reduction Act, which includes the largest climate effort in American history is a bunch of corporate tax cuts at its core, tax cuts for manufacturing of solar panels, tax cuts for people to buy electric vehicles, tax cuts for all sorts of things tied to the transition from fossil fuels to lower emission sources of energy. And those tax cuts add up. They add up for corporations. They add up for individuals. And in the end, that full suite of tax cuts that he’s passed across all of this legislation outweighs the modest tax increases that were also included in the Inflation Reduction Act to reduce its cost.

Got it. So a very big reason why Biden ends up cutting taxes, beyond the fact that he’s not able to raise them through Congress, is that that’s what it took, according to those in his administration, to get American industry and American consumers to change their behavior in line with policy goals such as getting more domestic computer chip manufacturing and getting more people to buy electric vehicles they decided the way to do that was to give people tax breaks, which means he cut their taxes.

Right, people and companies. The president certainly has talked throughout the campaign about wanting to give middle class families a break. But he has also, in the process of crafting policy, really come to rely on tax cuts for people and for corporations as a way of achieving these policy goals. And in many cases, again, this is what he had to do to pass these bills through even Democrats in Congress.

Senator Joe Manchin of West Virginia didn’t want to just send money to companies that were making solar panels. He wanted there to be tax incentives for it. And so that is part of the reason why these were created as tax incentives. And so all of this adds up to more of a tax cutting record than you might have imagined when Biden was on the campaign trail.

I’m curious who really ended up benefiting from these tax cuts. You said they went to people and to corporations, but on the whole, did they end up reaching lower income Americans, middle income Americans, or the rich?

Well, we don’t have a full distributional analysis, which is what you’re asking for, of the entirety of Biden’s tax changes. But what we can say this — particularly the ones that were in that early stimulus bill, the recovery plan, those were very much targeted toward lower income and middle income Americans.

There were income limits on who could get things like the Child Tax Credit. Obviously, the direct payments went to people who were middle class or less. So the analysis of that would suggest that these were tax cuts for lower income people, for middle class people. And on the flip side, what I think we are likely to see with the electric vehicle credit through the Inflation Reduction Act is that while there are some income limits on who can qualify for that credit, that the people who end up claiming that credit tend to be the higher earners among the people who qualify.

Right. Who buys a Tesla, after all? Somebody with a fair amount of money.

Right, exactly. And of course, the corporate tax cuts go to companies, flow through to their shareholders. There’s a huge debate in the academic literature among politicians about how much of that benefit actually ends up going to their workers versus stays with shareholders. But we can broadly say that Joe Biden has done a lot for certain corporations who are trying to advance his manufacturing goals in particular to reduce their tax bills. And that is certainly not in line with the rhetoric you hear him talking about most of the time about making corporations pay their fair share. And the White House acknowledges this. I asked them about it. And they basically said, we think there’s a difference between just cutting the corporate tax rate in a way that helps anybody no matter what they’re doing and what we’re trying to do, which is basically reward corporations for accelerating the energy transition.

Understood. But where does this ultimately leave Biden’s campaign promise to make the tax code fairer and to make sure that the well-off in particular and corporations are paying their, what he calls, fair share?

Well, I think by Biden’s own measurements, by his own ambitions, he would have to agree that he is nowhere close to what he believes would be a fair share for corporations. Because Biden is still running on this. As he enters his re-election campaign, as it really heats up, a rematch with Donald Trump, the president is really leaning into this message of we need to do more. We need to raise more taxes on corporate America. It is time for these companies and for high earners to pay their fair share.

Right. I didn’t get it done in the first term. But if you elect me, I’ll get it done in the second.

Give me another shot, and this time, I promise, will be different.

[MUSIC PLAYING]

We’ll be right back.

So Jim, let’s talk about Biden’s tax raising plans for a theoretical second term and why anyone should have any faith that he could get it done, if there’s a second term, given the experience so far of his first term.

Yeah, well, man, there’s a lot of plans to talk about. I don’t think we can get through all of them, but we can certainly hit the highlights here. So we can start with the couple of things that Biden has been able to do to raise taxes on corporations. He wants to take those and then plus them up.

He’s put this new minimum tax on corporations. It’s a 15 percent minimum tax on certain multinationals. He now wants to raise that to 21 percent.

He wants to take that corporate stock buyback tax which is 1 percent right now, and he’d like to quadruple it to 4 percent. And then he goes after some things large and small. He wants to do new taxes that hit the use of corporate and private jets. He wants to do new taxes on companies that pay large amounts of compensation to their executives.

And then we get to some really big taxes on high earning individuals. So the president has said over and over again, he won’t raise taxes on anyone making less than $400,000 a year. But he’s got a bunch of taxes for the people above that. So he wants to raise the top marginal income tax rate. He wants to take it from 37 percent, which is the level set by President Trump’s 2017 tax law, and bring it back to 39.6 percent, which is what it was before. He also wants to impose what he calls a billionaires tax.

OK. It’s a 25 percent tax on the total value of all of the assets of anyone worth more than $100 million.

OK, wait. I have several questions about this.

First being a fact check, if it’s a billionaires tax, it’s interesting that it’s going after people who have just 100 million.

Yeah, I think most billionaires would be offended at the inclusion of 100 millionaires in that. Yes, totally agree. That is factually inaccurate, the name.

Right. But beyond that, this sounds very much like a wealth tax, which we don’t really have in our system.

Yeah, it’s a sort of wealth tax. The Biden people don’t call it a wealth tax, but it is a tax on something other than income that you report every year to the IRS as having been earned. It goes beyond just, oh, I got interest from my stock holdings or I made money from my job. It’s, oh, the value of my art collection increased last year, and now Biden’s going to tax me on that increase, even if I didn’t sell the art.

That’s a real change, and that reflects the president’s view that people with enough money to buy enormous art collections that appreciate enormously in value should be paying more in taxes.

Right. And of course, a tax like this is extremely perhaps maddeningly hard to actually pull off. It’s hard to get someone to describe their art collection’s value so that you can apply a 25 tax to it. So this might end up being more of a political statement than a practical tax.

Yeah, there’s also questions about whether it’s constitutional. So there’s all sorts of drama around this proposal, but it is certainly, if nothing else, a statement of the president’s intent to make people worth a lot of money pay a lot more in taxes.

OK, so that’s a lot of proposed tax increases, almost all of them focused on those who are rich and corporations. Overall, Jim, what stands out to you about this Biden term two tax increase plan?

I think we could very fairly say that it’s the largest tax increasing plan by a sitting president or a presidential nominee for a party in American history.

He wants to get a lot of money from corporations and people who earn or are worth a lot of money.

But the rub, of course, is it’s hard to see the Congressional math that lets Biden accomplish these tax increases, some of which, like you said, he couldn’t get done the first time. Why would we think he would get them done the second time even if he wins this fall?

Yeah, it would be really difficult. Biden would have to win in November. Democrats would have to take the House of Representatives back from Republicans, which is certainly possible. It’s very closely divided right now. And they’d need to hold at least 50 seats in the Senate. And then those 50 Democrats in the Senate would have to be willing to go along with far more in tax increases than Democrats were last time around.

So if there is a second term, it feels like we should assume it will be very difficult perhaps even quite unlikely he’s going to get to push through a lot of these taxes. Which makes me wonder, Jim, why is Biden running on a tax program that he knows has so little chance of becoming reality and when it’s pretty clear that he’s gotten a lot of stuff done without raising taxes? It turns out that’s not been all that essential to getting infrastructure or climate bills done. So why is he making this so central?

Several reasons. One of them is it’s very important to him rhetorically to talk about fiscal responsibility. Big parts of the Biden agenda, the CHIPS bill, the infrastructure bill, some other legislation, were not actually paid for. The spending and tax cuts were not offset by tax increases.

So they’re going to add to the debt.

Right. So they’re going to add to the debt. Same is true of the stimulus bill. But moving forward, the president has said that he’s going to pay for his agenda and he’s actually going to have some extra tax dollars coming in left over to help pay down future budget deficits. And on paper, it’s the way to pay for Biden’s other big, expansive plans that he hasn’t been able to do but wants to — universal child care, federal paid leave, investing in elder care, just a whole bunch of things that he still wants to do more — housing initiatives.

The president needs money to make a case that he’s being fiscally responsible, and this is the money that would do that.

So that’s one reason. Another reason is the calendar. Biden and his team are looking ahead to the end of 2025, and they know that if he wins another term, he will be in office at a rare moment in Washington, when basically tax policy has to be on the Congressional agenda.

Well, Republicans, when they passed their tax cuts in 2017, set a bunch of them to expire at the end of 2025 in order to lower the cost of the bill.

These are the Trump tax cuts.

The Trump tax cuts. And that includes all the tax cuts for individuals. So now that those are coming due, there’s going to be a fight in Washington over whether to extend them or make them permanent or change them in some way or just let them expire, and Democrats know there’s going to be a huge fight that will reach almost certainly the floor of the House and the Senate. And so Biden wants to be ready.

He wants to be ready with a suite of policy proposals that Democrats can basically pull off the shelf and try to use to put Republicans in a box. Basically say, we would like to keep taxes low or cut them further for low income workers, middle class workers. But we want to pay for that by raising taxes on the rich. You Republicans also want to do nice things for low and middle class workers, but you want to cut taxes for corporations and the rich, and we think that’s a political loser for you.

So Biden is ready with what they think will be a political winner for Democrats in this almost certain floor tax fight at the end of 2025.

And that brings us to the last reason why Biden is doing this, and maybe the most important, which is it’s really good politics.

Just explain that. Why is talking about tax increases, net tax increases, such good politics?

If you talk to Democratic pollsters, if you talk to people inside the White House, outside the White House, political strategists anywhere in Biden’s orbit, they all agree that the public loves the idea of forcing rich people and corporations to pay their, quote, “fair share.” It’s just become a winning and central political argument in Democratic campaigns, the idea that corporations avoid taxes, that rich people avoid taxes, and that Joe Biden is trying to position himself as a champion of the idea that they need to pay more. Those corporations and those rich people need to pay more, and he’s going to make it happen.

You’re describing this as something that is kind of a new political reality. Is that right?

Yeah, it’s evolved over the last decade or so I think. For a long time in Washington, the conventional wisdom was just couldn’t talk about tax increases of any kind. They were poison. There was a whole anti-tax movement that did a really good job of messaging that, and Democratic candidates got very scared of talking about raising taxes even on the very, very rich.

That started to turn over time. But it’s really changed. I think we saw in the 2020 election that the Democratic primary had just enormous amounts of taxes on corporations and the rich funding all sorts of policy proposals — Medicare for all and universal child care and trillions and trillions of dollars — and Democratic candidates like Liz Warren and Bernie Sanders competing to see who could tax corporations and the rich the most.

Biden is a product of that primary. He was one of the most moderate people in that group, but his proposals are really outside of the historical norm for Democratic candidates up until then. And that reflects the fact that pollsters have been doing all this research, finding that the American people, including independents and increasingly numbers of Republicans, just don’t think corporations pay their fair share and are open to the idea they should pay more.

This is really interesting, and it makes me think that what you’re really saying is that there might have been a time when a Democratic nominee like Joe Biden might have reveled in his image as an overall tax cutter. But that is not this moment, and that is not this candidate. He wants to be a tax increaser. He thinks that is where the politics are.

I think that’s exactly right when you think about tax increaser as tax increaser on the rich and on corporations. There’s two ways to be a successful populist politician. One of them is to be like Trump and run around saying you’re going to do enormous tax cuts for everybody, which is a Republican version of populism. Trump, my biggest tax cut in history, I’m going to do another huge, enormous tax cut. It’s going to be so big you won’t believe it.

There might have been a time when Democrats tried to follow that playbook. But Biden’s not doing that. He’s leaning into the other side of populism. He’s telling workers, hey, I’m on your side with these big companies. They’re trying to screw you, and I’m not going to stand for it. And so I’m going to raise their taxes. I’m going to make them pay more so that there’s more money for you, whether that’s more tax cuts or more programs or whatever.

And that is the Democratic version of populism right now, and that’s the one that Joe Biden is running on. And that’s why he’s so happy to talk about raising corporate taxes because it’s a way to tell workers, hey, I’m on your side.

Right. Even if that’s not what he’s done or ever may be able to do.

Yeah. Part of the problem with populism is that you make a lot of promises you can’t keep, and this certainly, in his first term, has been an area where the president has talked a much bigger game than he’s been able to execute. The second term might be different, but that doesn’t really matter for the campaign. What matters is the rhetoric.

Well, Jim, thank you very much. We appreciate it.

Thank you. Always a pleasure.

Here’s what else you need to know today. On Tuesday, Israel confirmed that it had carried out the airstrike that killed seven aid workers delivering food to civilians in Gaza. The attack, which occurred on Monday, struck a convoy run by the World Central Kitchen, a nonprofit group. At the time of the attack, the aid workers were traveling in clearly marked cars that designated them as non-combatants.

Israel’s Prime Minister Benjamin Netanyahu described the attack as unintentional and said that his government deeply regretted the deaths. In its own statement, World Central Kitchen called the strike unforgivable and said that as a result, it would suspend its aid work in Gaza, where millions of people are in dire need of both food and medicine.

Today’s episode was produced by Stella Tan and Mary Wilson with help from Michael Simon Johnson. It was edited by Lisa Chow, contains original music by Dan Powell and Marion Lozano, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

• April 4, 2024   •   32:37 Israel’s Deadly Airstrike on the World Central Kitchen
• April 3, 2024   •   27:42 The Accidental Tax Cutter in Chief
• April 2, 2024   •   29:32 Kids Are Missing School at an Alarming Rate
• April 1, 2024   •   36:14 Ronna McDaniel, TV News and the Trump Problem
• March 29, 2024   •   48:42 Hamas Took Her, and Still Has Her Husband
• March 28, 2024   •   33:40 The Newest Tech Start-Up Billionaire? Donald Trump.
• March 27, 2024   •   28:06 Democrats’ Plan to Save the Republican House Speaker
• March 26, 2024   •   29:13 The United States vs. the iPhone
• March 25, 2024   •   25:59 A Terrorist Attack in Russia
• March 24, 2024   •   21:39 The Sunday Read: ‘My Goldendoodle Spent a Week at Some Luxury Dog ‘Hotels.’ I Tagged Along.’
• March 22, 2024   •   35:30 Chuck Schumer on His Campaign to Oust Israel’s Leader
• March 21, 2024   •   27:18 The Caitlin Clark Phenomenon

Hosted by Michael Barbaro

Featuring Jim Tankersley

Produced by Stella Tan and Mary Wilson

With Michael Simon Johnson

Edited by Lisa Chow

Original music by Dan Powell and Marion Lozano

Engineered by Chris Wood

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

In his campaign for re-election, President Biden has said that raising taxes on the wealthy and on big corporations is at the heart of his agenda. But under his watch, overall net taxes have decreased.

Jim Tankersley, who covers economic policy for The Times, explains.

On today’s episode

Jim Tankersley , who covers economic policy at the White House for The New York Times.

Background reading

An analysis prepared for The New York Times estimates that the tax changes President Biden has ushered into law will amount to a net cut of about $600 billion over four years.

“Does anybody here think the tax code’s fair?” For Mr. Biden, tax policy has been at the center of his efforts to make the economy more equitable.

There are a lot of ways to listen to The Daily. Here’s how.

We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Jim Tankersley writes about economic policy at the White House and how it affects the country and the world. He has covered the topic for more than a dozen years in Washington, with a focus on the middle class. More about Jim Tankersley

Advertisement