pros and cons of having a business plan

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14 Pros and Cons of a Business Plan

Should you create a business plan? Most people will say that you should have at least some sort of outline that helps you guide your business. Yet sometimes an opportunity is so great that you’ve just got to jump right in and grab it before it disappears. If you want funding or growth to be sustainable, however, there is a good chance that you’ll need to create a business plan of some sort in order to find success. Here are some of the pros and cons of a business plan to consider as you go about the process of creating and then running your business.

What Are the Pros of a Business Plan?

A business plan is a guide that you can use to make money. By understanding what your business is about and how it is likely to perform, you’ll be able to see how each result receive can impact your bottom line. With comprehensive plans in place, you’ll be prepared to take action no matter what happens over the course of any given day. Here are some more benefits to think about.

1. It gives you a glimpse of the future. A business plan helps you to forecast an idea to see if it has the potential to be successful. There’s no reason to proceed with the implementation of an idea if it is just going to cost you money, but that’s what you do if you go all-in without thinking about things. Even if the future seems uncertain, you’ll still get a glimpse of where your business should be.

2. You’ll know how to allocate your resources. How much inventory should you be holding right now? What kind of budget should you have? Some resources that your business needs to have are going to be scare. When you can see what your potential financial future is going to be, you can make adjustments to your journey so that you can avoid the obstacles that get in your way on the path toward success.

3. It is necessary to have a business plan for credit. In order for a financial institution to give you a line of credit, you’ll need to present them with your business plan. This plan gives the financial institution a chance to see how organized you happen to be so they can more accurately gauge their lending risks. Most institutions won’t even give you an appointment to discuss financing unless you have a formal business plan created and operational.

4. A business plan puts everyone onto the same page. When you’re working with multiple people, then you’re going to have multiple viewpoints as to what will bring about the most success. That’s not to say that the opinions of others are unimportant. If there isn’t any structure involved with a business, then people with a differing opinion tend to go rogue and just do their own thing. By making sure that everyone is on the same page with a business plan, you can funnel those creative energies into ideas that bring your company a greater chance of success.

5. It allows others to know that you’re taking this business seriously. It’s one thing to float an idea out to the internet to see if there is the potential of a business being formed from it. Creating a business plan for that idea means you’re taking the idea more seriously. It shows others that you have confidence in its value and that you’re willing to back it up. You are able to communicate your intentions more effectively, explain the value of your idea, and show how its growth can help others.

6. It’s an easy way to identify core demographics. No matter what business idea you have, you’re going to need customers in order for it to succeed. Whether you’re in the service industry or you’re selling products online, you’ll need to identify who your core prospects are going to be. Once that identification takes place, you can then clone those prospects in other demographics to continue a growth curve. Without plans in place that allow you to identify these people, you’re just guessing at who will want to do business with you and that’s about as reliable as throwing darts at a dartboard while blindfolded.

7. There is a marketing element included with a good business plan. This allows you to know how you’ll be able to reach future markets with your current products or services. You’ll also be able to hone your value proposition, giving your brand a more effective presence in each demographic.

What Are the Cons of a Business Plan?

A business plan takes time to create. Depending on the size of your business, it could be a time investment that takes away from your initial profits. Short-term losses might happen when you’re working on a plan, but the goal is to great long-term gains. For businesses operating on a shoestring budget, one short-term loss may be enough to cause that business to shut their doors. Here are some of the other disadvantages that should be considered.

1. A business plan can turn out to be inaccurate. It is important to involve the “right” people in the business planning process. These are the people who are going to be influencing the long-term vision of your business. Many small business owners feel like they can avoid this negative by just creating the business plan on their own, but that requires expertise in multiple fields for it to be successful. A broad range of opinions and input is usually necessary for the best possible business plan because otherwise the blind spots of inaccuracy can lead to many unintended consequences.

2. Too much time can be spent on analysis. Maybe you’ve heard the expression “paralysis by analysis.” It cute and catchy, but it also accurately describes the struggle that many have in the creation of a business plan. Focus on the essentials of your business and how it will grow. Sure – you’ll need to buy toilet paper for the bathroom and you’ll want a cleaning service twice per week, but is that more important than knowing how you can reach potential customers? Of course not.

3. There is often a lack of accountability. Because one person is generally responsible for the creation of a business plan, it is difficult to hold that person accountable to the process. The plans become their view of the company and the success they’d like to see. It also means the business plan gets created on their timetable instead of what is best for the business and since there isn’t anyone else involved, it can be difficult to hold their feet to the fire to get the job done.

4. A great business plan requires great implementation practices. Many businesses create a plan that just sits somewhere on a shelf or on a drive somewhere because it was made for one specific purpose: funding. When a solid business plan has assigned specific responsibilities to specific job positions and creates the foundation for information gathering and metric creation, it should become an integral part of the company. Unfortunately poor implementation has ruined many great business plans over the years.

5. It restricts the freedom you once had. Business plans dictate what you should do and how you should do it. A vibrant business sometimes needs its most creative people to have the freedom to develop innovative new ideas. Instead the average plan tends to create an environment where the executives of the company dictate the goals and the mission of everyone. The people who are on the front lines are often not given the chance to influence the implementation of the business plan, which ultimately puts a company at a disadvantage.

6. It creates an environment of false certainty. It is important to remember that a business plan is nothing more than a forecast based on plans and facts that are present today. We live in a changing world where nothing is 100% certain. If there is too much certainty in the business plan that has been created, then it can make a business be unable to adapt to the changes that the world is placing on it. Or worse – it can cause a business to miss an exciting new opportunity because they are so tunnel-visioned on what must be done to meet one specific goal.

7. There are no guarantees. Even with all of the best research, the best workers, and a comprehensive business plan all working on your behalf, failure is more likely to happen than success. In the next 5 years, 95 out of 100 companies that start-up today will be out of business and many of them will have created comprehensive business plans.

The pros and cons of a business plan show that it may be an essential component of good business, but a comprehensive plan may not be necessary in all circumstances. The goal of a business plan should be clear: to analyze the present so a best guess at future results can be obtained. You’re plotting out a journey for that company. If you can also plan for detours, then you’ll be able to increase your chances to experience success.

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Business Plan

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

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

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

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

Roadmapping From A to Z

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

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

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

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

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

How to write a business plan?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But now comes the tricky task of actually writing it. 

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

The key elements of a great business plan include:

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

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

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

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

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

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

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14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

• 3. Having a business plan minimizes your risk

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

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

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

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• 4. Crafts a roadmap to achieve important milestones

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

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

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

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

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

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

You need to verify:

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

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

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

6. You’ll make big spending decisions with confidence

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

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

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

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

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

• 8. Position your brand against the competition

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

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

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

• 9. Determines financial needs and revenue models

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

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

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

• 10. Helps you think through your marketing strategy

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

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

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

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

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

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

• 12. Future-proof your business

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

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

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

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

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

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

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

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

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

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

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

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• Writing your business plan

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

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

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

Table of Contents

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

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Pros and Cons of Writing a Business Plan from Scratch

The business plan is an essential document for strategizing about the steps your business needs to take to reach the next level of success. When you are writing a business plan , you generally have three choices: You can write a business plan from scratch, you can hire a professional to write a plan for you, or you can use business plan software to generate one using computerized templates.

There are pros and cons to each of these methods, but today we’re going to look at some of the advantages and disadvantages of writing a business plan from scratch.

PRO: It’s free

Writing your own business plan from scratch saves you money because you don’t have to pay professional market rates, and you don’t need to purchase special software in order to produce your business plan. Depending on the size of your business and the complexity of your business plan, this can be significant savings, especially over professional rates.

PRO: Personalize your plan with industry insight

When you write your own plan, you can draw on your own years of experience to tailor it to your specific situation and the industry insight that you have gained as a leader in your field. No one knows your business and your place in your industry better than you, so you can use yourself as your own best resource.

PRO: Intimate understanding of your plan

You will never know a business plan better than when you are intimately involved with it at every level. As you work through all of the financial statements, charts, graphs, and research, you will develop a deeper knowledge of your business and its position than you could ever gain from reading someone else’s work. This can be especially beneficial if you need to present your plan to investors or to a bank and will have to be able to talk in knowledgeable detail about everything contained in it.

CON: You get what you pay for

Because you are writing the plan yourself, you are limited by your own available time and expertise in developing your plan. As the old saying goes, you don’t know what you don’t know. When you hire experts or use paid software, you receive some guarantees of accountability and that the information in the plan will be presented correctly, with calculations that are accurate. If you are developing your own business plan, you won’t have a guarantee that charts are correct, data are accurate, and calculations are done right. If you make a mistake, there is no one to catch it buy you.

CON: It’s a lot more work

At every step of the plan-writing process, you will need to do all of the work yourself. That means that you can’t simply drag and drop numbers in a computer to generate financial statements, graphs, and charts for you. Instead, you will need to create these essential documents yourself. You will also need to format the whole business plan, complete with pagination, headings, etc. While this might seem easy enough if you are comfortable with desktop publishing software, it can be exceptionally time-consuming, even for desktop publishing pros, when you need to merge different types of documents, integrate spreadsheets, or use complex pagination or formatting styles.

CON: It’s more difficult to keep your plan up-to-date

Plans created by software can be updated with the click of a mouse, while those produced by experts can rely on those experts to do the updating for you, for a fee. When you create your own plan, you have to update it yourself, and you need to ensure that any updates and changes are carried through consistently from the beginning of the plan to the end, which can be a lot of extra work.

The path you choose for your business plan will depend on a number of factors, but before choosing to go it alone, be sure that you are comfortable with the different tools and datasets you will need to complete your business plan. If you have any concerns or doubts about the process, you might be better off using business plan software or even hiring someone professional to help write your own business plan for you.

Ultimately, a business plan serves as a key document for your company’s future, so it’s important to put in the time and the effort to do it right the first time to ensure that your company’s future remains bright.

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Advantages and Disadvantages of Business Plan

Every business starts with a business plan because starting a business without a plan is like going on a chilled winter night without warm clothes and since starting a business involves money and where there is money one cannot take chances of going ahead without a plan. In order to understand it better let’s look at some of the advantages and disadvantages of business plan –

Advantages of Business Plan

• The first and foremost advantage of business plans is that once the company has business plan ready then only it can take it forward and present it to prospective investors who in turn if they like the plan will finance the business plan and we all know how important capital is for starting a business because without capital no business can start.
• Another benefit of business plans is that it helps the promoter in getting things right because if plans are in mind only then it can lead to confusion as mind has dozen of ideas but once the plan in mind is put into paper in the form of business plan than it gets more clarity and the owner can concentrate on one plan only rather than thinking about dozen of plans.
• Another advantage of the business plans is that it helps in prioritizing the work and also putting the right people for right job which in turn increases the possibility of the business plan being a success as the owner can keep track of milestones of business as envisaged in the business plan.

Disadvantages of Business Plan

• The biggest disadvantage of the business plans is that it involves time and expenses and as far as small businesses are concerned they neither have money and expertise to make a proper business plan which in turn can lead to business suffering more rather than gaining from the business plan.
• Another drawback of it is that due to the presence of business plans the owners may lose flexibility and become rigid also they will keep sticking to the business plan even if it detrimental to the interests of the business. So for example, if business plan has envisaged 10000 units of production but due to change in consumer taste sales of only 5000 units can be done and if the owner sticks to the business plan then it will be a loss making the decision. Hence a good business plan is one which has the scope of flexibility in it.
• Another disadvantage of business plans is that though plans are good to see and hear but execution of those plans has many problems and uncertainties right from procurement of finance, production related uncertainty, marketing and selling challenges and many other problems and it is next to impossible that plans are carried out in exact fashion as set out by the top management or the owner of the company.
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Do you REALLY need a business plan?

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

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

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

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

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

1. Validate Your Business Idea

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

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

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

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

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

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

2. Set and Track Goals

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

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

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

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

3. Take Action

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

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

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

4. Manage Resources

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

Large Spending Decisions

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

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

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

5. Make Decisions

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

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

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

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

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

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

6. Manage Risk

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

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

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

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

7. Communicate Internally

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

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

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

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

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

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

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

8. Communicate Externally

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

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

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

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

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

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

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

9. Secure Funding

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

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

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

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

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

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

10. Grow and Change

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

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

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

Raising additional capital for expansion

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

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

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

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

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

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

Related Questions

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

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

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

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

Business Plan Importance: Why is business plan important?

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

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13 Advantages and Disadvantages of Owning Your Own Business

For over three years before starting my business, I went through the gamut of emotions, from being excited about the idea to being terrified at the prospect of failure. 

I postponed my entrepreneurial journey, researching and brainstorming various ideas. Taking the leap into entrepreneurship required examining my strengths and matching them with customer needs. 

However, the real push came from analyzing the advantages and disadvantages of owning my own business. Here are what I discovered.

If you are also wondering whether to buy small businesses or build your own, which one is better for you , I wrote a whole article that I encourage you to read.

Advantages of Owning Your Business

The 2021 SBA statistics show that the US has 32.5 million small businesses and continues to grow. What is the traction drawing many into entrepreneurship?

Let’s explore some advantages of owning your business.

1- Independent Control

The idea of being my boss was a powerful motivator to start my business. Working as an employee, the dread of getting fired was real . I needed a company that would pay the bills without the monster of a termination letter weighing over my head. 

Furthermore, running my own business meant making my own decisions. I can take advantage of opportunities that will grow my venture without consulting anyone. 

2- Financial Rewards

Running a business means I get all the financial rewards from my hard work. Unlike employment, where my pay is only part of my effort, I will pocket all the profits from my investment in the business.  

For instance, a salesperson can sell a company’s product and make huge profits. However, they are only paid a commission, a fraction of the profits.

You can make money with your own business.  

3- Flexible Lifestyle

Monday blues, endless meetings about targets, and the office dress code seemed off for me. I wanted the freedom to create my own work schedule and focus on deliverables. 

Owning your own business offers you the liberty of a flexible lifestyle. You can take your kids to school, head to the gym before work, and take vacations without authorization. 

You choose where and when to work so long as you accomplish the necessary tasks and satisfy your clients. Owning a business can help you have a successful career and raise a family without neglect. 

Running your business also means no time wasted commuting to work. 

4- Creative Freedom And Growth

Employment may mean working on your assignment whether you enjoy it or not. Your manager may also ignore your creative idea to help the team perform better, resulting in stifled growth. 

Many people o jobs they don’t enjoy. They look forward to the end month for the reward and nothing more.

On the other hand, owning your business allows you to do what you enjoy. Your business is probably based on your skills, passion, and interest. This makes it easier to grow and gain personal satisfaction. 

Money becomes the result of your passion, not something you chase after. You can implement your ideas, know your customers intimately, and watch your business soar. 

5- Prestige

Owning a business is prestigious. Your company offers you the right of ownership, meaning potential clients will likely listen to you .

When your business accomplishes great things in the industry, you attract more attention as the boss. 

6- Tax benefits

Business owners also enjoy tax benefits in most countries . They are given tax breaks, allowing them to claim certain expenses such as travel costs, utilities, and office equipment costs. 

I encourage you to consult accountants to help determine which expenses you can claim to reduce your tax obligations. 

7- Building Equity

Owning equity is another reason to be self-employed. Owning your business allows you to build something you can pass on to the next generation.  

Since a business is an asset, you can sell it or invite investors to invest money. You can then use the funds to create a new company or expand your operations. 

Owning equity in your company can also help you retire early, allowing the board to run the organization. 

8- Improve Your Knowledge

As a business owner, you handle many challenges and grow your expertise in your niche in a way you wouldn’t otherwise . You are constantly exposed to situations that push you to learn more about the industry. 

Enhanced knowledge means you are a valuable asset to other upcoming entrepreneurs. Additionally, knowledge helps you grow your business and profits faster.

Now, this does not mean that owning your business has no challenges. This leads us to… 

Disadvantages of Owning a Small Business

If I have convinced you in the first section of this article, you may wonder why we should work for someone else. Before you are overexcited, here is a reality check: running your business has its shortcomings, and here they are. 

9- Financial Risk

Entrepreneurs are indeed risk-takers; however, the risk levels differ from one individual to the other . A business can go scarily wrong, and you may lose all your investments. 

If you invest your life savings or go into debt for your seed capital, you could lose all of it from bad business decisions. 

And the statistics don’t help either. A report by Fundera shows that 50% of startups in the US will fail after five years. Five years of hard work, hope, and money goes up in smoke five times out of ten. 

The risk of failing is equal to the chances of success, so there is no guarantee your will venture will pick.

10- Stress And Health Issues

I will be honest with you. With so many decisions on your shoulder, owning a business can be stressful.   You are the face of the company and have to handle many concerns such as competition, customer problems, expenses, employees, sourcing suppliers, late deliveries, and equipment breakdown. 

Dealing with these challenges can impact your health, especially for new entrepreneurs. 

As a business owner, you are responsible for unpleasant responsibilities like interviewing, hiring, and firing employees. Things can get more stressful during a recession when the economy is slow. 

11- Time and Commitment

In theory, people become entrepreneurs to spend more time with their families. However, in reality, you may have little free time for entrepreneurship. 

In fact, you may have less free time than in your 9-5 job, especially in the initial stages. Small business owners are passionate about their startups, prompting them to work long hours. 

One report by Gallup shows that 57% of business owners work six or more days, averaging 55 hours a week. 

Most small business owners work at night, on the weekends, or even during holidays. And with the internet and mobile devices, day offs may be unrealistic for entrepreneurs, at least at the outset. 

An important email from a prospective client pops up. What choice do you have? You respond because you need them to jumpstart your business. 

12- Unknown Variables

Opening a business involves superior planning, but multiple unknown factors can throw your company off course . For instance, unexpected political chaos can sink the economy into recession, causing customers to reduce spending. 

An unexpectedly strong competitor may enter the market space and snatch major clients from you.  Or a key business partner may pull out of a deal or fall sick, leaving you with additional responsibilities. These unknown variables can give you sleepless nights. 

13- Unstable Income

In the initial stage of your startup, you may operate your business at a breakeven or loss before you can realize profits . This means you may need another source of income to cater to your bills. 

These hard development times can discourage you. And if you didn’t get your finances in order before quitting your job for an entrepreneurial life, you may find it tough to survive. 

With a family to feed and no emergency fund to fall back on, owning a business is a tough road. 

What to read next:

• How to Become a Creative Entrepreneur? (Here’s how!)
• 10 Best Ways to Avoid Burnout in Your Small Business .
• How To Start a Business While Still Employed?

How to Increase Your Chances of Success as a Business Owner?

Based on the data quoted in this article, almost half the businesses fail before the fifth year. How can you increase your odds of success? 

Every entrepreneur faces the pros and cons of owning a business. However, the difference between successful and unsuccessful ones comes down to researching and planning your course before launching the venture. 

How solid and thoughtful is your business plan? A business plan should show the following:

• Your products and services
• Demand levels
• Competitors and their strengths and weaknesses
• Startup costs
• Sources of funds
• Potential challenges you will meet and how to overcome them
• A clear growth road map

While things may not unfold as planned, having a plan increases your chances of success. What are some challenges and benefits you have experienced as an entrepreneur?

Welcome all! I am Altiné. I am SO excited you are here! I am the guy behind The Entrepreneur Journey. I am a blogger, Amazon private label seller, and I share everything I have learned along this journey with YOU

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The Advantages and Disadvantages of Different Business Plan Strategies

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Introduction

A business plan strategy is a document that outlines and outlines the goals and objectives of a business. It also contains information about the company's objectives, strategies, and resources. As business owners or entrepreneurs, it is important to develop strategies that will allow the business to reach its goals in the long-term.

There are two primary strategies when it comes to business planning: complete and incomplete. A complete business plan strategy covers all aspects of the business, including management, marketing, finance, operations, and more. An incomplete business plan strategy typically focuses on one or two aspects of the business, such as finance or marketing.

Advantages and Disadvantages of Complete Strategies

Creating a business plan that takes a complete approach involves including all information wherein all factors are considered. When a business plan is created with a complete strategy, the goals and objectives of the organization are stated clearly and in detail. Furthermore, when taking a more detailed approach, every aspect of the business strategies is taken into account and can account for facets such as business environment, competitive market positioning, and supportive channels. These strategies are designed to enhance visibility, credibility, and reliability within the markets in which the organization looks to compete.

Disadvantages

The major disadvantage of developing a complete approach business plan is the high cost and time involved. Generally, a complete plan comprises of a complex set of components and intensive research. This includes research on technology, people, and competitive landscape, that can be quite expensive. Additionally, a complete business plan could take a few months and possibly even more than a year for completion. Furthermore, although a complete plan provides clear direction, since it focuses on more elements, it becomes very difficult and challenging to track progress. A complete approach can be too overwhelming at times, especially for smaller businesses.

Advantages and Disadvantages of Incomplete Strategies

Businesses that prefer an incomplete business plan strategy often find it less time consuming and more cost effective to implement. They do not invest more time into creating complex goals or analysis, which helps to save time, energy, and money. In addition, they allow businesses to easily adjust to changes in their markets or to develop in different directions without having to invest too much in planning.

A disadvantage of incomplete strategies is that they may not account for the true state of the business's operations due to their simpler set of objectives. This type of strategy could also fail to consider external influences, such as changes in the competitive environment, or the interests of stakeholders. Ultimately, developing an incomplete strategy can lead to inadequate or misdirected goals, and may prevent a successful outcome.

In addition, due to their simplified nature, incomplete strategies may not be able to thoroughly recognize potential risks and exploits that could ensue. This could lead to volatile decision making and a chaotic business environment. Furthermore, the strategies may lack the structure, focus, and vision that are necessary for any long-term business success.

Considerations for Choosing Between Complete and Incomplete Strategies

Choosing between complete and incomplete business plan strategies ultimately comes down to two major considerations: size and scale of business, and type and scope of planning.

Size and Scale of Business

The size and scale of your business is a key factor when deciding between complete and incomplete strategies. For smaller and more agile operations, an incomplete strategy may be preferable, as it requires less start-up cost and can be implemented quickly. And while larger operations are typically better-suited to a comprehensive approach, incomplete strategies may still be applicable depending on the nature of the business.

Type and Scope of Planning

The type and scope of planning is also a major factor when choosing between a complete and incomplete strategy. For example, companies that require detailed and elaborate plans may find that a complete strategy is more effective and efficient. Alternatively, less complex companies may find that an incomplete strategy is more suitable to their needs.

In addition to size and scope of business and type and scope of planning, there are a number of other considerations to take into account when selecting between complete and incomplete strategies. Such considerations may include budget, resources, timeline, and overall objectives. Ultimately, the strategy chosen should be tailored to the unique needs of the organization.

Examples of Suitable Industries for Complete Strategies

When it comes to creating a business plan, there is no one-size-fits-all approach. For some industries, a more complete strategy may be best while a more incomplete one may be better suited for others. Two industries that may require a more complete approach include the financial sector and the manufacturing industry.

Financial Sector

The financial sector is one of the most highly regulated industries in the world. When it comes to creating a business plan, it is critical to take a comprehensive approach that understands the legal and regulatory frameworks that govern this industry. A financial business plan should include an in-depth analysis of the competitive landscape as well as a detailed roadmap for how the business plans to achieve its financial goals. The business plan should also outline the risks associated with entering the industry and how the business will mitigate them.

Manufacturing Industry

The manufacturing industry is all about efficiency and cost savings. A successful manufacturing business plan must take a holistic view of the whole manufacturing process and include a detailed cost-benefit analysis. It should outline the costs associated with manufacturing, including capital costs, labor costs, raw materials, and other overhead expenses. The plan should also provide a clear timeline for when the business expects to achieve certain production goals and be able to generate revenue.

The manufacturing business plan should also include strategies for ensuring quality across the production process and meeting safety standards. A good plan should also include contingency plans for dealing with unexpected challenges and unexpected markets.

Examples of Suitable Industries for Incomplete Strategies

Incomplete business strategies can be a great fit for certain industries depending on the specific type of services or products they provide. The following is a list of two industries that are particularly suited for an incomplete business plan strategy.

Food & Beverage Service

Food and beverage service industries such as restaurants, catering, and cafes can benefit from an incomplete business plan strategy. As customers' tastes change drastically and the market shifts, businesses in these industries often face an ever-evolving landscape. By not having a rigid business plan to adhere to, these businesses can quickly adapt their approach and reevaluate their goals.

Likewise, retail businesses can also use an incomplete strategy as the market rapidly changes due to customer demands as well as technological advancements. With a plan that is not set in stone, such businesses can easily introduce new products or services to their customers as the need arises and keep up with the competition.

Choosing a business plan strategy is essential for companies that wish to achieve their business goals. There are several options available, including complete and incomplete strategies. Each strategy is beneficial in different scenarios, but both should be thoroughly considered in order to determine which is the best fit for a company.

Summary of Complete and Incomplete Strategies

A complete strategy involves strategizing enterprise-wide goals and implementing the necessary tactics to achieve them. This kind of strategy is best suited to businesses that have well-defined goals, the right resources, and the capacity to implement a long-term plan. An incomplete strategy, on the other hand, emphasizes flexibility and adapting to changing business needs. It is best suited to companies that need to adjust their plans quickly, as the market shifts.

Final Considerations for Choosing a Strategy

When choosing between a complete and incomplete business plan strategy, business owners should take into account their goals, resources, and needs. It is essential to evaluate each option carefully in order to determine which strategy is best suited for the company's specific needs. Additionally, business owners should also consider any outside factors, such as the current market and competitors, that could influence their decision.

By understanding the differences between complete and incomplete business plan strategies, companies can make an informed and effective decision for their business. With the right strategy in place, businesses can develop and grow on their own terms.

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What are the advantages and disadvantages of a business plan?

Almost every business starts with a business plan. These documents are used to map out the steps you want to take to get your business off the ground. However, do these strategy documents work for all businesses?

Whether you’re an entrepreneur or an investor, business plans are considered an essential part of starting a new business . For business owners and other stakeholders, it acts as a manual that can be used to chart a business’ success. Similarly, business plans can generate confidence, helping to convince potential lenders that investment is a risk worth taking.

However, business plans can also be expensive and time-consuming to create. Additionally, there is also no guarantee that a business will succeed just because a sound plan has been put in place.

To help you decide if a business plan would benefit your new venture, this guide runs through the main advantages and disadvantages.

The advantages of a business plan

Although a business plan takes time and money to create, it can help save both in the future if done properly. Below we take a look at some of the key advantages of creating a business plan:

1. It helps you forecast future steps The primary purpose of a business plan is to give you (and investors) an idea of whether your business has the potential to be successful. By mapping out your next steps and setting milestones, you can spot strengths and weaknesses in your ideas and set targets. This is helpful as it may prevent you from proceeding with a business idea that may end up costing you money.

On the other hand, these initial forecasts may provide the positive projections you need to actually get started and even attract outside investment. Even if your business plan produces an uncertain forecast, it still provides a small glimpse of the direction your business wants to head in and how it may perform on the way. This is valuable information, both for business owners and third-party stakeholders.

2. It is required if you want to apply for credit In order to secure a business loan from an official lender, a business plan is essential. Most banks will not even meet with you to discuss financing unless you have a business plan to present. This is because financial institutions like banks and credit unions need a way to accurately gauge their lending risks.

A well-thought-out business plan gives you the opportunity to show lenders how organised and prepared you are. It should explain how your business will use any capital you are lent and how you intend to make repayments. This level of detail can help to instil confidence in your business by persuading lenders you are a good risk.

3. It helps you to identify future cash flow issues A business plan should contain detailed cash flow forecasts and analysis. This shows potential lenders how money is expected to travel in and out of your business. It can also be useful for owners to determine if/when the business is expected to have cash flow problems under certain strategies. Having this information at hand can make it easier to financially plan, ensuring the business is always properly funded.

4. It helps you to allocate resources One of the biggest challenges for new business owners is resource management. From how much inventory you should buy to setting initial budgets, these decisions can be difficult. A business plan encourages you to create a workable budget and allocate resources before you start spending. This ensures you can afford everything you need and you don’t overspend before your business can start making money.

5. It helps you better understand your competition Creating a business plan requires a great deal of industry research. While you may think you have a strong handle on what you want your business to achieve, only by analysing your competition will you be able to see the full picture. A business plan can help you produce highly valuable insights into competitor demographics. This includes existing consumer trends and preferences, as well as costing insights. These findings are not always viable without conducting business plan competitor analysis.

6. It can help to secure talent In order for a business to be successful, attracting talented workers is crucial. A business plan can help to secure this talent by setting out a clear vision for the business. From management to skilled entry level staff, by showing individuals the direction and potential of the business, you can start to build a strong and coherent team.

The disadvantages of a business plan

Business plans can be time-consuming and expensive to produce. On top of this, there is also no guarantee that they will be accurate or help you to achieve the investment you are looking for. With this in mind, below we outline a number of disadvantages when it comes to creating a business plan:

1. It may not be accurate Putting together credible business plans is a highly skilled process. For this reason, many businesses seek the help of experienced business advisors when creating one. However, even with the help of a broad range of expert opinions, there is no guarantee that what is produced will be accurate. Industries and even wider business climates can change very quickly. This means that even taking the time and money to create an in-depth business plan can be risky.

2. It can make you become ‘tunnel-visioned’ In a world where nothing is 100% certain, treating your business plan as an uncompromising manual is a bad idea. The fact is, they are nothing more than a set of forecasts. If followed religiously, these strategy documents can ultimately do more harm than good. This is especially true if you become tunnel-visioned by your business plan and fail to adapt when market forces and changing economic environments demand it.

3. It can waste precious time and money Creating a business plan can take a lot of time and money to produce. It may require the help of third-party experts, such as business advisors, lawyers and accountants, all of which will charge for their services. Additionally, it can also take you and other employees away from the day-to-day tasks involved with launching a new business. This can lead to precious resources being wasted on a task whose cost may exceed its benefits.

The above points show that although business plans represent an essential component for most new businesses, comprehensive plans may not be 100% necessary in all circumstances. Luckily, if you are looking to put one together but are struggling to know where to start, the Markel Law Hub can help. We have a simple, easy-to-follow business plan template for you to download. To learn how you can access the Markel Law Hub, click here .

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Start » startup, choosing the best business plan software.

Need help with your business planning efforts? Consider investing in business plan software. Here are some pros and cons to weigh before committing to a software.

Crafting a solid business plan is a necessary step for your business to succeed. However, many small business owners don't have all the necessary skills or financial background needed to assist in building a comprehensive plan. That’s where business plan software comes in handy. If you think your company could use some help with your business planning, consider the pros and cons of investing in software.

[Read: 5 Business Plan Templates to Help You Plan for Success ]

What is business plan software?

Business plan software is designed to guide you through each step of your business plan and fill any gaps. That way, you’ll be more efficient in reaching your business goals. Unfortunately, using this software doesn’t guarantee a flawless plan, and some business owners may be better off writing their plan from scratch.

Pros and cons of business plan software

As an entrepreneur, it’s important to consider whether new software or services will benefit your business or needlessly add to your overhead. Before purchasing business plan software, weigh the following pros and cons against the needs of your business.

Pros of business plan software

Business plan software offers several benefits, including:

• Step-by-step guidance. Business plan software takes the guesswork out of aligning your business’s structure and cash flow forecast with your future goals. It has detailed step-by-step guidance to assist you in making the right choices for a successful business. This is especially useful if you aren’t sure how to begin.
• Statement and report generation. In the current digital age, more and more small business owners don’t have a strong financial background or understanding of the strategic aspects of a business plan. An advantage to using business plan software is that it creates reports, graphs and documents for you based on the information you’ve entered. These generated statements save you from hours of configuring with your own desktop publishing software.
• Customization. Business plan software not only creates a plan for you, it offers the option to personalize the reports. It also gives you the freedom to test out a number of scenarios depending on your long-term business goals, giving you more confidence in your business.
• Accurate forecasting. A well-made business plan software usually comes with guarantees for accountability and accuracy in any reports generated under that program. It keeps you from having to do your own calculations or know for a fact the information in the business plan is presented accurately. Creating a business plan from scratch using your own devices may result in missed mistakes, skewing the data and rendering reports — and hours of work — useless.
• Easy to update. It’s simple to adjust or replace any numerical calculations or ideas for a different outcome using business plan software. Certain features can also keep you up to date on the current state of your business and give you a look into your future endeavors. Having direct insight into these future data points will help you make strategic business choices.

[Read: Smart Strategies for Presenting Your Business Plan ]

Crafting a solid business plan is a necessary step for your business to succeed.

Cons of business plan software

Business plan software can also come with a few drawbacks, including:

• Expensive price tag. Depending on the type, some business plan software can be pricey. Software can range from basic plans to premium versions. It’s difficult to know whether the premium version will assist you or just create a dent in your budget. Additionally, while it is time-consuming, writing your own business plan is free.
• Lack of flexibility. Some types of business plan software only allow for certain customizations which could limit personalizing your business plan. This includes sticking to the templates the software provides and being unable to rewrite the script or customize certain points in the data (unless you upgrade to a more expensive package).
• Missed industry insights. As you’re not writing the base coding that makes up a business plan software, there may be discrepancies between your industry and the developed software. This could lead to missed insights that could be crucial to leveling up your business within its industry.

There are many reasons to purchase business plan software, but there are also some downfalls that might turn you away from the investment. Weigh your options according to your business’s needs and determine which is right for you.

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Advantages and Disadvantages of Running Your Own Business

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Are you excited by the prospect of being your own boss and doing things your way? Are you also apprehensive of all the responsibilities and risks that come with running a business? You’re not alone. 

Many future entrepreneurs like you find themselves torn between the pros and cons of starting a company. While the advantages of a business are compelling, the possible disadvantages can very well pop the excitement bubble. 

We’ve created this helpful guide on the advantages and disadvantages of running your own business to help you line up your thoughts. As experts in the small business arena, we know how to start a business and what it’s really like to run one. Keep reading to learn from our experience. 

Pros & Cons of Running a Business – Overview

You might have plenty of reasons to start a business . When you want to do something, every reason looks as strong as the next. But it’s only wise to also look at the downsides. 

If you’re looking at both the advantages and disadvantages of running a business, this tells a lot about how open-minded you are. You should feel good about your willingness to look both ways and make a better decision for yourself. 

Before we move on, let’s acknowledge that identifying the disadvantages of a business is not a means of discouraging potential entrepreneurs. The bigger purpose is to help them identify loopholes in their business plan and start off with realistic expectations.

Advantages of a Business

There’s no other joy in the world like the joy of starting a business and experiencing its growth. But apart from the thrills and the joys of the entrepreneurial journey, there are several other advantages to running a business. Let’s take a look at them below.

Motivation Is No Longer an Issue – Be Your Own Boss

When you work for someone else, it might be difficult to find the desire to accomplish your best work. No matter how hard you work, the company’s owners will reap the final benefits.

You’ll find inspiration at work every day when you’re your own boss. Following your aspirations is thrilling, and you have complete control over your own achievements. Because the day-to-day viability of your company is dependent on you, you’ll be motivated to make each day as productive as possible. 

You’ll know that your own hard work and determination will help you enjoy the benefits, and this will add fuel to your business goals, propelling you to make sure that every single day accounts for something productive!

Freedom to Pursue Your Interests

Many entrepreneurs launch their own enterprises to pursue their aspirations and passions. Following your dreams will provide you fulfillment in ways that working for someone else may not. 

You are in charge of building your firm from the ground up, so you can mold it into something you are proud of and potentially create something to pass down to your next of kin as a legacy.

However, don’t forget a lot of businesses fail within five years , mostly because they don’t meet the market demands. Make sure pursuing your passion isn’t the only thing fueling your small business idea . It should also be something that promises to do well in the market.

Creative Freedom

Creative freedom is one of the most valuable advantages of a business if you opt to start one. From coming up with a business name to developing your brand identity, you have the luxury of using your creativity and problem-solving skills to determine what path your enterprise will take. If you’ve worked a 9-to-5 job, you must’ve experienced moments where you wanted to do something a certain way, but the ‘powers that be’ didn’t agree with it. 

Running your own business, you call the shots and you get to choose how to solve problems. Being able to use your knowledge and skills to take your company forward can be a huge boost to your personal satisfaction and self-esteem.

Financial Independence

Many people commit to beginning a business to make more money. While it’s true that getting your business off the ground can be difficult and result in some tough times, the ultimate aim of being your own boss is financial independence. 

There’s no limit to how profitable your own business may be with perseverance and hard work. There’s no reason why you can’t accumulate a lot of wealth through your profitable business idea .

Starting your own business has various financial advantages over working for someone else. For starters, you’re establishing a business with the potential for expansion, and your pocketbook will expand in tandem with your business. 

Second, your company is a great asset in and of itself. Your company’s value increases as it grows. You can choose to sell it or keep it and pass it down to your heirs. It’s valuable in either case. Thirdly, there are various tax benefits that come with small businesses and you can avail of them if they apply in your country or state.

Job Security

Apart from an opportunity to earn more and gain financial independence, you can also be sure no one can fire you from your own company. This applies as long as your business venture doesn’t go down entirely. 

Great Learning Experience

Nothing teaches you how to run a business better than actually running one. As they say, experience is king, and this couldn’t be truer when it comes to entrepreneurship.  

As a small business owner, you’re involved in all departments of your business. Right up from the start, when you register your business to building your marketing strategy, every step will give you tons of valuable knowledge and experience. 

Greater Control of Your Life

As an employee, you spend almost 30% of your entire time at work . Perhaps you’ve been in the corporate sector for a long time and are ready to start a new chapter in your life after years of reporting to a superior. 

Starting your own business might provide you with a more flexible lifestyle and schedule, allowing you to avoid feeling trapped on the corporate hamster wheel. When you’re the boss, you may organize meetings around your family’s schedule or work from home – the sky’s the limit.

Don’t make the mistake of assuming that you no longer have to work. In fact, if we’re to go off of history, the work you’ll be required to do will be far more than anything you’re experienced in your day job. However, unlike before, no one is watching over your shoulder to make sure you do it correctly and on time. Sounds scary, doesn’t it?

Starting a business is difficult, and a flexible schedule may not be possible straight away. Even if you work long hours, you know you’re doing it for yourself and your family rather than a faraway employer or shareholder.

Opportunity to Act Upon Social Injustice

Setting up your company for social advantage is one of the most rewarding aspects of becoming an entrepreneur. You can choose to donate your profits to non-profits, charities, or community projects. Alternatively, you can start a business to tackle a problem in your neighborhood or the world at large – whatever your passion is.

Disadvantages of a Business

Not everything is sunshine and rainbows when you run a business. While the advantages of a business are very tempting, you must also be aware of the disadvantages before you make the big move.

Financial Risks

Risk-taking is the second name for entrepreneurship. When you start a business, you’re investing your time and funds into an endeavor you believe in, but one can never be 100% sure about what the future holds. There’s always a possibility of losing your money. 

Taking risks is an essential part of running a business and is also the cost of building a successful company. This is simply because nothing great comes without a risk. 

When you start a company, you might have to invest extensively, initially depending on the type of business you’re starting. This might result in you investing all your savings or taking a loan, which puts you and your assets at risk. Not to mention that an enterprise takes its time to get into running and start generating income. This means you’ll face income instability if you’ve left your day job and this will continue until your business gets established. 

Small business owners tend to experience more stress than regular workers. A Gallup survey also found that female business owners tend to be more stressed than their male counterparts. 

The uncertainty associated with being an entrepreneur definitely takes its toll on your nerves. The extra work hours and countless administrative tasks and things to worry about, along with income instability and financial risk, can take your peace away. 

The stress and health issues that you can face as a business owner are one of the biggest disadvantages of running a business. However, you can play it the smart way and beat these issues with a simple self-care routine.

Time Commitment

As a business owner, you are the business. You need to be there for your business to run smoothly. Entrepreneurs have to wear many hats and have to invest much more time than regular employees. You might find yourself working 10 or even 12-hour workdays because you simply have a lot to do and no one else can do it for you. 

You might also have to say goodbye to your weekends and leisure time to make sure your business’ growth doesn’t stall, especially in the initial stages. Things might get easier as you hire employees but expect an 80 or even 90-hour work week when you start. 

Numerous Admin Tasks

You start a business thinking you’re finally able to follow your passion and earn a living from it. What you don’t expect is spending more than half your time running errands and completing administrative tasks for your business. 

You’ll find yourself doing everything from handling business registration paperwork and doing taxes to running payroll for your employees. These are not the most enjoyable duties, but you have to do them anyway to run your business.

Is Starting a Business Worth It? – Advantages of a Business

Although there are cons, the advantages of a business almost always take the win. The amazing feeling of seeing your business grow into an established enterprise that can earn a living for you is indescribable. You can only experience it if you take the entrepreneurial road. 

The fulfillment and sense of achievement you feel running a successful business makes it worth it. However, you also need to be aware of the disadvantages and what you’re up against. Being able to see both the pros and cons will help you avoid unrealistic expectations.

That said, there are plenty of unique market niches that the internet has opened for businesspeople to launch small firms, and there are innumerable online resources for help. Additionally, business owners may now connect with other entrepreneurs, learn from their experiences, and use other people’s successful and productive judgments as a model for their own decisions. 

If a nine-to-five job where you spend quite a decent amount of your waking hours at work does not appeal to you, it could be time to establish your own path, move at your own rate, and make a difference in the world. It makes sense to desire to direct your own behavior. Entrepreneurship accomplishes just that: it allows you total freedom to do any action you have ever desired. 

Don’t be scared to perform grunt labor since, as an owner, you will have various roles and duties in your company, especially in the beginning. You will frequently be in positions such as manager, marketer, counselor, or receptionist. While starting a company is risky, keep your motivation in mind when times are tough. 

How to Find Motivation to Start Your Business

Starting a business of your own takes more than just an idea. So many factors contribute to whether your business model will be a success. We understand that for many, even the thought of starting your business can seem like the most daunting procedure. However, if you let the psychological aspect stop you from taking charge, then the steps ahead will pose an even more significant challenge to your new endeavors. 

Fix Your Mindset

The first thing you need to do before even getting into the process of planning to start your business is to focus on positive energy. Many times, we hear news of the overnight success of many business owners, but nobody talks about the hardship that they had to overcome in the process. 

Do not let these success stories deter you from achieving success, even if it is at a slower pace than you wanted it to be. Also, know that you are not alone when it comes to having these doubts since as many as 54% of small business owners still feel that the pandemic is deteriorating the impact their business has or could have. 

Stay Consistent

You’ll be motivated when you first start your business, but that motivation will soon start to wane, leaving you feeling uninspired, confused, and dissatisfied. During this time, you would feel the need to find, once again, reasons to start a business. A whopping 55% of people around the world have begun their businesses solely motivated by the fact that they would get to be their own boss. 

However, you need to step back and focus on consistency and rely on your very first motivator. It would fare well for you to know that the failure rate for new businesses has dropped by 30% since the 1970s, which means the likelihood of your start-up failing is lower than it would have been 50 years ago. Moreover, only 20% of businesses fail within the first year of their launch. 

Working Towards Starting Your Business

When you think of the advantages of a business and running one, you need to think about what you are going to incentivize. Often, you will hear people advising you to come up with a business idea that monetizes what you love to do. 

This often does not translate well since a failed business model, in this case, would also make you hate the thing you once loved. People do not know that as many as 70% of small company owners work 40 to 49 hours each week. So what should be the motivator, if not passion, for pursuing one’s dreams? 

1. Define Your Business Concept

Besides having a strong motivation to start a business, you need to consider whether your business model is profitable and whether it is something you are good at, even if you have not received a formal education in it. Did you know, as many as 42% of the business end up in failure because there was no market need for them? This is why passion alone cannot fuel a business.

2. Look up the Competition and Market

As mentioned previously, the number one reason why businesses fail is due to the lack of a market for that particular product. If there is no need for the product, then who is going to purchase it? When you get to the funding phase, trying to get people to invest in your business, you will need to pitch your business concept to them.

If a business model is bound to fail, then you can forget to receive any investment, and this is the second most common reason why businesses do not make it. Almost 29% of companies go under because of a lack of funding. 

To understand the market demands, you can conduct a survey to see whether your business model is something people would be interested in or not. Relying on previous data as a sole source is unreliable, as past trends do not always apply to newer generations. 

3. Analyzing Your Finances

Starting a business takes money, and there is no question that a small amount and inadequate planning can be the ultimate demise of your business before it takes off. You must carefully consider how much it will cost to run your company and how you can turn a profit without overcharging for your goods.

The most popular method used today to fund a business is business owners using their own cash, this account for 39% of all new businesses. On the other hand, as many as 20% use their 401k retirement plan as their main source of funding, and 24% rely on friends and family. 

Many businesses fail since they are unable to raise further funds before making a profit. A small business owner typically needs $10,000 in launch financing. It is never a bad idea to anticipate your beginning costs because it may take time before the company starts generating stable income.

4. Finalize Your Business Structure

This is the technical part of setting up your business. Here is where you are done placing the building blocks, which will determine how much taxes you owe if your personal assets are a liability, and how the daily operations within your organization will work. 

Before choosing a business structure, discuss your situation with a small business accountant and maybe a lawyer, because each business form has unique tax concerns that could have an impact on you.

Here are some of the most commonly used business structures. 

• Corporation
• LLP – Limited Liability Partnership
• LLC – Limited Liability Company
• Sole Proprietorship 

Disadvantages and Advantages of a Business – Bottom Line

If you’re an aspiring future business owner, it was wise of you to read about both the advantages and disadvantages of running a business. It says a lot about how well-equipped you are for success.

It’s very easy to get consumed by how great your idea is, making it hard for you to see the potential downsides. Looking at both the pros and cons gives you a reality check and an opportunity to fail-proof your business plans. 

No matter how good your idea is, there is always a time when you’re tested in one way or another. It could come in the shape of financial hardship, a legal hindrance, strong competition, or low market demand. The secret to succeeding is to stay consistent, persevere, and improvise. 

Keep believing! 

About the author

Dr. Gabriel O'Neill, Esq.

Dr. Gabriel O'Neill, Esq., a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. O'Neill guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.

As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Gabriel O'Neill, Esq., is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.

Business continuity plan advantages and disadvantages for 2021

Do businesses continuity plan advantages and disadvantages exist? The importance of having a business continuity plan cannot be under-estimated. Business continuity strategies ' sometimes referred to as disaster recovery plans ' are an essential element of organizations planning.

You might be surprised, then, to find an article considering not just the benefits of a business continuity plan, but also the disadvantages. Are there really disadvantages to business continuity planning? Here we look ahead to the things that might impact your continuity strategies in 2021 and to some of the business continuity plan advantages and disadvantages.

What Are the Advantages of Business Continuity Planning?

Unexpected events can catch an organization out at any time. Whether the event is a natural disaster or accident, deliberate disruption or attack, the impact on your business can be significant. If you have failed to plan for such an event, the impact is likely to be far more significant. The benefits of developing a business continuity plan are numerous. A BCP can help to:

• Ensure your business can keep trading during and after an incident.
• Restart operations swiftly following disruption.
• Minimize the cost of tackling business interruption.
• Shorten the period of disruption.
• Reduce the risks and effect of risks on your business.
• Assure your customers, stakeholders and employees that your organization is capable of weathering disruption.
• Protect your corporate reputation.
• Increase compliance with regulatory or legal obligations.
• Improve insurance terms and costs.
• Reduce risk and danger to your employees and customers.

2020 has shown, more than most years, the importance of having such a plan in place. COVID-19 has highlighted the need for well-thought-out business continuity strategies, with organizations that had prepared for the worst being best-placed to maintain business continuity through the pandemic . From a coronavirus perspective, indications are that things are likely to remain disrupted at least in the early part of 2021. For businesses looking to maximize operational capability, this reinforces the need for a robust business continuity plan. And of course, coronavirus is far from the only threat businesses will face in 2021. Weather-related events; terrorism; cyber-attacks; fires ' there is a long list of things with the potential to disrupt your business. Whatever the year may throw at us, organizations that have planned for the unexpected will be best able to manage potential disruption. Having a team in place to spring into action as soon as business interruption looks likely speeds your response, increases your ability to cope with a crisis, and minimizes the impact on your business.

What Should You Consider When Assessing Your BCP

• Is your business continuity plan out of date? Your BCP shouldn't be static but needs to be revisited and updated regularly to take account of evolving threats. It also needs to keep pace with your changing business. Has your organization grown, organically or through M&A activity? If you have new subsidiaries since the plan was last reviewed, or have gone through an IPO that subjects you to additional regulatory or legislative requirements, your obligations will have changed.
• Is your plan complete; does it cover all your entities and every risk you face? A comprehensive BCP demands a full 360-degree organizational vision. The mitigating actions you put in place need to reflect the entirety of your business ' data on your legal entities and subsidiaries is therefore an essential foundation to your plan. Without this, the BCP may have dangerous holes that threaten your ability to maintain operations.
• Does it stand up to rigorous testing? Your plan should be tested regularly, either as part of a planned review or via surprise checks.

Are There Any Disadvantages To Having a Business Continuity Plan?

With business continuity plans delivering all the benefits set out above, it may seem counter-intuitive to consider that there may be disadvantages to developing a business continuity strategy. And maybe when we talk about disadvantages, 'limitations' may be a better term. Because while there are many advantages of business continuity planning, if plans are not prepared properly, they may give organizations a false sense of security. One thing that may be considered a disadvantage of business continuity planning is the spotlight it throws onto your contingency plans. If these are lacking ' if your back-up IT, power, communications or remote working plans are substandard ' the fact that a BCP brings this into sharp focus may be seen by some as a disadvantage of the process. In fact, painful as this may be, identifying shortcomings in your emergency plans is a vital step in putting in place the strategies you will need in the event of any crisis. The process of business continuity planning itself may also be considered a disadvantage; it can often be time-consuming, frustrating and seemingly never-ending, as plans evolve to meet the changing threats they must consider. Now that we have looked at the business continuity plan advantages and disadvantages, how can you ensure your company is prepared for crisis while mitigating business continuity planning limitations?

How To Overcome Business Continuity Challenges

Luckily, there are ways to make business continuity strategy planning pain-free. Many organizations have discovered the benefits of technology during the pandemic, in supporting their business processes and ensuring they could continue to operate. And it's not just the hardware itself that can help; the best technology providers are proving their worth as trusted partners, helping their clients to navigate the challenges of operating in unprecedented times. Cloud-based software allows businesses to maintain operations when their own locations are compromised. Highly-secure, off-site servers can host everything from compliance solutions to secure file sharing for board and other organizational documents. Market-leading entity management software gives businesses confidence that their plans are based on 100% accurate data. You can find out how Diligent and our suite of cloud-based solutions can help you to maintain operations in the event of the unexpected by getting in touch with us .

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What Are the Benefits of a Section 125 Plan?

Section 125 plans offer employees significant tax savings and could be an appealing part of any benefits package.

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Offering a great benefits package for employees helps businesses retain talent. But how can business owners save money when employer health insurance costs are soaring? One option that employers often overlook is a Section 125 plan (sometimes known as a “cafeteria plan”). Before you put together your benefits package, you should understand the definition of a Section 125 plan, when it can benefit your company and how you can start one.

What is a Section 125 plan (cafeteria plan)?

A Section 125 plan allows employees to convert their taxable benefits, such as their salaries, into nontaxable benefits. Employees enrolled in Section 125 plans can reserve part of their pretax cash earnings to cover the costs of qualified benefits. A common example of a Section 125 plan is a flexible spending account (FSA), in which employees set aside pretax dollars from their paychecks to be used for qualifying medical expenses. The benefit of setting this money aside is that employees can save up to 30 percent on local, state and federal taxes.

As with most employee benefit plans, there is no obligation to participate in a Section 125 plan. Some employees may forego Section 125 plans in favor of standard cash wages. However, for many employees, setting aside money before taxes are taken out is preferable.

How does a Section 125 plan work?

In a Section 125 plan, an employer sets aside a portion of an employee’s pretax wages to cover the costs of the plan’s qualified benefits. The employee never receives this money as part of their standard wages, so federal income tax is not taken on these earnings. Employers also benefit from setting aside wages for Section 125 use, since employer payroll taxes collected through Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) are not taken on these funds.

Although taxes are not levied on these wages, you still must report them on your employees’ W-2 forms. For example, if you set aside $1,000 of an employee’s salary toward a Section 125 benefit during a plan year, you must report that amount on Box 10 of the employee’s Form W-2.

No matter the benefits you offer, you are responsible for managing the Section 125 plan. A professional employer organization (PEO) can help you perform these human resources (HR)-related tasks and administer benefits plans. The best HR software providers also offer tools for starting and managing Section 125 plans. 

Section 125 plan pros and cons

Here are some of the benefits of Section 125 plans:

• Employees pay less in taxes: Employees will pay less in taxes because the money you funnel toward their Section 125 plans isn’t taxed as normal income.
• Employees have more money for out-of-pocket expenses: If you put $5,000 aside for an employee’s Section 125 plan, that’s a tax-free $5,000 they can use to cover out-of-pocket expenses. If you paid out this sum as part of their regular salaries instead, they would lose some of this money (often a percentage in the double digits) to taxes.
• Employers pay less in taxes too: Your company doesn’t have to pay FICA or FUTA taxes on employee wages set aside for Section 125 purposes. That means that you can reduce your business’s tax liability. 

Here are some of the drawbacks of Section 125 plans:

• There are setup fees: There is a cost for setting up Section 125 plans. In the short term, startups or businesses with cash flow problems might worry that setup fees are too high to justify starting a plan. However, in the long run, Section 125 employer tax savings can save you enough money to balance out your setup fees.
• Funds expire: Employees who opt into a Section 125 plan must use the money they’ve invested during the plan year; unused money does not roll over to the next plan year. This introduces some risk to Section 125 plans. If the money that could have been part of a paycheck goes unused as part of the Section 125 plan, the employee may be worse off financially than without their Section 125 plan.
• Section 125 funds are reimbursed, not used directly: Section 125 qualified benefits often take the shape of flexible spending arrangements. This means that employees must pay for their qualified benefits and then await reimbursement from their cafeteria plans. For some employees, this structure may result in challenges in acquiring the services they desire in the first place.

Who can open a Section 125 plan?

All types of employers can open a Section 125 plan, including C corporations, S corporations, partnerships, limited liability companies and sole proprietors. Government entities can also offer these types of benefits to employees.

You should also know who on your team qualifies for cafeteria plan coverage. Typically, all employees who worked at least 1,000 hours for your company in the previous calendar year qualify for your current plan year. This difference may influence your decision to hire full-time or part-time employees . That said, you can exclude two employee groups from your coverage: employees under 21 and those who have worked for your company for less than a year.

What does a Section 125 plan cover?

No matter which benefits you choose to include in your plan, you must specify in writing what your Section 125 plan encompasses, how employees can qualify for these programs and how they can choose the benefits that are right for them. According to Section 125 of the Internal Revenue Code, cafeteria plans can cover the following qualified benefits:

• Accident and health benefits: Exclusions are Archer medical savings accounts and long-term-care insurance. This supplemental health coverage policy deals with employee medical expenses for transportation to hospitals and income lost from not working during injury recovery periods.
• Dependent care assistance plans (DCAPs): A dependent care flexible spending account helps cover the cost of care for qualifying dependents. The IRS defines qualifying dependents as all children 12 and under who live with the employee. Those aged 13 or older also qualify if their physical or mental disabilities require the employee’s supervision and the person is regularly present in the employee’s household for at least eight hours per day.
• Adoption assistance: An adoption assistance plan partially or fully covers employee expenses for child adoption. These plans typically include paid or unpaid leave for employees who have recently adopted children. Information and referral services may also be covered.
• Group-term life insurance: Group-term insurance refers to the standard employer-based health insurance model but, in the case of cafeteria plans, this model is used for life insurance, not healthcare. As an employer, you will take out a policy and sign a contract with a life insurance provider. You can then offer your employees life insurance plans as benefits through your cafeteria plan.
• Health savings accounts (HSAs), including those that cover long-term-care services : Through HSAs, your employees can cover their qualified medical expenses using the pretax dollars you set aside in your Section 125 plan. These expenses include insurance deductibles, co-insurance, co-payments and more, though usually not insurance premiums. Note that only employees who have high-deductible health plans can contribute to HSAs.

Adoption assistance benefits, HSAs and DCAPs are traditionally offered as FSAs that reimburse employees for their qualified benefit expenses. FSAs typically include annual maximums and stipulate that funds don’t carry over from one plan year to the next.

Additionally, one exception exists regarding HSA coverage through cafeteria plans. This exception applies if your company offers health reimbursement arrangements (HRAs) through which your company covers your employees’ qualified medical expenses or insurance premiums. If this is the case and your employee has obtained insurance outside federal or state health insurance marketplaces or exchanges, the employee can use their cafeteria plan set-asides to cover non-HRA medical expenses and insurance premiums. This is the only case in which cafeteria plans can include HRAs.

How to start a Section 125 plan

Creating a Section 125 plan requires three fairly simple steps:

• Complete the required plan documentation.
• Notify employees that you are offering cafeteria plans.
• To meet your documentation needs, hire a third party to administer your Section 125 plan, process employee reimbursements and keep your company abreast of proposed regulations.

Once you begin offering Section 125 plans, you must remain vigilant about employment and anti-discrimination laws . Your company’s Section 125 plan must pass these three nondiscrimination tests:

• Eligibility to participate: If your third-party Section 125 company finds that your plan makes it easier for your company’s highest-paid employees to participate, you must revise your plan.
• Benefits and contributions: Similarly, the benefits and contributions you offer in your Section 125 plan must favor employees of all compensations equally.
• The value of nontaxable benefits provided to your key employees ― whom your third party can help you identify ― must be at most 25 percent of the value of all employees’ nontaxable benefits.

Employees may lose favorable tax treatment if your company lapses in meeting these requirements. Even when your Section 125 plan is accidentally discriminatory, it includes remedies for the disadvantaged parties.

Mike Berner contributed to this article.

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18 Advantages and Disadvantages of Strategic Planning

Strategic planning is a process that involves defining an organization’s goals, developing strategies to achieve those goals, and allocating resources to implement those strategies. 

It is a comprehensive and systematic approach that helps organizations achieve competitive advantage and adapt to changing environments.

• Redaction Team
• September 28, 2023
• Business Planning , Entrepreneurship

Advantages of Strategic Planning

• Clear Direction : Strategic planning provides a clear sense of direction for an organization, helping leaders and employees understand where the organization is headed and what it aims to achieve.
• Alignment : It aligns the efforts of employees and departments toward common goals, fostering a shared vision and purpose within the organization.
• Prioritization : Strategic planning helps organizations prioritize initiatives and allocate resources effectively to focus on high-impact activities.
• Adaptability : While it sets long-term objectives, strategic plans are often flexible and adaptable, allowing organizations to adjust to changing circumstances and seize opportunities.
• Resource Management : It assists in the efficient allocation of resources, including finances, time, and personnel, to support the organization's strategic goals.
• Performance Measurement : Strategic plans often include key performance indicators (KPIs) that enable organizations to track progress and assess the success of their strategies.
• Enhanced Decision-Making : Having a strategic plan in place can guide decision-making processes and reduce uncertainty by providing a framework for evaluating options.
• Communication : It facilitates effective communication both internally and externally, ensuring that stakeholders, employees, and partners are aware of the organization's objectives.

Disadvantages of Strategic Planning

• Time-Consuming : The strategic planning process can be time-consuming, requiring significant input from leaders and employees, which can divert resources from day-to-day operations.
• Costly : Developing and implementing a strategic plan can be expensive, especially when consultants or specialized software are involved.
• Rigidity : Overly rigid strategic plans can hinder an organization's ability to respond quickly to unexpected challenges or opportunities.
• Resistance to Change : Employees may resist changes that are part of the strategic plan, leading to internal conflicts and morale issues.
• Complexity : Strategic planning can become overly complex, making it difficult for employees at all levels of the organization to understand and execute.
• Uncertainty : The future is inherently uncertain, and strategic plans may not always account for unforeseen events or market shifts.
• Limited Focus : In some cases, strategic planning may lead to a narrow focus on achieving specific goals, potentially overlooking broader organizational or societal responsibilities.
• Implementation Challenges : Developing a strategic plan is only the first step; ensuring successful implementation can be challenging, and many strategies fail due to poor execution.
• Lack of Accountability : Without clear accountability and monitoring mechanisms, strategic plans may not be effectively executed, leading to unmet goals.
• Overemphasis on Process : Some organizations become overly focused on the process of strategic planning rather than the outcomes, leading to bureaucratic and time-consuming procedures.

One of the main advantages of strategic planning is that it helps organizations set clear goals and objectives. By having a well-defined strategic plan, organizations can align their resources and efforts towards a common purpose. This clarity of purpose allows employees to understand their roles and responsibilities, which leads to increased motivation and productivity.

Strategic planning also helps organizations identify and leverage their strengths. By conducting a thorough analysis of the internal environment, organizations can identify their core competencies and unique capabilities. This information can then be used to develop strategies that capitalize on these strengths and give the organization a competitive advantage.

Another advantage of strategic planning is that it helps organizations anticipate and adapt to changes in the external environment. By conducting a thorough analysis of the market, industry trends, and competition, organizations can identify potential threats and opportunities. This early identification allows organizations to proactively respond to changes and stay ahead of the competition.

Strategic planning also provides a framework for resource allocation. By setting priorities and making informed decisions about resource allocation, organizations can use their limited resources effectively. This ensures that resources are allocated to the most important and strategic initiatives, maximizing the organization’s impact and return on investment.

In addition, strategic planning helps organizations align their internal processes and functions. By involving different stakeholders and departments in the planning process, organizations can create a shared understanding and commitment to the strategic goals. This alignment improves coordination and collaboration, leading to increased efficiency and effectiveness.

Furthermore, strategic planning provides a basis for evaluating performance and progress. By setting clear goals and key performance indicators, organizations can track their progress and make necessary adjustments along the way. This monitoring and evaluation process allows organizations to learn from their experiences and continuously improve their performance.

Despite its many advantages, strategic planning also has some drawbacks that organizations should be aware of. One of the main disadvantages is the complexity of the process. Strategic planning requires a significant amount of time, effort, and expertise. It involves analyzing large amounts of data, conducting market research, and engaging stakeholders. This complexity can make the planning process challenging and resource-intensive for organizations.

Another disadvantage of strategic planning is the resistance to change it may encounter. Implementing a strategic plan often involves making significant changes to the organization’s structure, processes, and culture. This can create resistance among employees who may be reluctant to change and may fear the unknown. Overcoming this resistance requires effective change management strategies and strong leadership.

Moreover, strategic planning may not always guarantee success. While a good strategic plan provides a roadmap for the organization’s future, its implementation is not always straightforward. External factors, such as changes in the market or unexpected competition, can affect the business and its ability to achieve its strategic goals. Internal factors, such as lack of resources or poor execution, can also hinder the successful implementation of the plan.

Lastly, strategic planning can sometimes overlook the importance of human resources. While strategic plans focus on organizational strategies and objectives, they may not pay enough attention to the people who will execute those strategies. It is essential for organizations to consider the capabilities, skills, and motivation of their employees when developing and implementing strategic plans.

Conclusion of Advantages and Disadvantages of Strategic Management Planning

In conclusion, strategic planning has both advantages and disadvantages for organizations. It helps set clear goals, leverage strengths, adapt to changes, allocate resources effectively, and align internal processes. However, it is a complex process that requires time, effort, and expertise. It may face resistance to change and does not guarantee success. Therefore, organizations should carefully consider these factors when deciding to engage in strategic planning.

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+44 (0)1458 253536, pros and cons of having two citizenships.

Nuances of dual citizenship

• The rights of a dual citizen include the freedom to live and work in two countries, the right to own property in both nations, and the capacity to move about freely between the countries.
• Because certain nations do not permit dual citizenship, you may be required to renounce your birth citizenship before applying for citizenship in another country.
• There are several disadvantages associated with holding dual citizenship , such as the possibility of double taxation, the length, and expense of the procedure required to gain dual citizenship, and is subject to the laws of two countries.
• Although many migrants may become naturalized citizens upon moving to a new nation or marrying a foreign spouse, birth is the most straightforward route to acquiring dual citizenship.
• The application procedure for dual citizenship may be lengthy and costly, so you may want to consult with an immigration consultant before you start the process.

Dual citizenship benefits & drawbacks

The countries listed below are examples only. They may differ, and the rules, respectively, too, meaning that different pros and cons of dual citizenship may appear. Consider this before choosing a country where you can have two passports. To make the right choice, consult with experts such as Migronis . They will give you all the information you need on citizenship and residency through investment programs and help you find the best option for your case.

• Rights in politics — A person with dual citizenship can vote and hold elected positions in whichever nation they are a citizen of. Several democratic liberties fall under this category.
• Mixing work and vacation — When traveling to any of their two home countries, dual nationals need neither a visa nor permission to remain for as long as they desire. They may legally look for employment in either country without the hassle that non-citizens have while trying to get a work visa. They are not subject to the same rules as their international counterparts when doing business.
• Welfare and related assistance — People with citizenship in more than one nation are entitled to all those countries’ advantages and protections. They may go abroad to get medical services unavailable in their nation of dual citizenship. They may study for the exact cost as local students.
• Separate passports — If you are a dual citizen, you may use both passports to travel. If you have dual citizenship in the United States and New Zealand , you’ll find it much simpler to travel back and forth between the two nations. Having a citizen’s passport eliminates the need for long-stay visas and any questioning about the purpose of your trip during the customs process.
• Possession of property — It is another advantage of dual citizenship. Some nations only allow their residents to own land. You would be entitled to acquire real estate in either — or both — of the two nations as a dual citizen. This may be particularly helpful if you regularly move between the two nations since owning property may provide a more affordable means of maintaining two residences.
• Education in culture — You will gain from being fully engaged in the two nations’ cultures as a dual citizen. Dual citizenship is also favored by certain government representatives, who view it as a means of enhancing the nation’s reputation as a top tourism destination. People with dual citizenship can study the histories of both countries, pick up two (or more) languages, and experience life in a new manner.

Disadvantages

• Dual responsibilities — You are subject to the laws of both nations if you have dual citizenship. When serving as an officer in a foreign military fighting a war against the United States, for instance, you risk losing your citizenship if you are a citizen of both the United States and the nation in question. US policy generally acknowledges that dual citizens may be lawfully required to carry out military duties overseas, and many may do so without compromising their US citizenship. However, it is vital to examine each circumstance thoroughly.
• Multiple taxes — You can owe taxes to the US government and the government of the nation where the income was produced if you live in your country of dual residence, a country other than the United States. However, to prevent double taxation, income tax treaties between the United States and other nations effectively lower or eliminate an individual’s tax burden. For instance, a treaty between the United States and New Zealand supersedes each nation’s income tax regulations to prevent double taxation.
• Some employment forms face barriers — The disadvantages of dual citizenship might vary depending on your work choice. Dual citizenship may prevent you from obtaining the security clearance you need for this kind of employment if you are looking for work with the US government or your position needs access to material that the US government considers classified. There may be fewer issues for persons born with dual citizenship than those who deliberately sought it out.

Complex procedure — Dual citizenship may sometimes occur automatically (for example, when a child is born in the US to foreign parents). The process may sometimes be time-consuming, costly, and challenging. Some individuals may be discouraged from obtaining dual citizenship because of this.

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• General Partnership Agreement

Starting a Business with a Partner: Pros, Cons, and How-Tos

Starting any business can be a huge undertaking. However, starting a business with a partner can be even trickier because you have two people that are likely both very passionate about the company and may have differing opinions about certain aspects of it.

There are approximately 21 million businesses in the U.S. that have only one employee, while about 5 million have between one and nine employees. This stark contrast occurs for good reason: running a business as a partnership can be a challenge.

Creating a partnership from a legal perspective is the simple part; it is making the commitment and working together to create a framework that can be difficult. Creating a partnership agreement , even if you do not have a more formal business structure, is a critical aspect of any partnership that you should not overlook.

Table of Contents

The benefits of having a partner in your venture, the drawbacks of including a partner, finding the right partner, developing a business plan, the importance of having a partnership agreement, licenses and permits, partnership taxes, partnerships and other business entities, get business formation help.

Perhaps the greatest benefit of having a partner in your business venture is having someone who can share the workload of starting your own business with you. It can be extremely difficult to do everything on your own, and having someone to share your burdens can be very beneficial.

Having a partner also means that you can both pool your resources, skills, and experience together. One of the major reasons that businesses fail is because the business owners do not have experience running a business and are unsure of what to do. Having a partner, particularly one that has business experience if you do not, can significantly decrease this type of risk.

You have likely heard the saying that “two heads are better than one.” The same rationale applies to business ventures. Having the right partner can help you be more creative and plan more effectively. When two people work on the same project, they are bound to have differing opinions and viewpoints, which can be helpful for growth and allow the company to thrive.

Interestingly, many of the drawbacks of having a partner spring from aspects that could also be considered benefits. Differences of opinion can lead to irreconcilable clashes that may threaten the partnership. Personalities, goals, and passions can all play a huge role in the business relationship, and they may be the reason that a partnership ultimately fails.

Many people compare partnerships to marriages—you need to be sure that you are compatible before you make a commitment. You will be spending a lot of time with your partner as part of this venture, so be sure that you have chosen the right person.

In some instances, you may not be able to make decisions regarding the business without consulting the other partner. This process can make decision-making time consuming and inefficient. You can combat this potential drawback by allowing one partner to make all of the day-to-day matters or only requiring consultation on bigger decisions.

The “right” partner for you is going to depend a lot on your personal preferences, skills, and characteristics. There is never a one-size-fits-all solution to what type of individual will work best as a business partner. However, you can still look for specific qualities and traits that may be more desirable than others.

• Work ethic and drive – In most partnerships, unless a partner’s role is more of a passive investor, you want someone that is going to work as hard as you do. You do not want someone who will split the profits with you, but only works part-time or rarely shows up. Consider whether your potential partner has the right drive and work ethic to match yours, or you will likely face conflict very quickly.
• Motivation – Why does this person want to join your business venture? Is it because he or she is passionate about the product or service that you are offering? Or, is it simply to make money? If your potential partner does not have the right motivation, there can be conflict, particularly if values clash.
• Complementary skills or experience – While it may be easier to have someone on your team who has similar experiences or skills as you, it is often more beneficial to the relationship to have someone who has expertise in areas where you may be lacking. For example, if you are the creative person who physically makes the product you are selling, it might be helpful to have a partner who knows sales, marketing, or even accounting. These skills are essential to a business. When partners complement each other they can also be more efficient, as each partner spends time doing enjoyable things or engaging in activities in which they excel. When you are constantly forced to do things you hate, you are likely to lose motivation quickly or simply avoid those tasks altogether. Allowing each partner to focus on his or her strengths can propel the business forward in a way that may not be possible otherwise.
• Communication and trust – Being able to talk to your business partner about a variety of issues is essential for a successful partnership. If your potential partner is unwilling to discuss finances, planning, or the future, that is a huge red flag. You should be able to communicate with each other about goals, ideas, values, motivations, and more. Communication also goes hand-in-hand with having the ability to trust your partner. You cannot build a successful partnership if one partner is unreliable or cannot be trusted with money, confidential information , or other aspects of your business.

If you are starting a business with a partner, it is especially important to sit down and create a business plan . While a business plan is a good idea with any venture, it is particularly vital when you are going into business with someone else.

• It can provide a roadmap for you and your partner – It can help you establish what exactly you want the business to do and allow you to set specific goals.
• It is a good way to communicate with your partner about the vision for the business – You can see if your values and ideals align through this process. It can provide valuable insight, not only for the future of the business, but also into what motivates and drives your partner.
• You can find out in which areas your partner excels – For example, if your partner does not think you need to budget for advertising, you can dive into why that may be. Does your partner have marketing skills or experience to do this him or herself? Alternatively, did this area of expense just not occur to him or her because your partner lacks marketing experience altogether?
• It can help you realize areas in which you may need outside help – Perhaps you need to engage a marketing professional or get additional training in sales because neither partner has the skills necessary to complete those types of tasks. Creating your business plan together can help you realize these potential issues before they cause problems for your business.

There are no legal formalities that you absolutely must meet to create a partnership. Instead, a partnership is essentially formed when you say it is—or when you start acting as a joint venture. However, you should still create a partnership agreement to help you and your partner define the rights, roles , and responsibilities that each individual holds. The partnership agreement should generally address the following information:

• The name of the company and identifying and contact information for individual partners
• How profits and losses will be split
• Which decisions need approval from both partners
• Information regarding the organization’s place of business
• The effective date of the partnership agreement
• Information about the initial capital contribution
• Ownership percentages (will it be a 50/50 split or some other division?)
• Whether one partner will play a management role or if both (or all) partners will fulfill these obligations on a day-to-day basis
• Benefits information (such as paid time off, health insurance, retirement plans, etc.)
• Accounting methods (cash or accrual accounting)

You may also want to include additional information that relates to the agreement itself, such as which state’s law will apply to the agreement, how disputes will be resolved, and whether each portion will be considered severable if any other portion is determined to be invalid under the law.

Partnership agreements can solve many disputes before they become real problems. They can also force the partners to talk about difficult subjects ahead of time. Sometimes, discussing these issues can make you realize that this type of venture is not the right option for you or that the prospective partner may not be the right choice for your business.

Even though you do not need to file any formal documents with your state to create a general partnership, you must still comply with the licensure and permit requirements for a business of your type. You should use the company’s name and contact information (instead of an individual partner’s information) to obtain these permits and licenses. Necessary filings for these items can vary widely by state, county, city, and industry. Take some time to examine local laws for your industry to determine situations where you may need a permit or license to ensure you are complying with legal requirements.

General partnerships are “pass-through” entities. That means that the income generated from the venture will end up on your personal tax return. However, unlike a sole proprietorship, you must also report your income and expenses to the IRS using a separate tax form: Form 1065 . Then, each partner will receive a Form K-1 that he or she will use to report the income from the partnership on their individual tax return.

Partnerships do not have separate tax rates like a corporation would, but they are required to take this additional step in tax filing to report their income. Individual partners will often be liable for self-employment taxes as well. As a result, partners will usually have to pay estimated quarterly taxes.

When most people think of a partnership, they think of a general partnership, which has at least two owners and is essentially an extension of those individuals. However, you can actually have a partnership within other business structures as well.

For example, general partnerships do not offer any asset protection. As a result, partners may want to consider forming a limited partnership, LLC, or corporation. Forming an LLC converts the “partners” to “members,” but otherwise the individuals’ roles are the same. In a corporation, the owners become “shareholders,” which can complicate their ownership, but it can be structured very similarly to a partnership regarding management and sharing in profits and losses.

Forming an LLC , or any of these other entities, is a much more formal process than creating a general partnership, but the ideas are essentially the same. The formation documents set out the roles and responsibilities of the owners and indicate how profits and losses will be allocated. In creating any of these other entities, however, there may be compliance requirements that you must meet under state law that would not apply when creating a simple general partnership, including holding annual shareholders’ meetings and meeting internal record-keeping requirements.

Creating business documents from scratch can be extremely intimidating. LegalNature can help you to create tailored documents that work for your situation and comply with applicable legal requirements. Create your business formation documents today.

Aug 9, 2024

The Ups and Downs of Instagram’s New Rectangle Grid

Hayley Fiedler

Instagram has been shaking things up lately and are testing out a new grid format for some users: the rectangle!

According to a recent poll we conducted, only about 10% of users have been switched to this new layout. This is consistent with other major UI update tests Instagram has done, and they will likely use this group’s response to determine whether the change becomes permanent and is rolled out to the rest of their users. 

With Instagram also rolling out the ability to include 20 images in carousels, it’s clear they’re willing to re-think some of their long-standing norms. So, let’s dive into the pros and cons we’ve been hearing as people start testing this new grid view and see what people are buzzing about. 

‍ Greater Flexibility

Flexibility is key in the dynamic world of social media, and these new grids deliver just that. Whether you're sharing professional insights, showcasing products, or capturing personal moments, the rectangular format adapts beautifully. For business owners, it means presenting your brand’s story in a more engaging way. For social media aficionados, it’s about personalizing your feed without the constraints of the traditional square.

No More Cropping

Let’s be real, a lot of us are already sharing rectangular content, whether it's a cool landscape shot or an infographic. With the new rectangular grid, you won't have to worry about your photos getting awkwardly cropped in the feed. Now, what you see is what you get, and your posts will display exactly as you intended. This means less hassle and more focus on creating content that looks good on every Instagram screen.

A Refreshing Change

Switching things up, like with these new rectangular grids, can be incredibly refreshing. It’s exciting to see something different on your feed, capturing attention and sparking interest. This change not only boosts the visual appeal of your profile but can also enhance engagement. Your followers may love being able to see larger previews of your content, making them therefore more likely to click on + interact with your posts. 

‍ Follower + Content adaptation

Let's face it: Instagram users love their squares. Switching to a rectangle might feel like convincing someone to trade their favorite pair of jeans for a new style. It’s going to take time for followers to adjust to the new format and for creators to tweak their posts to fit just right. It may impact previously meticulously curated grid setups as well, requiring users to look back and make sure their historical post sequence still makes sense. Patience is key here as the Insta-fam gets used to this new look and feel. 

Extra time + Effort required 

While the introduction of the rectangular grid will likely eventually require less forethought, initially it will require content creators to invest more time and effort in figuring out how to best leverage this new format and structure their content, to maximize engagement. This additional effort includes experimenting with different layouts, planning posts more meticulously, and ensuring that the overall aesthetic of the profile remains cohesive. For those who are already managing a busy content schedule, this could be a significant adjustment and may initially slow down the posting process.

Less Visual Room for Posts

With the new rectangular format, your grid might feel a bit more limited, putting a bigger spotlight on each individual post rather than your overall feed. This can be great for some, but it could be a bit disheartening for those who have put in the time and effort to curate a perfect grid. Many creators have spent countless hours crafting a cohesive visual story or theme and depend on users seeing the bigger picture come together. This new, larger post size might make it tricky to display multiple images in a cohesive way and could push important content below the fold. 

Wrapping Up: 

Community responses to the switch have been mixed so far! According to one of our recent Instagram polls, 63% of users still prefer the original square format, while 37% are excited about the larger previews that come with the rectangle grid. It's clear that while the new format offers exciting possibilities, it's going to take some time for everyone to fully embrace the change. Whether you’re team square or team rectangle, it’s all about finding what works best for your content and your audience. We would love to hear what y’all are thinking about this new view, even though, ultimately, the decision lies with the Instagram Gods. Feel free to shoot us a message, or tag us in one of your posts to let us know which shape you prefer.

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19 Facts About Tim Walz, Harris’s Pick for Vice President

Mr. Walz, the governor of Minnesota, worked as a high school social studies teacher and football coach, served in the Army National Guard and chooses Diet Mountain Dew over alcohol.

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By Simon J. Levien and Maggie Astor

• Published Aug. 6, 2024 Updated Aug. 9, 2024

Until recently, Gov. Tim Walz of Minnesota was a virtual unknown outside of the Midwest, even among Democrats. But his stock rose fast in the days after President Biden withdrew from the race, clearing a path for Ms. Harris to replace him and pick Mr. Walz as her No. 2.

Here’s a closer look at the Democrats’ new choice for vice president.

1. He is a (very recent) social media darling . Mr. Walz has enjoyed a groundswell of support online from users commenting on his Midwestern “dad vibes” and appealing ordinariness.

2. He started the whole “weird” thing. It was Mr. Walz who labeled former President Donald J. Trump and his running mate, Senator JD Vance of Ohio, “weird” on cable television just a couple of weeks ago. The description soon became a Democratic talking point.

3. He named a highway after Prince and signed the bill in purple ink. “I think we can lay to rest that this is the coolest bill signing we’ll ever do,” he said as he put his name on legislation declaring a stretch of Highway 5 the “Prince Rogers Nelson Memorial Highway” after the musician who had lived in Minnesota.

4. He reminds you of your high school history teacher for a reason. Mr. Walz taught high school social studies and geography — first in Alliance, Neb., and then in Mankato, Minn. — before entering politics.

5. He taught in China in 1989 and speaks some Mandarin. He went to China for a year after graduating from college and taught English there through a program affiliated with Harvard University.

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• Money Transfer

Wise August 2024 Review: Pros & Cons

Updated: Apr 22, 2024, 6:21am

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Our Verdict

Wise comes with loads of special features, and it doesn’t mark up its rates for currency exchanges. But its services might come at a considerable cost, as it charges higher transfer fees than some of its competitors. Two other drawbacks: There are no options for delivery of cash to a home or business, and there are fewer than 100 countries where money can be sent.

• Variety of options for sending money
• No markup on exchange rates
• Fast money transfers for some transactions
• Higher transfer fees than some competitors
• No options for cash delivery to home or business
• Limited customer support

Table of Contents

Who should use wise, wise’s features, wise's pricing, how to use wise to transfer money, wise’s ease of use, wise’s support, how wise stacks up against the competition, frequently asked questions (faqs).

If you’re looking for an international money transfer service that’s cheap, Wise might not be the best pick. Wise is upfront about the fact that it’s not always the least expensive option, and the potentially higher cost might turn off some people.

However, some users might find a higher fee is a worthwhile tradeoff for a potentially speedy Wise transaction. Another advantage: Wise stands out from some of its competitors by not marking up exchange rates to fatten profits. The company boasts that it avoids “unfair” exchange rates charged by banks.

Each month, London-based Wise processes more than £8 billion (nearly $9.7 billion USD) worth of international transactions. Over 13 million people and businesses use Wise, which was founded as TransferWise in 2011.

Signing up for a free account takes just a few minutes, and Wise walks you through each step. In addition to entering personal information—your name, date of birth, address and phone number—you can register for an account using your Apple, Facebook or Google account. This login alternative isn’t available with most money transfer services.

Once you’ve registered for an account, Wise might need to verify your identity, typically by uploading a picture of your photo ID and proof of your address. This step usually takes two business days to complete. The need to verify your identity depends on where you’re sending money from and how much money you’re sending; Wise doesn’t verify your identity documents until you initiate your first transfer.

If you have a Wise account, you can sign up for a Wise debit card, which can be used in many, but not all countries. The card has a one-time fee of $9 USD. Each month, you can make two ATM withdrawals of up to $100 each month at no charge. After that, the fee is $1.50 USD per withdrawal. A 2% fee is charged on any withdrawal above $100.

The card also can be used to make online payments, and for Apple Pay and Google Pay transactions.

Multi-Currency Account

This free account lets you send, hold and receive money in a number of currencies.

Large Transfers

Wise charges lower fees if you send large sums of money (over the equivalent of £100,000 per transaction in U.S. dollars) at one time or several times a month.

Wise Assets

Through the Wise Assets program, you can invest money from your Wise account in the iShares World Equity Index Fund—its holdings include stock in Apple, Microsoft and Tesla.

Transfer fees depend on the amount being sent, the type of currency the recipient will get and the payment method. For example, a recent check found that the fees for sending $1,000 USD from the U.S. to Mexico (with the recipient getting Mexican pesos) ranged from $9.12 for a bank account to $46.19 for a credit card.

Wise’s fee is a percentage of the amount being sent.

To calculate the cost of exchanging money from one currency to another, Wise relies on what’s known as the mid-market exchange rate, also called the “real” exchange rate.

When banks buy currencies, they might pay a so-called “buy rate.” And when they sell currencies, they might pay a so-called “sell rate.” The mid-market rate splits the difference between the buy and sell rates. Bottom line: The buy and sell rates include a markup, which eats up more of a sender’s and recipient’s money than the mid-market rate does.

If you’re sending money in the same currency from one Wise account to another, there is no fee to convert the amount, but Wise charges a nominal fee to complete the transfer. Otherwise, there’s a conversion fee.

Below is an example of the cost to send $1,000 USD via Wise from the U.S. to Mexico, based on recent research:

Wise lists 50 countries where you can send money from the U.S. You also may be able to send money to someone in another country if the recipient’s bank account is in U.S. dollars, euros or British pounds. Overall, money can be sent to more than 80 countries, which is fewer than some of Wise’s competitors.

It takes anywhere from a few seconds to five business days to receive money through a Wise transfer, depending on the currency being sent. The company says half of its transfers arrive within an hour.

A recent check showed these the ranges for estimated delivery times of U.S. dollars via four payment methods to four countries, with the times fluctuating based on the payment method:

• India: Few seconds to one day
• Greece: One to two days
• Mexico: Two hours
• Thailand: Eight hours

Navigation of the Wise website and app is user-friendly, with no glitches during our test of the platform. However, because of the number of countries and currencies available, it can feel a little overwhelming to keep track of the basics (such as fees and exchange rates) for each type of transaction.

To use the free Wise app for an iPhone or iPad, your device must be equipped with iOS 14.0 or later. It’s available in 15 languages. The free Wise app also is available for Android devices; the Google Play page for the app doesn’t list specifications for running the app or the number of languages that the app supports.

Wise uses HTTPS encryption and a two-step login process to protect data. The company says it will never “misuse” or sell customer data. However, the App Store page for the app indicates some types of data may be collected and linked to your identity, such as contact information, financial information and search history.

Two tests of Wise’s customer support were disappointing.

When browsing the Wise website, a phone number for customer support was nowhere to be found. Worse yet, a message popped up on the webpage for Wise’s help center that said the support team was “really busy” and that it might be easier to try again later. Even more aggravating: After being questioned whether we still needed help, clicking on the “contact us” button brought up the same “busy” message.

Granted, this test took place on the Fourth of July, a federal holiday in the U.S., but what if you need an urgent answer to a question but customer support isn’t available?

Less than two weeks later, we again tried to contact customer service (on a Saturday). When we visited Wise’s online help center, we came across the following message about the live chat function being “closed.”

We then attempted to call Wise’s customer service department, but an automated message informed us the phone lines were “closed at the moment.” We were directed to find another way to contact Wise or to visit the Wise website to find out when the phone lines are open. Email turned out to be one of the contact options, but we couldn’t find any information on the Wise website about hours of operation for the customer service team.

By the way, Wise prides itself on not using automated systems to answer customer service calls. Its agents do business in a total of 14 languages.

Here’s how Wise stacks up against three of its competitors.

Wise vs. OFX

OFX enables someone to send money to people in 190 countries, while Wise is limited to fewer than 100 countries. Perhaps the biggest difference between the two is that OFX does not charge transfer fees and Wise does charge them. Yet Wise stands out because it does not mark up the exchange rate for transfers; OFX hits customers with exchange-rate markups. Also, Wise offers a debit card and a multi-currency account, neither of which is available from OFX.

Wise vs. Remitly

Remitly allows delivery of cash to a home or business, while Wise does not. But Wise does provide the option to send money via Apple Pay or Google Pay, a feature that isn’t available from Remitly. Meanwhile, Remitly’s Express option enables speedy transfers (within minutes using a debit card), whereas a Wise transfer may take up to two business days.

It’s also worth noting that Wise is up front about not being the cheapest option for money transfers. So if cost is an issue, Remitly might be a better choice.

Wise vs. Xoom

A Xoom user can add cash to a prepaid mobile phone account or can pay international bills; neither of those features is available from Wise. In addition, Xoom allows cash to be picked up or delivered, something that isn’t offered by Wise.

At the other end of the spectrum, Wise’s offerings include a debit card and a multi-currency account, as well as features such as Apple Pay and Google Pay, while Xoom has none of those. Perhaps most importantly, Wise takes a smaller cut of your money on large transfers compared to Xoom.

Exchange Your Currency with Wise

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How does Wise money transfer work?

You can send money from the U.S. to another country using a bank account (ACH), wire transfer, debit or credit card, international SWIFT network, Apple Pay or Google Pay.

How can you transfer money from Wise to your bank account?

Transferring money from a Wise account to a bank account isn’t a smooth process. First, you must sign into your Wise account, choose the amount you want to send, enter the recipient’s banking information and select “bank transfer” as the payment method. Next, you must leave your Wise account, and complete the transfer by signing into your bank account and plugging in your Wise account information.

How much can I transfer with Wise?

For a debit (ACH) transaction, you can send up to $15,000 per day. With a debit or credit card, the limit is $2,000 every 24 hours and $8,000 every seven days. For a local bank transfer, you’re able to transfer as much as $1 million. The amount goes up to $1.6 million for an international wire transfer through the SWIFT network. Local bank transfers tend to be cheaper than international wire transfers.

Who owns Wise?

Wise is a publicly held company whose stock is owned by shareholders. The company’s stock began trading on the London Stock Exchange in July 2021.

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