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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

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

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

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

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

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

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

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

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

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Business Planning

How to Write a Business Plan: Step by Step Guide

Written by Vinay Kevadiya

Published Nov. 16 2024 · 17 Min Read

Starting a business plan can often feel like trying to solve a complicated puzzle. You're unsure where to begin, what to include, and how to turn your ideas into a clear, actionable plan.

But there’s good news. You don’t need to figure out the missing pieces or the right arrangement for this puzzle on your own. In this blog, we’ll walk you through the essential steps on how to write a business plan for your brainchild.

Further, in this blog, you’ll explore the types of business plans and myths to be aware of while writing a business plan.

Ready to solve your business plan puzzle?

Let’s dive in!

What is a Business Plan?

A business plan is a written document that outlines what a business does, its goals, and how it plans to achieve them.

It includes details like the products or services offered, target market, marketing strategy, financial projections, and the steps needed to grow the business.

In short, it’s a roadmap that guides a business from where it’s now to where it wants to be. It serves as a versatile tool, often created for various purposes, such as to:

Raise funds
Start a new business
Launch a new product
Redevelop the existing business

While the purpose may vary, a business plan always serves a single goal: to propel your business to the next level. But how to write a business plan? Let’s check it out in the next section.

Did you know: According to Entrepreneur, 27% of small businesses have never had a business plan.

How to write a business plan?

Writing a business plan involves translating your business ideas into a structured document, but it’s more than just putting thoughts on paper. It requires a strategic approach to ensure your plan leads to success.

Here’s the structured approach that you should follow to write a business plan and get the desired results:

1) Craft executive summary

The executive summary is a snapshot of your entire business plan, which highlights your key business objectives, mission, and how you plan to achieve success.

It’s the first section of your business plan, and while it appears at the start, it’s often best to write it last.

This section is critical because it gives investors, partners, and stakeholders an immediate overview of your business and why it’s worth their time.

To craft an executive summary, start by briefly describing your business, its goals, and the problem it solves. Then, outline your strategy for growth and success, including key milestones and financial projections.

Your executive summary should be concise yet compelling, offering enough detail to pique interest and encourage the reader to dive deeper into your entire plan.

2) Create company description

The company description provides a detailed overview of your business. It’s your opportunity to introduce your company and explain what makes it unique.

This section should give readers a clear understanding of who you are, what you do, and why your business exists. Here’s what you can include in your company description section:

Business name and location
Mission statement (Your company's purpose and core values)
Business legal structures such as sole proprietorship, partnership, LLC, or corporation
Specific audience your business serves (B2B, B2C, or both)
Company's history, achievements, or milestones (If your business is already established)
Short-term and long-term objectives

The aim of including a company description in a business plan is to help readers understand your business's foundation quickly.

Remember, you create a solid first impression and build trust with your audience by clearly articulating your company’s identity, purpose, and direction.

3) Showcase your products and services

Showcasing your products and services in a business plan is about diving into the details of what your business offers.

Whether you’re offering a product, a service, or a combination of both, it’s important to outline them clearly in your business plan. Additionally, explain how these offerings address your customers’ needs and solve their problems.

To showcase your products and services effectively, include a value proposition—a clear statement that explains why your product or service is the best solution for your target customers.

It highlights your unique benefits, how you solve problems, and what sets you apart from competitors. A strong value proposition helps stakeholders quickly understand your business's core values.

Also remember, showcasing your product and services in the business plan not only explains your services but also sets the stage for later sections, such as marketing and financial projections, by establishing the core of your business model.

Here’s what you can include in your products and service section in the business plan:

Start by providing a detailed description of each product or service.
Highlight their key features, benefits, and unique selling points.
For products, include specifics like design, functionality, and pricing.
For services, explain the process, value delivered, and how it stands apart from competitors.
Inform about pricing, packaging, and logistics.

Including this feature in your products and services section will demonstrate the core value of your business and set the foundation for building trust as well as confidence with your audience.

4) Demonstrate market analysis

Market analysis is the section of your business plan where you consolidate all your research about the industry, target market, and competition. It’s your chance to show that you deeply understand your business's environment.

So, begin with an overview of your industry. Discuss its current size, growth trends, and any emerging opportunities or challenges. Highlight key statistics and data to establish the context in which your business operates.

Further, inform your stakeholders about your ideal customers, including their demographic details (age, gender, income level) and psychographic data (interests, values, buying behavior). Explain why this group is your focus and how your business addresses their specific needs.

You should include the following key aspects as well:

Key competitors, their strengths and weaknesses
Gaps or unmet needs in the market
Market size and growth projections
Potential obstacles

Demonstrating such market analysis in your business plan will provide valuable insight into your business strategies and show your investors that your business is grounded in reality as well as backed by thorough research, increasing their confidence in your plan.

5) Show your sales and marketing plan

The sales and marketing plan is a crucial part of your business plan that outlines how you’ll promote your products or services to reach your target audience.

A marketing plan demonstrates your understanding of the market, your strategies to attract customers, and your plans for retaining them. Hence, by presenting your marketing plan thoughtfully, you showcase a clear pathway to achieve growth.

Here’s what you should include in your marketing section in a business plan:

6) Introduce your management team

Just as stakeholders are eager to learn about your business idea and plans, they’re equally curious about who will drive the idea to success. They need assurance that the management team has the expertise to turn the business idea into reality.

So include their credentials in your plan to build confidence, showing that the business is in capable hands and boosting trust in your venture.

You can present your management team through a well-structured organizational chart in the business plan to achieve this. This chart clearly outlines each team member's name, roles, responsibilities, and position within the company’s hierarchy.

Such transparency highlights the strength of your leadership and makes stakeholders feel their investment is in safe hands.

7) Inform about your logistics and operations

Once stakeholders are confident in your management team, their attention will shift to your day-to-day operations. They’ll want to understand how your business functions on a practical level.

Key questions will arise, like:

What resources will you use?

How will you procure materials?

And once your product or service is ready, how will you handle logistics and delivery?

These operational details play a critical role in gaining stakeholders' trust, as they demonstrate your ability to efficiently manage the supply chain and ensure smooth execution from production to delivery.

To effectively showcase your logistics and operational strategy, include the following sections:

Outline the materials, suppliers, and resources needed for production.
Explain how materials will be sourced and managed.
Provide a step-by-step overview of your production or service delivery process.
Describe how finished goods will be stored, shipped, and delivered to customers.
Specify KPIs such as delivery time, cost per unit, and customer satisfaction.

Remember, demonstrating your logistics plan and day-to-day operations not only instills confidence in your stakeholders but also strengthens your case for securing financial support.

8) Exhibit funding and financial planning

Exhibiting your funding and financial planning in a business plan is crucial to showcasing your business's financial health and sustainability.

This section provides a clear picture of how your business manages its finances, whether you’re seeking investment, applying for loans, or planning your growth strategy.

Here's how you can structure it:

Begin by listing the capital needed to start or expand the business. Include costs for equipment, inventory, operational setup, and marketing.
Clearly state how much funding you need, why you need it, and how you plan to use it.
Provide realistic forecasts of your income, expenses, and profits for the next 3-5 years. Include income statement, cash flow statement, and balance sheet.
Show when your business is expected to become profitable. This helps investors understand how long it will take to see returns.
Outline your existing or planned funding sources, such as personal savings, loans, and grants.
If you plan to take loans, explain how you’ll repay them, including timelines and interest rates.

The aim of showcasing your financial planning is to aware lenders and investors about why and how much money your business needs.

Further, transparency in financial planning gives stakeholders confidence in your ability to manage finances, maximize profits, and navigate challenges.

9) Appendix (optional)

The appendix is a supporting section of your business plan that provides additional information and documents to back up the claims made in the main sections.

It serves as a repository for data that would otherwise clutter the core content of your plan but is still essential for stakeholders who want a deeper understanding.

Including an appendix enhances the credibility of your business plan by offering detailed evidence and supporting documents. It allows investors, lenders, or partners to validate your information without overwhelming the main body of the plan.

The appendix typically includes:

Detailed financial statement
Market research data
Resumes of key team members
legal documents
products images or prototypes
marketing samples

By thoughtfully including an appendix, you provide transparency and build trust with your stakeholders, ensuring they have all the information they need to make informed decisions.

Common myths to avoid while writing a business plan

Let’s address some common misconceptions that can lead to mistakes when writing a business plan.

1) You don’t need a detailed financial section if your idea is strong

A big myth! 🚨

Even the best ideas need solid financial backing. Skipping or underestimating your financial section can make investors lose confidence. Include realistic financial projections to show how your business will grow.

2) A business plan is only for startups

Business plans are valuable for businesses of all sizes. Whether you’re launching a startup, running a small business, or managing an enterprise, a plan helps track goals and growth.

3) Market research is optional

Think again! 💡

Understanding your market is crucial. Without thorough market analysis, you risk targeting the wrong audience or mispricing your product.

4) Longer business plans are better

Quality over quantity! ✅

A concise, focused plan is far more effective than a lengthy one filled with unnecessary details.

5) You only write a business plan once

Business plans should evolve as your business grows. Regular updates ensure your plan stays relevant and aligned with your goals.

Tips to write a comprehensive business plan

Writing a business plan can be challenging. But with tips from those who’ve done it, you can overcome hurdles, save time, and achieve better results.

Here are some:

tips to write a comprehensive business plan

1) Know your audience

Tailoring your business plan to your audience is crucial to keep them engaged and invested in your vision.

Presenting your business idea to your logistic team won’t inspire action; instead, show them how their role fits into the bigger picture and contributes to achieving your business goals.

Therefore, understand who your audience is—whether stakeholders, investors, or team members—and craft a business plan that resonates with their expectations and interests.

2) Focus on clarity and simplicity

Keep your business plan as simple as possible. Overdoing will only confuse your audience and dilute your core message.

A concise, straightforward plan ensures that key information stands out, making it easier for stakeholders to understand your goals and strategies.

Focus on delivering essential insights without overwhelming your readers with unnecessary details.

3) Set realistic financial projections

Presenting inaccurate numbers, statistics, or figures can harm your business's credibility and damage stakeholder trust. To avoid such pitfalls, always provide accurate data backed by reliable sources.

Transparency is key—showing true numbers with solid proof builds stakeholders' confidence and demonstrates your commitment to accountability as well as precision.

By presenting verifiable statistics, you position your business as trustworthy and professional, making securing investments, partnerships, or support for future growth easier.

4) Make your plan look attractive

To make your business plan visually appealing, incorporate relevant statistics, numbers, facts, and graphs. Use color highlights to emphasize key points and capture the reader's attention.

Utilize pie charts and bar graphs to present numbers and data effectively. Choose simple fonts with a size of 16-18 for optimal readability, and stick to black text on a white background to ensure clarity and focus.

Infographics and diagrams are great tools to convey information in an engaging way. This approach will help you create a business plan that is both attractive and easy to understand.

Make use of AI-powered tools to craft a business plan. These tools save you time, streamline the process, and provide professional-quality results with minimal effort.

Are you unaware of AI tools that help you craft a business plan? Let’s explore it in the next section.

How do you use AI tools to craft a business plan?

AI tools have transformed how we work, and the same goes for business plans. With just a few clicks, AI-powered tools make creating a professional plan easier, saving you time and effort while ensuring high-quality results.

Here are a few tools that make your business plan writing process seamless:

You know this one, don’t you?

ChatGPT is an AI-powered assistant that seems to know everything, including how to create a business plan.

All you need to do is provide prompts, and watch ChatGPT generate detailed content based on your inputs, helping you craft key sections of your plan, like the executive summary, market analysis, and financial projections.

Here’s a prompt example: "Create an executive summary for a tech startup that focuses on AI-driven solutions for small businesses, highlighting the product, target market, and financial projections."

However, ChatGPT can't provide graphs, images, or infographics directly, it can offer valuable suggestions on incorporating them into your business plan.

Bizplanr is a smart AI business plan generator that simplifies the process of creating a professional business plan. With its user-friendly interface and powerful features, you can quickly build a detailed, strategic business plan in minutes—no experience required.

The platform uses AI to streamline the process by asking series of straightforward questions that includes:

What’s your business name?
Write something about your business
Your business’s profession

Based on your responses, Bizplanr automatically generates a tailored business plan that covers all the essential components, including financial projections, market analysis, and strategy.

This user-friendly tool saves time and ensures that even those without prior business planning experience can produce a polished and well-structured plan.

Types of business plan

Not sure which business plan fits your needs? Explore this section to find the perfect match for your business.

The bottom line

We hope this blog has made writing your business plan easier. We’ve walked through every step of crafting a solid plan, highlighted common pitfalls to avoid, and explored various types of business plans to match your unique business needs.

However, writing a business plan is a time-consuming and complex task. If you’re looking for help, you can try using Bizplanr, the AI-powered business plan generator.

Answer a few simple questions, and your business plan will be ready in minutes. It’s worth trying if you’re short on time or need a structured guide to get started.

Bizplanr takes the guesswork out of the process, helping you create a professional business plan quickly and efficiently.

Try it out today!

Get Your Business Plan Ready In Minutes

Answer a few questions, and AI will generate a detailed business plan.

Generate your Plan

Frequently Asked Questions

What resources can help me write a business plan?

Templates, online guides, and tools like business planning software can help you write your business plan. Mentorship from business advisors also helps refine your plan.

How long should a business plan be?

A traditional business plan typically ranges from 15 to 25 pages , covering all key aspects of the business. However, the length ultimately depends on the type of plan and its purpose.

How can I get feedback on my business plan?

Share it with mentors, industry experts, or trusted business partners. You can also seek advice from professional consultants.

What are the most important sections of a business plan?

Key sections in a business plan include the executive summary, company description, market analysis, marketing plan, and financial projections. These provide a complete picture of your business strategy.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

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