basic considerations for business plan

How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated May 7, 2024

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

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

• The basics of business planning

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

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

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

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

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

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

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

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

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

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

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

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• What to include in your business plan

Executive summary

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

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

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

Your executive summary should include:

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

Dig Deeper: How to write an effective executive summary

Products and services description

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

This is usually called a problem and solution statement .

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

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

Market analysis

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

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

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

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

Related: Target market examples

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

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

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

Dig Deeper: Learn how to write a market analysis

Competitive analysis

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

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

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

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

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

Marketing and sales plan

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

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

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

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

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

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

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

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

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

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

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

Business operations

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

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

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

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

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

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

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

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

Key milestones and metrics

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

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

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

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

Possible milestones might be:

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

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

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

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

Dig Deeper: How to use milestones in your business plan

Organization and management team

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

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

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

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

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

• Sole proprietor
• Partnership

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

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

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

Financial plan

Last, but certainly not least, is your financial plan chapter. 

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

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

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

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

Dig Deeper: How to create financial forecasts and budgets

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

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

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

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

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

Your cover page should be simple and include:

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

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

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

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

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

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

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

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

• Writing tips and strategies

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

Determine why you are writing a business plan

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

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

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

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

Keep things concise

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

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

Have someone review your business plan

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

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

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

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

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

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

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

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

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

Common pitfalls and how to avoid them

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

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

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

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

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

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

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

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

Use your business plan to manage your business

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

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

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

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

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

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

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

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

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

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

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How to write a business plan FAQ

What is a business plan?

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

What are the benefits of a business plan?

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

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

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

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

What are the 5 most common business plan mistakes?

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

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

What questions should be answered in a business plan?

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

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

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

How long should a business plan be?

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

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

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

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

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

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

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

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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Business plans might seem like an old-school stiff-collared practice, but they deserve a place in the startup realm, too. It’s probably not going to be the frame-worthy document you hang in the office—yet, it may one day be deserving of the privilege.

Whether you’re looking to win the heart of an angel investor or convince a bank to lend you money, you’ll need a business plan. And not just any ol’ notes and scribble on the back of a pizza box or napkin—you’ll need a professional, standardized report.

Bah. Sounds like homework, right?

Yes. Yes, it does.

However, just like bookkeeping, loan applications, and 404 redirects, business plans are an essential step in cementing your business foundation.

Don’t worry. We’ll show you how to write a business plan without boring you to tears. We’ve jam-packed this article with all the business plan examples, templates, and tips you need to take your non-existent proposal from concept to completion.

Table of Contents

What Is a Business Plan?

Tips to Make Your Small Business Plan Ironclad

How to Write a Business Plan in 6 Steps

Startup Business Plan Template

Business Plan Examples

Work on Making Your Business Plan

How to Write a Business Plan FAQs

What is a business plan why do you desperately need one.

A business plan is a roadmap that outlines:

• Who your business is, what it does, and who it serves
• Where your business is now
• Where you want it to go
• How you’re going to make it happen
• What might stop you from taking your business from Point A to Point B
• How you’ll overcome the predicted obstacles

While it’s not required when starting a business, having a business plan is helpful for a few reasons:

• Secure a Bank Loan: Before approving you for a business loan, banks will want to see that your business is legitimate and can repay the loan. They want to know how you’re going to use the loan and how you’ll make monthly payments on your debt. Lenders want to see a sound business strategy that doesn’t end in loan default.
• Win Over Investors: Like lenders, investors want to know they’re going to make a return on their investment. They need to see your business plan to have the confidence to hand you money.
• Stay Focused: It’s easy to get lost chasing the next big thing. Your business plan keeps you on track and focused on the big picture. Your business plan can prevent you from wasting time and resources on something that isn’t aligned with your business goals.

Beyond the reasoning, let’s look at what the data says:

• Simply writing a business plan can boost your average annual growth by 30%
• Entrepreneurs who create a formal business plan are 16% more likely to succeed than those who don’t
• A study looking at 65 fast-growth companies found that 71% had small business plans
• The process and output of creating a business plan have shown to improve business performance

Convinced yet? If those numbers and reasons don’t have you scrambling for pen and paper, who knows what will.

Don’t Skip: Business Startup Costs Checklist

Before we get into the nitty-gritty steps of how to write a business plan, let’s look at some high-level tips to get you started in the right direction:

Be Professional and Legit

You might be tempted to get cutesy or revolutionary with your business plan—resist the urge. While you should let your brand and creativity shine with everything you produce, business plans fall more into the realm of professional documents.

Think of your business plan the same way as your terms and conditions, employee contracts, or financial statements. You want your plan to be as uniform as possible so investors, lenders, partners, and prospective employees can find the information they need to make important decisions.

If you want to create a fun summary business plan for internal consumption, then, by all means, go right ahead. However, for the purpose of writing this external-facing document, keep it legit.

Know Your Audience

Your official business plan document is for lenders, investors, partners, and big-time prospective employees. Keep these names and faces in your mind as you draft your plan.

Think about what they might be interested in seeing, what questions they’ll ask, and what might convince (or scare) them. Cut the jargon and tailor your language so these individuals can understand.

Remember, these are busy people. They’re likely looking at hundreds of applicants and startup investments every month. Keep your business plan succinct and to the point. Include the most pertinent information and omit the sections that won’t impact their decision-making.

Invest Time Researching

You might not have answers to all the sections you should include in your business plan. Don’t skip over these!

Your audience will want:

• Detailed information about your customers
• Numbers and solid math to back up your financial claims and estimates
• Deep insights about your competitors and potential threats
• Data to support market opportunities and strategy

Your answers can’t be hypothetical or opinionated. You need research to back up your claims. If you don’t have that data yet, then invest time and money in collecting it. That information isn’t just critical for your business plan—it’s essential for owning, operating, and growing your company.

Stay Realistic

Your business may be ambitious, but reign in the enthusiasm just a teeny-tiny bit. The last thing you want to do is have an angel investor call BS and say “I’m out” before even giving you a chance.

The folks looking at your business and evaluating your plan have been around the block—they know a thing or two about fact and fiction. Your plan should be a blueprint for success. It should be the step-by-step roadmap for how you’re going from Point A to Point B.

How to Write a Business Plan—6 Essential Elements

Not every business plan looks the same, but most share a few common elements. Here’s what they typically include:

• Executive Summary
• Business Overview
• Products and Services
• Market Analysis
• Competitive Analysis
• Financial Strategy

Below, we’ll break down each of these sections in more detail.

1. Executive Summary

While your executive summary is the first page of your business plan, it’s the section you’ll write last. That’s because it summarizes your entire business plan into a succinct one-pager.

Begin with an executive summary that introduces the reader to your business and gives them an overview of what’s inside the business plan.

Your executive summary highlights key points of your plan. Consider this your elevator pitch. You want to put all your juiciest strengths and opportunities strategically in this section.

2. Business Overview

In this section, you can dive deeper into the elements of your business, including answering:

• What’s your business structure? Sole proprietorship, LLC, corporation, etc.
• Where is it located?
• Who owns the business? Does it have employees?
• What problem does it solve, and how?
• What’s your mission statement? Your mission statement briefly describes why you are in business. To write a proper mission statement, brainstorm your business’s core values and who you serve.

Don’t overlook your mission statement. This powerful sentence or paragraph could be the inspiration that drives an investor to take an interest in your business. Here are a few examples of powerful mission statements that just might give you the goosebumps:

• Patagonia: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
• Tesla: To accelerate the world’s transition to sustainable energy.
• InvisionApp : Question Assumptions. Think Deeply. Iterate as a Lifestyle. Details, Details. Design is Everywhere. Integrity.
• TED : Spread ideas.
• Warby Parker : To offer designer eyewear at a revolutionary price while leading the way for socially conscious businesses.

3. Products and Services

As the owner, you know your business and the industry inside and out. However, whoever’s reading your document might not. You’re going to need to break down your products and services in minute detail.

For example, if you own a SaaS business, you’re going to need to explain how this business model works and what you’re selling.

You’ll need to include:

• What services you sell: Describe the services you provide and how these will help your target audience.
• What products you sell: Describe your products (and types if applicable) and how they will solve a need for your target and provide value.
• How much you charge: If you’re selling services, will you charge hourly, per project, retainer, or a mixture of all of these? If you’re selling products, what are the price ranges?

4. Market Analysis

Your market analysis essentially explains how your products and services address customer concerns and pain points. This section will include research and data on the state and direction of your industry and target market.

This research should reveal lucrative opportunities and how your business is uniquely positioned to seize the advantage. You’ll also want to touch on your marketing strategy and how it will (or does) work for your audience.

Include a detailed analysis of your target customers. This describes the people you serve and sell your product to. Be careful not to go too broad here—you don’t want to fall into the common entrepreneurial trap of trying to sell to everyone and thereby not differentiating yourself enough to survive the competition.

The market analysis section will include your unique value proposition. Your unique value proposition (UVP) is the thing that makes you stand out from your competitors. This is your key to success.

If you don’t have a UVP, you don’t have a way to take on competitors who are already in this space. Here’s an example of an ecommerce internet business plan outlining their competitive edge:

FireStarters’ competitive advantage is offering product lines that make a statement but won’t leave you broke. The major brands are expensive and not distinctive enough to satisfy the changing taste of our target customers. FireStarters offers products that are just ahead of the curve and so affordable that our customers will return to the website often to check out what’s new.

5. Competitive Analysis

Your competitive analysis examines the strengths and weaknesses of competing businesses in your market or industry. This will include direct and indirect competitors. It can also include threats and opportunities, like economic concerns or legal restraints.

The best way to sum up this section is with a classic SWOT analysis. This will explain your company’s position in relation to your competitors.

6. Financial Strategy

Your financial strategy will sum up your revenue, expenses, profit (or loss), and financial plan for the future. It’ll explain how you make money, where your cash flow goes, and how you’ll become profitable or stay profitable.

This is one of the most important sections for lenders and investors. Have you ever watched Shark Tank? They always ask about the company’s financial situation. How has it performed in the past? What’s the ongoing outlook moving forward? How does the business plan to make it happen?

Answer all of these questions in your financial strategy so that your audience doesn’t have to ask. Go ahead and include forecasts and graphs in your plan, too:

• Balance sheet: This includes your assets, liabilities, and equity.
• Profit & Loss (P&L) statement: This details your income and expenses over a given period.
• Cash flow statement: Similar to the P&L, this one will show all cash flowing into and out of the business each month.

It takes cash to change the world—lenders and investors get it. If you’re short on funding, explain how much money you’ll need and how you’ll use the capital. Where are you looking for financing? Are you looking to take out a business loan, or would you rather trade equity for capital instead?

Read More: 16 Financial Concepts Every Entrepreneur Needs to Know

Startup Business Plan Template (Copy/Paste Outline)

Ready to write your own business plan? Copy/paste the startup business plan template below and fill in the blanks.

Executive Summary Remember, do this last. Summarize who you are and your business plan in one page.

Business Overview Describe your business. What’s it do? Who owns it? How’s it structured? What’s the mission statement?

Products and Services Detail the products and services you offer. How do they work? What do you charge?

Market Analysis Write about the state of the market and opportunities. Use date. Describe your customers. Include your UVP.

Competitive Analysis Outline the competitors in your market and industry. Include threats and opportunities. Add a SWOT analysis of your business.

Financial Strategy Sum up your revenue, expenses, profit (or loss), and financial plan for the future. If you’re applying for a loan, include how you’ll use the funding to progress the business.

5 Frame-Worthy Business Plan Examples

Want to explore other templates and examples? We got you covered. Check out these 5 business plan examples you can use as inspiration when writing your plan:

• SBA Wooden Grain Toy Company
• SBA We Can Do It Consulting
• OrcaSmart Business Plan Sample
• Plum Business Plan Template
• PandaDoc Free Business Plan Templates

Get to Work on Making Your Business Plan

If you find you’re getting stuck on perfecting your document, opt for a simple one-page business plan —and then get to work. You can always polish up your official plan later as you learn more about your business and the industry.

Remember, business plans are not a requirement for starting a business—they’re only truly essential if a bank or investor is asking for it.

Ask others to review your business plan. Get feedback from other startups and successful business owners. They’ll likely be able to see holes in your planning or undetected opportunities—just make sure these individuals aren’t your competitors (or potential competitors).

Your business plan isn’t a one-and-done report—it’s a living, breathing document. You’ll make changes to it as you grow and evolve. When the market or your customers change, your plan will need to change to adapt.

That means when you’re finished with this exercise, it’s not time to print your plan out and stuff it in a file cabinet somewhere. No, it should sit on your desk as a day-to-day reference. Use it (and update it) as you make decisions about your product, customers, and financial plan.

Review your business plan frequently, update it routinely, and follow the path you’ve developed to the future you’re building.

Keep Learning: New Product Development Process in 8 Easy Steps

What financial information should be included in a business plan?

Be as detailed as you can without assuming too much. For example, include your expected revenue, expenses, profit, and growth for the future.

What are some common mistakes to avoid when writing a business plan?

The most common mistake is turning your business plan into a textbook. A business plan is an internal guide and an external pitching tool. Cut the fat and only include the most relevant information to start and run your business.

Who should review my business plan before I submit it?

Co-founders, investors, or a board of advisors. Otherwise, reach out to a trusted mentor, your local chamber of commerce, or someone you know that runs a business.

Ready to Write Your Business Plan?

Don’t let creating a business plan hold you back from starting your business. Writing documents might not be your thing—that doesn’t mean your business is a bad idea.

Let us help you get started.

Join our free training to learn how to start an online side hustle in 30 days or less. We’ll provide you with a proven roadmap for how to find, validate, and pursue a profitable business idea (even if you have zero entrepreneurial experience).

Stuck on the ideas part? No problem. When you attend the masterclass, we’ll send you a free ebook with 100 of the hottest side hustle trends right now. It’s chock full of brilliant business ideas to get you up and running in the right direction.

About Jesse Sumrak

Jesse Sumrak is a writing zealot focused on creating killer content. He’s spent almost a decade writing about startup, marketing, and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped business. A writer by day and a peak bagger by night (and early early morning), you can usually find Jesse preparing for the apocalypse on a precipitous peak somewhere in the Rocky Mountains of Colorado.

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How to make a business plan

Table of Contents

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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Home > Business > Business Startup

How To Write a Business Plan

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Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

• Write your executive summary
• Do your market research homework
• Set your business goals and objectives
• Plan your business strategy
• Describe your product or service
• Crunch the numbers
• Finalize your business plan

By signing up I agree to the Terms of Use and Privacy Policy .

Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

• Idea: What’s your business concept? What problem does your business solve? What are your business goals?
• Product: What’s your product/service and how is it different?
• Market: Who’s your audience? How will you reach customers?
• Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

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The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

Related content

• 5 Best Business Plan Software and Tools in 2023 for Your Small Business
• How to Get a Business License: What You Need to Know
• What Is a Cash Flow Statement?

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How to write a business plan in seven simple steps

When written effectively, a business plan can help raise capital, inform decisions, and draw new talent.

Companies of all sizes have one thing in common: They all began as small businesses.  Starting small  is the corner for those just getting off the ground. Learn about how to make that first hire, deal with all things administrative, and set yourself up for success.

Writing a business plan is often the first step in transforming your business from an idea into something tangible . As you write, your thoughts begin to solidify into strategy, and a path forward starts to emerge. But a business plan is not only the realm of startups; established companies can also benefit from revisiting and rewriting theirs. In any case, the formal documentation can provide the clarity needed to motivate staff , woo investors, or inform future decisions.  

No matter your industry or the size of your team, the task of writing a business plan—a document filled with so much detail and documentation—can feel daunting. Don’t let that stop you, however; there are easy steps to getting started. 

What is a business plan and why does it matter? 

A business plan is a formal document outlining the goals, direction, finances, team, and future planning of your business. It can be geared toward investors, in a bid to raise capital, or used as an internal document to align teams and provide direction. It typically includes extensive market research, competitor analysis, financial documentation, and an overview of your business and marketing strategy. When written effectively, a business plan can help prescribe action and keep business owners on track to meeting business goals. 

Who needs a business plan?

A business plan can be particularly helpful during a company’s initial growth and serve as a guiding force amid the uncertainty, distractions, and at-times rapid developments involved in starting a business . For enterprise companies, a business plan should be a living, breathing document that guides decision-making and facilitates intentional growth.

“You should have a game plan for every major commitment you’ll have, from early-stage founder agreements to onboarding legal professionals,” says Colin Keogh, CEO of the Rapid Foundation—a company that brings technology and training to communities in need—and a WeWork Labs mentor in the UK . “You can’t go out on funding rounds or take part in accelerators without any planning.”

How to make a business plan and seven components every plan needs

While there is no set format for writing a business plan, there are several elements that are typically included. Here’s what’s important to consider when writing your business plan. 

1. Executive summary 

No longer than half a page, the executive summary should briefly introduce your business and describe the purpose of the business plan. Are you writing the plan to attract capital? If so, specify how much money you hope to raise, and how you’re going to repay the loan. If you’re writing the plan to align your team and provide direction, explain at a high level what you hope to achieve with this alignment, as well as the size and state of your existing team.

The executive summary should explain what your business does, and provide an introductory overview of your financial health and major achievements to date.  

2. Company description 

To properly introduce your company, it’s important to also describe the wider industry. What is the financial worth of your market? Are there market trends that will affect the success of your company? What is the state of the industry and its future potential? Use data to support your claims and be sure to include the full gamut of information—both positive and negative—to provide investors and your employees a complete and accurate portrayal of your company’s milieu. 

Go on to describe your company and what it provides your customers. Are you a sole proprietor , LLC, partnership, or corporation? Are you an established company or a budding startup? What does your leadership team look like and how many employees do you have? This section should provide both historical and future context around your business, including its founding story, mission statement , and vision for the future. 

It’s essential to showcase your point of difference in your company description, as well as any advantages you may have in terms of expert talent or leading technology. This is typically one of the first pieces of the plan to be written.

3. Market analysis and opportunity

Research is key in completing a business plan and, ideally, more time should be spent on research and analysis than writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent to the wider market is essential for the success of your business, and these considerations should be described here. 

In addition to this, it’s important to include research into the target demographic of your product or service. This might be in the form of fictional customer personas, or a broader overview of the income, location, age, gender, and buying habits of your existing and potential customers. 

Though the research should be objective, the analysis in this section is a good place to reiterate your point of difference and the ways you plan to capture the market and surpass your competition.

4. Competitive analysis 

Beyond explaining the elements that differentiate you from your competition, it’s important to provide an in-depth analysis of your competitors themselves.

This research should delve into the operations, financials, history, leadership, and distribution channels of your direct and indirect competitors. It should explore the value propositions of these competitors, and explain the ways you can compete with, or exploit, their strengths and weaknesses. 

5. Execution plan: operations, development, management 

This segment provides details around how you’re going to do the work necessary to fulfill this plan. It should include information about your organizational structure and the everyday operations of your team, contractors, and physical and digital assets.

Consider including your company’s organizational chart, as well as more in-depth information on the leadership team: Who are they? What are their backgrounds? What do they bring to the table? Potentially include the résumés of key people on your team. 

For startups, your execution plan should include how long it will take to begin operations, and then how much longer to reach profitability. For established companies, it’s a good idea to outline how long it will take to execute your plan, and the ways in which you will change existing operations.

If applicable, it’s also beneficial to include your strategy for hiring new team members and scaling into different markets. 

6. Marketing plan 

It’s essential to have a comprehensive marketing plan in place as you scale operations or kick off a new strategy—and this should be shared with your stakeholders and employees. This segment of your business plan should show how you’re going to promote your business, attract customers, and retain existing clients.

Include brand messaging, marketing assets, and the timeline and budget for engaging consumers across different channels. Potentially include a marketing SWOT analysis into your strengths, weaknesses, opportunities, and threats. Evaluate the way your competitors market themselves, and how your target audience responds—or doesn’t respond—to these messages.

7. Financial history and projections  

It’s essential to disclose all finances involved in running your company within your business plan. This is so your shareholders properly understand how you’re projected to perform going forward, and the progress you’ve made so far. 

You should include your income statement, which outlines annual net profits or losses; a cash flow statement, which shows how much money you need to launch or scale operations; and a balance sheet that shows financial liabilities and assets. 

“An income statement is the measure of your financial results for a certain period and the most accurate report of business activities during that time, [whereas a balance sheet] presents your assets, liabilities, and equity,” Amit Perry, a corporate finance expert, explained at a WeWork Labs educational session in Israel.

It’s crucial to understand the terms correctly so you know how to present your finances when you’re speaking to investors. Amit Perry, CEO and founder of Perryllion Ltd.

In addition, if you’re asking for funding, you will need to outline exactly how much money you need as well as where this money will go and how you plan to pay it back. 

12 quick tips for writing a business plan 

Now that you know what components are traditionally included in a business plan, it’s time to consider how you’ll actually construct the document.

Here are 12 key factors to keep in mind when writing a business plan. These overarching principles will help you write a business plan that serves its purpose (whatever that may be) and becomes an easy reference in the years ahead. 

1. Don’t be long-winded

Use clear, concise language and avoid jargon. When business plans are too long-winded, they’re less likely to be used as intended and more likely to be forgotten or glazed over by stakeholders. 

2. Show why you care

Let your passion for your business shine through; show employees and investors why you care (and why they should too). 

3. Provide supporting documents

Don’t be afraid to have an extensive list of appendices, including the CVs of team members, built-out customer personas, product demonstrations, and examples of internal or external messaging. 

4. Reference data

All information regarding the market, your competitors, and your customers should reference authoritative and relevant data points.  

5. Research, research, research

The research that goes into your business plan should take you longer than the writing itself. Consider tracking your research as supporting documentation. 

6. Clearly demonstrate your points of difference

At every opportunity, it’s important to drive home the way your product or service differentiates you from your competition and helps solve a problem for your target audience. Don’t shy away from reiterating these differentiating factors throughout the plan. 

7. Be objective in your research

As important as it is to showcase your company and the benefits you provide your customers, it’s also important to be objective in the data and research you reference. Showcase the good and the bad when it comes to market research and your financials; you want your shareholders to know you’ve thought through every possible contingency. 

8. Know the purpose of your plan

It’s important you understand the purpose of your plan before you begin researching and writing. Be clear about whether you’re writing this plan to attract investment, align teams, or provide direction. 

9. Identify your audience

The same way your business plan must have a clearly defined purpose, you must have a clearly defined audience. To whom are you writing? New investors? Current employees? Potential collaborators? Existing shareholders? 

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10. Avoid jargon

Avoid using industry-specific jargon, unless completely unavoidable, and try making your business plan as easy to understand as possible—for all potential stakeholders. 

11. Don’t be afraid to change it

Your business plan should evolve with your company’s growth, which means your business plan document should evolve as well. Revisit and rework your business plan as needed, and remember the most important factor: having a plan in place, even if it changes.

A business plan shouldn’t just be a line on your to-do list; it should be referenced and used as intended going forward. Keep your business plan close, and use it to inform decisions and guide your team in the years ahead. 

Creating a business plan is an important step in growing your company 

Whether you’re just starting out or running an existing operation, writing an effective business plan can be a key predictor of future success. It can be a foundational document from which you grow and thrive . It can serve as a constant reminder to employees and clients about what you stand for, and the direction in which you’re moving. Or, it can prove to investors that your business, team, and vision are worth their investment. 

No matter the size or stage of your business, WeWork can help you fulfill the objectives outlined in your business plan—and WeWork’s coworking spaces can be a hotbed for finding talent and investors, too. The benefits of coworking spaces include intentionally designed lounges, conference rooms, and private offices that foster connection and bolster creativity, while a global network of professionals allows you to expand your reach and meet new collaborators. 

Using these steps to write a business plan will put you in good stead to not only create a document that fulfills a purpose but one that also helps to more clearly understand your market, competition, point of difference, and plan for the future. 

For more tips on growing teams and building a business, check out all our articles on  Ideas by WeWork.

Caitlin Bishop is a writer for WeWork’s  Ideas by WeWork , based in New York City. Previously, she was a journalist and editor at  Mamamia  in Sydney, Australia, and a contributing reporter at  Gotham Gazette .

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• May 6, 2019

Key Considerations When Writing a Business Plan for Your Startup

• --> Written by Nick Price

Steve Jobs said, “If you really look closely, most overnight successes took a long time.”

Starting a business is an exciting venture! It takes a lot of time, dedication and perseverance. The emotional and financial payoffs can be memorable.

Every business needs a business plan no matter how large or small it begins. Writing a business plan isn’t a difficult task. To write a good business plan takes a lot of thought and consideration. There are many templates available to help you get started. Think beyond the blank lines to how you can customize your business plan so that you can really make it your own.

There are countless things to consider as you prepare to write your business plan that will have a major impact on the final result.

If your business plan includes forming a board of directors, it’s wise to factor the cost of a BoardEffect board management software system into your plans to help your business get off the ground based on sound good corporate governance principles.

Here are a few things to give you some food for thought before you get started writing your business plan:

Key Considerations for Startup Businesses

It’s been said that timing is everything, and there’s certainly a lot of truth to that when it comes to deciding the best time to launch your business. Starting a business is incredibly time-consuming in the early months, so it’s wise to consider whether your lifestyle will allow you to dedicate the necessary time to pursuing a successful startup.

Think about what is going on in your life and how that may (or may not) change in the next few years. If you’re getting married, having a child or dealing with a debilitating illness, it might not be the best time to launch a startup.

Finances play a big role in timing a startup business . Do you have the funds to start a company? Do you have a plan for how to obtain startup funding? Will you be quitting a job that currently pays the bulk of your bills?

If you’re ready to go, complete your business plan, make those important decisions and stick by them!

Be sure to bear down on your budget. Large chunks of startup money whittle away quickly. Think through your startup and maintenance expenses thoroughly so you know what to expect. Get advice from other business owners and account for every expense and every penny.

If you lack discipline, starting a business might not be for you. You’ll need to form a budget and stick to it. Set goals for the day, week and month until you settle on a good flow. Establish benchmarks and put in overtime as needed. Don’t forget to think about work/life balance so you don’t burn out before you get started.

Sharpen your social skills. Build on your current network or get started building a new one. Talk up your new business at every opportunity.

Be sure to tie up all loose ends at the end of each day. If you don’t know how to do something, take the necessary steps to figure it out. Be flexible. There may be more than one way to do something. Don’t be afraid to step outside of the box and try something new.

Parts of a Business Plan

Writing a business plan is as easy as following directions or making a recipe. A business plan has distinct parts with specific instructions. The following is an outline for a standard business plan.

The Executive Summary

The Executive Summary is a one- to four-page summary that spells out the key points that you will describe in each section of the business plan that follows. The Executive Summary should stand alone as its own separate document.

Business Overview

The Business Overview heads up the first page of your business plan. This part of the business plan describes your business. It should include your business’s legal structure, a short history of how you formed your business, the type of business and the location. The Business Overview should also include a description of the means of how you will do business, whether it’s a brick-and-mortar store, the internet, mail order, a subscription box or something else.

Operations Plan

The Operations Plan provides a brief explanation of how the business will function. Describe the physical setup, who will fulfill various responsibilities and who will tend to certain tasks.

Market Analysis

The next section is the Market Analysis. Provide a brief overview of the market as a whole. Graphs, charts and infographics may be useful to paint an accurate picture of your business, at it will be in the scope of the industry. Clearly define your target market and how you plan to reach them.

Products and Services

In this section, you will provide a description of your products or services. Classify and categorize them and provide a succinct description of each.

Sales and Marketing

This is the place to outline your pricing and sales information. Describe your reasons for why you believe these are the best price points and what will attract your target audience to your products or services. Describe your plans for the marketing and advertising efforts that will lead you to your target audience.

Competitive Analysis

Figure out who your direct and indirect competitors are and analyze their strengths and weaknesses. Describe your plans to gain an edge over your competition.

Management Team

Describe in this section who your top leaders will be. Provide biographical information on all key staff.

Financial Plan

Outline the amount needed to start and maintain the business. Project how much will be required to maintain the business for the next two to five years. Describe how you plan to use the funds and whether you have a plan for additional funding. The costs for your board portal go in this section as a business expense. Carefully think through all business costs, including business supplies, business expenses, salaries, insurance costs, promotional expenses, marketing and any other financial information.

Projections

Write up income statements with financial projections for at least two or three years.

Finally, attach all supporting documents to your business plan. Include biographies of key managers, articles or media on the company, and any other relevant documents.

A board management software system such as BoardEffect is essential to a successful business. The portal is highly secure and provides unlimited cloud-based document storage for all of your startup documents. It’s a valuable tool that will help you keep your company in legal compliance and assist you in getting off the ground on the best possible footing. BoardEffect commits to adding innovative solutions as your business evolves to support business growth now and in the future.

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Anatomy of a Business Plan

Business plans are critical in the early stages of the life of a business, providing guidance to both internal and external stakeholders. In this guide, we will walk you through the process of writing a business plan, including the sections to cover and the necessary considerations to take into account.

By Toptal Research

As a founder, one of the first tasks that you need to tackle is the writing of a comprehensive business plan. In the initial stages, you will be asked repeatedly for your business plan: when attempting to raise money, when hiring a star team member, or when ensuring that your cash reserves will last. It seems that you do not have a proper business until you have written and refined a business plan that predicts your growth 5 years into the future.

Given the importance of business plans, founders need to understand how to best write one and how to use them to their maximum advantage to increase the chances of success. This post will attempt to lay out a guide on how to best answer these questions, helping founders understand if they can complete the task themselves or if they require some additional guidance from expert consultants .

What Is a Business Plan?

Let’s first define what we are doing. A business plan is a document that lays out:

• What your business does
• The short- and long-term goals of the business
• The action plan to achieve these goals

There are two main formats that you can use to write a business plan: a PowerPoint deck or a Word document. Both work well, but make sure that if you use a PowerPoint format, you also have a separate (and shorter) pitch deck. Initially you will share only the pitch deck with potential investors. The full business plan is reserved for those investors that have shown keen interest in your business and with whom you are moving along within the investment process.

Why Is It Important to Write a Business Plan?

There are some influential people in the startup industry that do not attach much value to overt reliance on business plans, vouching for the superiority of the “learning by doing” approach advocated by the Lean Startup method . Even though the lean approach does have significant merits in letting you test out a product’s market viability (through continuous iteration to ensure a better market fit), it does not provide answers to key questions of your business, such as where the business currently stands and where you want to take it.

A business plan will help you with the following aspects of your business:

• It will force you to state in writing what you want your business to be . This is also very useful so you can see what your business is currently NOT and better analyze the current gaps between reality and your goals.
• It will demand that you specifically write how you plan to accomplish your goals in practical terms , such as what competitive advantages the company has, what opportunities you see, and what threats exist.
• It will give your co-founders and team a common compass to guide the ship during the initial uncertain months.
• You will better understand the resources that you require in order to accomplish your goals.
• It will help with your fundraising efforts , through demonstrating to potential investors that you have thought through important aspects of the business. This will provide a concrete document to start fundraising discussions.

Although it is difficult to quantify how important writing a business plan is, a recent study showed that companies with formal business plans increase their chances of reaching positive cash flow by 16%, showing that it does pay to plan.

What Should Be Included in a Business Plan?

Once you are convinced that having a business plan is a must, the question arises of what content to include in the plan.

A cursory Google search will return an array of different “Business Plan Templates,” several of which will already be completed with generic content and where a founder just needs to substitute X for Y to make the business plan “acceptable.” It goes without saying that this shortcut should not be attempted. In many cases, it can even deviate the entrepreneur and their startup from what they actually wanted to achieve.

Founders should make the effort to write their own, original content. However, there are some uniform aspects that almost every business plan should contain:

1. Executive Summary

This is the section where you will probably spend most of your time during meetings with investors, team members, co-founders and other related stakeholders. In this section, you should summarize and recount the complete story of your business plan. If done properly, it will ensure that during meetings you will only need to refer to the different subsections if it is necessary to zero in on a specific section. Although, in later or more intensive meetings, it may be required that the whole document is scrutinized in its entirety.

For this reason, the executive summary should be the first section to be outlined when starting to write a business plan, because it will help you to structure the proceeding sections of the plan. In turn, it will be the last section to be completed, as following several edits fleshing out the main document, you can return to the executive summary to finalize it.

All of the critical subsections in the document should be touched upon in the executive summary, and you need to ensure that the content is ambitious, but grounded in reality. Back up any claims made with specific data—for example, “ My Company will provide the best in-market customer experience, as our NPS Score of above 80 already indicates.” Also, make sure that the tone is upbeat. If you do not believe in the positive future of your project yourself, then you will not convince anyone else either!

2. Company Overview

The main goal of this section is to make sure that the reader understands what the company does. It is surprising how many companies have a difficult time explaining what they do. You can find many tips online that you can use to help you to convey what your company does, but as a rule of thumb, try to keep it simple, identify the problem that is being addressed, and present your company’s solution.

After making sure that anyone can understand what your business does, include other relevant information about the company. Such details include: the formal corporate structure, when it was founded, and what milestones you have already achieved. Any examples of traction are great to establish a basis that the company and its founders are able to execute.

3. Market Analysis

In this section, there are two key pieces of information you need to communicate: the main characteristics and trends in your market, and a rough approximation of the market’s size.

When defining and explaining the market, lay out general figures like:

• What is the generally accepted market size (more on this below)?
• What is its annual historic and projected growth rate?
• An interesting data point (for example, “x% of American households have this product” )
• An overview of competitor and customer dynamics

After having defined the market trends, you must then explain your market size in greater detail. Let’s use an example of a hypothetical company selling premium baby products online. Some key questions to answer here would be:

• What is the total annual spending in the US for babies?
• What is the split of sales between online and offline?
• In the market sizing, do you include only premium products sold by specialty stores, or the whole range of products including those products only sold in supermarket retailers that you do not initially plan to sell?

As you see, there are multiple answers to this question. Thankfully, to better understand this issue and how to apply it, you can find a great post by Toptal Finance Expert Alex Graham regarding Total Addressable Market Sizing and how it is applied to WeWork’s specific case.

4. Competitor Analysis

In this section, you must lay out the current competitor landscape. Make sure that it is as comprehensive as possible, taking into account not only current competitors but also potential future competitors. For example, is a foreign company likely to enter your market? Or, is a company in another market close to expanding into your turf? A good example of this was Netflix’s expansion from being only a distributor to entering the business of content generation: Did Disney and HBO prepare for this external threat?

Also, in this analysis, pay attention to and map out indirect competitors and their market dynamics. In the example of the baby eCommerce idea laid out above, the spend in grocery stores and the indirect competitors (like nurseries) in that market would be important to include.

5. Customer Analysis

In the customer analysis section, you need to prove that there are actually real customers that will pay/use/download your service. Use this space to drill down into the psychographics of the customer. Where are they, what real problem do they have that needs to be addressed, and what is their profile? It is very useful to define some specific characteristics, such as gender, age, geographical location, marital status, family, and main consumption patterns.

Even though most of the time entrepreneurs gather this kind of information from secondary sources such as research reports, a strong recommendation is to also go out and conduct primary interviews with potential customers. Prepare a questionnaire, speak to potential customers, and analyze the intelligence gathered. It is surprising how many important perspectives can be obtained from primary research.

6. Go-to-Market Strategy

Up to this point, you will have identified what your company does, its market, the customers, and the competition. Now, you will need to detail how you plan to actually get your product or service to market. This will include, but not be limited to:

• Do you have several products/services to address the market?
• What will your marketing strategy be?
• What marketing channels do you plan to use? Direct sales, online marketing, or below the line?
• What will your pricing be, and why?

Make sure that you show your knowledge of all of the intricacies of your marketing initiatives. In this section, it is very useful to detail any marketing initiatives you have already executed and their results. For example, if one of your marketing channels is going to be online marketing, do a small test beforehand in the channels chosen (Google, Facebook, etc.) and show the initial results.

7. Operations/Technology Strategy

Does your company have any operational or technological advantages relative to competitors? This relates to exploiting your key competencies over your competitors for commercial gain, such as a superior logistics platform.

In this section, it is important to also list and define the main operational areas within your company, even if some of those functions have not yet been developed. This can lay out a roadmap for the future, such as a plan to introduce a dedicated customer service team.

8. Management Team

There are some investors who say they invest “ in the team, not the product ;” this is founded upon the thesis of the key role that a strong and well-rounded team has in making a company become successful.

There are two main aspects to be covered in this section: the actual executive management team and the investor team. In the executive management team, make sure to detail why the team is a great fit for the business in terms of experience and capabilities. It is also important to state what their specific roles are and if they have stock or stock options and under what conditions. Also, any information on their synergies of working together as a team will be very useful for potential investors, as it de-risks future management team dysfunctions.

Finally, if you already have business angels, VC funds, or advisors, list their experience, the relationship they have had with your company, and how they add value beyond the size of their pockets.

9. Financial Plan

In parallel to your business plan, you should also build a detailed financial business plan that shows all the assumptions, drivers, and financial statements of your business for the next 3 to 5 years. This financial business plan should have several scenarios (conservative, base, aggressive) and allow for the quick tweaking of assumptions. The financial statements developed should at a minimum include cash flow, balance sheet, and profit and loss statements, although more ad-hoc analysis such as unit economics P&L can add value.

Both documents, the written business plan and the financial business plan model, will feed into each other and help with different parts of their respective content.

In this section, you need to include the main financial projections that resulted from your financial business plan in a summarized and graphic manner. A good rule of thumb is to include at least the yearly P&L and cash flow statements of the main scenarios expected, but you can go into as much detail as you see fit.

Without a doubt, this section is one of the most technical and knowledge-specific parts of the document. Not many people know how to build detailed financial statements. Therefore, it is useful to consider hiring finance experts with significant know-how to ensure that you build the most suitable financial statements possible for the launch of your business.

10. Financing Requirements/The Ask

After having explained in detail your company, its plans, and the financial projections, now comes a critical part: asking for funding and detailing how much. There are two choices to make in how much information is shown here:

• Limited information: Detail that you are seeking funding, but leave out actual funding amounts, or any kind of valuation markers. The idea is to open up the conversation regarding this topic and then follow up with specifics in person with appropriate counterparts. The benefit of choosing this option is that it allows you to tailor your negotiations towards the appetite of any potential investor that you come across.
• Full disclosure: list the actual amount and the pre-money that you are seeking. The benefits of this is that it shows confidence in that you know exactly what you are looking for, but the downside is that you could either sell yourself short or scare away potential investors.

Although there are different opinions regarding the best approach, the idea is that during the development of the business plan, you will gain an idea of how much funding you need. In turn, with looking at the competition, you will also see comparable valuations, allowing you to triangulate towards a cash amount needed and a targeted valuation. Therefore, in case of doubt, it is preferable to go with full disclosure and accelerate any discussions, avoiding the loss of time (and face) that could occur if you and your potential investor are on completely different pages regarding ticket size and valuation.

Another topic usually included is the use of funds. If you are looking for funding from investors, they will want to know what you will be doing with their money.

Finally, a key component in the fundraising section is the exit strategy. Remember that investors are looking for financial returns, so any information that can be gathered regarding potential exits and valuations is a plus.

How Should a Business Plan Evolve as the Company Matures?

An aspect that is often ignored regarding business plans is what happens once it is written and the founders move on to executing it. As time goes by and a company matures, it is inevitable that some aspects of the business plan will change or develop as new market realities set in. When that happens, what do you do with your original business plan?

Periodically rewriting the business plan from scratch is not the best approach to take, as by doing so, you cannot see what areas have changed and use them as a learning opportunity. However, it does make sense to set up a yearly review of the business plan, which can usually be tied to your annual budget review. Another good practice would be to tie the review to a yearly management offsite where the company plans its next year in terms of goals.

Conclusions

Without a doubt, it is very important to write a well-structured and thought-out business plan. There is no need to add superfluous bells and whistles to it, but it is essential that it covers the core aspects of your business.

Use the plan as your benchmark—as your north star—and, when appropriate, check to see if changing course makes sense. Use the business plan to spark opening conversations and to initiate strong business relationships, whether with team members or potential investors. Finally, use your business plan to bring order to the early life of your company and to allow for structured growth going forward.

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

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Martin luenendonk.

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

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

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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10 Key Consideration For Writing a Business Plan

Creating a business plan is like building the foundation for your entrepreneurial journey. It’s the roadmap that turns your business dream into a reality. To do this effectively, you’ll need a combination of skills and a clear plan, all operating within a well-structured system. In this article, we’ll delve into the essential components of a business plan, from the initial dream to skill development, and how they fit into your mission and an organized system.

Business plan considerations: 10 key points

1. learn about your market:, 2. know your competitors:, 3. describe how you’ll get customers:, 4. explain how your business works:, 5. show your financial plans:, 6. identify and deal with risks:, 7. set goals:, 8. create an engaging executive summary:, 9. update your plan regularly:, 10. get advice from others:.

Creating a good business plan is like laying the foundation for your business dreams. It’s a roadmap that helps you navigate the ups and downs of starting a business. Here are 11 important things to include in your business plan: Explain What Makes You Special: In your plan, clearly state what makes your business unique. Who does it help, and why is it better than the competition? Keep it simple and easy to understand.

Use facts and figures to back up your claims. Find out who your competitors are, what the demand for your product or service is like, and any trends in your industry.

Learn how to write a DIY business plan now!

Study your competitors carefully. Understand what they do well and where they struggle. This will help you i dentify your own strengths and opportunities .

Explain how you plan to reach and attract customers. Cover everything from how you’ll advertise to how you’ll build relationships with your customers .

Tell the reader how your business is structured and what laws and regulations apply to it. Describe your day-to-day operations, what resources you need, and how you’ll get your products or services.

Paint a clear picture of your financial future . Explain how you’ll make money, how you’ll control your costs, and when you expect to start making a profit. Use charts and predictions to illustrate this.

Recognize the potential problems your business might face and explain how you’ll handle them. Base your plans on facts, not just hopes.

Explore our free sample business plans and kickstart your own business plan today!

Define your business goals clearly. Use the SMART method (Specific, Measurable, Achievable, Relevant, Time-bound) to set targets that will guide your journey.

Your executive summary should be a brief, clear, and interesting introduction to your business plan. Think of it as a trailer for your business story.

Your business plan is not set in stone. It should change as your business grows and evolves. Being flexible is important for success.

Don’t try to do it all by yourself. Seek feedback and advice from people who have experience in business, like mentors, advisors, peers, investors, and experts. Creating a business plan is both an art and a science. When done right, it’s a crucial tool for your business’s success. It showcases your vision and commitment, and it’s something others can trust. So, start writing your business plan today to set yourself on the path to success.

Connect with our experienced business plan writing consultant or our team of expert business plan writing consultants today to write a plan for your success.

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Conducting Market Research

Crafting a business plan, reviewing funding options, understanding legal requirements, implementing marketing strategies, how much does it cost to start a business, what should i do before starting a business, what types of funding are available to start a business, do you need to write a business plan, the bottom line.

Starting a business in the United States involves a number of different steps, spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also entails decisions around a business’s location, structure, name, taxation, and registration.

This article covers the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

• Entrepreneurs seeking to develop their own business should start by conducting market research to understand their industry space and competition, and to target customers.
• The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy. Potential funders and partners may want to review the business plan in advance of signing any agreements.
• Securing funding is crucial in launching a business. Funding can come in the form of grants, loans, venture capital, or crowdfunded money; entrepreneurs may also opt to self-fund instead of or in combination with any of these avenues.
• Choosing a location and business structure can have many implications for legal aspects of business ownership, such as taxation, registration, and permitting, so it’s important to fully understand the regulations and requirements for the jurisdiction in which the business will operate. 
• Another key aspect of launching a new business is having a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. 

The U.S. Small Business Administration (SBA) recommends researching demographic data around potential customers to understand a given consumer base and reduce business risk. It also breaks down common market considerations as follows:

• Demand : Do people want or need this product or service?
• Market size : How many people might be interested?
• Economic indicators : These include income, employment rate, and spending habits of potential customers.
• Location : Where are the target market and the business located?
• Market saturation : How competitive is the business space, and how many similar offerings exist?
• Pricing : What might a customer be willing to pay?

Market research should also include an analysis of the competition (including their strengths and weaknesses compared to those of the proposed business), market opportunities and barriers to entry, industry trends, and competitors’ market share .

There are various methods for conducting market research, and the usefulness of different sources and methodologies will depend on the nature of the industry and potential business. Data can come from a variety of sources: statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, or questionnaires.

A comprehensive business plan is like a blueprint for a business. It will help lay the foundation for business development and can assist in decision making, day-to-day operations, and growth. 

Potential investors or business partners may want to review and assess a business plan in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital. 

Business plans will differ according to the needs and nature of the company and only need to include what makes sense for the business in question. As such, they can vary in length and structure depending on their intended purpose. 

Business plans can generally be divided into two formats: traditional business plans and lean startup business plans. The latter is typically more useful for businesses that will need to adjust their planning quickly and frequently, as they are shorter and provide a higher-level overview of the company.

The process of funding a business can be as unique as the business itself—that is, it will depend on the needs and vision of the business and the current financial situation of the business owner. 

The first step in seeking funding is to calculate how much it will cost to start the business. Estimate startup costs by identifying a list of expenses and putting a number to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses. 

From there, an entrepreneur will need to determine how to secure the required funding. Common funding methods include:

• Self-funding , also known as bootstrapping  
• Seeking funding from investors, also known as venture capital  
• Raising money by crowdfunding
• Securing a business loan
• Winning a business grant

Each method will hold advantages and disadvantages depending on the situation of the business. It’s important to consider the obligations associated with any avenue of funding. For example, investors generally provide funding in exchange for a degree of ownership or control in the company, whereas self-funding may allow business owners to maintain complete control (albeit while taking on all of the risk). 

The availability of funding sources is another potential consideration. Unlike loans, grants do not have to be paid back—however, as a result, they are a highly competitive form of business funding. The federal government also does not provide grants for the purposes of starting or growing a business, although private organizations may. On the other hand, the SBA guarantees several categories of loans to support small business owners in accessing capital that may not be available through traditional lenders.

Whichever funding method (or methods) an entrepreneur decides to pursue, it’s essential to evaluate in detail how the funding will be used and lay out a future financial plan for the business, including sales projections and loan repayments , as applicable.  

Legally, businesses operating in the U.S. are subject to regulations and requirements under many jurisdictions, across local, county, state, and federal levels. Legal business requirements are often tied to the location and structure of the business, which then determine obligations around taxation, business IDs, registration, and permits.

Choosing a Business Location

The location—that is, the neighborhood, city, and state—in which a business operates will have an impact on many different aspects of running the business, such as the applicable taxes, zoning laws (for brick-and-mortar, or physical locations), and regulations.

A business needs to be registered in a certain location; this location then determines the taxes, licenses, and permits required. Other factors to consider when choosing a location might include:

• Human factors : Such as the target audience for your business, and preferences of business owners and partners around convenience, knowledge of the area, and commuting distance
• Regulations and restrictions : Concerning applicable jurisdictions or government agencies, including zoning laws
• Regionally specific expenses : Such as average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing
• The tax and financial environment : Including income tax, sales tax, corporate tax, and property tax, or the availability of tax credits, incentives, or loan programs

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications , it’s important to fully understand and choose a business structure carefully and, if necessary, consult a business counselor, lawyer, and/or accountant.

Common business structures include:

• Sole proprietorship : An unincorporated business that has just one owner, who pays personal income tax on profits
• Partnership : Options include a limited partnership (LP) or a limited liability partnership (LLP)
• Limited liability company (LLC) : A business structure that protects its owners from personal responsibility for its debts or liabilities
• Corporation : Options include a C corp , S corp , B corp , closed corporation , or nonprofit

Getting a Tax ID Number

A tax ID number is like a Social Security number for a business. Whether or not a state and/or federal tax ID number is required for any given business will depend on the nature of the business, as well as the location in which the business is registered.

If a business is required to pay state taxes (such as income taxes and employment taxes), then a state tax ID will be necessary. The process and requirements around state tax IDs vary by state and can be found on individual states’ official websites. In some situations, state tax IDs can also be used for other purposes, such as protecting sole proprietors against identity theft.

A federal tax ID, also known as an employer identification number (EIN) , is required if a business:

• Operates as a corporation or partnership
• Pays federal taxes
• Wants to open a business bank account
• Applies for federal business licenses and permits
• Files employment, excise, alcohol, tobacco, or firearms tax returns

There are further situations in which a business might need a federal tax ID number, specific to income taxation, certain types of pension plans, and working with certain types of organizations. Business owners can check with the Internal Revenue Service (IRS) about whether they need an EIN.

Registering a Business

Registration of a business will depend on its location and business structure, and can look quite different depending on the nature and size of the business. 

For example, small businesses may not require any steps beyond registering their business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all. However, registration can include personal liability protection as well as legal and tax benefits, so it can be beneficial even if it’s not strictly required. 

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will require a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

• Whether the business has a physical presence in the state
• If the business often conducts in-person client meetings in the state
• If a large portion of business revenue comes from the state
• Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state), and file for foreign qualification in any additional states.

Some businesses may decide to register with the federal government if they are seeking tax-exempt status or trademark protection, but federal registration is not required for many businesses.

Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business, and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling. 

Marketing plans will vary according to the specifics of the industry , target market, and business, but they should aim to include descriptions of and strategies around the following:

• A target customer : Including market size, demographics, traits, and relevant trends
• Unique value propositions or business differentiators : Essentially, an overview of the company’s competitive advantage with regard to employees, certifications, or offerings
• A sales and marketing plan : Including methods, channels, and a customer’s journey through interacting with the business
• Goals : Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, or sales targets
• An execution plan : Should detail tactics and break down higher-level goals into specific actions
• A budget : Detailing how much different marketing projects and activities will cost

The startup costs for any given business will vary greatly depending on the industry, business activity, and product or service offering. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for the purposes of starting a business, although private sources do.

Business plans are comprehensive documents that lay out the most important information about a business. They are important references for the growth, development, and decision-making processes of a business, and financial institutions as well as potential investors and partners generally request to review them in advance of agreeing to provide funding or work together.

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of the target market, competition, industry, business goals, business structure, funding requirements, tax and operating regulations, and marketing strategy, and conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Loans .”

U.S. Small Business Administration. “ Fund Your Business .”

U.S. Small Business Administration. “ Pick Your Business Location .”

U.S. Small Business Administration. “ Choose a Business Structure .”

U.S. Small Business Administration. “ Get Federal and State Tax ID Numbers .”

Internal Revenue Service. “ Do You Need an EIN? ”

U.S. Small Business Administration. “ Register Your Business .”

U.S. Small Business Administration. “ Apply for Licenses and Permits .”

U.S. Small Business Administration. “ Marketing and Sales .”

U.S. Small Business Administration. “ Grants .”

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
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• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
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• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
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1.1: Chapter 1 – Developing a Business Plan

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Learning Objectives

After completing this chapter, you will be able to

• Describe the purposes for business planning
• Describe common business planning principles
• Explain common business plan development guidelines and tools
• List and explain the elements of the business plan development process
• Explain the purposes of each element of the business plan development process
• Explain how applying the business plan development process can aid in developing a business plan that will meet entrepreneurs’ goals

This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

• Defines the vision for the company
• Establishes the company’s strategy
• Describes how the strategy will be implemented
• Provides a framework for analysis of key issues
• Provides a plan for the development of the business
• Helps the entrepreneur develop and measure critical success factors
• Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles

Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles .

First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity , the context within the proposed venture will operate (internal and external environment), and the business model (Hindle & Mainprize, 2006).

There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team . Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal , or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.

2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.

3. Make certain all of your pages are ordered and numbered correctly.

4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan, be 100% certain each of the following requirements are met:

• Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
• All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
• Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
• Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
• In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
• You should include all the information necessary for readers to understand everything in your document.
• The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.”

The 7 Steps of the Business Planning Process: A Complete Guide

In this article, we'll provide a comprehensive guide to the seven steps of the business planning process, and discuss the role of Strikingly website builder in creating a professional business plan.

Step 1: Conducting a SWOT Analysis

The first step in the business planning process is to conduct a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis will help you understand your business's internal and external environment, and it can help you identify areas of improvement and growth.

Strengths and weaknesses refer to internal factors such as the company's resources, capabilities, and culture. Opportunities and threats are external factors such as market trends, competition, and regulations.

You can conduct a SWOT analysis by gathering information from various sources such as market research, financial statements, and feedback from customers and employees. You can also use tools such as a SWOT matrix to visualize your analysis.

What is a SWOT Analysis?

A SWOT analysis is a framework for analyzing a business's internal and external environment. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses include internal factors such as the company's resources, capabilities, and culture. Opportunities and threats are external factors such as market trends, competition, and regulations.

A SWOT analysis can help businesses identify areas of improvement and growth, assess their competitive position, and make informed decisions. It can be used for various purposes, such as business planning, product development, marketing strategy, and risk management.

Importance of Conducting a SWOT Analysis

Conducting a SWOT analysis is crucial for businesses to develop a clear understanding of their internal and external environment. It can help businesses identify their strengths and weaknesses and uncover new opportunities and potential threats. By doing so, businesses can make informed decisions about their strategies, resource allocation, and risk management.

A SWOT analysis can also help businesses identify their competitive position in the market and compare themselves to their competitors. This can help businesses differentiate themselves from their competitors and develop a unique value proposition.

Example of a SWOT Analysis

Here is an example of a SWOT analysis for a fictional business that sells handmade jewelry:

• Unique and high-quality products
• Skilled and experienced craftsmen
• Strong brand reputation and customer loyalty
• Strategic partnerships with local boutiques
• Limited production capacity
• High production costs
• Limited online presence
• Limited product variety

Opportunities

• Growing demand for handmade products
• Growing interest in sustainable and eco-friendly products
• Opportunities to expand online presence and reach new customers
• Opportunities to expand product lines
• Increasing competition from online and brick-and-mortar retailers
• Fluctuating consumer trends and preferences
• Economic downturns and uncertainty
• Increased regulations and compliance requirements

This SWOT analysis can help the business identify areas for improvement and growth. For example, the business can invest in expanding its online presence, improving its production efficiency, and diversifying its product lines. The business can also leverage its strengths, such as its skilled craftsmen and strategic partnerships, to differentiate itself from its competitors and attract more customers.

Step 2: Defining Your Business Objectives

Once you have conducted a SWOT analysis, the next step is to define your business objectives. Business objectives are specific, measurable, achievable, relevant, and time-bound (SMART) goals that align with your business's mission and vision.

Your business objectives can vary depending on your industry, target audience, and resources. Examples of business objectives include increasing sales revenue, expanding into new markets, improving customer satisfaction, and reducing costs.

You can use tools such as a goal-setting worksheet or a strategic planning framework to define your business objectives. You can also seek input from your employees and stakeholders to ensure your objectives are realistic and achievable.

What is Market Research?

Market research is an integral part of the business planning process. It gathers information about a target market or industry to make informed decisions. It involves collecting and analyzing data on consumer behavior, preferences, and buying habits, as well as competitors, industry trends, and market conditions.

Market research can help businesses identify potential customers, understand their needs and preferences, and develop effective marketing strategies. It can also help businesses identify market opportunities, assess their competitive position, and make informed product development, pricing, and distribution decisions.

Importance of Market Research in Business Planning

Market research is a crucial component of the business planning process. It can help businesses identify market trends and opportunities, assess their competitive position, and make informed decisions about their marketing strategies, product development, and business operations.

By conducting market research, businesses can gain insights into their target audience's behavior and preferences, such as their purchasing habits, brand loyalty, and decision-making process. This can help businesses develop targeted marketing campaigns and create products that meet their customers' needs.

Market research can also help businesses assess their competitive position and identify gaps in the market. Businesses can differentiate themselves by analyzing their competitors' strengths and weaknesses and developing a unique value proposition.

Different Types of Market Research Methods

Businesses can use various types of market research methods, depending on their research objectives, budget, and time frame. Here are some of the most common market research methods:

Surveys are a common market research method that involves asking questions to a sample of people about their preferences, opinions, and behaviors. Surveys can be conducted through various channels like online, phone, or in-person surveys.

• Focus Groups

Focus groups are a qualitative market research method involving a small group to discuss a specific topic or product. Focus groups can provide in-depth insights into customers' attitudes and perceptions and can help businesses understand the reasoning behind their preferences and behaviors.

Interviews are a qualitative market research method that involves one-on-one conversations between a researcher and a participant. Interviews can be conducted in person, over the phone, or through video conferencing and can provide detailed insights into a participant's experiences, perceptions, and preferences.

• Observation

Observation is a market research method that involves observing customers' behavior and interactions in a natural setting such as a store or a website. Observation can provide insights into customers' decision-making processes and behavior that may not be captured through surveys or interviews.

• Secondary Research

Secondary research involves collecting data from existing sources, like industry reports, government publications, or academic journals. Secondary research can provide a broad overview of the market and industry trends and help businesses identify potential opportunities and threats.

By combining these market research methods, businesses can comprehensively understand their target market and industry and make informed decisions about their business strategy.

Step 3: Conducting Market Research

Market research should always be a part of your strategic business planning. This step gathers information about your target audience, competitors, and industry trends. This information can help you make informed decisions about your product or service offerings, pricing strategy, and marketing campaigns.

There are various market research methods, such as surveys, focus groups, and online analytics. You can also use tools like Google Trends and social media analytics to gather data about your audience's behavior and preferences.

Market research can be time-consuming and costly, but it's crucial for making informed decisions that can impact your business's success. Strikingly website builder offers built-in analytics and SEO optimization features that can help you track your website traffic and audience engagement.

Step 4: Identifying Your Target Audience

Identifying your target audience is essential in the business planning process. Your target audience is the group of people who are most likely to buy your product or service. Understanding their needs, preferences, and behaviors can help you create effective marketing campaigns and improve customer satisfaction.

You can identify your target audience by analyzing demographic, psychographic, and behavioral data. Demographic data include age, gender, income, and education level. Psychographic data includes personality traits, values, and lifestyle. Behavioral data includes buying patterns, brand loyalty, and online engagement.

Once you have identified your target audience, you can use tools such as buyer personas and customer journey maps to create a personalized and engaging customer experience. Strikingly website builder offers customizable templates and designs to help you create a visually appealing and user-friendly website for your target audience.

What is a Target Audience?

A target audience is a group most likely to be interested in and purchase a company's products or services. A target audience can be defined based on various factors such as age, gender, location, income, education, interests, and behavior.

Identifying and understanding your target audience is crucial for developing effective marketing strategies and improving customer engagement and satisfaction. By understanding your target audience's needs, preferences, and behavior, you can create products and services that meet their needs and develop targeted marketing campaigns that resonate with them.

Importance of Identifying Your Target Audience

Identifying your target audience is essential for the success of your business. By understanding your target audience's needs and preferences, you can create products and services that meet their needs and develop targeted marketing campaigns that resonate with them.

Here are reasons why identifying your target audience is important:

• Improve customer engagement. When you understand your target audience's behavior and preferences, you can create a more personalized and engaging customer experience to improve customer loyalty and satisfaction.
• Develop effective marketing strategies. Targeting your marketing efforts to your target audience creates more effective and efficient marketing campaigns that can increase brand awareness, generate leads, and drive sales.
• Improve product development. By understanding your target audience's needs and preferences, you can develop products and services that meet their specific needs and preferences, improving customer satisfaction and retention.
• Identify market opportunities. If you identify gaps in the market or untapped market segments, you can develop products and services to meet unmet needs and gain a competitive advantage.

Examples of Target Audience Segmentation

Here are some examples of target audience segmentation based on different demographic, geographic, and psychographic factors:

• Demographic segmentation. Age, gender, income, education, occupation, and marital status.
• Geographic segmentation. Location, region, climate, and population density.
• Psychographic segmentation. Personality traits, values, interests, and lifestyle.

Step 5: Developing a Marketing Plan

A marketing plan is a strategic roadmap that outlines your marketing objectives, strategies, tactics, and budget. Your marketing plan should align with your business objectives and target audience and include a mix of online and offline marketing channels.

Marketing strategies include content marketing, social media marketing, email marketing, search engine optimization (SEO), and paid advertising. Your marketing tactics can include creating blog posts, sharing social media posts, sending newsletters, optimizing your website for search engines, and running Google Ads or Facebook Ads.

To create an effective marketing plan , research your competitors, understand your target audience's behavior, and set clear objectives and metrics. You can also seek customer and employee feedback to refine your marketing strategy.

Strikingly website builder offers a variety of marketing features such as email marketing, social media integration, and SEO optimization tools. You can also use the built-in analytics dashboard to track your website's performance and monitor your marketing campaign's effectiveness.

What is a Marketing Plan?

A marketing plan is a comprehensive document that outlines a company's marketing strategy and tactics. It typically includes an analysis of the target market, a description of the product or service, an assessment of the competition, and a detailed plan for achieving marketing objectives.

A marketing plan can help businesses identify and prioritize marketing opportunities, allocate resources effectively, and measure the success of their marketing efforts. It can also provide the marketing team with a roadmap and ensure everyone is aligned with the company's marketing goals and objectives.

Importance of a Marketing Plan in Business Planning

A marketing plan is critical to business planning. It can help businesses identify their target audience, assess their competitive position, and develop effective marketing strategies and tactics.

Here are a few reasons why a marketing plan is important in business planning:

• Provides a clear direction. A marketing plan can provide a clear direction for the marketing team and ensure everyone is aligned with the company's marketing goals and objectives.
• Helps prioritize marketing opportunities. By analyzing the target market and competition, a marketing plan can help businesses identify and prioritize marketing opportunities with the highest potential for success.
• Ensures effective resource allocation. A marketing plan can help businesses allocate resources effectively and ensure that marketing efforts are focused on the most critical and impactful activities.
• Measures success. A marketing plan can provide a framework for measuring the success of marketing efforts and making adjustments as needed.

Examples of Marketing Strategies and Tactics

Here are some examples of marketing strategies and tactics that businesses can use to achieve their marketing objectives:

• Content marketing. Creating and sharing valuable and relevant content that educates and informs the target audience about the company's products or services.
• Social media marketing. Leveraging social media platforms like Facebook, Twitter, and Instagram to engage with the target audience, build brand awareness, and drive website traffic.
• Search engine optimization (SEO). Optimizing the company's website and online content to rank higher in search engine results and drive organic traffic.
• Email marketing. Sending personalized and targeted emails to the company's email list to nurture leads, promote products or services, and drive sales.
• Influencer marketing. Partnering with influencers or industry experts to promote the company's products or services and reach a wider audience.

By using a combination of these marketing strategies and tactics, businesses can develop a comprehensive and effective marketing plan that aligns with their marketing goals and objectives.

Step 6: Creating a Financial Plan

A financial plan is a detailed document that outlines your business's financial projections, budget, and cash flow. Your financial plan should include a balance sheet, income statement, and cash flow statement, and it should be based on realistic assumptions and market trends.

To create a financial plan, you should consider your revenue streams, expenses, assets, and liabilities. You should also analyze your industry's financial benchmarks and projections and seek input from financial experts or advisors.

.jpg)Image taken from Strikingly Templates

Strikingly website builder offers a variety of payment and e-commerce features, such as online payment integration and secure checkout. You can also use the built-in analytics dashboard to monitor your revenue and expenses and track your financial performance over time.

What is a Financial Plan?

A financial plan is a comprehensive document that outlines a company's financial goals and objectives and the strategies and tactics for achieving them. It typically includes a description of the company's financial situation, an analysis of revenue and expenses, and a projection of future financial performance.

A financial plan can help businesses identify potential risks and opportunities, allocate resources effectively, and measure the success of their financial efforts. It can also provide a roadmap for the finance team and ensure everyone is aligned with the company's financial goals and objectives.

Importance of Creating a Financial Plan in Business Planning

Creating a financial plan is a critical component of the business planning process. It can help businesses identify potential financial risks and opportunities, allocate resources effectively, and measure the success of their financial efforts.

Here are some reasons why creating a financial plan is important in business planning:

• Provides a clear financial direction. A financial plan can provide a clear direction for the finance team and ensure everyone is in sync with the company's financial goals and objectives.
• Helps prioritize financial opportunities. By analyzing revenue and expenses, a financial plan can help businesses identify and prioritize financial opportunities with the highest potential for success.
• Ensures effective resource allocation. A financial plan can help businesses allocate resources effectively and ensure that financial efforts are focused on the most critical and impactful activities.
• Measures success. A financial plan can provide a framework for measuring the success of financial efforts and making adjustments as needed.

Examples of Financial Statements and Projections

Here are some examples of financial statements and projections that businesses can use in their financial plan:

• Income statement. A financial statement that shows the company's revenue and expenses over a period of time, typically monthly or annually.
• Balance sheet. A financial statement shows the company's assets, liabilities, and equity at a specific time, typically at the end of a fiscal year.
• Cash flow statement. A financial statement that shows the company's cash inflows and outflows over a period of time, typically monthly or annually.
• Financial projections. Forecasts of the company's future financial performance based on assumptions and market trends. This can include revenue, expenses, profits, and cash flow projections.

Step 7: Writing Your Business Plan

The final step in the business planning process is to write your business plan. A business plan is a comprehensive document that outlines your business's mission, vision, objectives, strategies, and financial projections.

A business plan can help you clarify your business idea, assess the feasibility of your business, and secure funding from investors or lenders. It can also provide a roadmap for your business and ensure that you stay focused on your goals and objectives.

Importance of Writing a Business Plan

Writing a business plan is an essential component of the business planning process. It can help you clarify your business idea , assess the feasibility of your business, and secure funding from investors or lenders.

Here are some reasons why writing a business plan is important:

• Clarifies your business idea. Writing a business plan can help you clarify your business idea and understand your business's goals, objectives, and strategies.
• Assesses the feasibility of your business. A business plan can help you assess the feasibility of your business and identify potential risks and opportunities.
• Secures funding. A well-written business plan can help you secure funding from investors or lenders by demonstrating the potential of your business and outlining a clear path to success.
• Provides a roadmap for your business. A business plan can provide a roadmap and ensure that you stay focused on your goals and objectives.

Tips on How to Write a Successful Business Plan

Here are some tips on how to write a business plan successfully:

• Start with an executive summary. The executive summary is a brief business plan overview and should include your business idea, target market, competitive analysis, and financial projections.
• Describe your business and industry. Provide a detailed description of your business and industry, including your products or services, target market, and competitive landscape.
• Develop a marketing strategy. Outline your marketing strategy and tactics, including your target audience, pricing strategy, promotional activities, and distribution channels.
• Provide financial projections. Provide detailed financial projections, including income statements, balance sheets, and cash flow statements, as well as assumptions and risks.
• Keep it concise and clear. Keep your business plan concise and clear, and avoid using jargon or technical terms that may confuse or intimidate readers.

Role of Strikingly Website Builder in Creating a Professional Business Plan

Strikingly website builder can play a significant role in creating a professional business plan. Strikingly provides an intuitive and user-friendly platform that allows you to create a professional-looking website and online store without coding or design skills.

Using Strikingly, you can create a visually appealing business plan and present it on your website with images, graphics, and videos to enhance the reader's experience. You can also use Strikingly's built-in templates and a drag-and-drop editor to create a customized and professional-looking business plan that reflects your brand and style.

Strikingly also provides various features and tools that can help you showcase your products or services, promote your business, and engage with your target audience. These features include e-commerce functionality, social media integration, and email marketing tools.

Let’s Sum Up!

In conclusion, the 7 steps of the business planning process are essential for starting and growing a successful business. By conducting a SWOT analysis, defining your business objectives, conducting market research, identifying your target audience, developing a marketing plan, creating a financial plan, and writing your business plan, you can set a solid foundation for your business's success.

Strikingly website builder can help you throughout the business planning process by offering a variety of features such as analytics, marketing, e-commerce , and business plan templates. With Strikingly, you can create a professional and engaging website and business plan that aligns with your business objectives and target audience.

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6 Elements of a Successful Financial Plan for a Small Business

Improve your chances of growth by covering these bases in your plan.

Table of Contents

Many small businesses lack a full financial plan, even though evidence shows that it is essential to the long-term success and growth of any business. 

For example, a study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. If you’re not sure how to get started, read on to learn the six key elements of a successful small business financial plan.

What is a business financial plan, and why is it important? 

A business financial plan is an overview of a business’s financial situation and a forward-looking projection for growth. A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan.

A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and monthly expenses and plan for taxes each year.

Importantly, a financial plan helps you focus on the long-term growth of your business. That way, you don’t get so caught up in the day-to-day activities that you lose sight of your goals. Focusing on the long-term vision helps you prioritize your financial resources. 

The 6 components of a successful financial plan for business

1. sales forecasting.

You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles helps you better understand your business, and this knowledge is invaluable as you plan marketing initiatives and growth strategies . 

For instance, a seasonal business can aim to improve sales in the off-season to eventually become a year-round venture. Another business might become better prepared by understanding how upticks and downturns in business relate to factors such as the weather or the economy.

Sales forecasting is also the foundation for setting company growth goals. For instance, you could aim to improve your sales by 10 percent over each previous period.

2. Expense outlay

A full expense plan includes regular expenses, expected future expenses and associated expenses. Regular expenses are the current ongoing costs of your business, including operational costs such as rent, utilities and payroll. 

Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing, and the office holiday party. It’s a good idea to distinguish essential expenses from expenses that can be reduced or eliminated if needed.

Expected future expenses are known future costs, such as tax rate increases, minimum wage increases or maintenance needs. Generally, a part of the budget should also be allocated to unexpected future expenses, such as damage to your business caused by fire, flood or other unexpected disasters. Planning for future expenses ensures your business is financially prepared via budget reduction, increases in sales or financial assistance.

Associated expenses are the estimated costs of various initiatives, such as acquiring and training new hires, opening a new store or expanding delivery to a new territory. An accurate estimate of associated expenses helps you properly manage growth and prevents your business from exceeding your cost capabilities. 

As with expected future expenses, understanding how much capital is required to accomplish various growth goals helps you make the right decision about financing options.

3. Statement of financial position (assets and liabilities)

Assets and liabilities are the foundation of your business’s balance sheet and the primary determinants of your business’s net worth. Tracking both allows you to maximize your business’s potential value. 

Small businesses frequently undervalue their assets (such as machinery, property or inventory) and fail to properly account for outstanding bills. Your balance sheet offers a more complete view of your business’s health than a profit-and-loss statement or a cash flow report. 

A profit-and-loss statement shows how the business performed over a specific time period, while a balance sheet shows the financial position of the business on any given day.

4. Cash flow projection

You should be able to predict your cash flow on a monthly, quarterly and annual basis. Projecting cash flow for the full year allows you to get ahead of any financial struggles or challenges. 

It can also help you identify a cash flow problem before it hurts your business. You can set the most appropriate payment terms, such as how much you charge upfront or how many days after invoicing you expect payment .

A cash flow projection gives you a clear look at how much money is expected to be left at the end of each month so you can plan a possible expansion or other investments. It also helps you budget, such as by spending less one month for the anticipated cash needs of another month.

5. Break-even analysis

A break-even analysis evaluates fixed costs relative to the profit earned by each additional unit you produce and sell. This analysis is essential to understanding your business’s revenue and potential costs versus profits of expansion or growth of your output. 

Having your expenses fully fleshed out, as described above, makes your break-even analysis more accurate and useful. A break-even analysis is also the best way to determine your pricing.

In addition, a break-even analysis can tell you how many units you need to sell at various prices to cover your costs. You should aim to set a price that gives you a comfortable margin over your expenses while allowing your business to remain competitive.

6. Operations plan

To run your business as efficiently as possible, craft a detailed overview of your operational needs. Understanding what roles are required for you to operate your business at various volumes of output, how much output or work each employee can handle, and the costs of each stage of your supply chain will aid you in making informed decisions for your business’s growth and efficiency.

It’s important to tightly control expenses, such as payroll or supply chain costs, relative to growth. An operations plan can also make it easier to determine if there is room to optimize your operations or supply chain via automation, new technology or superior supply chain vendors.

For this reason, it is imperative for a business owner to conduct due diligence and become knowledgeable about merchant services before acquiring an account. Once the owner signs a contract, it cannot be changed, unless the business owner breaks the contract and acquires a new account with a new merchant services provider. 

Tips on writing a business financial plan

Business owners should create a financial plan annually to ensure they have a clear and accurate picture of their business’s finances and a realistic view for future growth or expansion. A financial plan helps the business’s leaders make informed decisions about purchases, debt, hiring, expense control and overall operations for the year ahead. 

A business financial plan is essential if a business owner is looking to sell their business, attract investors or enter a partnership with another business. Here are some tips for writing a business financial plan.

Review the previous year’s plan.

It’s a good idea to compare the previous year’s plan against actual performance and finances to see how accurate the previous plan and forecast were. That way, you can address any discrepancies or overlooked elements in next year’s plan.

Collaborate with other departments.

A business owner or other individual charged with creating the business financial plan should collaborate with the finance department, human resources department, sales team , operations leader, and those in charge of machinery, vehicles or other significant business tools. 

Each division should provide the necessary data about projections, value and expenses. All of these elements come together to create a comprehensive financial picture of the business.

Use available resources.

The Small Business Administration (SBA) and SCORE, the SBA’s nonprofit partner, are two excellent resources for learning about financial plans. Both can teach you the elements of a comprehensive plan and how best to work with the different departments in your business to collect the necessary information. Many websites, including business.com , and service providers, such as Intuit, offer advice on this matter. 

If you have questions or encounter challenges while creating your business financial plan, seek advice from your accountant or other small business owners in your network. Your city or state has a small business office that you can contact for help.

Business financial plan templates

Many business organizations offer free information that small business owners can use to create their financial plan. For example, the SBA’s Learning Platform offers a course on how to create a business plan. It also offers worksheets and templates to help you get started. You can seek additional help and more personalized service from your local office.

SCORE is the largest volunteer network of business mentors. It began as a group of retired executives (SCORE stands for “Service Corps of Retired Executives”) but has expanded to include business owners and executives from many industries. Advice is free and available online, and there are SBA district offices in every U.S. state. In addition to participating in group or at-home learning, you can be paired with a mentor for individualized help. 

SCORE offers templates and tips for creating a small business financial plan. SCORE is an excellent resource because it addresses different levels of experience and offers individualized help.

Other templates can be found in Microsoft Office’s template library, QuickBooks’ online resources, Shopify’s blog and other places. You can also ask your accountant for guidance, since many accountants provide financial planning services in addition to their usual tax services.

Diana Wertz contributed to the writing and research in this article.

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In the spotlight: Performance management that puts people first

In volatile times, companies are under outsize pressure to respond to economic, technological, and social changes. Effective performance management systems can be a powerful part of this response. They’re designed to help people get better in their work, and they offer clarity in career development and professional performance. And then there’s the big picture: companies that focus on their people’s performance are 4.2 times more likely to outperform their peers, realizing an average 30 percent higher revenue growth and experiencing attrition five percentage points lower (see sidebar, “About the research”). Companies that focus on their people and organizational health also reap dividends in culture, collaboration, and innovation—as well as sustained competitive performance. 1 Alex Camp, Arne Gast, Drew Goldstein, and Brooke Weddle, “ Organizational health is (still) the key to long-term performance ,” McKinsey, February 12, 2024.

Today, company leaders lack full confidence in most performance management systems—despite these systems’ importance and value—citing fragmentation, the existence of informal or “shadow” systems, misalignment, and inconsistency as common challenges. What sort of systems fit the company’s needs? Should rewards focus on individual or team goals? Where are limited resources best spent?

About the research

The insights in this article draw from a comprehensive review of industry best practices, including the experiences of more than 30 global companies across sectors, as well as research by the McKinsey Global Institute (MGI) into how companies gain a competitive edge and deliver top-tier financial results. Specifically, MGI studied more than 1,800 companies with revenues of greater than $100 million. 1 Performance through people: Transforming human capital into competitive advantage ; MGI, February 2, 2023. The article’s author team also completed a study of more than 50 companies’ performance management practices, aiming to provide a nuanced understanding of how organizations approach and execute performance management.

An understanding of the four basic elements of performance management—goal setting, performance reviews, ongoing development, and rewards—provides a foundation for answering these questions and more. Of course, the right performance management system will vary by organization. Leaders who embrace a fit-for-purpose design built on a proven set of core innovations can build motivational and meritocratic companies that attract and retain outstanding employees.

How leading companies approach performance management

Our research across a set of global companies found that despite widespread agreement about certain performance management best practices—such as offering regular feedback outside of an annual review—many companies remain stuck in old ways of working. There are many design choices that can determine the characteristics of a performance management system, but some are more critical than others (Exhibit 1). These decisions—and how they interact with each other—will help determine how the performance management system maps onto the company’s overarching strategy.

Goal setting

Two critical design decisions relate to goal setting: the number of performance management systems used and whether to prioritize individual or team performance goals.

Degree of differentiation. The simplest and best option for many organizations is a single performance management system to address the needs of all employees. However, in more-complex companies with several employee groups, more than one system might be necessary. Manufacturing companies, for instance, may employ three performance management systems with few commonalities: one for sales, in which sales agents are provided direct incentives for the number of goods sold; one for production, with a monthly rhythm focusing on improving core production KPIs; and one for executives, in which the focus might be related more to annual objectives and leadership behavior.

Considerations for these choices often revolve around the nature of the work and the ease of quantifying outputs. For roles in which performance can be easily measured through tangible metrics, such as sales and production, a system emphasizing quantifiable outcomes may be more suitable. On the other hand, for roles involving tasks that are less easily measured, such as those in R&D, a performance management system should be designed to accommodate the nuanced and less tangible aspects of their contributions.

The nucleus of performance. Many organizations have traditionally placed a strong emphasis on individual performance, rooted in the belief that individual accountability drives results. In recent years, there has been a noticeable shift toward recognizing the importance of the team in achieving overall organizational success.

At a large European online retailer, for instance, the focus of performance management has been put on the team rather than the individual. Goals are set for the team, feedback is given to the team, and the performance appraisal is conducted for the team. Example performance metrics for teams can include project completion timelines, cross-functional collaboration success, and the achievement of collective milestones. On an individual level, the company assesses performance using a sophisticated model that prescribes skills and behaviors for 14 job families, each with up to four hierarchies.

Another prominent company in the automotive industry underscores the team as the cornerstone of performance. The teams could be defined along both functional and organizational lines—such as the division or the business line—and the company linked the organizational lines’ performance to the individuals’ compensation.

Performance reviews

Performance reviews raise the question of how to balance the individual objectives and their appraisal with respect to the “what” and the “how,” as well as whether review responsibility should lie primarily with managers, committees, or a combination of both.

Performance formula: What versus how. The balance between setting objectives and assessing what employees accomplish and how they go about their work is the central focus here. To measure the “what,” reviews have traditionally used KPIs, concentrating on quantifiable metrics and specific targets and emphasizing measurable outcomes and achievements. 2 For more on metrics best practices and how they can help leaders avoid pitfalls in their performance management systems, see Raffaele Carpi, John Douglas, and Frédéric Gascon, “ Performance management: Why keeping score is so important, and so hard ,” McKinsey, October 4, 2017.

However, for many roles and in many segments of the company, the work is complex, multifaceted, and fast-paced and can be difficult to capture with rather static KPIs. Consequently, many companies have reverted to using objective key results (OKRs) to link results to defined objectives. The objectives represent the qualitative, aspirational goals an individual or team aims to achieve, while the key results are the quantifiable metrics used to measure progress toward those objectives. The objectives provide context and direction, capturing the broader strategic intent behind the measurable key results.

Companies that explicitly focus a portion of performance reviews on the “how” consider qualities such as collaboration, communication, adaptability, and ethical decision making. Considering behavior and conduct, in particular, can help assess leaders whose teams’ outcomes are hard to measure—such as long-term projects, complex initiatives, or qualitative improvements that may not have easily quantifiable metrics. About three in five companies in our sample look at a mix of both what and how, which can equip managers with a more comprehensive understanding of not only tangible results but also the underlying approach and mindset that contributed to those outcomes.

Review responsibility. In structuring accountability for conducting performance reviews, companies tend to lean on managers, committees, or a combination of both.

Managers should play a central role, and their discretion should be a significant factor in performance assessments because they can judge the context in which an employee has been working. For example, when evaluating performance, it’s crucial to consider the headwinds and tailwinds that the business, team, or employee faced during the evaluation period. External factors, market conditions, and organizational dynamics can significantly affect an employee’s ability to achieve their goals, and considering them helps provide a fair and contextual assessment.

In this context, another design question emerges: whether to appraise employees against OKR fulfilment or the effort they put into achieving the desired outcome. Particularly in many large digital players, OKRs are set as “moonshot” goals—objectives so ambitious they are difficult to achieve. Managers can help ensure that, at the end of the performance cycle, an employee is assessed against not only OKR fulfillment but also—and to an even greater degree—how hard they tried given the resources available to them.

Managers’ points of view, formed with knowledge of the circumstances that produced employees’ performance, produce richer assessments that are sensitive to context—given that managers work closely with their team members and have firsthand knowledge of the challenges, workloads, and specific situations that each employee encounters.

Committees, meanwhile, bring diverse perspectives and can mitigate biases that might arise from individual managers’ subjectivity. Committees can provide a checks-and-balances system, promoting consistency and standardization in the evaluation process.

A combination of these two approaches can be an effective solution. Senior managers and high performers across hierarchies could be discussed in committees, while the rest of the workforce could be evaluated by their direct managers. This integrated approach leverages the contextual insights of managers while also incorporating the diverse viewpoints and standardization that committees offer, particularly for more-senior or high-impact roles.

Regardless of the review responsibility structure, it’s worth noting that more and more managers, committees, and employees are using generative AI (gen AI) to aggregate and extract information to inform performance reviews. For example, some employees may toil to define clear, specific, and measurable goals that align with their career aspirations; gen AI can help create a first draft and iterate based on their role, helping the employee focus on their specific growth areas as well as gauge improvement on an ongoing basis. Managers and committees, meanwhile, used to spend a lot of time gathering performance metrics from different sources and systems for employee evaluation. Gen AI can aggregate input from various sources into a consolidated format to provide managers with a more comprehensive starting point for reviews.

Beyond employees’ formal professional-development opportunities, their managers’ capability to set goals, appraise performance fairly and motivationally, and provide feedback is one of the most critical success factors for an effective performance management system. As a result, many companies have pivoted to invest in focused capability building.

Ongoing development

Another key aspect to consider when designing a performance management system is the focus of the assessment: will it evaluate past performances, or will the emphasis be placed on creating an understanding and foundation for further growth?

A backward-looking assessment will focus on fulfillment of the what and how objectives to create a fair basis for ranking and related consequences. However, many companies are pivoting to complement this assessment or are even focusing entirely on a developmental appraisal. In this approach, the focus is on truly understanding the strengths and weaknesses of the individual as a basis for further development, capability building, and personal growth.

Against that backdrop, rather than concentrating solely on top performers, an inclusive developmental system should cater to the growth needs of employees across all levels and backgrounds. McKinsey research emphasizes the importance of ongoing development for all employees, including—crucially—efforts tailored specifically for women 3 Women in the Workplace 2023 , McKinsey, October 5, 2023. and other underrepresented groups. 4 Diversity matters even more: The case for holistic impact , McKinsey, December 5, 2023. Such development programs not only foster a more equitable culture but also help unlock the full potential of the entire workforce.

Traditionally, many companies have used relative ratings to compare and rank employees against one another, often resulting in a forced distribution or curve. Employees are placed into categories or tiers based on their relative performance, with a predetermined percentage falling into each category (for example, top 10 percent, middle 70 percent, and bottom 20 percent).

Many companies today are simplifying their ratings systems so employees understand where they stand while shifting toward development approaches tailored to individuals’ strengths and weaknesses. The goal is to identify areas for growth and provide targeted support to help employees enhance their capabilities and skills.

While assessing performance remains important, the emphasis should be on using those assessments as a starting point for identifying developmental opportunities, with an understanding of both strengths and weaknesses and the specific development needs to improve performance. The focus shifts from mere evaluation to understanding the underlying factors that contribute to an individual’s performance, be it skills gaps, mindsets, or environmental factors.

Four reward categories—compensation, career progression, development opportunities, and recognition—remain the core pillars of an effective performance management system. Most leading companies provide individual rewards (as opposed to team- or corporate-driven ones), with equal relevance given to short- and long-term incentives, looking at impact holistically and balancing investment in all four reward categories.

Under certain circumstances, it may make sense to emphasize financial rewards, particularly in sales functions or other roles where monetary incentives are highly valued. Indeed, some organizations may double down on monetary compensation, offering significantly higher pay packages to their top performers, because money is seen as a key motivator in these roles.

In other cases, it may be more effective to take money off the table and emphasize nonfinancial rewards, such as recognition, flexibility, and career development opportunities. While base pay may remain the same across the firm, high performers can be rewarded with faster career progression, more recognition, and better development opportunities. A 2009 McKinsey survey found that “three noncash motivators—praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces” were “no less or even more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options.” Furthermore, “The survey’s top three nonfinancial motivators play critical roles in making employees feel that their companies value them, take their well-being seriously, and strive to create opportunities for career growth.” 5 “ Motivating people: Getting beyond money ,” McKinsey Quarterly , November 1, 2009. More than a decade later, McKinsey research found that managers and employees remain misaligned: specifically, employers overlook the relational elements—such as feeling valued by a manager and the organization and feeling a sense of belonging—relative to how important these factors are to employee retention (Exhibit 2). 6 “ ‘ Great Attrition’ or ‘Great Attraction’? The choice is yours ,” McKinsey Quarterly , September 8, 2021. Indeed, the importance of nonmonetary incentives represents a consistent theme in performance management research and inquiry.

Given the time and effort required to effectively implement nonfinancial rewards, it’s crucial for organizations to carefully consider how to deploy these rewards strategically with employee groups. The decision of where to place emphasis should align with the organization’s culture, values, and the specific workforce’s motivations.

It’s worth noting that companies focusing on team achievement over individual performance also tend to value praise of the team. Public recognition and praise for effective teamwork and joint accomplishments can foster a sense of unity, camaraderie, and motivation.

Things to get right

Of the global companies we observed, there was a shared set of enabling factors across those with effective performance management systems. These things are fairly intuitive, but they are hard to practice well. Done consistently, they can produce powerful results.

• Ensure that performance management systems are agile. Systems should allow for goals to be easily updated so the workforce—and therefore the organization—can respond to quickly changing conditions. The processes themselves should also be agile. For instance, relationships and interactions between managers and employees should allow for coaching that is close to real time so employees are consistently being pushed in the right direction—and learning to create that momentum themselves.
• Provide regular feedback. Annual reviews can create a bottleneck on managers and the C-suite. More regular performance conversations can be successful in a variety of formats; quarterly, weekly, and casual check-ins should supplement formal reviews. Conversations can be about both the what and the how of the work and be a source of ongoing coaching.

If reviews remain once a year rather than more frequent, top management may consider prioritizing their direct involvement in the evaluation process to keep a pulse on employee sentiment and progress. A leading financial institution in Europe chose this route and found it was able to build a strong capability-building program around a feedback culture that is unafraid of difficult conversations.

• Establish an effective fact base. According to our research, only two in five companies use both upward and downward evaluation in individual performance reviews. To establish a more comprehensive fact base, organizations can implement robust 360° review processes that solicit feedback from an employee’s manager, peers, direct reports, and even customers or stakeholders outside the company. Many leaders have found that 360° reviews offer a comprehensive understanding of an individual’s performance because such reviews consider perspectives from both those who are led and those who are in leadership roles.
• Maintain rating and differentiation. Many companies have reassessed their approach to employee ratings and the subsequent differentiation of consequences. While some companies have eliminated ratings altogether, most companies have been evolving their systems to drive motivation, recognize and incentivize performance, and create a “talent currency.” This means a high performer from one division is considered by the organization to be of the same caliber as one from another division. Overall, leaders are pushing for simplification, such as moving from a seven-tier approach to a four-tier or even three-tier system. There is also a stronger link between ratings and outcomes, as well as a shift from forced distribution to distribution guidance.
• Employ gen AI. Gen AI—the latest technology to change the business landscape—can be a tool to support select elements of performance management, such as setting goals and drafting performance reviews. A manager could use the technology to aggregate and synthesize input from different sources to draft communications to and about employees more efficiently, freeing them to focus on the core value driving parts of performance management and giving more time for personal interactions with their employees, such as coaching and feedback. 7 For more, see People and Organization Blog , “ Four ways to start using generative AI in HR ,” blog post by Julian Kirchherr, Dana Maor, Kira Rupietta, and Kirsten Weerda, McKinsey, March 4, 2024.

Getting started

Companies can get started by understanding where they are now. Specifically, they should assess their organizations’ current performance culture, including the level of adoption of the existing performance management system and its quality. Decision makers should then use the following three questions to check the health of their performance management efforts and outline their ambitions for performance management:

• Are we getting the expected returns from the time invested in the performance management process, and does it drive higher performance and capabilities?
• Does the current performance management system reflect the needs and context of this particular business or workforce segment?
• Do we have a performance culture? (Hint: How frequent are employees’ coaching interactions? How clear and differentiated is feedback?)

Many traditional approaches to people management are unlikely to suffice in today’s top-performing organizations. The research-backed benefits of prioritizing people’s performance, from enhanced revenue growth to lower attrition rates, underscore the strategic importance of these systems. By embracing a fit-for-purpose design anchored in the key elements of performance management, organizations can position themselves as dynamic and adaptive employers.

Simon Gallot Lavallée is an associate partner in McKinsey’s Milan office, where Andrea Pedroni  is a partner; Asmus Komm is a partner in the Hamburg office; and Amaia Noguera Lasa is a partner in the Madrid office.

The authors wish to thank Katharina Wagner, Brooke Weddle, and the many industry professionals who contributed to the development of this article.

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I want health insurance that can cover me domestically and abroad. What options are available for HNIs?

In the indian context, there are certain types of health insurance plans and considerations that may cater to the needs of such individuals..

• Updated May 27, 2024, 3:47 PM IST

I'm interested in health insurance that provides coverage both domestically and abroad. What options are available for HNIs who travel frequently or have residences in multiple countries?

Reply by Ms. Anuradha Sriram, Chief Actuarial Officer, Aditya Birla Health Insurance   High Net Worth Individuals (HNIs) who travel frequently or have residences in multiple countries may require a specialized health insurance plan that provides comprehensive coverage both domestically and abroad. In the Indian context, there are certain types of health insurance plans and considerations that may cater to the needs of such individuals:   • International Health Insurance Plans: Some insurance providers in India offer international health insurance plans that provide coverage not only within India but also globally. These plans are designed for individuals who travel extensively  and includes covers like Emergency   Hospitalization, Emergency MedicaI Evacuation, Compassionate visit, Emergency Air Ambulance, Care and/or transportation of minor children, Return of mortal remains, Medical referral, Medical Repatriation, Loss of Passport, Loss of checked-in baggage, Trip Cancellation  & Interruption, Trip Delay, Delay of Checked-in Baggage.

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• Customized Health Insurance Solutions: Some insurers may offer customized health insurance solutions for HNIs, taking into account their unique needs, travel patterns. These plans can be tailored to provide seamless coverage across borders. There are certain plans designed for HNI customers which not only covers emergency treatments abroad but also includes planned treatments for any illness / injury. Such plan covers Hospitalization Expenses, Alternative Treatment coverage, Pre and post hospitalisation, Organ donor, Emergency air ambulance, coverage for non-payable expenses, Increase of sum insured irrespective of claims under the policy etc.   • Wide range of optional covers: There are plans which offer wide range of optional covers to opt basis customer requirement. These includes Critical Illness cover, Personal accident, cancer booster, compassionate visit, durable equipment cover, Reduction in Specific Disease waiting period, Reduction in Pre-Existing Disease waiting period, second e-opinion, Annual Screening Package for Cancer Diagnosed Patients.

• Health Management Program: Wellness programs are integral part of Health Insurance which enable the customer in providing services like Health Assessment to know the current status their health, coaching them to manage the health and life style, tracking of their physical activities and also incentivising basis tracking mechanisms.   • Access to High-End Hospitals and Specialists: Ensure that the insurance plan provides access to high-end hospitals and specialists globally. HNIs may have specific preferences for healthcare providers, and the insurance plan should accommodate these preferences.   • Policy Portability: Check whether the health insurance plan allows for policy portability, enabling you to seamlessly transfer coverage between countries without losing benefits.   • Inclusion of Travel Insurance Features: Some health insurance plans may include features commonly found in travel insurance, such as coverage for trip cancellations, lost baggage, and travel delays. This can provide comprehensive protection for HNIs during their travels.   • Review Policy Terms and Conditions: Thoroughly review the terms and conditions of the health insurance policy, paying attention to coverage limits, exclusions, and any unique features related to international coverage.   HNIs with international lifestyles may benefit from consulting with specialized insurance advisors or brokers who can assist in finding the most suitable health insurance solution. These advisors can help navigate the complexities of international health insurance and ensure that the chosen plan aligns with the individual's specific needs and preferences.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at [email protected]. We will get your queries answered by our panel of experts.)  

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A year after a single mom stopped getting $500 a month through Chicago's basic income program, she's still holding down an apartment and making ends meet: 'It was every single thing that I prayed for.'

• Chicago's basic income program helped Jennette Fisher, 46,  secure an apartment.
• Participants received $500 a month for a year, no-strings-attached.  
• Chicago is set to restart the program, joining 100+ similar pilots across the US.

Jennette Fisher and her 11-year-old daughter Sophia moved into a new apartment in January. Fisher is still setting up the furniture, but her Chicago suburb is starting to feel like home.

"It was every single thing that I prayed for," she told Business Insider.

Fisher, 46, was a participant in the City of Chicago's Resilient Communities Pilot. The guaranteed basic-income program provided 5,000 families with $500 a month no-strings-attached for a full year, beginning in summer 2022. Selected participants experienced economic hardship from the pandemic and had household incomes at or below 250% of the federal poverty line . That means participants like Fisher would've had to make less than $45,775 to qualify as a family of two.

For Fisher and her daughter, the cash was "a Godsend," and the help they needed to secure housing . Although she's no longer receiving payments, Fisher said the support allowed her to move out of temporary domestic violence shelters and sign a lease.

"It took such a weight off," Fisher said. "If I wouldn't have had that money, I don't know what would have happened."

Participants across the country have told BI they spent basic income money to pay rent, afford groceries, pay off debt, and support their children.

In April, Chicago announced that it will restart it's basic income program. The city has allocated $32 million to project, but has not yet specified when the next cash payments will begin, or how many participants are set to benefit. The renewed Chicago program will join a wave of over 100 basic-income pilots that have been launched since 2019.

Funding for the program will primarily come from The 2021 American Rescue Plan Act , a federal pandemic recovery budget that has been used to finance GBI pilots across the US. The federal government requires that all APRA funds must be spent by December 2026.

Policy advocates and economic security experts have told BI that basic income's widespread success gives insight into future poverty solutions. Basic income differs from traditional social services like SNAP and rental assistance because it allows participants, like Fisher, to choose how to spend their money.

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"The lessons from those pilots are infusing the whole ecosystem of support," Teri Olle, director for Economic Security California, said. "People are really seeing the power of those pilots, and the power of giving people money and trusting them."

Fisher is still worried about costs, but Chicago basic income gave her 'a brand new start'

When Fisher began receiving basic income , she felt immediate relief. She said she "never gave up" trying to build a better and safer life for herself and her daughter.

She used some of her first payment to take Sophia to dinner and Chuck E. Cheese. They hadn't been since one of Sophia's childhood birthday parties, and it meant a lot to Fisher that they could celebrate together.

Because Fisher was living between various Chicago domestic violence shelters before she signed for her apartment, she said it has been difficult to hold a job. She's also not sure she can work again due to mental health reasons and is currently in the application process for disability benefits .

With basic income payments, Fisher was able to afford daily expenses and buy the clothes and shoes she and her daughter needed. The money also put her in a position to start renting her new apartment. Having her own place with Sophia is "everything she ever wanted."

Fisher is still doing her best to get by. She has to pay rent and only receives a few hundred dollars a month total from SNAP for food. She has health insurance through Medicaid , and the benefits help pay for an addiction recovery program she's enrolled in.

Right now, she estimates she lives on less than $700 a month, an amount that comes through Sophia's father's Social Security check. However, Fisher said she doesn't receive any form of child support.

She is still stressed about expenses but said Chicago's GBI program offered her "a brand new start."

Going forward, Fisher is excited to keep getting settled in their new home. Sophia starts sixth-grade next fall, and the pair are hoping to see Fisher's family, whom they haven't been able to visit in years.

"Stability is the number one thing I want," Fisher said. "Stability, peace, happiness, and no drama."

Have you benefited from a guaranteed basic-income program? Are you open to sharing your story? If so, reach out to this reporter at [email protected].

Watch: Supreme Court strikes down Biden's student-debt relief plan

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Employee Benefits in Mergers & Acquisitions: Key Considerations When Acquiring a Defined Benefit Pension Plan

Although pension plans are increasingly rare, if your business is considering acquiring a company that sponsors a pension plan, then several new diligence and deal considerations come into play for the transaction. This can be incredibly daunting if your business does not already sponsor a pension plan, because pension plans are fundamentally different than defined contribution plans, such as 401(k) plans, in many respects. This article highlights some of the material diligence, transaction, and post-closing issues that you should consider if the target entity sponsors a pension plan.

1. Do You Understand the Funding Status of the Pension Plan?

• Pension plans are not required to be fully funded, i.e., it is not a legal requirement that the plan’s assets equal the plan’s liabilities. The “funded status” of a defined benefit pension plan can be viewed in different ways depending on the purpose for which the funding status is determined. For example, a pension plan that is considered “fully funded” (at 100% or more) for the plan’s most recently reported adjusted funding target attainment percentage (or, AFTAP) may not be considered “fully funded” if the plan was terminated and liquidated. This is because most ongoing actuarial funding certifications (like the annual AFTAP determination) are calculated by making certain actuarial assumptions related to the plan remaining in effect.
• Pension plans are only required to complete formal actuarial funding determinations on a periodic basis and then, those determinations are reported on a delayed basis. For example, for a calendar year pension plan, as of May 2024 the most recent Form 5500 available is for the 2022 plan year, which will report assets and liabilities as of the last day of the 2022 plan year. For a calendar year, that information is now almost one and a half years out of date. Unless an updated actuarial valuation is completed in connection with a transaction, the buyer will inevitably review “stale” funding data for the pension plan and must either demand an updated valuation (which may take time) or at a minimum, obtain an updated plan asset valuation so the buyer can at least assess more recent asset values.
• The funding status of the pension plan is important because if a plan is underfunded, then it’s likely the buyer will have to make periodic contributions to the plan’s trust to fund the plan, or a potentially large contribution if the intention is to terminate the plan. Further, an underfunded pension plan will pay more in annual PBGC premiums than a fully funded plan. These liabilities should be considered in the context of the overall financial aspects of the transaction.

2. Have You Reviewed Historical Compliance and Plan Governance?

• While the funding issue described above will likely be the most important issue to address in the transaction, the buyer should also review historical pension plan documents and governance to confirm that there are no significant outstanding compliance issues or liabilities sitting with the pension plan.
• At a minimum, the buyer should carefully review current plan documents, trust agreements, summary plan descriptions, participant notices (including distribution election materials), evidence of PBGC premium payments, Form 5500s, and any correspondence with the IRS, Department of Labor, or PBGC about the plan.
• To the extent there are outstanding compliance issues discovered in the diligence process, the buyer can address them in various ways. For example, the purchase agreement can require that necessary corrective actions to bring the plan into compliance be completed prior to the closing of the transaction, if feasible. Or, the parties may address material issues through purchase price adjustments or specific indemnity obligations, as needed.
• A buyer also needs to understand the current third-party administration arrangements and governance structure to determine if or when changes are needed following the closing of the transaction. For example, if the target company has established a benefits committee to serve as the plan’s administrator, then a buyer will need to consider if that committee should remain in place following closing (or, if members of the committee may no longer be around after the closing) or if the buyer has its own plan fiduciaries that it intends to appoint as the plan administrator going forward.

3. Do We Need to Address the Pension Plan in the Purchase Agreement?

• The purchase agreement will need to address the pension plan; however, how the plan gets addressed will vary depending on the overall business deal.
• The purchase agreement should contain certain representations from the seller about the overall compliance of the pension plan. If there are outstanding compliance issues, then the buyer may want to consider specific indemnification protections to address those risks.
• Depending on how a buyer views the pension plan’s overall funding and any minimum required contributions that are due prior to closing (or that relate to the pre-closing period, to the extent not due by closing), certain purchase price adjustments may need to be included within the purchase agreement. A buyer may also require a target company to make additional contributions to the pension plan’s trust prior to closing a transaction, which would also need to be documented under the purchase agreement.
• If the buyer expects the target company to take any corrective actions discovered during diligence or make any changes to the plan in connection with the closing, then pre-closing covenants and/or closing deliverables covering these items should be included under the purchase agreement.

4. Can We Freeze or Terminate the Pension Plan?

• If the target’s pension plan is still actively adding new participants and accruing new benefits (or, the plan may be frozen to new participants, but current participants are still accruing benefits), a buyer will want to consider fully freezing the plan to limit future benefit obligations. Decisions about freezing a pension plan will need to consider the buyer’s philosophy for retirement benefits going forward, any obligations under the purchase agreement to maintain defined benefit plan accruals for some post-closing period, and, in the event any plan participants are governed by a collectively bargained arrangement, those decisions will be subject to bargaining requirements. In addition, there are advanced notice requirements to freeze a pension plan that may make it impractical to implement a freeze at or shortly after the closing of the transaction. However, a pension plan can be frozen at any time on a prospective basis.
• Unlike a 401(k) plan, a buyer could terminate and liquidate a pension plan after the closing of a transaction. Even if a buyer does not plan to continue operating the pension plan after closing, the buyer does not necessarily need to require a seller to terminate a pension plan before closing (and, depending on the timing of a transaction, that may not even be feasible). A buyer could elect to terminate the pension plan at some later point after closing. Terminating a pension plan is a detailed and lengthy process that includes plan amendments, participant notices, potential funding obligations, ongoing Form 5500 reporting obligations, and PBGC and IRS reporting and determination processes, and can take around a year to complete.
• If the buyer intends to terminate the pension plan at or shortly following closing, then determining the appropriate funding status of the plan and whether additional contributions are needed (and who will pay for such contributions within the purchase agreement) becomes a critical point to address during the transaction.

5. What Do We Do with the Pension Plan After the Transaction Closes?

• Determine whether any plan amendments or updated participant communications or notices are necessary.
• Determine who are the pension plan’s current fiduciaries and plan administrators and if those delegations need to be updated to transition to the buyer’s other previously established fiduciary committees or to change authorized signatories for the plan.
• Ensure there are sufficient procedures and policies in place to adequately administer the pension plan and to implement the plan’s governance, investment, and other fiduciary decisions. Establish a regular cadence for review of the plan’s administration and investment performance. Establish contact and ongoing correspondence with third-party service providers for the plan.
• If the buyer already maintains other pension plans within its controlled group and will maintain the newly acquired plan after closing, then consider whether there are cost or administrative efficiencies in consolidating pension plan third-party vendors (e.g., plan recordkeeping, investment fiduciaries, etc.) and the appropriate timing for making those changes.
• If the buyer already maintains other pension plans within its controlled group and will maintain the newly acquired plan, then consider whether it makes sense at some point to merge the pension plans into a single plan. There are various considerations when deciding whether and when to merge pension plans, including those related to the funding status of each plan and PBGC premium costs. The plan sponsor should consult its various advisors before consolidating pension plans.

Kathleen Dreyfus Bardunias

Leigh C. Riley

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