explain about the business plan

• Search Search Please fill out this field.

Business Plan: What It Is, What's Included, and How to Write One

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

What Is a Business Plan?

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

Key Takeaways

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

Investopedia / Ryan Oakley

Understanding Business Plans

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

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

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

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

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

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

How to Write a Business Plan

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

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

Common Elements of a Business Plan

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

How Often Should a Business Plan Be Updated?

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

What Does a Lean Startup Business Plan Include?

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

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

The Bottom Line

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

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

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

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for May 2024 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How To Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

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

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

Published: June 07, 2023

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

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

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

What is a business plan?

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

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

What is a business plan used for?

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

Business Plan Template [ Download Now ]

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

Purposes of a Business Plan

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

1. Securing financing from investors.

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

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

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

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

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

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

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

Free Business Plan Template

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

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

You're all set!

Click this link to access this resource at any time.

Free Business Plan [Template]

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

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

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

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

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

4. Getting an A in your business class.

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

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

What does a business plan need to include?

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

1. Business Plan Subtitle

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

2. Executive Summary

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

3. Company Description

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

4. The Business Opportunity

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

5. Competitive Analysis

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

6. Target Market

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

7. Marketing Plan

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

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

8. Financial Summary

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

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

10. Funding Requirements

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

Types of Business Plans

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

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

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

1. Startup Business Plan

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

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

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

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

2. Feasibility Business Plan

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

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

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

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

3. Internal Business Plan

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

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

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

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

4. Strategic Business Plan

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

These types of business plans may include:

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

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

5. Business Acquisition Plan

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

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

A business plan for an existing company will explain:

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

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

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

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

6. Business Repositioning Plan

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

This plan will:

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

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

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

7. Expansion or Growth Business Plan

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

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

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

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

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

Getting Started With Your Business Plan

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

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

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

Don't forget to share this post!

Related articles.

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

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

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

The Content Aggregator Guide for 2023

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

The 8 Best Free Flowchart Templates [+ Examples]

16 Best Screen Recorders to Use for Collaboration

The 25 Best Google Chrome Extensions for SEO

Professional Invoice Design: 28 Samples & Templates to Inspire You

Customers’ Top HubSpot Integrations to Streamline Your Business in 2022

2 Essential Templates For Starting Your Business

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

🎉 Celebrate Small Business Month:

25% Off Annual Plans! SAVE NOW

0 results have been found for “”

 Return to blog home

What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

That just scratches the surface for why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those that are ready to start a business. It’s just as valuable for those that have an idea and want to determine if it’s actually possible or not. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

Document your strategy and goals

For those starting or managing a business understanding where you’re going and how you’re going to get there are vital. Writing your plan helps you do that. It ensures that you are considering all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll have an idea of where you want your business to go as well as how you’ve performed in the past. This alone better prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

This will be the first part of your plan but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps .  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add it. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing the viability of your business. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex on the surface, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

• Sales and revenue projections
• Profit and loss statement
• Cash flow statement
• Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first and only add documentation that you think will be beneficial for anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. So, to get the most out of your plan, it’s best to find a format that suits your needs. 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 for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

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. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

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. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan. This format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is 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.

Now, the option that we here at LivePlan recommend is the Lean Plan . This 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 holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

Like this post? Share with a friend!

Posted in Business Plan Writing

Join over 1 million entrepreneurs who found success with liveplan, like this content sign up to receive more.

Subscribe for tips and guidance to help you grow a better, smarter business.

You're all set!

Exciting business insights and growth strategies will be coming your way each month.

We care about your privacy. See our privacy policy .

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

You’re our first priority. Every time.

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

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

How to Write a Business Plan, Step by Step

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

What is a business plan?

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

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

ZenBusiness

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

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

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

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

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

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

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

Your business’s registered name.

Address of your business location .

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

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

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

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

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

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

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

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

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

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

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

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

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

Licenses and permits.

Equipment leases.

Bank statements.

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

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

How much do you need?

with Fundera by NerdWallet

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

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

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

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

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

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

On a similar note...

Find small-business financing

Compare multiple lenders that fit your business

• Customer Reviews
• Net 30 Account
• Wise Services
• Steps & Timeline
• Work at a Glance
• Market Research at a Glance
• Business Plan Writing Services
• Bank Business Plan
• Investor Business Plan
• Franchise Business Plan
• Cannabis Business Plan
• Strategic Business Plan
• Corporate Business Plan
• Merge and Acquisition Business Plan (M&A)
• Private Placement Memorandums (PPM)
• Sample Business Plans
• Professional Feasibility Study
• PowerPoint Presentations
• Pitch Deck Presentation Services
• Business Plan Printing
• Market Research
• L-1 Business Plan
• E-2 Business Plan
• EB-5 Business Plan
• EB-5 Regional Centers
• Immigration Attorneys
• Nonprofit Business Plan
• Exit Business Planning
• Business Planning
• Business Formation
• Business License
• Business Website
• Business Branding
• Business Bank Account
• Digital Marketing
• Business Funding Resources
• Small Business Loans
• Venture Capital
• Net 30 Apply

What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.

• What are some of the reasons why business plans don't succeed?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

Looking for someone to write a business plan?

Find professional business plan writers for your business success.

These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

Access specialized business plan writing service now!

Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

Need Guidance with Your Business Plan?

Access 14 free business plan samples!

A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

Quick Links

• Investor Business Plans
• M&A Business Plan
• Private Placement
• Feasibility Study
• Hire a Business Plan Writer
• Business Valuation Calculator
• Business Plan Examples
• Real Estate Business Plan
• Business Plan Template
• Business Plan Pricing Guide
• Business Plan Makeover
• SBA Loans, Bank Funding & Business Credit
• Finding & Qualifying for Business Grants
• Leadership for the New Manager
• Content Marketing for Beginners
• All About Crowdfunding
• EB-5 Regional Centers, A Step-By-Step Guide
• Logo Designer
• Landing Page
• PPC Advertising

• Business Entity
• Business Licensing
• Virtual Assistant
• Business Phone
• Business Address
• E-1 Visa Business Plan
• EB1-A Visa Business Plan
• EB1-C Visa Business Plan
• EB2-NIW Business Plan
• H1B Visa Business Plan
• O1 Visa Business Plan
• Business Brokers
• Merger & Acquisition Advisors
• Franchisors

Proud Sponsor of

• 1-800-496-1056

• (613) 800-0227

• +44 (1549) 409190

• +61 (2) 72510077

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

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

Was This Article Helpful?

Martin luenendonk.

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

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

The Business Planning Process: 6 Steps To Creating a New Plan

In this article, we will define and explain the basic business planning process to help your business move in the right direction.

What is Business Planning?

Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.

The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.

The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.

Finish Your Business Plan Today!

The best business planning process is to use our business plan template to streamline the creation of your plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.

The Better Business Planning Process

The business plan process includes 6 steps as follows:

• Do Your Research
• Calculate Your Financial Forecast
• Draft Your Plan
• Revise & Proofread
• Nail the Business Plan Presentation

We’ve provided more detail for each of these key business plan steps below.

1. Do Your Research

Conduct detailed research into the industry, target market, existing customer base,  competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:

• What are your business goals?
• What is the current state of your business?
• What are the current industry trends?
• What is your competition doing?

There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.

You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.

2. Strategize

Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.

This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.

3. Calculate Your Financial Forecast

All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.

Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.

A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.

This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.

4. Draft Your Plan

With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.

If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.

5. Revise & Proofread

Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.

Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.

6. Nail the Business Plan Presentation

The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.

Business Planning Process Conclusion

Every entrepreneur dreams of the day their business becomes wildly successful.

But what does that really mean? How do you know whether your idea is worth pursuing?

And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way. ​

Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.

Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how Growthink business plan consultants can create your business plan for you.

Other Helpful Business Plan Articles & Templates

Sign up for our newsletter for product updates, new blog posts, and the chance to be featured in our Small Business Spotlight!

The importance of a business plan

Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.

Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.

What is a business plan?

A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.

Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success. ‍

Why is a business plan important?

A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

• A market analysis : gathering information about factors and conditions that affect your industry
• Competitive analysis : evaluating the strengths and weaknesses of your competitors
• Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
• Marketing: using your research to advertise your business
• Logistics and operations plans : planning and executing the most efficient production process
• Cash flow projection : being prepared for how much money is going into and out of your business
• An overall path to long-term growth

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

Send invoices, estimates, and other docs:

• via links or PDFs
• automatically, via Wave

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for the first 10 transactions of each month of your subscription, then 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions for the US and Canada . See Wave’s Terms of Service for more information.

Send invoices, get paid, track expenses, pay your team, and balance your books with our financial management software.

2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Understanding the importance of a business plan

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

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

Related Posts

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

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

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.

Most Viewed

10 Simple Tips to Write a Successful Business Plan

"The absolute biggest business plan mistake you can make is to not plan at all." So writes Noah Parsons in his helpful blog post 17 Key Business Plan Mistakes to Avoid in 2023 . But how does one pull together all of the necessary components of a cohesive plan? It can feel overwhelming.

Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to update the second edition of our best-selling book Write Your Business Plan to provide you with a simple, step-by-step process for creating a successful business plan. In the following excerpt, he gives ten tips to gather all of the critical information you will need to succeed.

1. Know your competition.

You need to name them and point out what makes you different from (and better than) each of them. But do not disparage your competition.

2. Know your audience.

You may need several versions of your business plan. For example, you may need one for bankers or venture capitalists, one for individual investors, and one for companies that may want to do a joint venture with you rather than fund you.

3. Have proof to back up every claim you make.

If you expect to be the leader in your field in six months, you have to say why you think that is. If you say your product will take the market by storm, you have to support this statement with facts. If you say your management team is fully qualified to make the business a success, be sure staff resumes demonstrate their experience.

Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium

• Easy step-by-step business plan generator
• Built-in financial calculators
• 500+ sample plans and templates

4. Be conservative in all financial estimates and projections.

If you feel certain you'll capture 50 percent of the market in the first year, you can say why you think so and hint at what those numbers may be. But make your financial projections more conservative. For example, a 10 percent market share is much more credible.

5. Be realistic with time and resources available.

If you're working with a big company before you buy a business, you may think things will happen faster than they will once you have to buy the supplies, write the checks, and answer the phones yourself. Being overly optimistic with time and resources is a common error entrepreneurs make. Being realistic is important because it lends credibility to your presentation. Always assume things will take 20 percent longer than you anticipated. Therefore, twenty weeks is now twenty-four weeks.

6. Be logical.

Think like a banker and write what they would want to see.

7. Have a strong management team.

Make sure it has good credentials and expertise. Your team members don't have to have worked in the field. However, you need to draw parallels between what they've done and the skills needed to make your venture succeed. Don't have all the skills you need? Consider adding an advisory board of people skilled in your field and include their resumes.

Write Your Own Business Plan is available now at Entrepreneur Bookstore | Barnes & Noble | Amazon

8. Document why your idea will work.

Have others done something similar that was successful? Have you made a prototype? Include all the variables that can have an impact on the result or outcome of your idea. Show why some of the variables don't apply to your situation or explain how you intend to overcome them or make them better.

9. Describe your facilities and location for performing the work.

That includes equipment you use to create your products and/or services. If you'll need to expand, discuss when, where, and why.

10. Discuss payout options for the investors.

Some investors want a hands-on role. Some want to put associates on your board of directors. Some don't want to be involved in day-to-day activities at all. All investors want to know when they can get their money back and at what rate of return. Most want out within three to five years. Provide a brief description of options for investors, or at least mention that you're ready to discuss options with any serious prospect.

To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

• 3. Having a business plan minimizes your risk

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

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

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

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• 4. Crafts a roadmap to achieve important milestones

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

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

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

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

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

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

You need to verify:

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

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

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

6. You’ll make big spending decisions with confidence

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

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

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

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

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

• 8. Position your brand against the competition

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

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

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

• 9. Determines financial needs and revenue models

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

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

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

• 10. Helps you think through your marketing strategy

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

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

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

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

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

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

• 12. Future-proof your business

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

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

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

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

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

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

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

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

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

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

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

Free business plan template

Join over 1-million businesses and make planning easy with our simple, modern, investor-approved business plan template.

Download Template

• Writing your business plan

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

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

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

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

Table of Contents

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

Related Articles

7 Min. Read

8 Business Plan Templates You Can Get for Free

5 Min. Read

How to Run a Productive Monthly Business Plan Review Meeting

5 Consequences of Skipping a Business Plan

10 Min. Read

Use This Simple Business Plan Outline to Organize Your Plan

The Bplans Newsletter

The Bplans Weekly

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

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Book a Speaker

Employee Onboarding Guide

Onboarding definition & overview.

Last updated: May 15th, 2024

Quality onboarding is crucial for new employees' long-term success and organizational productivity. Learn why a solid employee onboarding process can make a significant impact on employee experience and retention, plus innovative ideas to approaching welcoming new staff.

Onboarding Guide Navigation

> Definition & Overview

What Is Onboarding?

Onboarding is the process of integrating new employees into an organization. It includes the orientation process and opportunities for new hires to learn about the organization's structure, culture, vision, mission and values. Onboarding can span one or two days of activities at some companies; others offer a more extensive series of activities spanning months. 

Onboarding is often confused with orientation. While orientation is necessary for completing paperwork and other routine tasks, onboarding is a comprehensive process involving management and other employees and can last up to 12 months. 

Why Is It Important to Get Onboarding Right?

All new employees are onboarded—but the quality of the onboarding makes a difference. Too often, onboarding consists of handing a new employee a pile of forms and having a supervisor or HR professional walk the employee around the premises, making introductions on an ad hoc basis. When onboarding is done well, however, it lays a foundation for long-term success for the employee and the employer. It can improve productivity, build loyalty and engagement, and help employees become successful early in their careers with the new organization.

A study by  Gallup  showed that while only 12 percent of employees felt their company did a great job with onboarding, those employees were nearly three times as likely to say they have the best possible job. Overall, only 29 percent of new hires felt they were prepared and supported to excel in their new role. This leaves a lot of room for improvement.

Other studies consistently show a positive correlation between engaged employees and a company's profitability, turnover rate, safety record, absenteeism, product quality and customer ratings. An effective onboarding plan offers an ideal opportunity to boost employee engagement by, for example, fostering a supportive relationship between new hires and management, reinforcing the company's commitment to helping employees' professional growth and proving that management recognizes the employees' talent.   For further reading learn  how to optimize the onboarding process  and the importance of good onboarding . 

Relatedly, an  employee value proposition  (EVP) defines the value employees will get from working for a particular organization. It embodies the promises made during recruitment and is lived out every day through company culture. Onboarding gives employees their first look at how an organization's EVP may or may not be realized.

Onboarding Process Summary

While there are many ways to design an onboarding program, some components are integral to the process:

1. Preboarding

Consider inviting new employees to tour the facility, sending informational material, providing care packages, and assigning a buddy to help them integrate before their official start date.

2. Orientation

Introduce employees to the organization's structure, vision, mission, and values; review employee handbook and major policies; complete paperwork; cover administrative procedures; and provide other mandatory training.

3. Foundation Building

Ensure the onboarding process consistently embodies an organization's culture, mission, employee value proposition, brand, and other foundational elements, recognizing that assimilating these values takes time.

4. Mentoring and Buddy Systems

In partnership with hiring managers, enlist mentors or buddies to provide new employees with guidance, assistance, and insights into organizational nuances.

View our full guide on onboarding process steps.

Innovative Approaches to Onboarding

Various components of an onboarding program can be delivered using different approaches and methodologies combined to suit the organization and available resources.

Some employers are using innovative practices, such as games, video, and team-building exercises, to get new hires excited about joining the company. They're also working to make sure people can hit the ground running with functional workstations and equipment. Some examples of this include: 

Facebook has its "45-minute rule," which means all new employees can begin to work within 45 minutes of arriving because all of their systems and devices have been set up before they report for their first day.

Leaders at Suffolk Construction, a national construction firm based in Boston, invite entry-level hires to participate in a variety of team-building exercises, including rowing the Charles River. 

New employees at Bedgear, a Farmingdale, N.Y.-based manufacturer of performance bedding, take a walking tour of downtown Manhattan to visit other retailers that sell customized products, including Warby Parker and Samsung.

View more  original onboarding options, shared from 4 HR leaders . 

Continue Learning About Onboarding

Additional resources:.

• Checklist for Developing Onboarding/New Hire Practices
• New Hire Orientation Checklist
• New-Hire Orientation Process
• New Hire Survey
• New Hire Survey – Remote Employee
• Onboarding Companies and Vendors in the SHRM Vendor Directory  
• SHRM Store resources on  Onboarding

HR Daily Newsletter

New, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.

Success title

Success caption

• Share full article

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

The Possible Collapse of the U.S. Home Insurance System

A times investigation found climate change may now be a concern for every homeowner in the country..

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

From “The New York Times,” I’m Sabrina Tavernise. And this is “The Daily.”

[MUSIC PLAYING]

Today, my colleague, Christopher Flavelle, on a “Times” investigation into one of the least known and most consequential effects of climate change — insurance — and why it may now be a concern for every homeowner in the country.

It’s Wednesday, May 15.

So, Chris, you and I talked a while ago about how climate change was really wreaking havoc in the insurance market in Florida. You’ve just done an investigation that takes a look into the insurance markets more broadly and more deeply. Tell us about it.

Yeah, so I cover climate change, in particular the way climate shocks affect different parts of American life. And insurance has become a really big part of that coverage. And Florida is a great example. As hurricanes have gotten worse and more frequent, insurers are paying out more and more money to rebuild people’s homes. And that’s driving up insurance costs and ultimately driving up the cost of owning a home in Florida.

So we’re already seeing that climate impact on the housing market in Florida. My colleagues and I started to think, well, could it be that that kind of disruption is also happening in other states, not just in the obvious coastal states but maybe even through the middle of the US? So we set out to find out just how much it is happening, how much that Florida turmoil has, in fact, become really a contagion that is spreading across the country.

So how did you go about reporting this? I mean, where did you start?

All we knew at the start of this was that there was reason to think this might be a problem. If you just look at how the federal government tracks disasters around the country, there’s been a big increase almost every year in the number and severity of all kinds of disasters around the country. So we thought, OK, it’s worth trying to find out, what does that mean for insurers?

The problem is getting data on the insurance industry is actually really hard. There’s no federal regulation. There’s no government agency you can go to that holds this data. If you talk to the insurers directly, they tend to be a little reluctant to share information about what they’re going through. So we weren’t sure where to go until, finally, we realized the best people to ask are the people whose job it is to gauge the financial health of insurance companies.

Those are rating agencies. In particular, there’s one rating company called AM Best, whose whole purpose is to tell investors how healthy an insurance company is.

Whoa. So this is way down in the nuts and bolts of the US insurance industry.

Right. This is a part of the broader economy that most people would never experience. But we asked them to do something special for us. We said, hey, can you help us find the one number that would tell us reporters just how healthy or unhealthy this insurance market is state by state over time? And it turns out, there is just such a number. It’s called a combined ratio.

OK, plain English?

Plain English, it is the ratio of revenue to costs, how much money these guys take in for homeowner’s insurance and how much they pay out in costs and losses. You want your revenue to be higher than your costs. If not, you’re in trouble.

So what did you find out?

Well, we got that number for every state, going back more than a decade. And what it showed us was our suspicions were right. This market turmoil that we were seeing in Florida and California has indeed been spreading across the country. And in fact, it turns out that in 18 states, last year, the homeowner’s insurance market lost money. And that’s a big jump from 5 or 10 years ago and spells real trouble for insurance and for homeowners and for almost every part of the economy.

So the contagion was real.

Right. This is our first window showing us just how far that contagion had spread. And one of the really striking things about this data was it showed the contagion had spread to places that I wouldn’t have thought of as especially prone to climate shocks — for example, a lot of the Midwest, a lot of the Southeast. In fact, if you think of a map of the country, there was no state between Pennsylvania and the Dakotas that didn’t lose money on homeowner’s insurance last year.

So just huge parts of the middle of the US have become unprofitable for homeowner’s insurance. This market is starting to buckle under the cost of climate change.

And this is all happening really fast. When we did the Florida episode two years ago, it was a completely new phenomenon and really only in Florida. And now it’s everywhere.

Yeah. And that’s exactly what’s so striking here. The rate at which this is becoming, again, a contagion and spreading across the country is just demolishing the expectations of anyone I’ve spoken to. No one thought that this problem would affect so much of the US so quickly.

So in these states, these new places that the contagion has spread to, what exactly is happening that’s causing the insurance companies to fold up shop?

Yeah. Something really particular is happening in a lot of these states. And it’s worth noting how it’s surprised everyone. And what that is, is formally unimportant weather events, like hailstorms or windstorms, those didn’t used to be the kind of thing that would scare insurance companies. Obviously, a big problem if it destroys your home or damages your home. But for insurers, it wasn’t going to wipe them out financially.

Right. It wasn’t just a complete and utter wipeout that the company would then have to pony up a lot of money for.

Exactly. And insurers call them secondary perils, sort of a belittling term, something other than a big deal, like a hurricane.

These minor league weather events.

Right. But those are becoming so frequent and so much more intense that they can cause existential threats for insurance companies. And insurers are now fleeing states not because of hurricanes but because those former things that were small are now big. Hailstorms, wildfires in some places, previous annoyances are becoming real threats to insurers.

Chris, what’s the big picture on what insurers are actually facing? What’s happening out there numbers-wise?

This is a huge threat. In terms of the number of states where this industry is losing money, it’s more than doubled from 10 years ago to basically a third of the country. The amount they’re losing is enormous. In some states, insurers are paying out $1.25 or even $1.50 for every dollar they bring in, in revenue, which is totally unsustainable.

And the result is insurers are making changes. They are pulling back from these markets. They’re hiking premiums. And often, they’re just dropping customers. And that’s where this becomes real, not just for people who surf balance sheets and trade in the stock market. This is becoming real for homeowners around the country, who all of a sudden increasingly can’t get insurance.

So, Chris, what’s the actual implication? I mean, what happens when people in a state can’t get insurance for their homes?

Getting insurance for a home is crucial if you want to sell or buy a home. Most people can’t buy a home without a mortgage. And banks won’t issue a mortgage without home insurance. So if you’ve got a home that insurance company doesn’t want to cover, you got a real problem. You need to find insurance, or that home becomes very close to unsellable.

And as you get fewer buyers, the price goes down. So this doesn’t just hurt people who are paying for these insurance premiums. It hurts people who want to sell their homes. It even could hurt, at some point, whole local economies. If home values fall, governments take in less tax revenue. That means less money for schools and police. It also means people who get hit by disasters and have to rebuild their homes all of a sudden can’t, because their insurance isn’t available anymore. It’s hard to overstate just how big a deal this is.

And is that actually happening, Chris? I mean, are housing markets being dragged down because of this problem with the insurance markets right now?

Anecdotally, we’ve got reports that in places like Florida and Louisiana and maybe in parts of California, the difficulty of getting insurance, the crazy high cost of insurance is starting to depress demand because not everyone can afford to pay these really high costs, even if they have insurance. But what we wanted to focus on with this story was also, OK, we know where this goes eventually. But where is it beginning? What are the places that are just starting to feel these shocks from the insurance market?

And so I called around and asked insurance agents, who are the front lines of this. They’re the ones who are struggling to find insurance for homeowners. And I said, hey, is there one place that I should go if I want to understand what it looks like to homeowners when all of a sudden insurance becomes really expensive or you can’t even find it? And those insurance agents told me, if you want to see what this looks like in real life, go to a little town called Marshalltown in the middle of Iowa.

We’ll be right back.

So, Chris, you went to Marshalltown, Iowa. What did you find?

Even before I got to Marshalltown, I had some idea I was in the right spot. When I landed in Des Moines and went to rent a car, the nice woman at the desk who rented me a car, she said, what are you doing here? I said, I’m here to write a story about people in Iowa who can’t get insurance because of storms. She said, oh, yeah, I know all about that. That’s a big problem here.

Even the rental car lady.

Even the rental car lady knew something was going on. And so I got into my rental car and drove about an hour northeast of Des Moines, through some rolling hills, to this lovely little town of Marshalltown. Marshalltown is a really cute, little Midwestern town with old homes and a beautiful courthouse in the town square. And when I drove through, I couldn’t help noticing all the roofs looked new.

What does that tell you?

Turns out Marshalltown, despite being a pastoral image of Midwestern easy living, was hit by two really bad disasters in recent years — first, a devastating tornado in 2018 and then, in 2020, what’s called a derecho, a straight-line wind event that’s also just enormously damaging. And the result was lots of homes in this small town got severely damaged in a short period of time. And so when you drive down, you see all these new roofs that give you the sense that something’s going on.

So climate had come to Marshalltown?

Exactly. A place that had previously seemed maybe safe from climate change, if there is such a thing, all of a sudden was not. So I found an insurance agent in Marshalltown —

We talked to other agents but haven’t talked to many homeowners.

— named Bobby Shomo. And he invited me to his office early one morning and said, come meet some people. And so I parked on a quiet street outside of his office, across the street from the courthouse, which also had a new roof, and went into his conference room and met a procession of clients who all had versions of the same horror story.

It was more — well more of double.

A huge reduction in coverage with a huge price increase.

Some people had faced big premium hikes.

I’m just a little, small business owner. So every little bit I do feel.

They had so much trouble with their insurance company.

I was with IMT Insurance forever. And then when I moved in 2020, Bobby said they won’t insure a pool.

Some people had gotten dropped.

Where we used to see carriers canceling someone for frequency of three or four or five claims, it’s one or two now.

Some people couldn’t get the coverage they needed. But it was versions of the same tale, which is all of a sudden, having homeowner’s insurance in Marshalltown was really difficult. But I wanted to see if it was bigger than just Marshalltown. So the next day, I got back in my car and drove east to Cedar Rapids, where I met another person having a version of the same problem, a guy named Dave Langston.

Tell me about Dave.

Dave lives in a handsome, modest, little townhouse on a quiet cul-de-sac on a hill at the edge of Cedar Rapids. He’s the president of his homeowners association. There’s 17 homes on this little street. And this is just as far as you could get from a danger zone. It looks as safe as could be. But in January, they got a letter from the company that insures him and his neighbors, saying his policy was being canceled, even though it wasn’t as though they’d just been hit by some giant storm.

So then what was the reason they gave?

They didn’t give a reason. And I think people might not realize, insurers don’t have to give a reason. Insurance policies are year to year. And if your insurance company decides that you’re too much of a risk or your neighborhood is too much of a risk or your state is too much of a risk, they can just leave. They can send you a letter saying, forget it. We’re canceling your insurance. There’s almost no protection people have.

And in this case, the reason was that this insurance company was losing too much money in Iowa and didn’t want to keep on writing homeowner’s insurance in the state. That was the situation that Dave shared with tens of thousands of people across the state that were all getting similar letters.

What made Dave’s situation a little more challenging was that he couldn’t get new insurance. He tried for months through agent after agent after agent. And every company told him the same thing. We won’t cover you. Even though these homes are perfectly safe in a safe part of the state, nobody would say yes. And it took them until basically two days before their insurance policy was going to run out until they finally found new coverage that was far more expensive and far more bare-bones than what they’d had.

But at least it was something.

It was something. But the problem was it wasn’t that good. Under this new policy, if Dave’s street got hit by another big windstorm, the damage from that storm and fixing that damage would wipe out all the savings set aside by these homeowners. The deductible would be crushingly high — $120,000 — to replace those roofs if the worst happened because the insurance money just wouldn’t cover anywhere close to the cost of rebuilding.

He said to me, we didn’t do anything wrong. This is just what insurance looks like today. And today, it’s us in Cedar Rapids. Everyone, though, is going to face a situation like this eventually. And Dave is right. I talked to insurance agents around the country. And they confirmed for me that this kind of a shift towards a new type of insurance, insurance that’s more expensive and doesn’t cover as much and makes it harder to rebuild after a big disaster, it’s becoming more and more common around the country.

So, Chris, if Dave and the people you spoke to in Iowa were really evidence that your hunch was right, that the problem is spreading and rapidly, what are the possible fixes here?

The fix that people seem most hopeful about is this idea that, what if you could reduce the risk and cause there to be less damage in the first place? So what some states are doing is they’re trying to encourage homeowners to spend more money on hardening their home or adding a new roof or, if it’s a wildfire zone, cut back the vegetation, things that can reduce your risk of having really serious losses. And to help pay for that, they’re telling insurers, you’ve got to offer a discount to people who do that.

And everyone who works in this field says, in theory, that’s the right approach. The problem is, number one, hardening a home costs a fantastic amount of money. So doing this at scale is hugely expensive. Number two, it takes a long time to actually get enough homes hardened in this way that you can make a real dent for insurance companies. We’re talking about years or probably decades before that has a real effect, if it ever works.

OK. So that sounds not particularly realistic, given the urgency and the timeline we’re on here. So what else are people looking at?

Option number two is the government gets involved. And instead of most Americans buying home insurance from a private company, they start buying it from government programs that are designed to make sure that people, even in risky places, can still buy insurance. That would be just a gargantuan undertaking. The idea of the government providing homeowner’s insurance because private companies can’t or won’t would lead to one of the biggest government programs that exists, if we could even do it.

So huge change, like the federal government actually trying to write these markets by itself by providing homeowner’s insurance. But is that really feasible?

Well, in some areas, we’re actually already doing it. The government already provides flood insurance because for decades, most private insurers have not wanted to cover flood. It’s too risky. It’s too expensive. But that change, with governments taking over that role, creates a new problem of its own because the government providing flood insurance that you otherwise couldn’t get means people have been building and building in flood-prone areas because they know they can get that guaranteed flood insurance.

Interesting. So that’s a huge new downside. The government would be incentivizing people to move to places that they shouldn’t be.

That’s right. But there’s even one more problem with that approach of using the government to try to solve this problem, which is these costs keep growing. The number of billion-dollar disasters the US experiences every year keeps going up. And at some point, even if the government pays the cost through some sort of subsidized insurance, what happens when that cost is so great that we can no longer afford to pay it? That’s the really hard question that no official can answer.

So that’s pretty doomsday, Chris. Are we looking at the end of insurance?

I think it’s fair to say that we’re looking at the end of insurance as we know it, the end of insurance that means most Americans can rest assured that if they get hit by a disaster, their insurance company will provide enough money they can rebuild. That idea might be going away. And what it shows is maybe the threat of climate change isn’t quite what we thought.

Maybe instead of climate change wrecking communities in the form of a big storm or a wildfire or a flood, maybe even before those things happen, climate change can wreck communities by something as seemingly mundane and even boring as insurance. Maybe the harbinger of doom is not a giant storm but an anodyne letter from your insurance company, saying, we’re sorry to inform you we can no longer cover your home.

Maybe the future of climate change is best seen not by poring over weather data from NOAA but by poring over spreadsheets from rating firms, showing the profitability from insurance companies, and how bit by bit, that money that they’re losing around the country tells its own story. And the story is these shocks are actually already here.

Chris, as always, terrifying to talk to you.

Always a pleasure, Sabrina.

Here’s what else you should know today. On Tuesday, the United Nations has reclassified the number of women and children killed in Gaza, saying that it does not have enough identifying information to know exactly how many of the total dead are women and children. The UN now estimates that about 5,000 women and about 8,000 children have been killed, figures that are about half of what it was previously citing. The UN says the numbers dropped because it is using a more conservative estimate while waiting for information on about 10,000 other dead Gazans who have not yet been identified.

And Mike Johnson, the Speaker of the House, gave a press conference outside the court in Lower Manhattan, where Michael Cohen, the former fixer for Donald Trump, was testifying for a second day, answering questions from Trump’s lawyers. Trump is bound by a gag order. So Johnson joined other stand-ins for the former president to discredit the proceedings. Johnson, one of the most important Republicans in the country, attacked Cohen but also the trial itself, calling it a sham and political theater.

Today’s episode was produced by Nina Feldman, Shannon Lin, and Jessica Cheung. It was edited by MJ Davis Lin, with help from Michael Benoist, contains original music by Dan Powell, Marion Lozano, and Rowan Niemisto, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Sabrina Tavernise. See you tomorrow.

• May 17, 2024   •   51:10 The Campus Protesters Explain Themselves
• May 16, 2024   •   30:47 The Make-or-Break Testimony of Michael Cohen
• May 15, 2024   •   27:03 The Possible Collapse of the U.S. Home Insurance System
• May 14, 2024   •   35:20 Voters Want Change. In Our Poll, They See It in Trump.
• May 13, 2024   •   27:46 How Biden Adopted Trump’s Trade War With China
• May 10, 2024   •   27:42 Stormy Daniels Takes the Stand
• May 9, 2024   •   34:42 One Strongman, One Billion Voters, and the Future of India
• May 8, 2024   •   28:28 A Plan to Remake the Middle East
• May 7, 2024   •   27:43 How Changing Ocean Temperatures Could Upend Life on Earth
• May 6, 2024   •   29:23 R.F.K. Jr.’s Battle to Get on the Ballot
• May 3, 2024   •   25:33 The Protesters and the President
• May 2, 2024   •   29:13 Biden Loosens Up on Weed

Hosted by Sabrina Tavernise

Featuring Christopher Flavelle

Produced by Nina Feldman ,  Shannon M. Lin and Jessica Cheung

Edited by MJ Davis Lin

With Michael Benoist

Original music by Dan Powell ,  Marion Lozano and Rowan Niemisto

Engineered by Alyssa Moxley

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music | YouTube

Across the United States, more frequent extreme weather is starting to cause the home insurance market to buckle, even for those who have paid their premiums dutifully year after year.

Christopher Flavelle, a climate reporter, discusses a Times investigation into one of the most consequential effects of the changes.

On today’s episode

Christopher Flavelle , a climate change reporter for The New York Times.

Background reading

As American insurers bleed cash from climate shocks , homeowners lose.

See how the home insurance crunch affects the market in each state .

Here are four takeaways from The Times’s investigation.

There are a lot of ways to listen to The Daily. Here’s how.

We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Christopher Flavelle contributed reporting.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Christopher Flavelle is a Times reporter who writes about how the United States is trying to adapt to the effects of climate change. More about Christopher Flavelle

Advertisement

Boeing shareholders approve CEO’s compensation as company faces investigations, possible prosecution

FILE- A Boeing 737 MAX 7 is displayed during a debut for employees and media on Feb. 5, 2018, in Renton, Wash. Boeing holds a virtual shareholders' meeting on Friday, May 17, 2024, as it deals with multiple federal investigations, frustrated airline customers and disappointing financial results. (AP Photo/Elaine Thompson, File)[ASSOCIATED PRESS/Elaine Thompson]

Boeing shareholders on Friday approved CEO David Calhoun’s $32.8 million compensation and heard leaders explain what the troubled aircraft maker is doing to improve the quality and safety of its planes after a door plug blew off a Boeing 737 Max jetliner in January.

Calhoun said the company is finishing a 90-day plan for fixing its manufacturing problems — a report the Federal Aviation Administration demanded after the door-plug blowout.

The CEO added that the company is still working to complete an acquisition of key supplier Spirit AeroSystems , but he gave no deadline for completion. Spirit makes fuselages for Max jets and has been a source of manufacturing flaws.

The shareholder meeting was conducted online and heavily scripted. A moderator posed a handful of shareholder questions, which Calhoun and Steven Mollenkopf, the new chairman of Boeing’s Board of Directors, fielded by seeming to read their answers. None of the questions were too pointed.

Shareholders approved an advisory measure on executive compensation — nearly all of Calhoun’s pay for 2023 was in stock awards — and rejected shareholder resolutions dealing with subjects such as pay gaps for women and people of color, and the company’s ties to China. Vote counts were not immediately provided.

The company has lost more than $23 billion — including $2.2 billion last year — since Calhoun took over as CEO in January 2020, mostly related to a pair of deadly 737 Max crashes that occurred in Indonesia and Ethiopia while he was on the board but before he became chief executive.

Through Thursday, the shares had fallen 27% since the door plug accident during an Alaska Airlines flight over Oregon.

“Our CEO was paid $33 million last year for failure,” said James McRitchie of CorpGov.net, an activist shareholder who presented an unrelated resolution during Friday’s online meeting.

Calhoun announced in March that he would step down at the end of the year. Another shareholder said Calhoun should leave immediately.

Boeing was made the subject of multiple investigations after the door plug blowout. It could also face criminal prosecution for allegedly violating terms of a settlement with the Justice Department after the Max crashes in 2018 and 2019, which killed 346 people. The company has fallen far behind European rival Airbus — the world’s other major manufacturer of large passenger jets — in sales and deliveries.

Mollenkopf said the months and years ahead are critical “as we take the necessary steps to regain the trust lost in recent times.”

“The world needs a healthy, safe and successful Boeing, and the board is going to make sure that is what it’s going to get,” he said.

Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.