4 parts of the business plan

What Are the 4 Important Parts of a Business Plan?

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• Business Planning & Strategy
• Importance of Business Plans
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How to Write a Strategic Plan to Raise Capital

How to prepare business plans, what are the components of a good business plan.

• How to Write a Comprehensive Business Plan
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When you’re starting a small business, a sound business plan is a critical element you need to secure funding and develop your operational and marketing tactics. While there are several different sections within a business plan, it’s critical to focus on the most important ones so that you can guide your business where you want it to go.

The four most important sections of a business plan include your unique value proposition, details about your management team, your market analysis and your financial projections.

The 4 Most Important Elements of a Business Plan

According to the U.S. Small Business Administration , a business plan is like a GPS for your new venture. Without it, you can often feel lost or confused. Taking time to write out a solid business plan helps to cement your ideas and fine tune your tactics. This is a good exercise to do even if you don’t need to get funding for your business. A business plan helps entrepreneurs think through their ideas carefully, and provides the next steps they need to take to succeed.

When you’re writing a business plan, it’s important to consider your audience. In many cases, this includes potential investors, partners or financial institutions. They want to understand why your business is posed to succeed and why you are the person that’s going to get it there. As a result, there are four key areas you need to focus on in your business plan, in addition to the rest of its contents:

• The unique value proposition of your business
• The experience, education and successes of your management team
• A detailed market analysis
• A realistic financial projection

Anyone who is looking at your business plan will pay special attention to these four key areas because they summarize your plan for success.

Describe Your Unique Value Proposition

Directly after your executive summary, you need to include a section in your business plan where you describe your company and the products or services you sell. This section should include details on your business structure, legal form and whether you need any special licenses or permits. This practical information is key, according to Entrepreneur , because investors need to see that you have the logistical details in place.

This section is a key element of your business plan because you have the opportunity to showcase what makes your business unique. According to Forbes , it’s critical to show how your products and services are different from your competition. For example, do you use a new ingredient that other cafés don't have, or do you have a unique process no one else in the industry knows? These are the types of things you’ll need to include in this section of your business plan.

Plus, be sure to outline who your market is. Who are your ideal customers and why will they be interested in what you have to offer? You can provide an overview of your prospects here and delve deeper into it in your market analysis.

Showcase Your Management Team

A most important aspect of a business plan is the management bios. When it comes to small businesses, your successes are interlinked with the company leadership. A business can succeed based on the experience, education and expertise of its owner. Similarly, it may fail if the leadership team makes poor decisions, lacks the proper experience or isn’t interested in learning new skills.

As a result, investors and financial institutions will want to know who is heading up your organization. Take some time to write up professional bios of your core management team. This may include the business owner and heads of key departments such as sales, marketing and product development.

The bios should contain previous positions the management team have held and what kind of accolades they have received. Adding quantitative metrics is key, such as a sales manager increasing sales in their last position by 110 percent. If anyone of the leadership team has previous experience starting a business, be sure to highlight this information and provide the successes of that business. You’ll also need to point out any skills gaps, and discuss how you plan to fill them with additional resources or outsourced assets, according to Constant Contact .

Conduct a Market Analysis

Another most important component of a business plan is the market analysis. In this key section, you need to cover why this is a viable market from a financial standpoint, according to The Business Plan Shop . This requires a lot of detailed quantitative and qualitative research into your target audience and your competition.

Begin by outlining who your audience is, and provide their demographic, geographic, behavioral and psychographic characteristics. It’s important to provide numbers wherever possible to show how big your potential market segment is and whether it can support your business. Be sure to outline what kind of problems or challenges they are experiencing and how your business can solve them.

You’ll also need to provide a competitive analysis by reviewing other players in your industry. Provide estimations on how much market share each competitor has and where you have opportunities to take market share from them. This section should also include any barriers to entry. For example, can anyone open up a similar store and take market share away from you?

Provide Financial Statements and Projections

Perhaps the most important part of a business plan, especially for investors, partners and financial institutions, is your financial projections. These show the viability of your business in the years to come, according to Constant Contact. While complicated graphs, charts and spreadsheets can look intimidating, it’s important to be familiar with them and be able to talk about them in plain English. Entrepreneur recommends providing a cover page to the financial document section describing the content in detail.

Be sure to include these three financial statements in this section:

• Income statement: Entrepreneur recommends listing your income projections monthly for your first year of business, quarterly for your second year of business and annually after that.
• Cash flow statement: This document is important for investors because it shows how much money is required for your business, where it’s going to come from and when it’s going to come in.
• Balance sheet: This document summarizes your business’ assets, liabilities and equity.

Other Important Elements of Your Business Plan

While these four sections are key to your business plan, it’s important to also focus on the other necessary sections. Typically, business plans follow a templated order so that information is provided in a logical format to meet your investors’ needs. Be sure to include these sections within your business plan:

• Executive summary
• Mission and vision statement
• Business description and unique value proposition
• Management team biographies
• Market analysis with competitor details and target market segmentation
• Marketing plan
• SWOT analysis (strengths, weaknesses, opportunities, threats)
• Logistics and operations plan
• Financial statements and projections

Some investors or financial institutions may have separate requirements for business plans, so it’s important to keep your audience in mind when writing it out. Whenever possible, be sure to provide concrete examples, quantitative information and intricate details. Remember that writing out a business plan is useful for you even if you’re not seeking investment or funds, because it will help you clarify your plans and develop market strategies for success.

• U.S. Small Business Administration: 5 Reasons You Need a Business Plan
• Constant Contact: 4 Sections Every Business Plan Must Have (And Why they’re Important)
• Entrepreneur: Elements of a Business Plan
• Forbes: 10 Essential Business Plan Components
• The Business Plan Shop: How to Do a Market Analysis for a Business Plan

Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.

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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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

Noah Parsons

24 min. read

Updated April 10, 2024

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

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

• The basics of business planning

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

You understand that planning helps you: 

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

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

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

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

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

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

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

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

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

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

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• What to include in your business plan

Executive summary

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

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

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

Your executive summary should include:

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

Dig Deeper: How to write an effective executive summary

Products and services description

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

This is usually called a problem and solution statement .

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

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

Market analysis

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

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

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

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

Related: Target market examples

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

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

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

Dig Deeper: Learn how to write a market analysis

Competitive analysis

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

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

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

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

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

Marketing and sales plan

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

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

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

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

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

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

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

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

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

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

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

Business operations

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

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

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

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

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

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

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

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

Key milestones and metrics

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

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

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

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

Possible milestones might be:

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

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

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

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

Dig Deeper: How to use milestones in your business plan

Organization and management team

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

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

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

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

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

• Sole proprietor
• Partnership

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

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

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

Financial plan

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

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

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

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

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

Dig Deeper: How to create financial forecasts and budgets

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

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

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

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

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

Your cover page should be simple and include:

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

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

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

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

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

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

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

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

• Writing tips and strategies

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

Determine why you are writing a business plan

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

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

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

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

Keep things concise

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

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

Have someone review your business plan

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

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

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

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

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

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

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

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

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

Common pitfalls and how to avoid them

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

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

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

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

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

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

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

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

Use your business plan to manage your business

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

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

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

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

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

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

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

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

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

Learn More: How to run a regular plan review

Free business plan templates and examples

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

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How to write a business plan FAQ

What is a business plan?

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

What are the benefits of a business plan?

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

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

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

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

What are the 5 most common business plan mistakes?

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

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

What questions should be answered in a business plan?

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

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

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

How long should a business plan be?

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

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

What are the different types of business plans?

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

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

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

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

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

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

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

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

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

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

Table of Contents

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

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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.

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10 Essential Components of a Business Plan and How to Write Them

Business Plan Template

Ayush Jalan

• January 4, 2024

12 Min Read

A business plan is an essential document for any business, whether it’s a startup or an established enterprise. It’s the first thing any interested investor will ask for if they like your business idea and want to partner with you. 

That’s why it’s important to pay attention when writing your business plan and the components inside it. An incomplete business plan can give the impression that you’re unqualified—discouraging investors and lenders. 

A good business plan reduces ambiguity and communicates all essential details such as your financials, market analysis, competitive analysis, and a timeline for implementation of the plan. In this article, we’ll discuss the 10 important business plan components. 

10 Important Business Plan Components

A comprehensive and well-thought-out business plan acts as a roadmap that guides you in making sound decisions and taking the right actions at the right times. Here are its key components and what to include in them.

1. Executive summary

The executive summary is one of the most important parts of a business plan. It’s the first thing potential investors will read and should therefore provide a clear overview of your business and its goals.

In other words, it helps the reader get a better idea of what to expect from your company. So, when writing an executive summary of your business, don’t forget to mention your mission and vision statement.

Mission statement

A mission statement is a brief statement that outlines your objectives and what you want to achieve. It acts as a guiding principle that informs decisions and provides a clear direction for the organization to follow.

For instance, Google’s mission is to “organize the world’s information and make it universally accessible and useful.” It’s short, inspiring, and immediately communicates what the company does.

A mission statement should be realistic, and hint towards a goal that is achievable in a reasonable amount of time with the resources you currently have or are going to acquire in the near future.

Vision statement

While a mission statement is more actionable and has an immediate effect on the daily activities of the company, a vision statement is more aspirational and has a much broader scope.

In other words, it highlights where the company aims to go in the future and the positive change it hopes to make in the world within its lifetime.

2. Company description

The second component of your business plan is the company description. Here, you provide a brief overview of your company, its products or services, and its history. You can also add any notable achievements if they are significant enough for an investor to know.

A company overview offers a quick bird’s-eye view of things such as your business model , operational capabilities, financials, business philosophy, size of the team, code of conduct, and short-term and long-term objectives.

Products and services

The products and services part of your company description explains what your business offers to its customers, how it’s delivered, and the costs involved in acquiring new customers and executing a sale.

Company History

Company history is the timeline of events that took place in your business from its origin to the present day. It includes a brief profile of the founder(s) and their background, the date the company was founded, any notable achievements and milestones, and other similar facts and details.

If you’re a startup, you’ll probably not have much of a history to write about. In that case, you can share stories of the challenges your startup faced during its inception and how your team overcame them.

3. Market analysis

The market analysis section of your business plan provides an in-depth analysis of the industry, target market, and competition. It should underline the risks and opportunities associated with your industry, and also comment on the attributes of your target customer.

Demographics and segmentation

Understanding the demographics of your customers plays a big role in how well you’re able to identify their traits and serve them.

By dividing your target audience into smaller and more manageable groups, you can tailor your services and products to better meet their needs.

You can use demographics such as age, gender, income, location, ethnicity, and education level to better understand the preferences and behaviors of each segment, and use that data to create more effective marketing strategies.     

Target market and size

Understanding your target market lies at the core of all your marketing endeavors. After all, if you don’t have a clear idea of who you’re serving, you won’t be able to serve well no matter how big your budget is.

For instance, Starbucks’ primary target market includes working professionals and office workers. The company has positioned itself such that many of its customers start their day with its coffee.

Estimating the market size helps you know how much scope there is to scale your business in the future. In other words, you’re trying to determine how much potential revenue exists in this market and if it’s worth the investment.

Market need

The next step is to figure out the market need, i.e., the prevalent pain points that people in that market experience. The easiest way to find these pain points is to read the negative reviews people leave on Amazon for products that are similar to yours.

The better your product solves those pain points, the better your chances of capturing that market. In addition, since your product is solving a problem that your rivals can’t, you can also charge a premium price.

To better identify the needs of your target customers, it helps to take into account things such as local cultural values, industry trends, buying habits, tastes and preferences, price elasticity, and more.

4. Product Summary

The product summary section of your business plan goes into detail about the features and benefits that your products and services offer, and how they differ from your competitors. It also outlines the manufacturing process, pricing, cost of production, inventory, packaging, and capital requirements.

5. Competitive analysis

Unless you’ve discovered an untapped market, you’re probably going to face serious competition and it’s only going to increase as you scale your business later down the line.

This is where the competitive analysis section helps; it gives an overview of the competitive landscape, introduces your immediate rivals, and highlights the current dominant companies and their market share.

In such an environment, it helps to have certain competitive advantages against your rivals so you can stand out in the market. Simply put, a competitive advantage is the additional value you can provide to your customers that your rivals can’t—perhaps via unique product features, excellent customer service, or more.

Want to Perform Competitive Analysis for Your Business?

Discover your competition’s secrets effortlessly with our user-friendly and Free Competitor Analysis Generator!

6. Marketing and sales plan

The marketing and sales plan is one of the most important business plan components. It explains how you plan to penetrate the market, position your brand in the minds of the buyers, build brand loyalty, increase sales, and remain competitive in an ever-changing business environment.

Unique selling proposition

A unique selling proposition (USP) conveys how your products and services differ from those of your competitors, and the added value those differences provide.

A strong USP will stand out in a competitive market and make potential customers more likely to switch to your brand—essentially capturing the market share of your rivals.

Marketing Plan

Your product might be unique, but if people don’t even know that it exists, it won’t sell. That’s where marketing comes in.

A marketing plan outlines strategies for reaching your target market and achieving sales goals. It also outlines the budget required for advertising and promotion.

You may also include data on the target market, target demographics, objectives, strategies, a timeline, budget, and the metrics considered for evaluating success.

Sales and distribution plan

Once people are made aware of your product, the next step is to ensure it reaches them. This means having a competent sales and distribution plan and a strong supply chain.

Lay out strategies for reaching potential customers, such as online marketing, lead generation, retail distribution channels, or direct sales.

Your goal here is to minimize sales costs and address the risks involved with the distribution of your product. If you’re selling ice cream, for example, you would have to account for the costs of refrigeration and cold storage.

Pricing strategy

Pricing is a very sensitive yet important part of any business. When creating a pricing strategy , you need to consider factors such as market demand, cost of production, competitor prices, disposable income of target customers, and profitability goals.

Some businesses have a small profit margin but sell large volumes of their product, while others sell fewer units but with a massive markup. You will have to decide for yourself which approach you want to follow.

Before setting your marketing plans into action, you need a budget for them. This means writing down how much money you’ll need, how it will be used, and the potential return you are estimating on this investment.

A budget should be flexible, meaning that it should be open to changes as the market shifts and customer behavior evolves. The goal here is to make sure that the company is making the best use of its resources by minimizing the wastage of funds.

7. Operations plan

The operations plan section of your business plan provides an overview of how the business is run and its day-to-day operations. This section is especially important for manufacturing businesses.

It includes a description of your business structure, the roles and responsibilities of each team member, the resources needed, and the procedures you will use to ensure the smooth functioning of your business. The goal here is to maximize output whilst minimizing the wastage of raw material or human labor.

8. Management team

At the core of any successful business lies a dedicated, qualified, and experienced management team overlooking key business activities. 

This section provides an overview of the key members of your management team including their credentials, professional background, role and responsibilities, experience, and qualifications.

A lot of investors give special attention to this section as it helps them ascertain the competence and work ethic of the members involved.

Organizational structure

An organizational structure defines the roles, responsibilities, decision-making processes, and authority of each individual or department in an organization.

Having a clear organizational structure improves communication, increases efficiency, promotes collaboration, and makes it easier to delegate tasks. Startups usually have a flatter organizational hierarchy whereas established businesses have a more traditional structure of power and authority.

9. Financial Plan

Financials are usually the least fun thing to talk about, but they are important nonetheless as they provide an overview of your current financial position, capital requirements, projections, and plans for repayment of any loans. 

Your financial plan should also include an analysis of your startup costs, operating costs, administration costs, and sources of revenue.

Funding requirements

Once an investor has read through your business plan, it’s time to request funding. Investors will want to see an accurate and detailed breakdown of the funds required and an explanation of why the requested funds are necessary for the operation and expansion of your business.

10. Appendix

The appendix is the last section of your business plan and it includes additional supporting documents such as resumes of key team members, market research documents, financial statements, and legal documents. 

In other words, anything important or relevant that couldn’t fit in any of the former sections of your business plan goes in the appendix.

Write a Business Plan Worth Reading

Starting a business is never easy, but it’s a little less overwhelming if you have a well-made business plan. It helps you better navigate the industry, reduce risk, stay competitive, and make the best use of your time and money.

Remember, since every business is unique, every business plan is unique too, and must be regularly updated to keep up with changing industry trends. Also, it’s very likely that interested investors will give you feedback, so make sure to implement their recommendations as well.

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About the Author

Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

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Parts of Business Plan and Definition

The parts of business plan and definition refer to the governing document of your company and the elements it should include. 3 min read updated on February 01, 2023

The parts of business plan and definition refer to the governing document of your company and the elements it should include. The business plan thoroughly describes your company's purpose, structure, and goals for potential partners, stakeholders, and investors.

Purpose of a Business Plan

Your business plan will be informed by the specific goals for your business. The more complex your product or service, the more complex and detailed your business plan must be. If you are using the business plan to seek investors, you'll need to provide a thorough explanation of your concept and how it fits into your industry.

Once you've drafted a plan, show it to colleagues, partners, and mentors you trust. They can provide an objective view of the business plan and indicate areas where you may need to provide more thorough information.

Executive Summary

This is the first section of your business plan and provides a quick overview of what you want to accomplish with your company. This should comprise the mission statement followed by a description of the services and/or products you provide. Use this basic outline:

• Description of the business
• Products/services
• Market/competition
• Goals and objectives
• Owner and executive qualifications
• Funding information
• Cash and earnings projections

Company Description

A more involved company description should follow the executive summary. This section details the business's key information and examines the market segment you want to capture. The company description is the "meat" of your business plan and should include information about:

• The name of your business
• The business location
• The type of business entity (proprietorship, corporation, or limited liability company (LLC))
• How your company is different from its competition
• Growth and success factors
• How the products and services you offer will solve a problem or fill a need for your desired audience

This is also where you should include operational details such as your hiring plan for the first year or two in business with job classifications and duties. You should also indicate the type of facility you will need for operations and where it will be located.

Market Analysis

This section will demonstrate your understanding of your specific market as well as your industry as a whole. Include the following information:

• Description of your target market
• Overview of industry projection
• List of all competitors with business analysis of each

Product and Service Information

Describe the products and services your business will offer, providing enough detail for those who may be unfamiliar with your industry. Indicate whether you will need to patent your product idea and/or whether a patent application is pending. You should also indicate other steps you've taken to protect intellectual property such as your business name, product names, logo, and branding identity.

If you are manufacturing a product, include information about the materials you'll need and your suppliers for those materials as well as the production process.

Financial Projections

This section demonstrates your plan to make a profit using realistic numbers with a basis in research. Although your ideas are important, you'll also need to show that you will generate enough cash flow to capture a significant market share. Elements this section of your business plan should address include:

• Initial operating costs
• First-year cash flow and sales projects
• Personal expenses
• Start-up and growth financing
• Business bank accounts and/or credit lines
• Projected timeline to a positive cash flow

Management Information

A strong management team will inspire confidence in potential lenders, investors, and partners. The purpose of this section is to make your people shine by highlighting their unique strengths. This part of your business plan should include answers to these questions:

• Who are your company-level and department-level managers?
• What are their qualifications?
• How many full-time and part-time managers do you need?
• How many employees will each manage and what are their responsibilities?
• How will you fund wages and benefits?
• What are your plans for employee training and mentorship?

Additional Information

Complete your business plan with supplemental information that will strengthen your case. Finish with a summary that restates the highlights of your plan and indicates your determination to succeed as a business owner. Attach supporting documents such as licenses, permits, patents, product diagrams, building blueprints, and letters of support from consultants and/or your accountant and attorney.

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

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4 MAIN PARTS OF A BUSINESS PLAN: 4 Necessary Business Plan Components

• by Kenechukwu Muoghalu
• August 14, 2023
• No comments
• 8 minute read

Table of Contents Hide

#1. executive summary.

• #2. Construct The Management Bios
• #3. Market Analysis
• #4. Financial Plan

#1. It Shows Some Level of Seriousness About Your Business

#2. it secures you some funds, #3. gives more insights on the market terrain, #4. help you create critical decisions, #5. helps provide structure and management objectives to a business, #6. pins out potential weakness, key lessons on the 4 main parts of a business plan, what next, what is the basic structure of a business plan, what are the contents of a business plan, can i use a template to create my business plan.

If you are looking for a simplified way to create a unique business plan, then you should scan through these 4 main parts of a business plan listed in this article. It is right to say that a business plan can boost the growth of every business, but the structure of that plan is also important.

According to Wikipedia , a business plan entails the goals of a business, how to set and achieve those goals, and how long it will take to achieve the desired result. In order to create this road map for the success of your business, you need to pick some important components that should be enlisted in your business plan.

There are several components to a business plan, but this article will focus more on the most essential parts of a business plan. These four main parts of a business plan can cover either a small-scale business or a large-scale business, but the main focus should be on creating an effective business plan.

4 Necessary Business Plan Components

When it comes to components of a business plan, there are quite a handful of options. These options also cover a large-scale business. Out of these numerous options, there are major components that should be present in any business plan, they include:

Believe me, when I say that no one has all the time to go through your 30-pages business plan, you need a summary. The executive summary is one of the 4 main parts of a business plan that should not be ignored. Once you hand out your business plan to any reader, they will scan their eyes through your summary to know if the business sparks their idea or not.

An executive summary should be more of a call to action because it will determine if the reader should inquire further about your business or just let it slide.

While writing an executive summary, you should include your business mission statement. You should also include a description of your product and the services your business offers. Make the readers understand your level of knowledge in your business and how unique you are from the others .

# 2. Construct The Management Bios

The key people in your business will determine if the business will be a success or not. This is the reason why their bios must look outstanding to the readers. You will need to impress your readers so they can take interest in your business. That is the more reason why the management bios need to stand out.

Read Also: BENEFITS OF A BUSINESS PLAN: Benefits and Drawbacks

When creating their bios, enrich them with good quality skills that they possess. You can also refer back to their level of expertise and state how they are always ready to deliver services. Include previous positions, experiences, and how you intend to fill any skill gaps with outsourced assets. Note that one good page bio on each of the key people involved in your business is enough to keep you on the good side.

# 3. Market Analysis

In this section, explain why you chose this market and why you think it is important in this recent environment. You will also make some good research to detect who your audience and competitors are. You will also be making use of some quantitative analysis. This is because your readers need to see numbers need to detect how important your market segment is and how well it can boost your business. 

List the current challenges they may face and how your company can handle the problems. Review your competitors, discuss how far unique you are then they are and the possibilities of taking their market shares from them. From this, your readers or investors will detect how familiar you are with the market. Describe your customers and how to reach out to them to make sales.

# 4. Financial Plan

Your financial plan is another vital aspect of the 4 main parts of a business plan that is not to be ignored. Your financial projections are an area of interest to your partners and investors. This is because it determines the viability of your company in the future. Your financial statements should contain lots of numbers represented in charts. It should also contain a few words that describe what it is about.

To get the reader’s attention, add an introductory page to explain how the estimations were made in full detail.

In this section, you should also include income statements, balance sheets, and cash flow statements. When your financial sector is planned out well, it can guide you to start and grow your business.

Read Also: STARTING A BUSINESS: Best Guide For Beginners and Dummies

The income statements should entail your monthly income projections for the first year of your business, the second year of your business, and annually.

Cash flow statements also entail the movement of your capital. It shows how much your business needs when it will be generated, and when it is going to arrive.

This balance sheet holds the summary of your company’s assets, equity, and liabilities.

The Importance of Having a Business Plan

Entrepreneurs do not just create a business plan for the fun of it. A business plan has a lot to contribute to every business. Having looked at the 4 main parts of a business plan, now let’s buttress more on the importance of a business plan, to see more reasons why you need to create a breathtaking plan.

A business plan is more like having a strategy and when an entrepreneur has a strategy for their business, it only means that they are passionate about its growth. This passion shows some level of seriousness and will eventually attract investors, partners, or employees to the business.

A business plan can guarantee funds for your business either from your first stage or in years to come. If you have future plans of selling your company to another in the future or even borrowing from a bank, then a business plan is compulsory for that decision. Any financial aider would lookout for a business plan before financing your company.

Having a business plan will give you an edge in understanding your competitors and the market in a more accurate and broader manner. You will better understand the consumer trends and preferences and know how to navigate them to suit your company’s needs.

A business plan is responsible for most vital decisions when it comes to a business. One cannot seem to operate a company without having tons of decisive moments and that is where your business plan comes in handy. With a business plan, you will not need to always sit down and articulate your next move in your business. The presence of a business plan shows that most thinking has been done already. With that, it helps you make critical decisions in time and even ahead of time.

The structure and objective of any business will stand firm with the presence of a business plan and without one, objectives often become arbitrary. Some functions like sales targets and operational milestones will be on track with the aid of a plan. When these functions are guaranteed, it will be easier to measure and manage your company.

Potential pitfalls can ruin any company, but when the company has a business plan, it will identify those weaknesses even before it happens. As an entrepreneur, you might also need to share your business plan with potential professionals and experts to get their advice on how solid your plan looks.

Knowing what matters and following the 4 main parts of a business plan listed above while implementing all that applies is a good way to start off any business. Now to make sure you get the drip, let’s review the top lessons we went over in this article:

• For your business plan to be the talk of the town, you must acknowledge the importance of the 4 main parts of a business plan and inculcate them into your plan. They include the executive summary, marketing plan, financial plan, and key management bios.
• There are other necessary sections of a business plan that you can include in your plan. You can choose to include them if you need to because they must target a specific purpose, function, or audience.
• Don’t compose a boring business plan, make sure you have lots of exciting business ideas for your company. These plans should be listed on your executive summary in order to hook your readers and force them to take action.

Steps to Follow When Creating a Business Plan

• Your first action is to select sections of a business plan, you can make some selections from the 4 main parts of a business plan listed above. Each component should be viable to your business. You can also choose from other parts of a business plan that are not included here.
• Make a rough sketch to determine what you will include in each category of your business plan.
• Get your data and facts ready. These facts and information should be in support of your business plan.
• Fill in each section with the information you discovered. Both the section and its content should be in alignment.
• Lastly, carefully analyze each component with a friend or mentor.

Having known how to create a proper business plan, you can then proceed to choose a business that works for you. A bakery business plan won’t be a bad one to venture into and start making mind-blowing profits. To crown it all, you do not have to run extra work on this plan.

We have handled the hardest part of the job which is to create a compelling business plan. All you need to do is implement our plan in your business and watch it boom. Are you ready to start earning? Grab a copy now!

It is argued that business plans are not crucial but the truth is that every company needs a business plan. To create this business plan successfully, these 4 main parts of a business plan should be followed. When these features are all in check, your business will be healthy.

The structure of a business plan includes an executive summary, an overview of your business, market research and target market, marketing strategy, financial projection and an appendix.

A proper business plan should contain the overall nature of your business and the services you will offer to your customers. Also include the cost of organising the business, revenues and profile to make in the long run.

Yes, you can. A template can serve as a guide if you wish to create your business plan by yourself.

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Kenechukwu Muoghalu

Kenny, an accomplished business writer with a decade of experience, excels in translating intricate industry insights into engaging articles. Her passion revolves around distilling the latest trends, offering actionable advice, and nurturing a comprehensive understanding of the business landscape. With a proven track record of delivering insightful content, Kenny is dedicated to empowering her readers with the knowledge needed to thrive in the dynamic and ever-evolving world of business.

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8 Things You Need in a Business Plan

The Harvard Business Review says a good business plan is super important for entrepreneurs. It’s like a guide for them in the tricky world of business. The plan has different parts, and each part is like a piece of the puzzle for success.

For example, there’s the short and powerful Executive Summary that tells the most important things about the business. Then, there’s the smart Market Analysis that helps you understand what customers want.

All of these parts work together to make a strong plan. So, let’s take a closer look at these important pieces that help turn business dreams into successful reality.

What is a business plan?

A business plan is a detailed document that explains how a business works and what it aims to achieve. It outlines the business’s goals, strategies , and resources. It’s like a roadmap for the business, helping it stay on course and navigate challenges.

 The plan typically includes sections about the business’s description , market research , marketing and sales strategies, operations, management, and financial projections .

 Entrepreneurs use it to clarify their vision, secure funding, and measure progress. It’s a crucial tool for anyone starting or running a business, helping them make informed decisions and work toward success.

Need assistance in writing a business plan?

Contact our award-winning business plan writers now!

Eight Key Components of Business Plans

Crafting a business plan is akin to laying the foundation for a grand architectural masterpiece. It’s your roadmap to success, a strategic blueprint that breathes life into your entrepreneurial dreams. Allow me to take you on a journey through the essential components of this vital document.

• Executive Summary
• Business Description
• Market Analysis
• Marketing and Sales Strategy
• Operations Plan
• Management and Organization
• Financial Plan

1. Executive Summary

Picture this as the dazzling opening act of your business plan, where you showcase your vision, mission, and why your venture is destined for greatness. It’s a compelling glimpse into the heart and soul of your business.

It’s like a short summary of your business, including what it does and what makes it special.

• Advice: Keep it concise and engaging. Think of it as a teaser that makes people want to read more. Highlight what makes your business unique.

2. Business Description

Here, we dive deep into the DNA of your business. You’ll spill the beans on what you do, your industry, your history, and your grand plans for the future. It’s a snapshot that captures the essence of your business.

This part explains your business in detail, like what it sells, the industry it’s in, and its history.

• Advice: Be clear about what your business does and why it matters. Describe your industry and explain how your business fits into it.

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Explore our free business plan samples now!

3. Market Analysis

This section is where we turn detective. We unearth market trends, study customer behaviors, and dissect your competitors. It’s a treasure trove of insights that helps you navigate the marketplace.

Here, you look at the market your business is in. You study things like customer behavior and what other businesses are doing.

• Advice: Research thoroughly. Understand your customers’ needs and your competition. Show that you know your market inside and out.

4. Marketing and Sales Strategy

Imagine this as the stage where you reveal your magic tricks. Here, you outline how you’ll entice and retain your customers. It’s where the art of attracting and selling meets strategy.

This section talks about how you’ll get customers and sell your products or services.

• Advice: Outline your plan for attracting customers and selling your products or services. Focus on how you’ll reach your target audience and convince them to buy from you.

5. Operations Plan

Ever wondered how the show runs backstage? This is where you spill the beans. From location to logistics, it’s the nitty-gritty of daily operations. It’s the backbone that keeps your business standing tall.

It’s about how your business will work day-to-day, like where you’ll be located and how you’ll make your products.

Advice: Detail how your business will operate day-to-day. Discuss your location, equipment, suppliers, and how you’ll ensure quality.

6. Management and Organization

Introducing the cast and crew of your business. Who’s in charge? What’s their expertise? It’s where you showcase your dream team and the hierarchy that keeps everything in check.

This part introduces the people running the business and how it’s organized.

• Advice: Introduce your team and their qualifications. Explain who’s in charge and how your business is structured.

7. Financial Plan

This section is your crystal ball into the future. It predicts your financial performance, balances your books, and forecasts cash flows. Investors love it, and you will too.

It’s like a prediction of how much money your business will make and spend in the future.

Advice: Be realistic with your financial projections. Include income, expenses, and cash flow predictions. Show how you’ll make a profit.

8. Appendix

This is your secret stash. All those extra documents, licenses, contracts, and accolades find their home here. It’s the vault of credibility that adds weight to your plan.

This is where you put extra documents like licenses, contracts, and other important stuff.

• Advice: Use this section for supporting documents. Include licenses, contracts, and anything that adds credibility to your plan.

Hire our professional business plan writing consultants now!

Remember, your business plan isn’t set in stone. It’s a living, breathing document that evolves with your journey. It’s your guiding star, your go-to reference, and your pitch to investors, all rolled into one.

With a well-crafted business plan, you’re equipped to clarify your vision, rally support from investors, and steer your venture to success. So, let’s get started on your masterpiece!

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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 .

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4 Components of a Successful Business Plan

Business plan basics to get you started.

October 07, 2019

Among experts there is a debate about the necessity for a business plan. Some say that you only need a business plan if you are seeking some sort of loan or funding from investors. Some even say that taking the time required to create a business plan can stifle the startup process and cost precious opportunities for a small business.

In my opinion, writing a business plan is necessary whether you need outside investors or not. The process of writing a winning plan forces you to invest significant time and energy into thinking about your business and doing your homework.

Plans are also written to help existing businesses grow, but that aspect of “strategic planning” is different than what I’m writing about today, which is to provide a framework to convince an investor, and yourself, that your plan possesses the necessary ingredients to become one of the 5% of new businesses that succeed. Savvy investors and lenders know the odds and unless you educate yourself on the realities of winning plans, your plan will likely make its way to the bottom of the waste basket.

If you are a start-up or you’ve been in business for decades, below are the four most important components you should include in your business plan.

The Business

Also called Business Strategy or Business Description, this section might include such subsections as Business Opportunity, Organization and Operations, Legal Structure, Business Model, Operating Procedures, Operations Description, Management, Personnel, Strengths and Weaknesses, Core Competencies and Challenges, Business Accomplishments, Location, Product Offering, Product or Service, Records and Insurance.

In the Business section, make sure you “sell” the one reason your business will be able to generate excessive cash flow. Remember that you are selling by communicating your experience and education, not by promoting your company with empty words and promises.

The Marketing

Also called Market Strategy and including subsections such as Target Markets, Customers, Competition, Distribution, Relationships, Advertising, Pricing, Industry and Market Trends, Strategy and Market Strategy. The Marketing section is a thorough discussion of the industry and your business’ place in it. It covers all the forces that come to bear on your business. From the customers to the competition, advertising to pricing, industry trends to global economics, this section gives the reader a thorough understanding of how your business will deal with getting the product to potential buyers.

The Financials

Also called Financial Data or The Deal and includes subsections such as Uses of Funds, Income Statements, Cash Flow Statement, Balance Sheet, Cash Flow Forecast, Profit and Loss Forecast, Income Projection, Sales Revenue Forecast, Income Forecast, Capital Spending Plan, Assumptions, Budget and Break-Even Analysis. The Financial section is all about the numbers. The past, present and future are all represented.

The Supporting Materials

The material used will depend upon the type of business for which you are planning as well as the contents of the rest of your plan. Common supporting documents include resumes, letters of reference, credit reports, legal documents, agreements and contracts. This is information that needs no textual introduction or explanation or that is introduced or explained in the previous sections of the plan.

Ideally, by the time the plan is complete, you will have enough information to suit anyone’s guidelines. Compiling the initial information is the real work. Rearranging it into different formats should not be difficult. No matter what outline you choose, be sure to cover all your bases. It is tempting to skip management information if you are preparing the plan for loan purposes only or to skip financials if you are preparing a plan for your own management purposes.

Great business plans come from entrepreneurs willing to delay immediate gratification. They take risks and invest the time and energy necessary to gain relevant experience and education. They are not afraid of making mistakes or failing because mistakes and failure equal experience. They start small and build, recognizing experience leads to greater ability. After paying the price, true entrepreneurs gain the knowledge to build a winning plan and winning business.

To learn more tips for writing a winning business plan get my book, Writing Winning Business Plans: How to Prepare a Business Plan that Investors will Want to Read—and Invest In .

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Parts of a Business Plan

Whether you are starting a pizza shop or a plumbing business, a flower shop or a factory, you need a solid plan. In fact, your Business Plan will be an essential tool throughout the life of your business – from starting out to cashing in. It will help you to start out on the right foot, stay focused, get financing, manage your growth, and more.

Not every Business Plan will be the exactly same, but every Plan should incorporate several key elements.

The Parts of the Plan

Here are the key pieces to a solid Business Plan.

• The title, or heading, of the plan, and very brief description of the business.
• The name of the owner
• The company name and location
• A copyright or confidentiality notice

Table of Contents

• A list of the individual sections and their page numbers, starting with the Title Page and ending with a section for Special Materials (references, etc.).

Summary/Overview

• A brief, but focused statement (a few sentences or paragraphs) stating why the business will be successful. This is the most important piece of a Business Plan because it brings everything together.

Market Analysis

• Identifies specific knowledge about the business and its industry, and the market (or customers) it serves.
• An analysis that identifies and assesses the competition.

Description of the Company

• Information about the nature of the business and the factors that should make it successful .
• Special business skills and talents that provide the business with a competitive advantage, such as a unique ability to satisfy specific customer needs, special methods of delivering a product or service, and so on.

Organization & Management

• The company’s organizational and legal structure, Is it a sole proprietorship? A partnership? A corporation? (See: “ Ownership Structures “)
• Profiles of the ownership and management team: What is their background, experience and responsibilities?

Marketing & Sales

• The company’s process of identifying and creating a customer base. (See: “ Market Research “)

Description of Product or Service

• How they will benefit from the product or service?
• Specific needs or problems that the business can satisfy or solve, focusing especially on areas where the business has the strongest skills or advantages.
• The amount of current and future funding needed to start or expand the business. Includes the time period that each amount will cover, the type of funding for each (i.e., equity, debt), and the proposed or requested repayment terms.
• How the funds will be used: For equipment and materials? Everyday working capital? Paying off debt?
• Explains or projects how the company is expected to perform financially over the next several years. (Sometimes called a “pro-forma projection.”)  Because investors and lenders look closely at this projection as a measure of your company’s growth potential, professional input is strongly recommended.
• Credit histories (personal & business)
• Resumes of key personnel and partners
• Letters of reference
• Details of market studies
• Copies of licenses, permits, patents, leases, contracts, etc.
• A list of business consultants, attorneys, accountants, etc.

These are just the basic essentials to creating a Business Plan. Each plan should be tailored to the specific business. (See: Business Plan Assistance )

4 Types of Business Structures — and Their Tax Implications

When starting, a new business must select a business structure, which will have both legal and tax implications. And, the choice of business structure is a monumental step for a new company. It can affect ongoing costs, liability and how your business team can be configured. This topic becomes particularly timely during tax season, as your business’ structure has direct tax implications.

Have no fear: Below, we outline the most common types of business structures and their respective tax ramifications.

What Is a Business Structure?

A business structure is a type of legal organization of a business. When starting a new business, it’s important to take time to decide on the right type of business entity. The business structure you choose doesn’t have a lot of impact on the day-to-day operation of your business, but it is extremely important in defining ownership, limiting personal liability, managing business taxes, and preparing for future growth.

At a basic level, business entities establish the business as a legal entity that can have bank accounts, enter into contracts, and conduct business without putting everything in your own name. For some very small businesses, working under your own name may be okay, but if you plan to earn a full-time income from the business, sign contracts, or hire employees, it’s likely in your best interest to choose a business structure and register with your state.

Key Takeaways

• A business structure is a form of legal organization for a business.
• The right business structure may offer personal liability protection and other benefits.
• Most businesses should choose a business structure and register with their state.
• There are unique pros and cons of each type of business structures for every business.

Business Structures Explained

If you’ve ever had a job, rented a home, or bought a car, you likely signed a contract where you were acting as yourself. However, on the other side of the contract, the signature lines may show someone signing on behalf of a business. For that business to enter into a contract, it must use a recognized business structure and maintain an active registration with the state government.

When you sign a contract or do business as yourself, which is the default if you start a business and don’t register, you are personally liable for anything that goes wrong. If you make a mistake with a client or someone is injured by your product or service, you could be personally liable for any financial damages. That means they can sue you and go after your personal bank accounts, investments, home, and other assets in the suit. When you operate a registered business and follow best practices, your personal assets are protected.

By default, your business is considered a sole proprietorship, where you are the business and transact under your own name. When you create an LLC, corporation, or partnership, that new entity takes your place on contracts. Once you reach a certain income level, if you’re running the business full-time, there are additional tax benefits as well.

However, business entities are not free. Every state requires different fees to start and maintain a business. You may be able to file the registration paperwork on your own, but many people choose to hire a lawyer to ensure the business is created correctly and stays in compliance with local, state, and federal laws. Because every business and business owner is unique, it may be worthwhile to consult with a legal or tax professional for advice on choosing the best business structure for your long-term goals.

What Are the Four Types of Business Structures?

1. sole proprietorship.

A sole proprietorship is the most common type of business structure. As defined by the IRS (opens in new tab) , a sole proprietor “is someone who owns an unincorporated business by himself or herself.” The key advantage in a sole proprietorship lies in its simplicity. Here, there is no distinction between the business and the individual who owns it — which means that the owner is entitled to all profits. However, it also means that the sole proprietor is responsible for all the business’s debts, losses and liabilities. This means that creditors or lawsuit claimants may have access to the business owner’s personal accounts and assets if the business accounts cannot cover the debt. Examples of sole proprietorship include freelance writers, independent consultants, tutors and caterers.

Overview of liabilities

Liabilities are defined as a company’s financial debts or obligations that arise during business operations.

Limited liability is a type of legal structure where a corporate loss will not exceed the amount invested in a partnership or LLC. In other words, investors’ and owners’ private assets are not at risk if the company fails. So, if a company with limited liability is sued, then the claimants are suing the company; personal assets can’t be touched.

Whereas personal liability is when a business owner’s assets can be used to satisfy any business debts.

However, "piercing the corporate veil" is the most common in close corporations to settle debts and can occur when serious misconduct takes place. This is when courts put aside limited liability and hold a company’s shareholders personally liable for the corporation’s actions or debts.

Pass-through entity

In terms of tax implications, sole proprietorships are considered a “pass-through entity.” Also known as a “flow-through entity” or “fiscally transparent entity,” this means that the business itself pays no taxes. Instead, taxes are “passed through” to the owner. Pass-through entities are not subject to corporate income tax. Profits pass through to owners who pay them in their personal returns under ordinary income tax rates on the typical Tax Day, usually April 15.

• No cost to start — You are a sole proprietor by default.
• Easy to maintain — There are no ongoing registration or legal requirements to start, maintain, or shut down a sole proprietorship.
• Personal liability: You are personally liable for anything that goes wrong related to the business.
• No tax benefits: You must pay self-employment tax on all earnings and include business earnings on your personal tax return using Schedule C.
• Less professional: Clients and customers may find you to be unprofessional unless you operate a legally registered business. You may also struggle to get business financing.

2. Partnership

In business structure, a partnership is (opens in new tab) “the relationship existing between two or more persons who join to carry on a trade or business.” Partnerships have three common types of classifications: a general partnership (opens in new tab) , limited partnership (opens in new tab) or a limited liability partnership (opens in new tab) .

• General partnership: Consists of two or more partners who share all liability and responsibility equally. This means the partners both take part in the day-to-day operations of the business. It also means that the partners are equally liable for any debts generated by the business. All partners are considered “general partners.”
• Limited partnership (LP): Has at least one “general partner” and one “limited partner.” A general partner assumes ownership of the business operations and unlimited liability. A limited partner, also known as a silent partner, invests capital in the business. However, limited partners are not involved in the day-to-day operations and don’t have voting rights (opens in new tab) and therefore have limited liability.
• Limited liability partnership (LLP): In this arrangement, all partners have limited personal liability, which means they are not liable for wrongdoings (i.e. acts of malpractice or negligence) committed by other partners. All partners in an LLP can be involved in the management of the business. It tends to be more flexible than the previous partnership forms because partners can determine their own management structure.

Like a sole proprietorship, partnerships are considered a pass-through entity when it comes to taxation. In many ways, a partnership is like an expanded sole proprietorship — but with the advantages and disadvantages that comes with a partner. A partner can provide expertise, skills and capital for the business. But while they can affect the business positively, they can also impact it negatively. You should be comfortable with whomever you enter into business with.

Partnership tax returns are due the fifteenth day of the third month after the end of the entity’s tax year, which is typically March 15 (or March 16 in 2020). However, while the taxes are filed in March, partners don’t tend to pay taxes on the business until the April deadline (July 15 in 2020) since it passes through to their personal tax return.

• Relatively easy to create: Creating a partnership with your state is a relatively simple process.
• May offer liability protections: Limited Partnerships and Limited Liability Partnerships may offer personal financial and legal liability protection.
• May not protect from all liabilities: Partnerships may not shield all personal liability depending on the specific business structure and operations.
• More complex tax requirements: Partnerships must file their own tax returns and supply additional forms to partners for personal taxes.

3. Limited liability company

Now, a limited liability company (LLC) is where things start to get a little dicey. The IRS states that an LLC is a “business structure allowed by state statute.” That means it is formed under state law and the regulations surrounding LLCs vary from state to state. Depending on elections made by the LLC and its characteristics, the IRS will treat an LLC as either a corporation, partnership or as part of the LLC’s owner’s tax return (i.e. a “ disregarded entity (opens in new tab) ” with many of the characteristics of a sole proprietorship).

An LLC is considered a hybrid legal entity because it has traits of numerous other business structures, depending on the elections made by the owners. This lends it more protections and flexibility than some of its business structure counterparts. From a protections perspective, members of an LLC are not personally liable. Because the LLC is an entity created by state statute, it has flexibility in regards to federal tax treatment. For instance, a single-member LLC (opens in new tab) can be taxed as a sole proprietorship or a corporation. A multi-member LLC (opens in new tab) can be taxed as a partnership or a corporation.

The aforementioned flexibility causes some discrepancies when it comes to the federal tax due date.

• An LLC that chooses to be viewed federally as a sole proprietorship or C corporation (find more on C corporations types below) will typically have a federal tax filing and payment due date of April 15.
• However, an LLC being taxed as an S corporation or partnership will typically have a federal tax filing due date of March 15 and a payment deadline in line with their individual income return.
• Liability protection for one or more owners: When established and operated correctly, an LLC offers liability protection for owners, including a single owner.
• Choose between two taxation methods: Choose between pass-through taxation or S Corp taxation depending on which is more beneficial to owner finances.
• Potential for major tax savings: Owners who work in the business full-time may save on self-employment taxes with S Corp taxation.
• Costs to establish and maintain: LLCs require government forms and fees to establish and maintain.
• More complex tax requirements: Tax preparation may be more complex, particularly if you opt for S Corp taxation.

4. Corporation

Corporations are a company or group of people authorized to act as a single legal entity. This means that the company is considered separate and distinct from its owners (i.e. there’s no personal liability here). However, a corporation is eligible for many of the rights that individuals possess, hence why it is sometimes referred to as a “legal person.” (opens in new tab) For instance, a corporation can sue or be sued, enter into contracts and is entitled to free speech.

The IRS splits corporations into two separate classifications: the “C corporation” and the “S corporation.”

• C corporation (C corp): A C corporation is considered the default designation for corporations. All corporations start in the “C” classification when filing articles of incorporation with the state’s business filing agency. Unlike our preceding business structures, C corporations are not a pass-through entity. They are taxed twice at a corporate and personal income level, which is referred to as double taxation.
• S corporation (S corp): An S corporation is distinctively different from a C corporation because it is a pass-through entity, allowing it to avoid double taxation. However, the IRS institutes strict standards (opens in new tab) for companies looking to qualify for S corporation status, particularly around shareholders. For instance, an S corporation can only have 100 shareholders, and they must be U.S. citizens/residents. (It’s not unusual for startups to issue 100,000 shares of stock (opens in new tab) at their outset.)

Like partnerships, an S corporation must always file its annual federal tax return by the fifteenth day of the third month following the end of the tax year, generally March 15. The income is then passed down to its members individual returns, which adhere to the normal April Tax Day.

Corporations are the only business tax structure allowing for perpetual existence. This means that its continuance is not affected by the coming and going of shareholders, officers and directors.

• Extensive liability protections: S Corp and C Corp owners are shareholders and receive more extensive legal protection if the business operates correctly.
• Corporation acts as a legal person: The corporation can enter contracts and transact as its own legal entity.
• Can have unlimited shareholders: S Corporations may have up to 100 shareholders. C Corporations can have unlimited shareholders.
• More costly to establish and maintain: Corporations typically require more work and higher fees to establish and maintain.
• Detailed ongoing requirements: Corporations have requirements such as annual meetings, appointing a board of directors, and other state-imposed regulations.

What Are the Tax Pros and Cons of Each Business Structure?

Choosing a business structure.

The best business structure for your company depends on your long-term goals, ownership, plans to hire employees, and legal risk. While some very small businesses and side hustles may operate safely as a sole proprietorship, most businesses are better off registering a business with their state.

The best business structure for businesses that don’t plan to bring in outside investments is often an LLC, as it works for one or more owners with lower startup and maintenance requirements than a full corporation. If your business employs one or more owner full-time, it could make sense to register as an LLC and opt for taxation as an S Corporation.

If you plan to bring in outside investment rounds and may grow into a publicly traded company in the future, the best business structure is a C Corporation, as that structure allows for 100 or more shareholders.

Because of the important tax and legal implications, it’s often well worth the cost to consult with an attorney or tax expert for advice on the best business structure for your needs and goals.

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Choosing a legal business structure is a critical step in your business's lifecycle. It affects everything from the ability to attract investors to personal liability and government paperwork.

Businesses owners should weigh their own personal circumstances and long-term business goals against the costs to pick the best possible legal structures. Once you have that important decision locked in, it's back to focusing on what's most important: running your day-to-day operation for maximum business profits.

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Kevin Costner's 12-hour 'Horizon' binge plan is PT Barnum-like showmanship that could be ‘big winner’: expert

Kevin costner's 'horizon: an american saga' part one will release in theaters june 28.

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Kevin Costner has big dreams for his "Horizon" movie saga.

According to the Hollywood Reporter, Costner teased at CinemaCon that once all four "Horizon" films are made, he hopes fans will be able to go to a movie theater and binge all the films at once. 

"Maybe a year and a half, two years from now, they will come (to theaters) for 12 hours," Costner said before sharing details about the first two films. "Horizon: An American Saga" part one debuts in theaters June 28 and the second film shortly after Aug. 16.

Kevin Costner's "Horizon: An American Saga" debuts part one June 28. (Getty Images / Getty Images)

Business and finance expert Eric Schiffer told FOX Business it's highly unlikely fans will go to a movie theater for 12 straight hours. 

KEVIN COSTNER IS EAGER FOR ‘HORIZON’ DEBUT: ‘THIS TIME HAS COME’  

"When you think of binging, and you do it perhaps at the house, you're alone. You have privacy, you have perhaps your loved ones and the ability to break and do other things," he explained. "To sit in a movie theater, even if there's a small intermission, it sounds like Costner needs to be paying people to go."

Schiffer said it would be "lethally stupid" for fans to attend the movie theater for that long. 

"It's wacky, it's crazed, and it's inconsistent with modern-day reality," Schiffer said.

Kevin Costner's wish to have fans binge all four "Horizon" films is the "financial kiss of death," according to one expert. (Jerod Harris/Getty Images for CinemaCon / Getty Images)

Whether this is a good or bad financial decision for the movie star, Schiffer added, "it's a threat to the estate of Kevin Costner. It's the financial kiss of death."

Meanwhile, Doug Eldridge of Achilles Public Relations, told FOX Business, "If Costner solely intended to release this in one half-day marathon format, it simply wouldn't survive; more accurately, it would likely never be cleared for takeoff, much less crash and burn."

Eldridge noted that if Costner's plan is to release the movies separately and then an option for a movie marathon in theaters, "it will likely be met with success."

"This level of P.T. Barnum showmanship will certainly appeal to a portion of the viewing audience who would love the sheer audacity (and awesomeness) of a 12-hour movie," Eldridge told FOX Business. "It's not for everyone, but if Costner times it right, he'll reach the broader audience as well as the niche audience and come away the big winner.​"

Eldridge noted that Costner has an advantage because "the hunger for Westerns is seeing a surge in popularity that it hasn't enjoyed since the 1960s.

The Kevin Costner-led "Yellowstone" was a "key driver" in the revival of Westerns, public relations expert Doug Eldridge told FOX Business. (Getty Images / Getty Images)

"'Yellowstone' was a key driver in that revival, and Costner was at the heart of the hit series," he continued. "He is doubling-down on that popularity — both for himself and for the genre — in ​the creation of ‘Horizon.’ I predict it will be a monster hit, and Costner will cash in, commercially and critically."

According to the Hollywood Reporter, Costner has only addressed two films that have been made, but plans for his "Horizon" franchise consist of four films.

"When I think about the promise of America, there was a promise out here, if you could go. If you were tough enough, if you were mean enough, if you were resourceful enough, if you were lucky enough, you could take what you wanted in America," Costner said at CinemaCon. 

"That promise meant that we step on a whole group of people who had been here for thousands of years. But that’s what happened in America. … I don’t pass judgment because I don’t want to look down on people’s resourcefulness."

Kevin Costner spoke about his film "Horizon: An American Saga" onstage during CinemaCon 2024 in Las Vegas April 9, 2024. (Valerie Macon/AFP via Getty Images / Getty Images)

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Costner co-wrote the script, stars in the film and serves as the director, his first time taking on that role since his 2003 film, "Open Range." Costner's "Horizon: An American Saga" will have its world premiere at the Cannes Film Festival May 19.

The last time Costner attended the famed film festival was for the premiere of "The Matrix Reloaded" in 2003.

Kevin Costner leveraged millions to ensure the "Horizon" film saga was made. (Getty Images / Getty Images)

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"I’ve been waiting for the right time to return, and I’m proud to say that this time has come," Costner said of the Cannes Film Festival, according to the Hollywood Reporter. 

"'Horizon: An American Saga' is a story that began 35 years ago, and I can’t think of a better place than Cannes to reveal to the world the result of such a wonderful adventure. The French have always supported films and believed deeply in filmmaking. Just as I believe deeply in my film."

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• April 14, 2024 The Sunday Read: ‘What I Saw Working at The National Enquirer During Donald Trump’s Rise’
• April 12, 2024   •   34:23 How One Family Lost $900,000 in a Timeshare Scam
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How One Family Lost $900,000 in a Timeshare Scam

A mexican drug cartel is targeting seniors and their timeshares..

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A massive scam targeting older Americans who own timeshare properties has resulted in hundreds of millions of dollars sent to Mexico.

Maria Abi-Habib, an investigative correspondent for The Times, tells the story of a victim who lost everything, and of the criminal group making the scam calls — Jalisco New Generation, one of Mexico’s most violent cartels.

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Maria Abi-Habib , an investigative correspondent for The New York Times based in Mexico City.

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How a brutal Mexican drug cartel came to target seniors and their timeshares .

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Katrin Bennhold is the Berlin bureau chief. A former Nieman fellow at Harvard University, she previously reported from London and Paris, covering a range of topics from the rise of populism to gender. More about Katrin Bennhold

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When and where the solar eclipse will be crossing the U.S.

A total solar eclipse will grace the skies over North America on Monday, one of the most hotly anticipated sky-watching events in recent years.

Weather permitting , millions of people in Mexico, 15 U.S. states and eastern Canada will have the chance to see the moon slip between Earth and sun, temporarily blocking the sun’s light .

The total solar eclipse will be visible along a “path of totality” that measures more than 100 miles wide and extends across the continent. Along that path, the moon will fully obscure the sun, causing afternoon skies to darken for a few minutes.

Follow live updates on the solar eclipse

In all other parts of the continental U.S., a partial solar eclipse will be visible, with the moon appearing to take a bite out of the sun. Exactly how big a bite depends on the location.

The first spot in North America that will experience totality on Monday is on Mexico’s Pacific coast at around 11:07 a.m. PT, according to NASA .

After moving northeast across Mexico, the eclipse’s path travels through Texas, Oklahoma, Arkansas, Missouri, Illinois, Kentucky, Indiana, Ohio, Pennsylvania, New York, Vermont, New Hampshire and Maine. Slivers of Michigan and Tennessee will also be able to witness totality if conditions are clear.

In Canada, the eclipse will be visible in parts of southern Ontario, Quebec, New Brunswick, Prince Edward Island and Cape Breton, at the eastern end of Nova Scotia.

The timing of the eclipse and the duration of totality varies by location. Most places will experience around 2 minutes of darkness, but the longest periods of totality are typically in the center of the eclipse’s path.

This year, the longest stretch of totality will last 4 minutes and 28 seconds in an area northwest of Torreón, Mexico.

Below is a list of timings for some U.S. cities along the path of totality, according to NASA .

• Dallas: Partial eclipse begins at 12:23 p.m. CT and totality at 1:40 p.m. CT.
• Idabel, Oklahoma: Partial eclipse begins at 12:28 p.m. CT and totality at 1:45 p.m. CT.
• Little Rock, Arkansas: Partial eclipse begins at 12:33 p.m. CT and totality at 1:51 p.m. CT.
• Poplar Bluff, Missouri: Partial eclipse begins at 12:39 p.m. CT and totality at 1:56 p.m. CT.
• Paducah, Kentucky: Partial eclipse begins at 12:42 p.m. CT and totality at 2:00 p.m. CT.
• Carbondale, Illinois: Partial eclipse begins at 12:42 p.m. CT and totality at 1:59 p.m. CT.
• Evansville, Indiana: Partial eclipse begins at 12:45 p.m. CT and totality at 2:02 p.m. CT.
• Cleveland: Partial eclipse begins at 1:59 p.m. ET and totality at 3:13 p.m.
• Erie, Pennsylvania: Partial eclipse begins at 2:02 p.m. ET and totality at 3:16 p.m. ET.
• Buffalo, New York: Partial eclipse begins at 2:04 p.m. ET and totality at 3:18 p.m.
• Burlington, Vermont: Partial eclipse begins at 2:14 p.m. ET and totality at 3:26 p.m. ET.
• Lancaster, New Hampshire: Partial eclipse begins at 2:16 p.m. ET and totality at 3:27 p.m.
• Caribou, Maine: Partial eclipse begins at 2:22 p.m. ET and totality at 3:32 p.m. ET.

Other resources can also help you figure out when the various phases of the eclipse will be visible where you live, including NationalEclipse.com and TimeandDate.com .

If you plan to watch the celestial event, remember that it’s never safe to look directly at the sun, including through binoculars, telescopes or camera lenses. Special eclipse glasses are required to safely view solar eclipses and prevent permanent eye damage.

Denise Chow is a reporter for NBC News Science focused on general science and climate change.

Want to see the next total solar eclipse in 2026? An expert recommends booking travel now.

• 2026 will be Europe's first total solar eclipse in 27 years.
• Travelers worldwide will likely head to Spain, Iceland, and Greenland for the event.
• A hotel expert encouraged travelers to start planning and booking their trips now.

It'll be two decades before the next total solar eclipse hits the US .

Another option: hop on a plane to Europe and turn the 2026 total solar eclipse into a viewing vacation.

Eclipse cartographer Michael Zeiler at GreatAmericanEclipse.com told Space.com that up to 3.7 million people likely traveled for the solar eclipse on Monday.

HotelPlanner's chief communication officer, Philip Ballard, told Business Insider that the eclipse was a major revenue generator for many cities. For places like Austin, Texas, and Rochester, New York, it could have created $1 billion in revenue, Vox reported.

"I would say the total solar eclipse has become a global phenomenon," Ballard said.

Ballard added that the next solar eclipse , which will pass through Iceland, Greenland, and Spain on August 12, 2026, could result in similar tourism and revenue influxes.

And if travelers are considering a trip to Europe for the solar eclipse, Ballard recommends planning your trip now.

Determine your eclipse viewing destination

According to Space.com , 2026 will be Europe's first total solar eclipse in 27 years. Its path will go through Greenland, parts of western Iceland, and northern Spain.

Choosing where to watch the eclipse will be a tough and important decision for travelers.

Iceland and Greenland have some positives. These regions will experience longer totality times, so viewers can watch the eclipse longer. Plus, the sun will be higher in the sky, so finding a spot to watch the eclipse will be less challenging, Space.com reported.

The downside is that these regions are more likely to be cloudy, according to the outlet.

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While parts of Spain are likely to offer clearer skies, the eclipse's timing will be shorter and closer to the horizon, which means travelers will need to plan and track down a viewing location with unobstructed views of the western horizon, Space.com reported.

Regardless of the destination, according to the outlet, one bonus is that the strongest meteor shower in the Northern Hemisphere will happen the following night, so travelers can pack two events into one trip.

Book flights and hotels far in advance

Ballard encouraged people to book their hotels in their destination of choice as far in advance as possible.

"You should start looking now and booking hotels now because those cities in the path are already going to be at peak season," Ballard said.

Ballard said it's similar to when a Super Bowl city is determined or a Taylor Swift tour date is announced — you immediately see spikes in bookings. He predicts hotel occupancy rates will hit near-record highs, and room prices may double around the solar eclipse date.

Ballard's general rule of thumb is to book international travel at least three months in advance, but since this is such an anticipated event, booking earlier is smart. His advice is to start discussing plans with friends and family. If you decide on a destination, book a refundable room to keep your options open if plans change.

Regarding purchasing a plane ticket, a study from Expedia states that international travel's sweet spot is at least six months in advance.

According to Expedia, travelers who book six months in advance save an average of 10% more than travelers booking within two months or less.

Skip the hassle of planning altogether and book a solar eclipse tour

Another option is to let a tour operator do the work for you. A handful of tour companies have seen the increased interest in the solar eclipse and launched tours designed around the event.

These tours will have predetermined locations to view the eclipse, hotel blocks reserved, and itineraries highlighting both the region and the eclipse.

However, these can sell out quickly. For example, Space and Telescope created an 11-day tour of Spain around viewing the 2026 solar eclipse. The tour has already sold out as of Wednesday, and the waitlist is full.

Other operators, such as Wilderness Travel and Eclipse Traveler, have similar itineraries for the total eclipse in 2026.

Watch: A small Australian town was treated to a rare hybrid solar eclipse

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