what is the component of business plan

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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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8 Components of a Business Plan

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023 Updated on February 27, 2024

A key part of the business startup process is putting together a business plan , particularly if you’d like to raise capital. It’s not going to be easy, but it’s absolutely essential, and an invaluable learning tool.

Creating a business plan early helps you think through every aspect of your business, from operations and financing to growth and vision. In the end, the knowledge you’ll gain could be the difference between success and failure.

But what exactly does a business plan consist of? There are eight essential components, all of which are detailed in this handy guide.

1. Executive Summary

The executive summary opens your business plan , but it’s the section you’ll write last. It summarizes the key points and highlights the most important aspects of your plan. Often investors and lenders will only read the executive summary; if it doesn’t capture their interest they’ll stop reading, so it’s important to make it as compelling as possible.

The components touched upon should include:

The business opportunity – what problem are you solving in the market?
Your idea, meaning the product or service you’re planning to offer, and why it solves the problem in the market better than other solutions.
The history of the business so far – what have you done to this point? When you’re just getting started, this may be nothing more than coming up with the idea, choosing a business name , and forming a business entity.
A summary of the industry, market size, your target customers, and the competition.
A strong statement about how your company is going to stand out in the market – what will be your competitive advantage?
A list of specific goals that you plan to achieve in the short term, such as developing your product, launching a marketing campaign, or hiring a key person.
A summary of your financial plan including cost and sales projections and a break-even analysis.
A summary of your management team, their roles, and the relevant experience that they have to serve in those roles.
Your “ask”, if applicable, meaning what you’re requesting from the investor or lender. You’ll include the amount you’d like and how it will be spent, such as “We are seeking $50,000 in seed funding to develop our beta product”.

Remember that if you’re seeking capital, the executive summary could make or break your venture. Take your time and make sure it illustrates how your business is unique in the market and why you’ll succeed.

The executive summary should be no more than two pages long, so it’s important to capture the reader’s interest from the start.

2. Company Description/Overview

In this section, you’ll detail your full company history, such as how you came up with the idea for your business and any milestones or achievements.

You’ll also include your mission and vision statements. A mission statement explains what you’d like your business to achieve, its driving force, while a vision statement lays out your long-term plan in terms of growth.

A mission statement might be “Our company aims to make life easier for business owners with intuitive payroll software”, while a vision statement could be “Our objective is to become the go-to comprehensive HR software provider for companies around the globe.”

In this section, you’ll want to list your objectives – specific short-term goals. Examples might include “complete initial product development by ‘date’” or “hire two qualified sales people” or “launch the first version of the product”.

It’s best to divide this section into subsections – company history, mission and vision, and objectives.

3. Products/Services Offered

Here you’ll go into detail about what you’re offering, how it solves a problem in the market, and how it’s unique. Don’t be afraid to share information that is proprietary – investors and lenders are not out to steal your ideas.

Also specify how your product is developed or sourced. Are you manufacturing it or does it require technical development? Are you purchasing a product from a manufacturer or wholesaler?

You’ll also want to specify how you’ll sell your product or service. Will it be a subscription service or a one time purchase? What is your target pricing? On what channels do you plan to sell your product or service, such as online or by direct sales in a store?

Basically, you’re describing what you’re going to sell and how you’ll make money.

4. Market Analysis

The market analysis is where you’re going to spend most of your time because it involves a lot of research. You should divide it into four sections.

Industry analysis

You’ll want to find out exactly what’s happening in your industry, such as its growth rate, market size, and any specific trends that are occurring. Where is the industry predicted to be in 10 years? Cite your sources where you can by providing links.

Then describe your company’s place in the market. Is your product going to fit a certain niche? Is there a sub-industry your company will fit within? How will you keep up with industry changes?

Competitor analysis

Now you’ll dig into your competition. Detail your main competitors and how they differentiate themselves in the market. For example, one competitor may advertise convenience while another may tout superior quality. Also highlight your competitors’ weaknesses.

Next, describe how you’ll stand out. Detail your competitive advantages and how you’ll sustain them. This section is extremely important and will be a focus for investors and lenders.

Target market analysis

Here you’ll describe your target market and whether it’s different from your competitors’. For example, maybe you have a younger demographic in mind?

You’ll need to know more about your target market than demographics, though. You’ll want to explain the needs and wants of your ideal customers, how your offering solves their problem, and why they will choose your company.

You should also lay out where you’ll find them, where to place your marketing and where to sell your products. Learning this kind of detail requires going to the source – your potential customers. You can do online surveys or even in-person focus groups.

Your goal will be to uncover as much about these people as possible. When you start selling, you’ll want to keep learning about your customers. You may end up selling to a different target market than you originally thought, which could lead to a marketing shift.

SWOT analysis

SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s one of the more common and helpful business planning tools.

First describe all the specific strengths of your company, such as the quality of your product or some unique feature, such as the experience of your management team. Talk about the elements that will make your company successful.

Next, acknowledge and explore possible weaknesses. You can’t say “none”, because no company is perfect, especially at the start. Maybe you lack funds or face a massive competitor. Whatever it is, detail how you will surmount this hurdle.

Next, talk about the opportunities your company has in the market. Perhaps you’re going to target an underserved segment, or have a technology plan that will help you surge past the competition.

Finally, examine potential threats. It could be a competitor that might try to replicate your product or rapidly advancing technology in your industry. Again, discuss your plans to handle such threats if they come to pass.

5. Marketing and Sales Strategies

Now it’s time to explain how you’re going to find potential customers and convert them into paying customers.

Marketing and advertising plan

When you did your target market analysis, you should have learned a lot about your potential customers, including where to find them. This should help you determine where to advertise.

Maybe you found that your target customers favor TikTok over Instagram and decided to spend more marketing dollars on TikTok. Detail all the marketing channels you plan to use and why.

Your target market analysis should also have given you information about what kind of message will resonate with your target customers. You should understand their needs and wants and how your product solves their problem, then convey that in your marketing.

Start by creating a value proposition, which should be no more than two sentences long and answer the following questions:

What are you offering
Whose problem does it solve
What problem does it solve
What benefits does it provide
How is it better than competitor products

An example might be “Payroll software that will handle all the payroll needs of small business owners, making life easier for less.”

Whatever your value proposition, it should be at the heart of all of your marketing.

Sales strategy and tactics

Your sales strategy is a vision to persuade customers to buy, including where you’ll sell and how. For example, you may plan to sell only on your own website, or you may sell from both a physical location and online. On the other hand, you may have a sales team that will make direct sales calls to potential customers, which is more common in business-to-business sales.

Sales tactics are more about how you’re going to get them to buy after they reach your sales channel. Even when selling online, you need something on your site that’s going to get them to go from a site visitor to a paying customer.

By the same token, if you’re going to have a sales team making direct sales, what message are they going to deliver that will entice a sale? It’s best for sales tactics to focus on the customer’s pain point and what value you’re bringing to the table, rather than being aggressively promotional about the greatness of your product and your business.

Pricing strategy

Pricing is not an exact science and should depend on several factors. First, consider how you want your product or service to be perceived in the market. If your differentiator is to be the lowest price, position your company as the “discount” option. Think Walmart, and price your products lower than the competition.

If, on the other hand, you want to be the Mercedes of the market, then you’ll position your product as the luxury option. Of course you’ll have to back this up with superior quality, but being the luxury option allows you to command higher prices.

You can, of course, fall somewhere in the middle, but the point is that pricing is a matter of perception. How you position your product in the market compared to the competition is a big factor in determining your price.

Of course, you’ll have to consider your costs, as well as competitor prices. Obviously, your prices must cover your costs and allow you to make a good profit margin.

Whatever pricing strategy you choose, you’ll justify it in this section of your plan.

6. Operations and Management

This section is the real nuts and bolts of your business – how it operates on a day-to-day basis and who is operating it. Again, this section should be divided into subsections.

Operational plan

Your plan of operations should be specific , detailed and mainly logistical. Who will be doing what on a daily, weekly, and monthly basis? How will the business be managed and how will quality be assured? Be sure to detail your suppliers and how and when you’ll order raw materials.

This should also include the roles that will be filled and the various processes that will be part of everyday business operations . Just consider all the critical functions that must be handled for your business to be able to operate on an ongoing basis.

Technology plan

If your product involves technical development, you’ll describe your tech development plan with specific goals and milestones. The plan will also include how many people will be working on this development, and what needs to be done for goals to be met.

If your company is not a technology company, you’ll describe what technologies you plan to use to run your business or make your business more efficient. It could be process automation software, payroll software, or just laptops and tablets for your staff.

Management and organizational structure

Now you’ll describe who’s running the show. It may be just you when you’re starting out, so you’ll detail what your role will be and summarize your background. You’ll also go into detail about any managers that you plan to hire and when that will occur.

Essentially, you’re explaining your management structure and detailing why your strategy will enable smooth and efficient operations.

Ideally, at some point, you’ll have an organizational structure that is a hierarchy of your staff. Describe what you envision your organizational structure to be.

Personnel plan

Detail who you’ve hired or plan to hire and for which roles. For example, you might have a developer, two sales people, and one customer service representative.

Describe each role and what qualifications are needed to perform those roles.

7. Financial Plan

Now, you’ll enter the dreaded world of finance. Many entrepreneurs struggle with this part, so you might want to engage a financial professional to help you. A financial plan has five key elements.

Startup Costs

Detail in a spreadsheet every cost you’ll incur before you open your doors. This should determine how much capital you’ll need to launch your business.

Financial projections

Creating financial projections, like many facets of business, is not an exact science. If your company has no history, financial projections can only be an educated guess.

First, come up with realistic sales projections. How much do you expect to sell each month? Lay out at least three years of sales projections, detailing monthly sales growth for the first year, then annually thereafter.

Calculate your monthly costs, keeping in mind that some costs will grow along with sales.

Once you have your numbers projected and calculated, use them to create these three key financial statements:

Profit and Loss Statement , also known as an income statement. This shows projected revenue and lists all costs, which are then deducted to show net profit or loss.
Cash Flow Statement. This shows how much cash you have on hand at any given time. It will have a starting balance, projections of cash coming in, and cash going out, which will be used to calculate cash on hand at the end of the reporting period.
Balance Sheet. This shows the net worth of the business, which is the assets of the business minus debts. Assets include equipment, cash, accounts receivables, inventory, and more. Debts include outstanding loan balances and accounts payable.

You’ll need monthly projected versions of each statement for the first year, then annual projections for the following two years.

Break-even analysis

The break-even point for your business is when costs and revenue are equal. Most startups operate at a loss for a period of time before they break even and start to make a profit. Your break-even analysis will project when your break-even point will occur, and will be informed by your profit and loss statement.

Funding requirements and sources

Lay out the funding you’ll need, when, and where you’ll get it. You’ll also explain what those funds will be used for at various points. If you’re in a high growth industry that can attract investors, you’ll likely need various rounds of funding to launch and grow.

Key performance indicators (KPIs)

KPIs measure your company’s performance and can determine success. Many entrepreneurs only focus on the bottom line, but measuring specific KPIs helps find areas of improvement. Every business has certain crucial metrics.

If you sell only online, one of your key metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase.

Perhaps the purchase process is too complicated or your product descriptions are vague. The point is, learning why your conversion rate is low gives you a chance to improve it and boost sales.

8. Appendices

In the appendices, you can attach documents such as manager resumes or any other documents that support your business plan.

As you can see, a business plan has many components, so it’s not an afternoon project. It will likely take you several weeks and a great deal of work to complete. Unless you’re a finance guru, you may also want some help from a financial professional.

Keep in mind that for a small business owner, there may be no better learning experience than writing a detailed and compelling business plan. It shouldn’t be viewed as a hassle, but as an opportunity!

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9 essential components of a business plan.

Maybe you’re a small business owner that has been in business for years. Or, you could be going through the process of starting a business. Regardless of where you’re at with your career, tasks and responsibilities will come at you quickly.

You need to worry about to-do lists, scheduled meetings, accounting processes and everything in between. When are you supposed to find the time to put your business plan together? It can be an intimidating process to go through, but having a well-thought-out business plan is incredibly important.

There’s no perfect recipe for a business plan, but one of the best things that you can do is write it before you start your business. It can act as a roadmap for where your business is going in the future and how you’re going to get there. So, where do you start?

Let’s take a look at everything that you need to know for writing a business plan that can get you ahead.

Here’s What We’ll Cover:

What Is a Business Plan?

Tips to make your business plan stand out, 9 components of a business plan, key takeaways.

Think about the last time you needed to get somewhere you hadn’t been before. You might drive, ride your bike or take the train. But no matter the way you get there, you first need to know how to get there. You might put the directions into a GPS, follow a bike path or look up the train schedules.

A business plan works in the exact same way, only it’s a roadmap for your business. It’s a comprehensive document that outlines how your small business is going to grow and develop.

Throughout a business plan, you’re going to communicate who your business is, what you plan on doing and how you plan on doing it. This can give valuable insights into your business for potential investors or hiring new talent.

That all said, a business plan is completely different from a general business concept or business idea. A business plan acts as a blueprint for your business and will highlight who you are. Most banking institutions and venture capitalists won’t invest in a small business unless they have a good business plan.

Potential investors are going to want to know that you have a product or service that fits in the market with a good team in place. Plus, it can show the scalability of your business and how you will grow sales volume.

When Do You Need a Business Plan?

First and foremost, a business plan is important to have regardless of the industry you’re in or the products you offer your customers. It will not only keep you focused and efficient, but a well-written business plan can have other benefits.

A business plan can be helpful when:

You need new investments, funding or loans
You are searching for a new partner for your business
You are attracting and retaining top talent
You are experiencing slower growth than expected and want a change

Every business plan is going to be a little different compared to others. This is since your business is unique and your business plan is going to reflect that. But, if your plan is badly written or missing key bits of information then it won’t be as attractive to potential investors.

Here are some tips to help you get the most out of your business plan and make it stand out.

Make it as easy to read as possible. Investors want something that’s easily scannable and is divided into distinct sections. This way, they can quickly look through the plan and spot the key information.
Keep it brief. Most business plans are going to range anywhere from 10 – 20 pages. But, as long as you cover the essentials and highlight the key points, less can often be more.
Make sure you proofread and edit. Always double-check for grammatical errors and that it’s formatted properly. Typos and mistakes are not going to reflect positively for your business.
Have a quality design. Make sure you have the proper layout, formatting and brand messaging throughout. Bookbinding your business plan can make it look more professional.
Know all your business margins. Include each and every cost that your business incurs. You can make sure that you’re organizing and assigning those costs to the right product or service you offer.

One of the best things that you can do before writing your business plan is to determine who your audience is going to be. Are you pitching to a room full of potential investors? Do you have a meeting with your local financial institution’s venture funding department? Or, do you just want to create an internal document to help guide your business forward?

Being able to define who your audience is going to be will help you figure out how to write your business plan. For example, the language in your business plan might be different depending on who you want to highlight your business to.

Here are the 9 essential components of a business plan.

1. Executive Summary

Your executive summary is going to be at the front of your plan and be one of the first things that someone reads. But, writing the executive summary should be the last thing that you do, even though it’s first on the list. For now, you can leave your executive summary blank.

Why? Because it lays out every piece of vital information that’s included in your business plan, usually in one page or less. It’s basically a high-level summary of each of the sections in the plan. This means you can’t really write the executive summary first.

2. Company Description

This is where you’re going to highlight your business and what you do. Your company description will include three different things: a mission statement, company history and business objectives.

First, let’s look at your mission statement .

A mission statement is basically the main reason why you’re in business. It’s not necessarily about what you do or the products or services that you sell. Rather, it’s all about why your business does what it does.

Try and make your mission statement inspirational, motivational and even emotional. It’s going to be the foundation on which your business is built. Put some thought into the things that motivate you and the reasons why you started your business in the first place. What do you want to get out of it? Why are you doing it?

You can also think about the causes or different experiences which led you to start your business and the problems it can solve for your customers.

Next, let’s look at your company history .

This doesn’t need to be a long or in-depth section, but more of a highlight of what your business has done in the past and where you stand today. To help make things easier, you can even write about your company history in the form of a profile. Here’s some of the important information you can include in your company history.

The date you founded or started your business
Any major milestones worth highlighting
Your business location, or locations
How many employees you have
Your executive leadership and the roles that they have within your company
The flagship services or products that you offer your customers

Finally, let’s look at your business objectives .

Your business objectives are your guiding lights. They’re the goals that you plan on achieving and they will outline how you plan on getting there. When developing your business objectives, base them on the process of SMART goals.

These are specific, measurable, achievable, realistic and time-bound. Basically, each objective gets tied to the key results you want to achieve. If you don’t clearly define your business objectives, it can make it more difficult for your employees to work efficiently towards a common goal.

3. Market Research and Business Potential

This is the section of your business plan where you outline your target demographic and ideal customer base. You’re also going to do research into the potential and actual size of the market you’re going to enter into. Target markets are going to identify specific information about your customers.

Usually, you can research and find the following information for your target customers:

Location and average income
Age and gender
Education level and profession
Any activities or hobbies that are relevant

Getting as specific as possible will allow you to illustrate your expertise and get a sense of confidence when it comes to your business. For example, if your target market is extremely broad, it will show investors that it might be more difficult to generate revenue.

4. Competitive Analysis

What is your competition doing? Competitor research is going to start by identifying any companies that are currently in the market you want to enter into. Understanding everything you can about your competition can seem overwhelming and intimidating.

But having this information is extremely useful and will help you make more informed business decisions in the future. Here are a few common questions that you can ask yourself when you’re doing competitive research.

Where are they investing most in marketing and advertising?
Do they get any press coverage? If they do, how are they getting it?
What is their customer service like? Does your customer service stack up against theirs?
What are their pricing strategies and what are their sales?
Do they have good reviews on third-party rating platforms?

One of the best ways to do competitive research is to check out your competition’s website. Read through their About Us page or their value and mission statements. This will give you a better understanding of who they are, what they’re doing and how they’re doing it.

Being able to distinguish your business from your competition is a critical element of any business plan. Take some time to think about what sets your business apart and how you’re going to provide a solution to a problem.

5. Describe You Products or Services

What do you offer your customers? What product or service is your business built on? This section of your business plan is going to detail everything about your product or service. Plus, it’s going to highlight why what your business offers is better than the competition.

Touch on the benefits that your product or service offers, the production process and the product life cycle.

When you’re describing the benefits, try and focus on things like unique features and how they translate into benefits. You can also highlight intellectual property rights or patents that differentiate your products.

For the production process, you can explain how you create your existing or new products or services and how you source the raw materials. Other things such as quality control, quality assurance and supply chain logistics can get included.

With your product life cycle, you can highlight any cross-sells, down-sells or upsells. As well as your future plans for research and development.

6. Marketing and Sales Strategy

You could spend weeks putting together an in-depth business plan that highlights your company and what you do. But, if you don’t have a solid marketing and sales strategy in place then it won’t matter how good your business plan is. You still need to know how you’re going to generate sales.

This part of your plan is entirely dependant on the type of products or services that you offer. You can include your company’s value proposition, ideal target market and your existing customer segments. Then, you can start with some more specifics.

What’s the launch plan that you have in place to help attract new business? What are your growth tactics to help your business expand in the future? Do you have any retention strategies in place, such as customer loyalty or referral programs? What about advertising across print, social media, search engines or television?

These are all good questions to ask yourself when putting together your sales and marketing strategy. You can use this part of the business plan to highlight your business strengths and how you differentiate from the competition.

7. Business Financials

If you are just starting your business then you aren’t going to have much financial data. You won’t have things like financial statements or an income statement. But, you still need to put together some type of financial plan and budget. If you have been operating for a while, you will have some important information to include, such as:

Profit and loss statements
Income statements
Cash flow statement
Balance sheets
Revenue vs net income
The ratio of liquidity to debt repayment

Make sure that the data and figures that you include are accurate. For example, things like costs, profit margins and sale prices can be closely linked together. If you don’t have access to historical data, you can put together financial projections.

8. Management and Organization

The people that you have working for your business are the driving force behind your overall success. Without the right people in place, your business won’t likely be successful. This is the part of your business plan where you’re going to highlight your team.

Identify the members of your team and explain how they are going to help turn your business idea into a reality. Plus, you can highlight the qualifications and expertise of each team member. This will position your business as one that’s worth potentially investing in.

9. Include an Appendix

This is where you’re going to compile and include everything that both investors and your team will need access to. Include everything that’s useful for an investor to conduct due diligence.

Here are some of the most common official documents you can include in a well-organized appendix.

Any legal documents, local permits or deeds
Professional licenses or business registries
Any patents or intellectual property
Any industry memberships or associations
Your business identification numbers or codes
Any key purchase orders or customer contracts that you have in place

It can also be helpful to include a table of contents in your appendix. This can make it easier to find the right information or allow you to highlight the most important documents.

It’s worth noting that a business plan doesn’t just have to be a way to attract potential investors. There are several other reasons why having a business plan is important.

You can better clarify the goals and objections that you want your business to accomplish and you can gain insights into your target market. Team members can have a much better sense as to the direction the business is going and how they can contribute to its success and growth. Plus, you can establish and define the roles of each team member, all while setting achievable benchmarks.

Creating a business plan will act as a roadmap for your business. It’s going to highlight the goals and objectives you have. As well as touch on things like marketing, advertising, your management team and financials. Here’s a quick review of the 9 essential components of a business plan.

Executive summary, which you will write after you have completed steps 2 – 9
Company description, including a mission statement, company history and business objectives
Competitive analysis
Market research and business potential
Your products or services
Marketing and sales strategy
Business financials
Management and organization

Follow the 9 components outlined in this article to help you develop a business plan. You can clearly define your business goals and have a roadmap to help your business be successful.

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The 10 Key Components of a Business Plan

Written by Dave Lavinsky

Growthink.com Components of a Business Plan Step By Step Advice

Over the past 20+ years, we have helped over 1 million entrepreneurs and business owners write business plans. These plans have been used to raise funding and grow countless businesses.

Download our Ultimate Business Plan Template here >

From working with all these businesses, we know what the 10 elements in any great business plan. Providing a comprehensive assessment of each of these components is critical in attracting lenders, angel investors, venture capitalists or other equity investors.

Get started with a title page that includes your company name, logo and contact information, since interested readers must have a simple way to find and reach out to you. After that be sure to include the 10 parts of a business plan documented below.

What are the 10 Key Components of a Business Plan?

The 10 sections or elements of a business plan that you must include are as follows:

1. Executive Summary

The executive summary provides a succinct synopsis of the business plan, and highlights the key points raised within. It often includes the company’s mission statement and description of the products and services. It’s recommended by me and many experts including the Small Business Administration to write the executive summary last.

The executive summary must communicate to the prospective investor the size and scope of the market opportunity, the venture’s business and profitability model, and how the resources/skills/strategic positioning of the company’s management team make it uniquely qualified to execute the business plan. The executive summary must be compelling, easy-to-read, and no longer than 2-4 pages.

2. Company Analysis

This business plan section provides a strategic overview of the business and describes how the company is organized, what products and services it offers/will offer, and goes into further detail on the business’ unique qualifications in serving its target markets. As any good business plan template will point out, your company analysis should also give a snapshot of the company’s achievements to date, since the best indicator of future success are past accomplishments.

3. Industry or Market Analysis

This section evaluates the playing field in which the company will be competing, and includes well-structured answers to key market research questions such as the following:

What are the sizes of the target market segments?
What are the trends for the industry as a whole?
With what other industries do your services compete?

To conduct this market research, do research online and leverage trade associations that often have the information you need.

4. Analysis of Customers

The customer analysis business plan section assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them.

The following are examples of customer segments: moms, engaged couples, schools, online retailers, teens, baby boomers, business owners, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of business you operate as different segments often have different needs. Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations and income levels of the customers you seek to serve. With regards to psychographic variables, discuss whether your customers have any unique lifestyles, interests, opinions, attitudes and/or values that will help you market to them more effectively.

5. Analysis of Competition

All capable business plan writers discuss the competitive landscape of your business. This element of your plan must identify your direct and indirect competitors, assesses their strengths and weaknesses and delineate your company’s competitive advantages. It’s a crucial business plan section.

Direct competitors are those that provide the same product or service to the same customer. Indirect competitors are those who provide similar products or services. For example, the direct competitors to a pizza shop are other local pizza shops. Indirect competitors are other food options like supermarkets, delis, other restaurants, etc.

The first five components of your business plan provide an overview of the business opportunity and market research to support it. The remaining five business plan sections focus mainly on strategy, primarily the marketing, operational, financial and management strategies that your firm will employ.

6. Marketing, Sales & Product Plan

The marketing and sales plan component of your business plan details your strategy for penetrating the target markets. Key elements include the following:

A description of the company’s desired strategic positioning
Detailed descriptions of the company’s product and service offerings and potential product extensions
Descriptions of the company’s desired image and branding strategy
Descriptions of the company’s promotional strategies
An overview of the company’s pricing strategies
A description of current and potential strategic marketing partnerships/ alliances

7. Operations Strategy, Design and Development Plans

These sections detail the internal strategies for building the venture from concept to reality, and include answers to the following questions:

What functions will be required to run the business?
What milestones must be reached before the venture can be launched?
How will quality be controlled?

8. Management Team

The management team section demonstrates that the company has the required human resources to be successful. The business plan must answer questions including:

Who are the key management personnel and what are their backgrounds?
What management additions will be required to make the business a success?
Who are the other investors and/or shareholders, if any?
Who comprises the Board of Directors and/or Board of Advisors?
Who are the professional advisors (e.g., lawyer, accounting firm)?

9. Financial Plan

The financial plan involves the development of the company’s revenue and profitability model. These financial statements detail how you generate income and get paid from customers,. The financial plan includes detailed explanations of the key assumptions used in building the business plan model, sensitivity analysis on key revenue and cost variables, and description of comparable valuations for existing companies with similar business models.

One of the key purposes of your business plan is to determine the amount of capital the firm needs. The financial plan does this along with assessing the proposed use of these funds (e.g., equipment, working capital, labor expenses, insurance costs, etc.) and the expected future earnings. It includes Projected Income Statements, Balance Sheets (showing assets, liabilities and equity) and Cash Flow Statements, broken out quarterly for the first two years, and annually for years 1-5.

Importantly, all of the assumptions and projections in the financial plan must flow from and be supported by the descriptions and explanations offered in the other sections of the plan. The financial plan is where the entrepreneur communicates how he/she plans to “monetize” the overall vision for the new venture. Note that in addition to traditional debt and equity sources of startup and growth funding that require a business plan (bank loans, angel investors, venture capitalists, friends and family), you will probably also use other capital sources, such as credit cards and business credit, in growing your company.

10. Appendix

The appendix is used to support the rest of the business plan. Every business plan should have a full set of financial projections in the appendix, with the summary of these financials in the executive summary and the financial plan. Other documentation that could appear in the appendix includes technical drawings, partnership and/or customer letters, expanded competitor reviews and/or customer lists.

Find additional business plan help articles here.

Expertly and comprehensively discussing these components in their business plan helps entrepreneurs to better understand their business opportunity and assists them in convincing investors that the opportunity may be right for them too.

In addition to ensuring you included the proper elements of a business plan when developing your plan always think about why you are uniquely qualified to succeed in your business. For example, is your team’s expertise something that’s unique and can ensure your success? Or is it marketing partnerships you have executed? Importantly, if you don’t have any unique success factors, think about what you can add to make your company unique. Doing so can dramatically improve your success. Also, whether you write it on a word processor or use business plan software , remember to update your plan at least annually. After several years, you should have several business plans you can review to see what worked and what didn’t. This should prove helpful as you create future plans for your company’s growth.

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

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

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

What is a business plan?

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

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

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

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These are the following purpose of business plan:

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

The Essential Components of a Business Plan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are the benefits of having a business plan?

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

How to write a business plan?

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

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

How to write a business plan step by step?

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

Why do I need a business plan for my startup?

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

What are the key components of a business plan?

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

Can a business plan help secure funding for my business?

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

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What is an LLC? Limited Liability Company Structure and Benefits Defined
Corporation: What It Is and How to Form One
Starting a Small Business: Your Complete How-to Guide
Starting an Online Business: A Step-by-Step Guide
How to Start Your Own Bookkeeping Business: Essential Tips
How to Start a Successful Dropshipping Business: A Comprehensive Guide

Starting a business in the United States involves a number of different steps spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also requires decisions about a business’ location, structure, name, taxation, and registration. Here are the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

Entrepreneurs should start by conducting market research to understand their industry space, competition, and target customers.
The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy.
Securing funding in the form of grants, loans, venture capital, and/or crowdfunded money is crucial if you’re not self-funding.
When choosing a venue, be aware of local regulations and requirements.
Design your business structure with an eye to legal aspects, such as taxation and registration.
Make a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. The U.S. Small Business Administration (SBA) breaks down common market considerations as follows:

Demand : Is there a need for this product or service?
Market size : How many people might be interested?
Economic indicators : What are the income, employment rate, and spending habits of potential customers?
Location : Are the target market and business well situated for each other?
Competition : What is the market saturation ? Who and how many are you going up against?
Pricing : What might a customer be willing to pay?

Market research should also include an analysis of market opportunities, barriers to market entry, and industry trends, as well as the competition’s strengths, weaknesses, and market share .

There are various methods for conducting market research, and these will vary depending on the nature of the industry and potential business. Data can come from a variety of places, including statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, and questionnaires.

A comprehensive business plan is like a blueprint. It lays the foundation for business development and affects decision-making, day-to-day operations, and growth. Potential investors or partners may want to review and assess it in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital.

Business plans will differ according to the needs and nature of the company and should only include what makes sense for the business in question. As such, they can vary in length and structure. They can generally be divided into two formats: traditional and lean start-up. The latter is less common and more useful for simple businesses or those that expect to rework their traditional business plan frequently. It provides a vivid snapshot of the company through a small number of elements.

The process of funding a business depends on its needs and the vision and financial situation of its owner. The first step is to calculate the start-up costs . Identify a list of expenses and put a dollar amount to each of them through research and requesting quotes. The SBA has a start-up costs calculator for small businesses that includes common types of business expenses.

The next step is to determine how to get the money. Common methods include:

Self-funding , also known as “ bootstrapping ”
Finding investors willing to contribute to your venture capital
Raising money online by crowdfunding
Securing a business loan from a bank, an online lender, or a credit union
Winning a business grant from a donor, usually a government, foundation, charity, or corporation

Different methods suit different businesses, and it’s important to consider the obligations associated with any avenue of funding. For example, investors generally want a degree of control for their money, while self-funding puts business owners fully in charge. Of course, investors also mitigate risk; self-funding does not.

Availability is another consideration. Loans are easier to get than grants, which don’t have to be paid back. Additionally, the federal government doesn’t provide grants for the purposes of starting or growing a business, although private organizations may. However, the SBA does guarantee several categories of loans , accessing capital that may not be available through traditional lenders. No matter the funding method(s), it’s essential to detail how the money will be used and lay out a future financial plan for the business, including sales projections and loan repayments .

Businesses operating in the U.S. are legally subject to regulations at the local, county, state, and federal level involving taxation, business IDs, registrations, and permits.

Choosing a Business Location

Where a business operates will dictate such things as taxes, zoning laws (for brick-and-mortar locations), licenses, and permits. Other considerations when choosing a location might include:

Human factors : These include target audience and the preferences of business owners and partners regarding convenience, knowledge of the area, and commuting distance.
Regulations : Government at every level will assert its authority.
Regionally specific expenses : Examples are average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing.
The tax and financial environment : Tax types include income, sales, corporate, and property, as well as tax credits; available investment incentives and loan programs may also be geographically determined.

Picking a Business Structure

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

Common business structures include:

Sole proprietorship : A sole proprietorship is an unincorporated business that has just one owner, who pays personal income tax on its profits.
Partnership : Partnership options include a limited partnership (LP) and a limited liability partnership (LLP) .
Limited liability company (LLC) : An LLC protects its owners from personal responsibility for the company’s debts and liabilities.
Corporation : The different types of corporations include C corp , S corp , B corp , closed corporation , and nonprofit .

Getting a Tax ID Number

A tax ID number is the equivalent of a Social Security number for a business. Whether or not a state and/or federal tax ID number is required will depend on the nature of the business and the location in which it’s registered.

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

Operates as a corporation or partnership
Pays federal taxes
Has employees
Files employment, excise, alcohol, tobacco, or firearms tax returns
Has a Keogh plan
Withholds taxes on non-wage income to nonresident aliens
Is involved with certain types of organizations, including trusts, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives, and plan administrators

An EIN can also be useful if you want to open a business bank account, offer an employer-sponsored retirement plan, or apply for federal business licenses and permits. You can get one online from the Internal Revenue Service (IRS) . State websites will do the same for a state tax ID.

Registering a Business

How you register a business will depend on its location, nature, size, and business structure. For example, a small business may not require any steps beyond registering its business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all.

That said, registration can provide personal liability protection, tax-exempt status, and trademark protection, so it can be beneficial even if it’s not strictly required. Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

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

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

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

Obtaining Permits

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

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

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

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

How Much Does It Cost to Start a Business?

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

What Should I Do Before Starting a Business?

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

What Types of Funding Are Available to Start a Business?

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

Do You Need to Write a Business Plan?

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

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

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

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

U.S. Small Business Administration. " Calculate Your Startup Costs ."

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

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

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

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

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

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

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

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

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

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

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How To Develop the Industry Analysis of Your Business Plan

Written By Dave Lavinsky

Just like other key success factors of your business plan, the industry analysis section explains why your new or growing business is valuable to investors or lenders. The word, “analysis” doesn’t mean you’ll have to research in libraries or collect statistics from all over the world; it only means readers will be able to learn some facts about the industry in which your business operates. Why is this important? The industry analysis facts help explain why an investment in your business is a good idea for important reasons.

What Is The Industry Analysis In A Business Plan?

The industry analysis is a collection of facts that build the story of your business and the industry within which it operates. An industry analysis usually contains some details about the size of the industry. It will offer numbers that show how active the industry is overall and how much it’s growing. An industry analysis may also include industry trends and information about the competitive landscape. Along with other facts, the industry analysis will outline why your business is a solid opportunity for investors or lenders and this is why it is an important part of your business plan.

Here’s what you should know about creating an industry analysis: it’s not hard to do. In the following paragraphs, we will walk you through the places where you can find information and you’ll see how to set up the industry analysis like a pro. Use this analysis to show investors or lenders how much you know about the industry in which your own business operates.

Industry Analysis vs. Market Analysis

While building your industry analysis, you’ll probably find terms like “market analysis” or “market trends.” Where do these terms fit into an industry analysis? Let’s first look at the term, “industry analysis.” Think of the industry in which your business operates as an entire world. It is made up of businesses that are like yours or similar to yours. An industry analysis is the “big picture” view of a particular kind of business in a national or even global view.

If an industry analysis is the big picture, a “market analysis” is just one part of that big picture. A market analysis usually shows facts about two key areas within business: potential customers and major competitors of your business. There are several parts to your industry analysis, which you’ll build in the following section, but the market analysis is especially important to investors or lenders. It is a forecast of the potential success of your business.

Key Components of an Industry Analysis

There are several parts inside the “big picture” of an industry analysis; however, you only need to include those that relate to your business and industry. To help make this analysis easy to build, you’ll find the “key components” of an industry analysis listed here. While these are all important, if you are in an industry that needs more explanation, you can add analysis facts to this section, as well. The main idea here is to showcase the industry in which your business operates and detail why your business in this industry is a winning opportunity for investors or lenders.

First, read about the key components that you will place in an effective industry analysis. You’ll find out why each is important to the readers of your business plan. Then, in the following section, find what you will need to complete each key component in your industry analysis.

Industry Overview

The overview is a general look at your industry. Explain what you know about the industry. What products or services are sold? Is this industry worldwide or within the US? This section is a few sentences of explanation about the industry overall.

Industry Size

The size of the industry will tell readers just how big your business might become. It tells readers there is an audience of buyers who want the products or services sold and it suggests that there is potential in the industry for new products, new technology, and new ideas.

Market Size

The target market size relates only to two factors: the potential customers of your business and the main competitors of your business. This is not a highly-detailed examination, but it should be a specific one. You’ll want to include the most reliable facts possible to help investors or lenders understand the potential of your business.

Industry Rate of Growth

The rate of growth shows the age of any particular industry. Investors use it to gauge how much potential might be in a business. If the industry is in a fast-paced growth stage, a mature stage, or a declining stage, readers will want this information to make informed strategic decisions about the health of the industry.

Market Trends

In this section, you’ll show facts about trends among customers in the industry in general. For example, if you own a coffee shop, are industry suppliers suggesting customers want more varieties of coffee from which to choose? Are coffee shop owners in general bringing in new business with drive-through service? These kinds of details tell part of the industry story as it relates to customers in general.

Competitors

Every growing industry has competition among businesses and, while it is a positive sign for industry growth, it can also signal challenges and obstacles for new or growing businesses. Offering facts about the status of competition in your industry, including their strengths and weaknesses, pricing strategies, and marketing strategies, will help readers understand the health of your competitors in the industry.

Market Challenges

Just as there are always opportunities, there are also always challenges to an industry. This may include government regulations, labor laws, union requirements, or other issues that are challenges for the success of the industry overall. These should be included in your industry analysis report to give a full understanding to readers of the current status of the industry.

Strategies and Strengths

This key component of your industry analysis looks at strategies that may be used to overcome challenges. It also sketches out how the strengths of the industry meet any obstacles within the industry.

How To Write An Industry Analysis For Your Business

Each key component for a comprehensive industry analysis is defined above. However, these components cannot be presented in your business plan unless you know how to find the information you need. The following is an “action list” with resources you can search to find the information for each key component. In no time, you’ll be a pro at finding the information and facts you need to write your industry analysis.

1. Action Step: Industry Overview

To find basic facts about the industry in which your business operates, conduct an online search to discover various websites that hold industry information. Look for industry information in:

National trade associations
Labor unions
Governmental agencies
National advertising firms
Business database groups
National business associations

2. Action Step: Industry Size

The size of the industry in which your business operates may be a major consideration for investors or lenders. You may offer historical growth, projected growth, global growth or local growth rates. It is preferable for industries to show thriving businesses and growing numbers; however, it is also important to note that newly-established industry groups are often intriguing and inviting to investors. Use specific industry size facts from reliable sources in this section of your industry analysis.

Look for industry information in:

Governmental agencies (Economic Census, Bureau of Labor Statistics)
Competitor information
Manufacturing reports

3. Action Step: Market Size

The market size for your business will be a more detailed look at your business competition than the larger industry size research. You’ll want to search for verifiable facts and statistics online and via trade association information.

IBISWorld (reliable, paid-subscription)
Statista (online portal)
D&B Hoovers (industry/business directory)
Trade associations
Industry manufacturing reports

4. Action Step: Industry Rate of Growth

This important fact will tell a crucial story to investors or lenders: the rate of growth, year over year, will suggest a rapid growth industry, a mature industry, or a declining industry. Search for reliable information for the year prior to the current one (i.e. if 2024, look at 2023):

Trade association magazines
Government reports or filings
Market watch reports
Advertising/marketing reports

5. Action Step: Market Trends

If you are unsure of the industry trends, look at recent business magazines for updated or new information and check the following resources for news:

Online search of competitors
Union and labor group associations
Industry trade magazines

6. Action Step: Competitors

If you are unsure of who your business competitors are or where they are located, this is the perfect time to conduct market research to find these details. Note how big their businesses might be, when they were each established, who owns the companies, how many employees they have, and add any details regarding yearly revenues that can be found. Also, note any signs of growth or loss in the competitor businesses. Look in the following for information:

Local business groups
City or state governmental information
Businesses that may want to collaborate with yours

7. Action Step: Market Challenges

Every business has challenges from competitors, growth trends, shifting business suppliers, and other variables. List these for potential investors or lenders. Acknowledge the challenges, and explain your strategy for overcoming each challenge. In this way, readers will understand that you’ve pre-determined a course or action by forecasting the challenge and preparing for it. This is the type of decision-making and leading that investors and lenders want to see.

8. Action Step: Strategies and Strengths

To complement your strategies to meet any market challenges, list ways in which you will use the strengths of your business to put solid growth plans into place and meet those business objectives and goals. Indicate any strategies you’ve designed to overcome competitor advantages and outline the competitive edge or unique value your business will offer over others. In this key component, allow your own vision and goals to shine for readers.

Looking For A Shortcut To Create A Business Plan?

There’s absolutely nothing wrong with saying, “I’m too busy to write a business plan.” We know this is true because we’ve been there. Sometimes, in the middle of business, you just don’t have time to write about business. And, you may not have time to conduct exhaustive research or check out historical data from various online databases. If this is where you are, we have the solution for you in PlanBuildr, the fastest and easiest business plan software available today. In fact, in about 10 minutes, you can complete the first draft of your business plan and in about an hour, you can finish it. PlanBuildr was created by business experts, developed for busy professionals just like you and is designed to bring investors to your door. Try PlanBuildr for free !

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5 Essential Elements of Strategic Planning

Free Ultimate Guide On Writing A Business Plan

June 4, 2024

Remember Sears?

The company became a household name in the US, opening hundreds of retail stores nationwide.

It released its first IPO In 1906. The IPO led by Goldman Sachs raised substantial capital for Sears and Roebuck and Co., totaling US$40 million.

But then, the company went through a brutal downfall.

What went wrong?

There were many significant reasons listed. Lack of innovation, unclear value propositions, and losing their edge—among others.

But the key reason was an unrefined business strategy!

They had no plan for how to bounce back into the market or how to compete with other growing brands like Walmart and Amazon. In other words, no strategy, company vision, or mission. They lost the battle!

But that doesn’t need to be your story.

In this article, we’ll cover what strategic planning is, followed by the 5 key elements of strategic planning.

What is strategic planning?

Strategic planning is when an organization decides its goals and how to successfully achieve them. It involves setting long-term strategic objectives and identifying the actions and resources necessary to achieve those goals. Additionally, it includes implementing and monitoring the plan to ensure successful outcomes.

In short, it’s like a detailed roadmap, guiding the journey of your business toward its destination (growth).

5 essential elements of a strategic plan

The business roadmap has different components to ensure smooth navigation, and so does your strategic plan.

Before beginning the journey you need to know the destination, so the first element is all about your end goal.

Element 1: Company vision statement

To conduct business effectively for years to come, you need a solid foundation for your plan. This requires a clear company vision statement.

It’s as simple as answering this question: Where and how do you see your business forward in years?

Start by envisioning what you want your business to be in the future. Consider every crucial aspect that affects your growth such as market position, evolution of your target audience, and your value proposition.

At last, pen down your aspirations very clearly, just as Starbucks did.

Starbucks’s vision statement is – “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.”

This is a great example of a well-written vision statement . Here’s why:

It’s future-oriented with a long-term perspective.
The phrase “premier purveyor” makes it sound aspirational and inspiring.
The statement is specific, with a clear growth objective to establish itself as the finest coffee provider in the world.
The phrase “uncompromising principles” resonates with socially conscious consumers.

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Element 2: Mission statement

After knowing your destination, you need to decide the best-suited route for yourself. So here comes the second element, i.e., writing a mission statement .

You need to validate your organization’s existence while highlighting your primary objective. Most importantly, your mission should align with your vision.

Have a look at Starbucks’ mission statement “To inspire and nurture the human spirit — one person, one cup, and one neighborhood at a time.”

Here’s how this compliments the organization’s vision:

The phrase ‘one person, one cup, and one neighborhood at a time’ complements Starbucks’ vision of focusing on growth.
The phrase ‘Inspire and nurture the human spirit’ resonates closely with the vision of becoming the premier purveyor of the finest coffee globally.

The strategic vision and mission statements need to be subtly intertwined with each other.

Element 3: Goals and objectives

While navigating the route of our choice, we often set milestones for us. Achieving each of these milestones ensures company success.

Goals are nothing but milestones bound by the timeframe that keep you motivated while carrying out your mission.

Goals are the most critical element of a strategic plan, as they must be clear, concise, realistic, and measurable.

Let’s have a look, at what Starbucks’ goals look like:

“The company’s financial results and long-term growth model will continue to be driven by new store openings, comparable store sales growth, and operating margin management.”

Starbucks has key metrics in numbers to measure its growth.

In March, the company achieved a milestone towards its environmental goal of certifying 10,000 greener stores globally by 2025. This included over 6,000 certified greener stores in more than 40 markets globally.

You can use goal-setting frameworks to ensure clarity, alignment, accountability, and motivation.

A few famous frameworks are:

– SMART (Specific, Measurable, Achievable, Relevant, Timely) goal-setting framework – OKR (Objective and Key Results) goal-setting framework – KPI (Key Performance Indicator) framework

You can also create your own framework.

Element 4: SWOT analysis

While we’re talking about journey and destination, how can we forget about the roadblocks? One must know their strengths and weaknesses before beginning the journey.

SWOT Analysis allows you to identify your potential roadblocks by mirroring your weaknesses. It also ensures you realize your strengths and competitive edge.

Let’s understand this with Starbucks’ SWOT Analysis:

Here are a few key takeaways from an analysis of Starbucks that can help provide insights into how to enhance the presentation of the findings:

Starbucks is major dependent on a single product line (coffee), so this can be a potential roadblock. However, the brand has the opportunity to acquire complementary businesses and brands.
They’re facing intense competition in the coffee industry, but they have the opportunity to introduce new products and expand into new markets.

This way, you, too, can analyze your organization’s strengths, weaknesses, opportunities, and threats. Thereby picturing all the potential wins and business turmoils.

Element 5: Final plan development

After conducting a thorough SWOT analysis, you need to revisit your goals and objectives. Then, you can develop your final strategic plan.

This step involves refining your existing action plan to leverage your strengths and opportunities while addressing your threats and weaknesses.

Now is the time to:

Break down the company’s objectives and goals into tasks with set deadlines, and specific outcomes.
Determine resource allocation to ensure smooth task execution and individual accountability.
Define KPIs (Key Performance Indicators) to measure progress against your strategic goals.
Collaborate with your team and stakeholders while crafting the final plan.

So, include all these essential five elements for successful strategic planning. Let’s go further and understand what a great strategic plan includes.

What makes a great strategic plan?

In addition to the key elements of strategic planning, a great strategic plan should have various key characteristics. Here are some of them:

Clear and measurable goals

Clearly defined goals and specific objectives help businesses measure the outcome through various KPIs. It also ensures that every goal adds value to your business.

Set realistic targets

Set practical goals given your resources and conditions to avoid wasting money on unrealistic objectives.

Establishing deadlines in a strategic plan creates accountability among employees. It ensures the timely completion of tasks, resulting in goal achievement. Moreover, clear deadlines help track progress and make timely adjustments to stay on track.

Flexibility

Make your strategic plan flexible by using adaptable strategies and keep an eye on changes. Adjust your goals as and when needed. Authorize your team to make quick decisions accordingly, and use regular feedback to improve.

A company’s strategic planning process requires a deep understanding of your business, market, and target audience. It’s a prerequisite to achieving your business goals and maintaining your market position.

Always Remember –

“Vision without execution is just hallucination.” – Thomas Edison

So keep strategizing and executing to avoid ending up like Sears! For all the assistance in strategic & business plans, you can always rely on business planning software like Upmetrics .

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Frequently Asked Questions

Who should be involved in strategic planning.

Strategic planning should include top management, the board of directors, department heads, middle management, employees, key stakeholders, experts, and human resources. There can be other important individuals as well with a vested interest in your company’s success.

How often should an organization review and update its strategic plan?

A firm should do an annual review to update its strategic plan. Apart from that, one can alter the strategic plans after reviewing them quarterly or whenever there are any major shifts to gain desired outcomes.

Can strategic planning be applied to non-profit organizations?

Yes, the strategic planning process can and should be applied to non-profit organizations. Just like for-profit businesses, non-profits benefit from establishing strategic priorities for clear direction and structured plans to achieve their mission and goals.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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More From Forbes

Strategies For Managing Debt In A Growing Business

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Managing debt is a critical component of running a successful business, especially when that business is in a growth phase. As your business expands, it is natural to incur debt for purchasing new equipment, expanding your workforce, or entering new markets. However, managing this debt effectively is key to ensuring sustainable growth and financial health.

Here are some strategies to help you manage debt in your growing business:

1. understand your debt.

Before you can manage your debt, you need to have a clear understanding of it. This includes knowing the total amount owed, interest rates, repayment schedules, and any penalties for late payments. Create a detailed list or spreadsheet that tracks all your business debts, including:

Loan Amounts: The principal amounts of each loan.
Interest Rates: The interest rates and whether they are fixed or variable.
Repayment Terms: The length of the loan and the repayment schedule.
Collateral: Any assets pledged as security for the loans.
Lenders: The names and contact details of your lenders.

Knowing this information will help you make informed decisions about how to manage your debt effectively.

2. Prioritize Your Debt Payments

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Not all debt is created equal. Prioritizing your debt payments can help you avoid unnecessary penalties and reduce your overall debt burden more quickly. Generally, you should focus on paying off high-interest debt first, as this is the costliest in the long run. Consider the following prioritization strategies:

High-Interest Debt: Pay off credit cards and high-interest loans first.
Secured Debt: Ensure you stay current on loans secured by collateral to avoid losing assets.
Tax Obligations: Always prioritize any tax debts, as these can lead to severe penalties and legal issues.

3. Negotiate Better Terms

If your business has a good credit history and a solid relationship with your lenders, you may be able to negotiate better terms. This could include:

Lower Interest Rates: Request a lower interest rate to reduce your monthly payments and overall debt burden.
Extended Repayment Terms: Ask for an extended repayment period to lower your monthly payments.
Consolidation: Consider consolidating multiple debts into a single loan with a lower interest rate and more manageable repayment terms.

Negotiating better terms can provide immediate relief and improve your business's cash flow.

4. Create a Debt Repayment Plan

A structured debt repayment plan is essential for managing debt effectively. This plan should outline how much you will pay each month, which debts you will prioritize, and your timeline for becoming debt-free. A well-thought-out plan can help you stay focused and disciplined in your debt repayment efforts. Here are some things to think about when creating your repayment plan:

Set Realistic Goals: Determine a realistic timeline for paying off your debt based on your business's cash flow.
Automate Payments: When you set up automatic payments you never miss a due date.
Track Progress: Regularly review your debt repayment progress and adjust your plan as needed.

5. Improve Cash Flow

Improving your business's cash flow can make it easier to manage and pay off debt. Look for ways to increase revenue and reduce expenses, such as:

Boost Sales: Implement marketing strategies to increase sales and attract new customers.
Reduce Costs: Identify areas where you can cut costs without compromising quality or efficiency.
Optimize Inventory: Manage inventory levels to avoid overstocking and reduce holding costs.
Invoice Promptly: Ensure you send invoices promptly and follow up on overdue payments to maintain healthy cash flow.

6. Seek Professional Advice

Managing business debt can be complex, and seeking professional advice can provide valuable insights and guidance. Consider consulting with:

Accountants: They can help you create a debt repayment plan and identify tax-saving opportunities.
Financial Advisors: They can offer strategies for improving cash flow and managing debt more effectively.
Debt Counselors: They can provide specialized advice and support for businesses struggling with debt.

7. Monitor and Adjust

You must monitor your debt management strategy regularly and make adjustments as needed. Business conditions can change rapidly, and your debt management plan should be flexible enough to adapt to these changes. Regularly review your financial statements, track your debt repayment progress, and adjust your strategy to stay on track.

The bottom line is that managing debt in a growing business is an ongoing process. By understanding your debt, prioritizing payments, negotiating better terms, creating a structured repayment plan, improving cash flow, seeking professional advice, and monitoring your progress, you can effectively manage your debt and ensure your business continues to thrive. Remember, the goal is not just to manage debt but to leverage it as a tool for growth and success.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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What is cash value?

Types of cash value life insurance, benefits of cash value life insurance.

Considerations before choosing

Cash value life insurance FAQs

Cash value life insurance explained.

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Cash value is money that accumulates on a permanent life insurance policy, which can build wealth.
Policyholders can use their cash value to invest, save, or even borrow.
Cash value grows differently depending on the type of permanent life insurance you choose.

Cash value is a feature unique to permanent life insurance policies , which offers coverage for your entire life. Unlike your death benefit, you can use your cash value during your lifetime as you see fit. However, using your cash value can impact your death benefit and have tax consequences. It's important to understand the terms and conditions of your policy, including any fees or penalties associated with accessing the cash value and the tax consequences of withdrawals or loans.

Cash value is money that accumulates as you pay your monthly premium on a permanent life insurance policy. You can use this money to save or invest, which increases your policy's value over time. This adds an addition dimension to permanent life insurance policies, letting policyholders get some use out of their life insurance policy while they're still living.

How cash value accumulates

You have to pay a premium to maintain your permanent life insurance policy, much like a subscription service or utilities. A portion of that premium goes towards your cash value account.

Depending on the type of permanent policy you have, you build cash value based on interest rates, dividends, and investment gains. Policyholders can access their cash value through loans, withdrawals, or by surrendering or canceling their policy.

Term life insurance vs. permanent life insurance

Like permanent life insurance, term life insurance offers a death benefit. However, there's no cash value component and your policy will expire after a specified amount of time, usually between 10 to 30 years. Hence, term life is significantly more affordable than permanent life.

The difference between term life insurance and permanent life insurance is similar to the difference between renting an apartment and owning a home. When you rent, you have a lease for a certain term. When that lease is over, you can renew, but most likely with a rent increase.

Likewise, term insurance lasts temporarily. When your coverage is up, you can reapply. However, your premiums will likely increase as you age and your health deteriorates.

Whole life insurance

Whole life insurance is a lifelong or permanent policy in which you pay a fixed premium for a guaranteed death benefit and guaranteed cash value growth. The insurance company saves a portion of your premium in its own portfolio to increase your policy's cash value. Since whole life insurance offers many guarantees, it's one of the costlier life insurance policies.

Universal life insurance

Universal life insurance allows more flexibility than a whole life policy and grows cash value based on current interest rates. You can raise or lower your death benefit, which increases or decreases your premiums based on your financial situation and needs. For example, if you find that you need less coverage because your children are grown up and your mortgage is almost paid off, you can lower your death benefit. As a result, this decreases your premiums.

Indexed universal life insurance

Indexed universal life (IUL) , is a type of universal life insurance. So, it offers flexible premiums and coverage amounts. Unlike a universal policy, indexed universal life insurance's cash value invests your premiums in indexed stock markets and bonds based on the S&P 500 and the NASDAQ.

Variable life insurance

Variable life (VL) insurance policy , a type of permanent life insurance, was created years after universal life for people who didn't like how whole and universal life commingled their investments with the insurance company.

This policy invests your money in subaccounts that track underlying mutual funds, bonds, and stocks. If the market does well, so do you. If the market falls, so does your cash value, making it riskier than whole and universal life.

Tax-deferred growth

Your cash value grows on a tax-deferred basis, meaning you won't have to pay taxes on your earnings until withdrawal. Alternatively, you can decide to pass down your cash value to your beneficiaries . They usually don't have to pay taxes on the inherited amount, except in unique scenarios.

Option to borrow against the policy

Policyholders can take loans against their cash value. Unlike traditional loans, you can borrow from your policy without undergoing a credit check. Plus, policy loans generally come with lower interest rates and more favorable repayment plans. Be aware that loans reduce your death benefit if not repaid with interest.

Living benefits

Term life insurance only offers a death benefit, which your beneficiaries can access after you're gone. Permanent life insurance allows you to access your cash value benefit while you're alive. You can use your cash value for emergencies, retirement, or other financial goals.

Considerations before choosing cash value life insurance

Higher premiums.

The cost of permanent life insurance is exponentially more expensive than a term life policy. According to Policygenius, the average monthly cost of a $500,000 term life policy for a male and female with a few health issues is $26. While the average monthly cost of a $500,000 permanent life policy of a male and female in good health is $451.

It's important to only get coverage you can afford. Before purchasing a permanent policy, consider whether the additional cost fits in your budget.

Potential tax implications

Unpaid loans (which can cause your coverage to lapse) and cash value withdrawals is subject to taxes. You'll have to pay taxes if the withdrawn amount exceeds the amount of premiums paid into your policy.

There are many ways to use your cash value. You can borrow from your policy via a loan, withdraw from your account, pay your premiums, or use as collateral. It's important to understand how each use impacts your premiums and coverage.

Your insurer will likely keep your cash value if you pass away before withdrawing it. Your beneficiaries only receive your death benefit. However, you can use your cash value to purchase a paid-up additions rider, which increases your policy's death benefit.

No, only permanent life insurance policies (whole, universal, indexed universal, variable) offer cash value. Term life insurance doesn't.

It depends. Compared to the stock market, life insurance policies yield subpar returns. However, if you've maxed out your retirement plan (i.e., 401(k) or Individual Retirement Account (IRA)) for the year, life insurance can be an excellent investing vehicle for its tax advantages.

Find the best life insurance with cash value by comparing costs, coverage options, financial strength, and policy flexibility from multiple insurers. An independent agent can help you compare quotes from different companies and offer personalized advice.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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What is a Business Plan? Definition and Resources

Clipboard with paper, calculator, compass, and other similar tools laid out on a table. Represents the basics of what is a business plan.

9 min. read

Updated May 10, 2024

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan — or at least the very basic components of one.

The origin of formal business plans is murky. But they certainly go back centuries. And when you consider that 20% of new businesses fail in year 1 , and half fail within 5 years, the importance of thorough planning and research should be clear.

But just what is a business plan? And what’s required to move from a series of ideas to a formal plan? Here we’ll answer that question and explain why you need one to be a successful business owner.

What is a business plan?

Definition: Business plan is a description of a company's strategies, goals, and plans for achieving them.

A business plan lays out a strategic roadmap for any new or growing business.

Any entrepreneur with a great idea for a business needs to conduct market research , analyze their competitors , validate their idea by talking to potential customers, and define their unique value proposition .

The business plan captures that opportunity you see for your company: it describes your product or service and business model , and the target market you’ll serve.

It also includes details on how you’ll execute your plan: how you’ll price and market your solution and your financial projections .

Reasons for writing a business plan

If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact:

Companies that commit to planning grow 30% faster than those that don’t.

Creating a business plan is crucial for businesses of any size or stage. It helps you develop a working business and avoid consequences that could stop you before you ever start.

If you plan to raise funds for your business through a traditional bank loan or SBA loan , none of them will want to move forward without seeing your business plan. Venture capital firms may or may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes them want to invest.

But it’s more than just a means of getting your business funded . The plan is also your roadmap to identify and address potential risks.

It’s not a one-time document. Your business plan is a living guide to ensure your business stays on course.

Related: 14 of the top reasons why you need a business plan

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What research shows about business plans

Numerous studies have established that planning improves business performance:

71% of fast-growing companies have business plans that include budgets, sales goals, and marketing and sales strategies.
Companies that clearly define their value proposition are more successful than those that can’t.
Companies or startups with a business plan are more likely to get funding than those without one.
Starting the business planning process before investing in marketing reduces the likelihood of business failure.

The planning process significantly impacts business growth for existing companies and startups alike.

Read More: Research-backed reasons why writing a business plan matters

When should you write a business plan?

No two business plans are alike.

Yet there are similar questions for anyone considering writing a plan to answer. One basic but important question is when to start writing it.

A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business.

But the reality can be more nuanced – it depends on the stage a business is in, or the type of business plan being written.

Ideal times to write a business plan include:

When you have an idea for a business
When you’re starting a business
When you’re preparing to buy (or sell)
When you’re trying to get funding
When business conditions change
When you’re growing or scaling your business

Read More: The best times to write or update your business plan

How often should you update your business plan?

As is often the case, how often a business plan should be updated depends on your circumstances.

A business plan isn’t a homework assignment to complete and forget about. At the same time, no one wants to get so bogged down in the details that they lose sight of day-to-day goals.

But it should cover new opportunities and threats that a business owner surfaces, and incorporate feedback they get from customers. So it can’t be a static document.

Related Reading: 5 fundamental principles of business planning

For an entrepreneur at the ideation stage, writing and checking back on their business plan will help them determine if they can turn that idea into a profitable business .

And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them respond to market shifts they wouldn’t be prepared for otherwise.

It also lets them compare their forecasts and budgets to actual financial results. This invaluable process surfaces where a business might be out-performing expectations and where weak performance may require a prompt strategy change.

The planning process is what uncovers those insights.

Related Reading: 10 prompts to help you write a business plan with AI

How long should your business plan be?

Thinking about a business plan strictly in terms of page length can risk overlooking more important factors, like the level of detail or clarity in the plan.

Not all of the plan consists of writing – there are also financial tables, graphs, and product illustrations to include.

But there are a few general rules to consider about a plan’s length:

Your business plan shouldn’t take more than 15 minutes to skim.
Business plans for internal use (not for a bank loan or outside investment) can be as short as 5 to 10 pages.

A good practice is to write your business plan to match the expectations of your audience.

If you’re walking into a bank looking for a loan, your plan should match the formal, professional style that a loan officer would expect . But if you’re writing it for stakeholders on your own team—shorter and less formal (even just a few pages) could be the better way to go.

The length of your plan may also depend on the stage your business is in.

For instance, a startup plan won’t have nearly as much financial information to include as a plan written for an established company will.

Read More: How long should your business plan be?

What information is included in a business plan?

The contents of a plan business plan will vary depending on the industry the business is in.

After all, someone opening a new restaurant will have different customers, inventory needs, and marketing tactics to consider than someone bringing a new medical device to the market.

But there are some common elements that most business plans include:

Executive summary: An overview of the business operation, strategy, and goals. The executive summary should be written last, despite being the first thing anyone will read.
Products and services: A description of the solution that a business is bringing to the market, emphasizing how it solves the problem customers are facing.
Market analysis: An examination of the demographic and psychographic attributes of likely customers, resulting in the profile of an ideal customer for the business.
Competitive analysis: Documenting the competitors a business will face in the market, and their strengths and weaknesses relative to those competitors.
Marketing and sales plan: Summarizing a business’s tactics to position their product or service favorably in the market, attract customers, and generate revenue.
Operational plan: Detailing the requirements to run the business day-to-day, including staffing, equipment, inventory, and facility needs.
Organization and management structure: A listing of the departments and position breakdown of the business, as well as descriptions of the backgrounds and qualifications of the leadership team.
Key milestones: Laying out the key dates that a business is projected to reach certain milestones , such as revenue, break-even, or customer acquisition goals.
Financial plan: Balance sheets, cash flow forecast , and sales and expense forecasts with forward-looking financial projections, listing assumptions and potential risks that could affect the accuracy of the plan.
Appendix: All of the supporting information that doesn’t fit into specific sections of the business plan, such as data and charts.

Read More: Use this business plan outline to organize your plan

Different types of business plans

A business plan isn’t a one-size-fits-all document. There are numerous ways to create an effective business plan that fits entrepreneurs’ or established business owners’ needs.

Here are a few of the most common types of business plans for small businesses:

One-page plan : Outlining all of the most important information about a business into an adaptable one-page plan.
Growth plan : An ongoing business management plan that ensures business tactics and strategies are aligned as a business scales up.
Internal plan : A shorter version of a full business plan to be shared with internal stakeholders – ideal for established companies considering strategic shifts.

Business plan vs. operational plan vs. strategic plan

What questions are you trying to answer?
Are you trying to lay out a plan for the actual running of your business?
Is your focus on how you will meet short or long-term goals?

Since your objective will ultimately inform your plan, you need to know what you’re trying to accomplish before you start writing.

While a business plan provides the foundation for a business, other types of plans support this guiding document.

An operational plan sets short-term goals for the business by laying out where it plans to focus energy and investments and when it plans to hit key milestones.

Then there is the strategic plan , which examines longer-range opportunities for the business, and how to meet those larger goals over time.

Read More: How to use a business plan for strategic development and operations

Business plan vs. business model

If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the business model represents how they will make money.

The difference may seem subtle, but it’s important.

Think of a business plan as the roadmap for how to exploit market opportunities and reach a state of sustainable growth. By contrast, the business model lays out how a business will operate and what it will look like once it has reached that growth phase.

Learn More: The differences between a business model and business plan

Moving from idea to business plan

Now that you understand what a business plan is, the next step is to start writing your business plan .

The best way to start is by reviewing examples and downloading a business plan template. These resources will provide you with guidance and inspiration to help you write a plan.

We recommend starting with a simple one-page plan ; it streamlines the planning process and helps you organize your ideas. However, if one page doesn’t fit your needs, there are plenty of other great templates available that will put you well on your way to writing a useful business plan.

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

Table of Contents

Reasons to write a business plan
Business planning research
When to write a business plan
When to update a business plan
Information to include
Business vs. operational vs. strategic plans

9 Min. Read

How to Write an Airbnb Business Plan + Free PDF Template

6 Min. Read

How to Write a Law Firm Business Plan + Free Sample Plan PDF

4 Min. Read

How to Define Your Target Market

8 Min. Read

How to Write a Trucking Business Plan + Example Templates

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The 10 Components of a Business Plan
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The final component of a business plan is the appendix. Here, you may include additional documents cited in other sections or requested by readers. These might be résumés, financial statements, product pictures, patent approvals, and legal records. Components of a business plan FAQ.
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A business plan can take many forms, depending on the venture. A four-person management consulting firm may produce a leaner plan focused on service expertise and industry experience compared to a 20-employee widget maker, which would also have to describe products, manufacturing techniques, competitive forces and marketing needs, among other details.
Write your business plan
Traditional business plans use some combination of these nine sections. Executive summary. Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company's leadership team, employees, and location.
Business Plan
A business plan is an effective way of communicating with potential investors, and the level of expertise and time used in preparing a business plan also gives professional credibility to entrepreneurs. It analyzes and predicts the chances of success for the investor and helps to raise capital. Features of a Good Business Plan 1. Executive Summary
How to Start a Business: A Comprehensive Guide and Essential Steps
The first step is to calculate the start-up costs. Identify a list of expenses and put a dollar amount to each of them through research and requesting quotes. The SBA has a start-up costs ...
How To Develop the Industry Analysis of Your Business Plan
In no time, you'll be a pro at finding the information and facts you need to write your industry analysis. 1. Action Step: Industry Overview. To find basic facts about the industry in which your business operates, conduct an online search to discover various websites that hold industry information.
Top 5 Essential Elements of a Strategic Planning (Key Insights)
You can use goal-setting frameworks to ensure clarity, alignment, accountability, and motivation. A few famous frameworks are: - SMART (Specific, Measurable, Achievable, Relevant, Timely) goal-setting framework. - OKR (Objective and Key Results) goal-setting framework. - KPI (Key Performance Indicator) framework.
Strategies For Managing Debt In A Growing Business
Managing debt is a critical component of running a successful business, especially when that business is in a growth phase. As your business expands, it is natural to incur debt for purchasing new ...
Webinar "Business Plan Writing" and "Export Plan"
Join us to learn: Who, Why, and When needs a Business Plan; the Outline, Formats, Contents and Examples of Build Your Business Plan and the resources/assistance of SBA's resource partners: SCORE, SBDC and WBC. "Export Plan" Part I: Export Policy Commitment Statement; Part II: Situation or Background Analysis; Part III: Marketing Component; Part IV: Action Steps; Part V: Export Budget ...
What is Azure—Microsoft Cloud Services
The Azure cloud platform is more than 200 products and cloud services designed to help you bring new solutions to life—to solve today's challenges and create the future. Build, run, and manage applications across multiple clouds, on-premises, and at the edge, with the tools and frameworks of your choice. Start free Your most popular ...
Cash Value Life Insurance: Build Savings & Protection
Cash value is money that accumulates as you pay your monthly premium on a permanent life insurance policy. You can use this money to save or invest, which increases your policy's value over time ...
3-hour meeting ends with FAA saying Boeing can't increase Max plane
The plan includes several components to improve employee training, clarify instructions for assembly line employees, prevent suppliers from shipping defective components to Boeing and go ...
What is a Business Plan? Definition + Resources
A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. But the reality can be more nuanced - it depends on the stage a business is in, or the type of business plan being written. Ideal times to write a business plan include: When you have an idea for a ...

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

Why Are Business Plans Important?

1. Proves Your Business Viability

2. Guides You Throughout the Business Cycle

3. Helps You Make Better Business Decisions

4. Eliminates Big Mistakes

5. Secures Financing and Attracts Top Talents

Key Elements of Business Plan

1. Executive Summary

Components of an Executive Summary

2. Business Description

Components of a Business Description

3. Market Analysis

Market Analysis Factors

Components of the Market Analysis Section

4. Marketing Plan

5. Sales Strategy

6. Competitive Analysis

7. Management and Organization

8. Products and Services

9. Operating Plan

10. Financial Projections and Assumptions

11. Request For Funding

12. Exhibits and Appendices

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8 Components of a Business Plan

1. Executive Summary

3. Products/Services Offered

Industry analysis

Competitor analysis

Target market analysis

SWOT analysis

5. Marketing and Sales Strategies

Marketing and advertising plan

Sales strategy and tactics

Pricing strategy

Operational plan

Technology plan

Management and organizational structure

Personnel plan

Startup Costs

Financial projections

Break-even analysis

Funding requirements and sources

Key performance indicators (KPIs)

8. Appendices

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Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya

LivePlan Software Review

What to Include in Your Business Plan Appendix?

Resources for Your Growing Business

What Is a Business Plan?

When Do You Need a Business Plan?

1. Executive Summary

2. Company Description

3. Market Research and Business Potential

4. Competitive Analysis

5. Describe You Products or Services

6. Marketing and Sales Strategy

7. Business Financials

8. Management and Organization

9. Include an Appendix

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The 10 Key Components of a Business Plan

What are the 10 Key Components of a Business Plan?

1. Executive Summary

2. Company Analysis

3. Industry or Market Analysis

4. Analysis of Customers

5. Analysis of Competition

6. Marketing, Sales & Product Plan

7. Operations Strategy, Design and Development Plans

8. Management Team

9. Financial Plan

10. Appendix

How to Finish Your Business Plan in 1 Day!

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Other Helpful Business Plan Articles & Templates