state 5 importance of a business plan

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The importance of business plan: 5 key reasons.

A key part of any business is its business plan. They can help define the goals of your business and help it reach success. A good business plan can also help you develop an adequate marketing strategy. There are a number of reasons all business owners need business plans, keep reading to learn more!

Here’s What We’ll Cover:

What Is a Business Plan?

5 reasons you need a well-written business plan, how do i make a business plan, key takeaways.

A business plan contains detailed information that can help determine its success. Some of this information can include the following:

• Market analysis
• Cash flow projection
• Competitive analysis
• Financial statements and financial projections
• An operating plan

A solid business plan is a good way to attract potential investors. It can also help you display to business partners that you have a successful business growing. In a competitive landscape, a formal business plan is your key to success.

Check out all of the biggest reasons you need a good business plan below.

1. To Secure Funding

Whether you’re seeking funding from a venture capitalist or a bank, you’ll need a business plan. Business plans are the foundation of a business. They tell the parties that you’re seeking funding from whether or not you’re worth investing in. If you need any sort of outside financing, you’ll need a good business plan to secure it.

2. Set and Communicate Goals

A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you’re more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike.

3. Prove Viability in the Market

While many businesses are born from passion, not many will last without an effective business plan. While a business concept may seem sound, things may change once the specifics are written down. Often, people who attempt to start a business without a plan will fail. This is because they don’t take into account all of the planning and funds needed to get a business off of the ground.

Market research is a large part of the business planning process. It lets you review your potential customers, as well as the competition, in your field. By understanding both you can set price points for products or services. Sometimes, it may not make sense to start a business based on the existing competition. Other times, market research can guide you to effective marketing strategies that others lack. To have a successful business, it has to be viable. A business plan will help you determine that.

4. They Help Owners Avoid Failure

Far too often, small businesses fail. Many times, this is due to the lack of a strong business plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. Some of them are listed below, which can be avoided by having a business plan:

• The market doesn’t need the business’s product or service
• The business didn’t take into account the amount of capital needed
• The market is oversaturated
• The prices set by the business are too high, pushing potential customers away

Any good business plan includes information to help business owners avoid these issues.

5. Business Plans Reduce Risk

Related to the last reason, business plans help reduce risk. A well-thought-out business plan helps reduce risky decisions. They help business owners make informed decisions based on the research they conduct. Any business owner can tell you that the most important part of their job is making critical decisions. A business plan that factors in all possible situations helps make those decisions.

Luckily, there are plenty of tools available to help you create a business plan. A simple search can lead you to helpful tools, like a business plan template . These are helpful, as they let you fill in the information as you go. Many of them provide basic instructions on how to create the business plan, as well.

If you plan on starting a business, you’ll need a business plan. They’re good for a vast number of things. Business plans help owners make informed decisions, as well as set goals and secure funding. Don’t put off putting together your business plan!

If you’re in the planning stages of your business, be sure to check out our resource hub . We have plenty of valuable resources and articles for you when you’re just getting started. Check it out today!

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The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

What is the purpose of a business plan?

A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Business plan FAQs

How does having a business plan help small business owners make better decisions.

Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.

What industry-specific issues can business plans help tackle?

Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.

How can small business owners use their business plans to pitch investors or apply for loans?

In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.

Understanding the importance of a business plan

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

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

Related Posts

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

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

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

• 3. Having a business plan minimizes your risk

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

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

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

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• 4. Crafts a roadmap to achieve important milestones

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

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

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

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

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

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

You need to verify:

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

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

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

6. You’ll make big spending decisions with confidence

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

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

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

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

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

• 8. Position your brand against the competition

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

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

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

• 9. Determines financial needs and revenue models

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

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

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

• 10. Helps you think through your marketing strategy

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

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

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

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

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

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

• 12. Future-proof your business

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

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

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

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

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

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

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

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

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

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

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

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• Writing your business plan

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

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

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

Table of Contents

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

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Do you REALLY need a business plan?

The top three questions that I get asked most frequently as a professional business plan writer will probably not surprise you:

• What is the purpose of a business plan – why is it really required?
• How is it going to benefit my business if I write a business plan?
• Is a business plan really that important – how can I actually use it?

Keep reading to get my take on what the most essential advantages of preparing a business plan are—and why you may (not) need to prepare one.

The importance, purpose and benefit of a business plan is in that it enables you to validate a business idea, secure funding, set strategic goals – and then take organized action on those goals by making decisions, managing resources, risk and change, while effectively communicating with stakeholders.

Let’s take a closer look at how each of the important business planning benefits can catapult your business forward:

1. Validate Your Business Idea

The process of writing your business plan will force you to ask the difficult questions about the major components of your business, including:

• External: industry, target market of prospective customers, competitive landscape
• Internal: business model, unique selling proposition, operations, marketing, finance

Business planning connects the dots to draw a big picture of the entire business.

And imagine how much time and money you would save if working through a business plan revealed that your business idea is untenable. You would be surprised how often that happens – an idea that once sounded so very promising may easily fall apart after you actually write down all the facts, details and numbers.

While you may be tempted to jump directly into start-up mode, writing a business plan is an essential first step to check the feasibility of a business before investing too much time and money into it. Business plans help to confirm that the idea you are so passionate and convinced about is solid from business point of view.

Take the time to do the necessary research and work through a proper business plan. The more you know, the higher the likelihood that your business will succeed.

2. Set and Track Goals

Successful businesses are dynamic and continuously evolve. And so are good business plans that allow you to:

• Priorities: Regularly set goals, targets (e.g., sales revenues reached), milestones (e.g. number of employees hired), performance indicators and metrics for short, mid and long term
• Accountability: Track your progress toward goals and benchmarks
• Course-correction: make changes to your business as you learn more about your market and what works and what does not
• Mission: Refer to a clear set of values to help steer your business through any times of trouble

Essentially, business plan is a blueprint and an important strategic tool that keeps you focused, motivated and accountable to keep your business on track. When used properly and consulted regularly, it can help you measure and manage what you are working so hard to create – your long-term vision.

As humans, we work better when we have clear goals we can work towards. The everyday business hustle makes it challenging to keep an eye on the strategic priorities. The business planning process serves as a useful reminder.

3. Take Action

A business plan is also a plan of action . At its core, your plan identifies where you are now, where you want your business to go, and how you will get there.

Planning out exactly how you are going to turn your vision into a successful business is perhaps the most important step between an idea and reality. Success comes not only from having a vision but working towards that vision in a systematic and organized way.

A good business plan clearly outlines specific steps necessary to turn the business objectives into reality. Think of it as a roadmap to success. The strategy and tactics need to be in alignment to make sure that your day-to-day activities lead to the achievement of your business goals.

4. Manage Resources

A business plan also provides insight on how resources required for achieving your business goals will be structured and allocated according to their strategic priority. For example:

Large Spending Decisions

• Assets: When and in what amount will the business commit resources to buy/lease new assets, such as computers or vehicles.
• Human Resources: Objectives for hiring new employees, including not only their pay but how they will help the business grow and flourish.
• Business Space: Information on costs of renting/buying space for offices, retail, manufacturing or other operations, for example when expanding to a new location.

Cash Flow It is essential that a business carefully plans and manages cash flows to ensure that there are optimal levels of cash in the bank at all times and avoid situations where the business could run out of cash and could not afford to pay its bills.

Revenues v. Expenses In addition, your business plan will compare your revenue forecasts to the budgeted costs to make sure that your financials are healthy and the business is set up for success.

5. Make Decisions

Whether you are starting a small business or expanding an existing one, a business plan is an important tool to help guide your decisions:

Sound decisions Gathering information for the business plan boosts your knowledge across many important areas of the business:

• Industry, market, customers and competitors
• Financial projections (e.g., revenue, expenses, assets, cash flow)
• Operations, technology and logistics
• Human resources (management and staff)
• Creating value for your customer through products and services

Decision-making skills The business planning process involves thorough research and critical thinking about many intertwined and complex business issues. As a result, it solidifies the decision-making skills of the business owner and builds a solid foundation for strategic planning , prioritization and sound decision making in your business. The more you understand, the better your decisions will be.

Planning Thorough planning allows you to determine the answer to some of the most critical business decisions ahead of time , prepare for anticipate problems before they arise, and ensure that any tactical solutions are in line with the overall strategy and goals.

If you do not take time to plan, you risk becoming overwhelmed by countless options and conflicting directions because you are not unclear about the mission , vision and strategy for your business.

6. Manage Risk

Some level of uncertainty is inherent in every business, but there is a lot you can do to reduce and manage the risk, starting with a business plan to uncover your weak spots.

You will need to take a realistic and pragmatic look at the hard facts and identify:

• Major risks , challenges and obstacles that you can expect on the way – so you can prepare to deal with them.
• Weaknesses in your business idea, business model and strategy – so you can fix them.
• Critical mistakes before they arise – so you can avoid them.

Essentially, the business plan is your safety net . Naturally, business plan cannot entirely eliminate risk, but it can significantly reduce it and prepare you for any challenges you may encounter.

7. Communicate Internally

Attract talent For a business to succeed, attracting talented workers and partners is of vital importance.

A business plan can be used as a communication tool to attract the right talent at all levels, from skilled staff to executive management, to work for your business by explaining the direction and growth potential of the business in a presentable format.

Align performance Sharing your business plan with all team members helps to ensure that everyone is on the same page when it comes to the long-term vision and strategy.

You need their buy-in from the beginning, because aligning your team with your priorities will increase the efficiency of your business as everyone is working towards a common goal .

If everyone on your team understands that their piece of work matters and how it fits into the big picture, they are more invested in achieving the objectives of the business.

It also makes it easier to track and communicate on your progress.

Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

8. Communicate Externally

Alliances If you are interested in partnerships or joint ventures, you may share selected sections of your plan with the potential business partners in order to develop new alliances.

Suppliers A business plan can play a part in attracting reliable suppliers and getting approved for business credit from suppliers. Suppliers who feel confident that your business will succeed (e.g., sales projections) will be much more likely to extend credit.

In addition, suppliers may want to ensure their products are being represented in the right way .

Professional Services Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, including attorneys, accountants, and other professional consultants as needed, to make sure that everyone is on the same page.

Advisors Share the plan with experts and professionals who are in a position to give you valuable advice.

Landlord Some landlords and property managers require businesses to submit a business plan to be considered for a lease to prove that your business will have sufficient cash flows to pay the rent.

Customers The business plan may also function as a prospectus for potential customers, especially when it comes to large corporate accounts and exclusive customer relationships.

9. Secure Funding

If you intend to seek outside financing for your business, you are likely going to need a business plan.

Whether you are seeking debt financing (e.g. loan or credit line) from a lender (e.g., bank or financial institution) or equity capital financing from investors (e.g., venture or angel capital), a business plan can make the difference between whether or not – and how much – someone decides to invest.

Investors and financiers are always looking at the risk of default and the earning potential based on facts and figures. Understandably, anyone who is interested in supporting your business will want to check that you know what you are doing, that their money is in good hands, and that the venture is viable in the long run.

Business plans tend to be the most effective ways of proving that. A presentation may pique their interest , but they will most probably request a well-written document they can study in detail before they will be prepared to make any financial commitment.

That is why a business plan can often be the single most important document you can present to potential investors/financiers that will provide the structure and confidence that they need to make decisions about funding and supporting your company.

Be prepared to have your business plan scrutinized . Investors and financiers will conduct extensive checks and analyses to be certain that what is written in your business plan faithful representation of the truth.

10. Grow and Change

It is a very common misconception that a business plan is a static document that a new business prepares once in the start-up phase and then happily forgets about.

But businesses are not static. And neither are business plans. The business plan for any business will change over time as the company evolves and expands .

In the growth phase, an updated business plan is particularly useful for:

Raising additional capital for expansion

• Seeking financing for new assets , such as equipment or property
• Securing financing to support steady cash flows (e.g., seasonality, market downturns, timing of sale/purchase invoices)
• Forecasting to allocate resources according to strategic priority and operational needs
• Valuation (e.g., mergers & acquisitions, tax issues, transactions related to divorce, inheritance, estate planning)

Keeping the business plan updated gives established businesses better chance of getting the money they need to grow or even keep operating.

Business plan is also an excellent tool for planning an exit as it would include the strategy and timelines for a transfer to new ownership or dissolution of the company.

Also, if you ever make the decision to sell your business or position yourself for a merger or an acquisition , a strong business plan in hand is going to help you to maximize the business valuation.

Valuation is the process of establishing the worth of a business by a valuation expert who will draw on professional experience as well as a business plan that will outline what you have, what it’s worth now and how much will it likely produce in the future.

Your business is likely to be worth more to a buyer if they clearly understand your business model, your market, your assets and your overall potential to grow and scale .

Related Questions

Business plan purpose: what is the purpose of a business plan.

The purpose of a business plan is to articulate a strategy for starting a new business or growing an existing one by identifying where the business is going and how it will get there to test the viability of a business idea and maximize the chances of securing funding and achieving business goals and success.

Business Plan Benefits: What are the benefits of a business plan?

A business plan benefits businesses by serving as a strategic tool outlining the steps and resources required to achieve goals and make business ideas succeed, as well as a communication tool allowing businesses to articulate their strategy to stakeholders that support the business.

Business Plan Importance: Why is business plan important?

The importance of a business plan lies in it being a roadmap that guides the decisions of a business on the road to success, providing clarity on all aspects of its operations. This blueprint outlines the goals of the business and what exactly is needed to achieve them through effective management.

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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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The Undeniable Importance of a Business Plan

We often hear about business plans in the context of early-stage companies; however, constructing excellent business plans is difficult and time-consuming, so many entrepreneurs avoid them. But, is this a mistake?

While most people may be aware of the “soft” arguments for and against writing a business plan, in this article, a Toptal Finance Expert takes a data-driven approach to addressing the debate. In it, he finds strong evidence to support the notion that writing an excellent business plan is time well spent.

By Sean Heberling

Sean has analyzed 10,000+ companies, built complex models, and helped facilitate $1+ billion in investment transactions.

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Executive Summary

• Individuals who write business plans are 2.5x as likely to start businesses.
• Business planning improves corporate executive satisfaction with corporate strategy development.
• Angels and venture capitalists value business plans and their [financial models](https://www.toptal.com/finance/tutorials/what-is-a-financial-model).
• Companies who complete business plans are 2.5x as likely to get funded.
• Even if a small-scale early-stage venture seeking just $250,000 in capital spent almost $40,000 on business planning and another almost $40,000 on capital raising, it should still expect to "break even" on a probability-weighted basis.
• Larger early-stage ventures enjoy extraordinary probability-weighted returns on investment from business planning. Because the target net capital so greatly exceeds the money spent on business planning, the prospective ROI is huge.
• Company Overview: An explanation of why your company is relevant and the need you are addressing.
• Market Overview: A description of the state of your market and its important trends, a detailed description of your customers, and a description of your current competitors and their advantages.
• Product/Service Overview: A description of your product(s), how they compete with other brands, why they are needed, and why customers will pay a fair economic value for it.
• Financial Projections: Three thorough financial plans with conservative, moderate, and optimistic assumptions.
• The process of writing forces the author to ask introspectively how they reached their conclusions and each of the sub-conclusions along the way because they must explain their logic to a cynical reader.
• The written author needs to support all conclusions with facts and logic to prove that they are not "making it up" or relying upon popular "myths."
• Outlined reports and outlined business plans are not generally subject to the same level of reader scrutiny.

We often hear about business plans in the context of early-stage companies , but constructing excellent business plans is difficult and time-consuming, so many entrepreneurs avoid them. That’s a mistake, as there is strong evidence demonstrating that business plans generate positive returns on time and money invested .

The business world has long debated the importance of business plans, and most involved understand the “soft” arguments. However, this article delves into the data to conclude that writing an excellent business plan is time well spent. I developed a similar view over my 20+ year financial career , during which I have analyzed well over 10,000 different types of companies. I have noticed that while a business plan may not be required for a venture to become successful, having one does seem to greatly improve the probability of successful outcomes.

Expert Opinions Support the Value of Business Planning

Expert opinions support the four following conclusions:

• Angels and venture capitalists value business plans and their financial models.

Individuals Who Write Business Plans Are 2.5x More Likely to Become Entrepreneurs

Many people have business ideas over the course of their careers, but often, these ideas never come to fruition, or they get lost amidst our daily obligations. Interestingly, studies support the notion that those who write business plans are far more likely to launch their companies. Data from the Panal Study of Entrepreneurial Dynamics in fact suggests that business planners were 2.5x as likely to get into business . The study, which surveyed more than 800 people across the United States who were in the process of starting businesses, therefore concluded that “writing a plan greatly increased the chances that a person would actually go into business.”

Of course, causation of this phenomenon is hard to pin down. There are several different possible reasons why this correlation between writing business plans and actually starting a business may exist. But William Gartner, Clemson University Entrepreneurship Professor and author of the Panal Study, believes that “‘research shows that business plans are all about walking the walk. People who write business plans also do more stuff.’ And doing more stuff, such as researching markets and preparing projections, increases the chances an entrepreneur will follow through.”

Research shows that business plans are all about walking the walk. People who write business plans also do more stuff. And doing more stuff, such as researching markets and preparing projections, increases the chances an entrepreneur will follow through.

William Bygrave, a professor emeritus at Babson College, reached a similar conclusion despite having previously shown “that entrepreneurs who began with formal plans had no greater success than those who started without them.” Bygrave does admit, however, that “40% of Babson students who have taken the college’s business plan writing course go on to start businesses after graduation, twice the rate of those who didn’t study plan writing.”

Business Planning Improves Corporate Executive Satisfaction

Another important way in which business plans can provide tangible help is by aligning everyone in an organization with the vision and strategy going forward. And this, in turn, has important ramifications on corporate executive satisfaction. A study by McKinsey & Company which surveyed nearly 800 corporate executives across a range of industries confirms this conclusion. In it, McKinsey found that “formal strategic-planning processes play an important role in improving overall satisfaction with strategy development. That role can be seen in the responses of the 79 percent of managers who claimed that the formal planning process played a significant role in developing strategies and were satisfied with the approach of their companies, compared with only 21 percent of the respondents who felt that the process did not play a significant role. Looked at another way, 51% of the respondents whose companies had no formal process were dissatisfied with their approach to the development of strategy, against only 20% of those at companies with a formal process.”

Of course, not all planning is equal. Planning just for the sake of planning doesn’t have the desired effects. As McKinsey itself noted in their study, “Just 45% of the respondents said they were satisfied with the strategic planning process. Moreover, only 23% indicated that major strategic decisions were made within its confines. Given these results, managers might well be tempted to jettison the planning process altogether.” As such, entrepreneurs and business managers should take the time and effort required to put together a well-written and well-researched business plan. Later in the article, I outline some of the elements of a well-written plan.

Business Plans and Their Financial Models Are Valuable to Angels and Venture Capitalists

Many entrepreneurs will eventually need to raise outside capital to grow and develop their businesses. In my experience, a business plan is a crucial tool in maximizing the chances of raising money from external investors. A well-written plan not only helps investors understand your business and your vision, but also shows them that you’ve taken the time to carefully assess and think through the issues your business will face, as well as the more detailed questions surrounding the economics and fundamentals of your business model.

Nathan Beckford, CFA, is the CEO of FounderSuite, the funding stack used by startups in Y Combinator, TechStars, 500s, and more to raise over $750 million. Nathan illustrates the above point nicely in an email he wrote to me recently: “Prior to starting Foundersuite.com, I ran a startup consulting business called VentureArchetypes.com. For the first few years, our primary business was cranking out bold, bullish, beautifully-written business plans for startups to present to investors. Around the mid-2000s, business plans started to go out of favor as the ‘Lean Startup’ methodology became popular. Instead of a written plan, we saw a huge uptick in demand for detailed financial models. Bottom line, I still see value in taking time to be contemplative and strategic before launching a startup. Does that need to be in the form of a 40-page written document? No. But if that’s the format that best works for you, and it can help you model scenarios and ‘see around the corner’ then that’s valuable.”

Nathan and I have frequently interacted, as I maintain a subscription to FounderSuite, software I use when running capital campaigns for early-stage companies on whose boards I sit, or when raising capital for my own firm’s investment projects. Nathan’s feedback is helpful, as he frequently interacts with thousands of entrepreneurs simultaneously running capital campaigns, providing him with a great perspective on which approaches work and which don’t. Clearly, he sees that financial models and business plans in some form help entrepreneurs raise capital.

Companies Who Complete Business Plans Are 2.5x as Likely to Get Funded

Following the section above, naturally, if business plans are useful to outside investors, these are therefore likely to also increase one’s chances of successfully raising capital. A study by Palo Alto Software confirms this hypothesis. The study showed that although 65% of entrepreneurs had NOT completed business plans, the ones who had were twice as likely to have secured funding for their businesses.

This study surveyed 2,877 entrepreneurs. Of those, 995 had completed business plans, with 297 of them (30%) having secured loans, 280 of them (28%) having secured investment capital, and 499 of them (50%) having grown their businesses. Contrast these percentages with the results for the 1,882 entrepreneurs who had not completed business plans, where just 222 of them (12%) had secured loans, 219 of them (12%) had secured investment capital, and 501 of them (27%) had grown their businesses. (Note that the percentages among the business plan population sum to over 100% because of some overlap between each of the sub-categories.) These results led the study authors to conclude that “Except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.”

Calculating the Return on Investment for Business Planning

The data and studies outlined above all serve to prove something that I have come to understand very clearly throughout my career. Nevertheless, I still often find that startups struggle with the idea of having to put together a business plan, and in particular with the option of hiring an outside professional to help them do that. As such, I quantified the ROI of such an activity, using data and numbers based on my many years of business consulting. The results of the exercise are summarized in the table at the end of the section, but there are two overarching conclusions:

• Even a small-scale early-stage company can “afford” to pay a finance expert $191 per hour both to create a business plan and to guide the capital raising process, at worst “breaking even” on the investment.
• Larger early-stage companies can expect significant returns on investments in business planning, perhaps as much as 6,700% (67x the amount of money invested).

Diving into the analysis, my inputs included:

• My professional experience with writing business plans. I have spent 25 - 200 hours apiece creating business plans I feel comfortable sharing with founders, advisors, and investors.
• Data from the Palo Alto study discussed earlier in this article. This study showed that 30% of early-stage ventures with business plans had secured funding, 2.5x as great as the 12% of early-stage ventures without business plans who managed to secure funding despite the absence of such plans.
• The hourly rate for a finance expert x (150 to 200 hours) for one round of financing, OR
• 10% of the amount of capital targeted

My analysis illustrates the following:

• Early-stage companies should expect to spend $4,000 - $40,000 on business planning, including the financial modeling associated with it.
• Early-stage companies should expect to spend $30,000 - $200,000 for an initial round of financing between $250,000 and $2 million in size, resulting in net financing of $200,000 - $1.8 million.
• Even if a small-scale early-stage venture seeking just $250,000 in capital spent almost $40,000 on business planning and another almost $40,000 on capital raising, it should still expect to “break even” on a probability-weighted basis. In other words, because the odds of success with a professional business plan are 2.5x greater than without one, small-scale early-stage ventures can justify such a significant investment. This also assumes NO additional odds for success from engaging a professional to coordinate the fundraising effort. I suspect that doing so may push the odds of success from 12% without a business plan and 30% with a business plan to above 50%. It is also likely that a smaller-scale venture may require significantly fewer hours for business planning and capital raising that what is outlined in the “worst case” below.
• Larger early-stage ventures enjoy extraordinary probability-weighted returns on investment from business planning. Because the target net capital so greatly exceeds the money spent on business planning, the prospective ROI is huge, and this analysis just assumes ONE round of equity financing. Most successful startups will experience several rounds of financing.

Thoughts on Writing an Excellent Business Plan

An extensive overview of how to write an excellent business plan is beyond the scope of this article. However, here are two key thoughts that have emerged from my years of experience with startups.

First, there are four common elements to an excellent business plan. In Alan Hall’s Forbes article, “ How to Build a Billion Dollar Business Plan: 10 Top Points ,” he interviews Thomas Harrison, Chairman of Diversified Agency Services, an Omnicom division that has purchased “a vast number of firms,” to share his views on the key elements of a great business plan. Although each of these ten elements is essential, I reorganized the list into four broad categories:

1. Company Overview

• An explanation of why your company is relevant and the need are you addressing
• A description of corporate priorities and the processes to achieve them.
• An overview of the various resources, including the people that will be needed, to deliver what’s expected by the customer.

2. Market Overview

• A description of the state of your market and its important trends.
• A detailed description of your customers.
• A description of your current competitors and their advantages. Which ones will you displace?

3. Product/Service Overview

• A description of your products, how they compete with other brands, and why they are needed.
• An explanation of why customers will pay a fair economic value for your product or service. This element is conspicuously absent from some of today’s most expensive unicorns. Companies such as Uber and Tesla are losing massive amounts of money on rapidly growing sales because these companies may not be selling their services/products for fair economic value. Of course, sales grow rapidly when customers can buy your services/products for far less than their fair economic values!

4. Financial Projections

• Conservative
• Each scenario should have realistic and achievable sales, margins, expenses, and profits on monthly, quarterly, and annual bases. Again, these elements appear to be conspicuously absent from some of today’s most expensive unicorns.

Second, written business plans are superior to those just “outlined.” As an adjunct professor of finance for Villanova University, I require my students to write research reports prior to developing slide decks to present their findings from a full semester of industry research. The process of writing forces the authors to ask themselves how they reached their conclusions and each of the sub-conclusions along the way because they must explain their logic to cynical readers. The written authors need to support their conclusions with facts and logic to prove that they are not “making it up” or relying upon popular “myths.” Outlined reports and outlined business plans are not generally subject to the same level of reader scrutiny. Therefore, written business plans are superior to those just “outlined.” Outlined plans are often kept on 10-12 slide decks, and the slide deck is an important tool in the capital raising process, but the written business plan that stands behind it will differentiate an entrepreneur from their seemingly infinite competition.

Parting Thoughts

Some argue that many public multi-billion-dollar companies such as Apple or Google never had formal business plans before they started, but this argument is flawed because most of these companies likely developed business plans either during the solicitation of venture capital or during the process of going public. Apple and Google were both funded with venture capital, and soliciting venture capital involves business planning. The founders of Apple and Google likely created financial projections and outlined strategic paths.

Moreover, Apple and Google are both public companies, and going public involves business planning. Underwriters employ research analysts creating financial forecasts based on business plans projected by management at the companies going public. Buy-side firms purchasing and holding shares in newly public companies create forecasts based upon the business plans projected by public company management teams.

Admittedly, you don’t need a written business plan to have a successful company. You may not even need a business plan at all to have a successful company. However, the probability of success without a business plan is much lower. Angels and venture capitalists like to know about your business plan, and public companies need to project business plans to persuade underwriters and investors to purchase their securities.

Further Reading on the Toptal Blog:

• Creating a Narrative from Numbers
• Business Plan Consultants: Who They Are and How They Create Value
• Building a Business Continuity Plan
• Building the Next Big Thing: A Guide to Business Idea Development
• Mission Statements: How Effectively Used Intangible Assets Create Corporate Value

Understanding the basics

Why it is important to have a business plan.

Expert opinions and numerous studies show that business plans improve corporate satisfaction, are useful for angel investors and venture capitalists, and increase a company’s chances of raising capital by 2.5x.

What are the benefits of a business plan?

Individuals who write business plans are 2.5x as likely to start businesses. Moreover, business planning improves corporate executive satisfaction with corporate strategy development. Finally, investors value business plans, making the chances of raising capital 2.5x greater.

What does an investor look for in a business plan?

The four key sections of a business plan are: the company overview, a market overview, your product/service overview, and the financial projections.

• BusinessPlan

Sean Heberling

Bryn Mawr, PA, United States

Member since October 18, 2017

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Nine reasons why you need a business plan

Building a great business plan helps you plan, strategize and succeed. Presented by Chase for Business .

Making the decision to create a new business is an exciting yet stressful experience. Starting a business involves many tasks and obstacles, so it’s important to focus before you take action. A solid business plan can provide direction, help you attract investors and ensure you maintain momentum.

No matter what industry you plan on going into, a business plan is the first step for any successful enterprise. Building your business plan helps you figure out where you want your business to go and identify the necessary steps to get you there. This is a key document for your company to both guide your actions and track your progress.

What is the purpose of a business plan?

Think of a business plan like a roadmap. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis and logistics and operations plans.

It can also help you organize your thoughts and goals, as well as give you a better idea of how your company will work. Good planning is often the difference between success and failure.

Here are nine reasons your company needs a business plan.

1. Prove your idea is viable

Through the process of writing a business plan, you can assess whether your company will be successful. Understanding market dynamics, as well as competitors, will help determine if your idea is viable.

This is also the time to develop financial projections for your business plan, like estimated startup costs, a profit and loss forecast, a break-even analysis and a cash flow statement . By taking time to investigate the viability of your idea, you can build goals and strategies to support your path to success.

A proper business plan proves to all interested parties—including potential investors, customers, employees, partners and most importantly yourself — that you are serious about your business.

2. Set important goals

As a business owner, the bulk of your time will mostly likely be spent managing day-to-day tasks. As a result, it might be hard to find time after you launch your business to set goals and milestones. Writing a business plan allows you to lay out significant goals for yourself ahead of time for three or even five years down the road. Create both short- and long-term business goals. 

3. Reduce potential risks

Prevent your business from falling victim to unexpected dangers by researching before you break ground. A business plan opens your eyes to potential risks that your business could face. Don’t be afraid to ask yourself the hard questions that may need research and analysis to answer. This is also good practice in how your business would actually manage issues when they arise. Incorporate a contingency plan that identifies risks and how you would respond to them effectively.

The most common reasons businesses fail include:

• Lack of capital
• Lack of market impact or need
• Unresearched pricing (too high or low)
• Explosive growth that drains all your capital
• Stiff competition

Lack of capital is the most prevalent reason why businesses fail. To best alleviate this problem, take time to determine how your business will generate revenue. Build a comprehensive model to help mitigate future risks and long-term pain points. This can be turned into a tool to manage growth and expansion.

4. Secure investments

Whether you’re planning to apply for an SBA loan , build a relationship with angel investors or seek venture capital funding, you need more than just an elevator pitch to get funding. All credible investors will want to review your business plan. Although investors will focus on the financial aspects of the plan, they will also want to see if you’ve spent time researching your industry, developed a viable product or service and created a strong marketing strategy.

While building your business plan, think about how much raised capital you need to get your idea off the ground. Determine exactly how much funding you’ll need and what you will use it for. This is essential for raising and employing capital.

5. Allot resources and plan purchases

You will have many investments to make at the launch of your business, such as product and services development, new technology, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. It gives you an idea of how much you’ll need to spend on resources and it ensures your business will manage those resources effectively.  

A business plan provides clarity about necessary assets and investment for each item. A good business plan can also determine when it is feasible to expand to a larger store or workspace.

In your plan, include research on new products and services, where you can buy reliable equipment and what technologies you may need. Allocate capital and plan how you’ll fund major purchases, such as with a Chase small business checking account or business credit card .

6. Build your team

From seasoned executives to skilled labor, a compelling business plan can help you attract top-tier talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your executive team as well as the different roles you need filled immediately and further down the line.

Small businesses often employ specialized consultants, contractors and freelancers for individual tasks such as marketing, accounting and legal assistance. Sharing a business plan helps the larger team work collectively in the same direction. 

This will also come into play when you begin working with any new partners. As a new business, a potential partner may ask to see your business plan. Building partnerships takes time and money, and with a solid business plan you have the opportunity to attract and work with the type of partners your new business needs.

7. Share your vision 

When you start a business, it's easy to assume you'll be available to guide your team. A business plan helps your team and investors understand your vision for the company. Your plan will outline your goals and can help your team make decisions or take action on your behalf. Share your business plan with employees to align your full staff toward a collective goal or objective for the company.  Consider employee and stakeholder ownership as a compelling and motivating force. 

8. Develop a marketing strategy

A marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.

Important questions to consider as you build your marketing strategy include:

• What industry segments are we pursuing?
• What is the value proposition of the products or services we plan to offer?
• Who are our customers?
• How will we retain our customers and keep them engaged with our products or services and marketing?
• What is our advertising budget?
• What price will we charge?
• What is the overall look and feel of our brand? What are our brand guidelines?
• Will we need to hire marketing experts to help us create our brand?
• Who are our competitors? What marketing strategies have worked (or not worked) for them?

With a thoughtful marketing strategy integrated into your business plan, your company goals are significantly more in reach.

9. Focus your energy

Your business plan determines which areas of your business to focus on while also avoiding possible distractions. It provides a roadmap for critical tradeoffs and resource allocation.

As a business owner, you will feel the urge to solve all of your internal and customers’ problems, but it is important to maintain focus. Keep your priorities at the top of your mind as you set off to build your company.

As a small business owner, writing a business plan should be one of your first priorities. Read our checklist for starting a business, and learn how to take your business from a plan to reality. When you’re ready to get started, talk with a Chase business banker to open a Chase business checking or savings account today.

For Informational/Educational Purposes Only: The views expressed in this article may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.

JPMorgan Chase Bank, N.A. Member FDIC. Equal Opportunity Lender, ©2023 JPMorgan Chase & Co

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5 Reasons to Write a Business Plan There are any number of reasons why you need to create a business plan, including starting a business, seeking funding and more.

By Entrepreneur Staff Dec 2, 2014

In their book Write Your Business Plan , the staff of Entrepreneur Media offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors offer five reasons why someone would want to write a business plan and what they'll use it for.

Anybody beginning or extending a venture that will consume significant resources of money, energy or time and that's expected to return a profit should take the time to draft some kind of business plan.

But there are many reasons to write a business plan, including the following five:

1. You want to start a business.

The classic business plan writer is an entrepreneur seeking funds to help start a new venture. Many great companies had their starts in the form of a plan that was used to convince investors to put up the capital necessary to get them under way.

2. You own an established firm and are seeking help.

Many business plans are written by and for companies that are long past the startup stage but also well short of large-corporation status. These middle-stage enterprises may draft plans to help them find funding for growth. They may feel the need for a written plan to help manage an already rapidly growing business and to convey the mission and prospects of the business to customers, suppliers or other interested parties. A business plan can address the next stage in the life process of a business.

3. You need to determine your objectives.

There are so many options when it comes to starting a business, including the size, location, and, of course, the reason for existence. You'll be able to determine all of these and so many more aspects of business with the help of your business plan. It forces you to think through all of the areas that form the main concept to the smallest details. This way, you don't find yourself remembering at the last minute that your website still isn't developed or that you still have most of your inventory in a warehouse and no way to ship it.

4. You're trying to predict the future.

It may seem dishonest to say that a business plan can't predict the future. What are all those projections and forecasts for if they're not attempts to predict the future? The fact is, however, no projection or forecast is really a hard-and-fast prediction of the future. The best you can do is have a plan in which you logically and systematically attempt to show what will happen if a particular scenario occurs. You'll use your research, sales forecasts, market trends and competitive analysis to make well thought-out predictions of how you see your business developing if you're able to follow a specified course. To some extent, you can create your future rather than simply trying to predict it by the decisions you make. For example, you may not have a multimillion-dollar business in ten years if you're trying to start and run a small family business. Your decision on growth would therefore factor into your predictions and the outcome.

5. You want to use it to raise all the money you'll need.

A business plan can't guarantee that you'll raise all the money you need at any given time, especially during the startup phase. Even if you're successful in finding an investor, odds are good you won't get quite what you asked for. There may be a big difference in what you have to give up, such as majority ownership or control, to get the funds. Or you may be able to make minor adjustments if you cannot snare as large a chunk of cash as you want.

In a sense, a business plan used for seeking funding is part of a negotiation taking place between you and your prospective financial backers. The part of the plan where you describe your financial needs can be considered your opening bid in this negotiation. In a way, a business plan is an excellent opening bid -- it's definite, comprehensive and clear.

But you know what happens to bids in negotiations: They get whittled away, the terms get changed, and, sometimes, the whole negotiation breaks down under the force of an ultimatum from one of the parties involved. Does this mean you should ask for a good deal more money than you actually need in your plan? Actually, that may not be the best strategy either. Investors who see a lot of plans are going to notice if you're asking for way too much money. Such a move stands a good chance of alienating those who might otherwise be enthusiastic backers of your plan. It's probably a better idea to ask for a little more than you think you can live with, plus slightly better terms than you really expect.

Entrepreneur Staff

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

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

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

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

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

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

Let’s get started.

Why Are Business Plans Important?

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

1. Proves Your Business Viability

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

2. Guides You Throughout the Business Cycle

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

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

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

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

3. Helps You Make Better Business Decisions

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

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

4. Eliminates Big Mistakes

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

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

5. Secures Financing and Attracts Top Talents

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

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

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

Key Elements of Business Plan

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

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

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

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

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

1. Executive Summary

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

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

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

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

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

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

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

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

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

Components of an Executive Summary

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

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

2. Business Description

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

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

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

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

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

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

Components of a Business Description

Your business description needs to contain these categories of information.

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

3. Market Analysis

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

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

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

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

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

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

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

Market Analysis Factors

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

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

Components of the Market Analysis Section

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

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

4. Marketing Plan

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

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

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

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

5. Sales Strategy

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

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

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

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

6. Competitive Analysis

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

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

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

This section should define the following:

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

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

7. Management and Organization

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

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

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

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

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

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

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

8. Products and Services

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

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

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

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

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

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

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

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

9. Operating Plan

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

The operating plan for your business should include:

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

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

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

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

10. Financial Projections and Assumptions

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

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

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

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

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

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

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

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

11. Request For Funding

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

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

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

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

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

12. Exhibits and Appendices

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

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

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

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

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

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

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

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

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

Why is a business plan important and what should it include?

Posted: Tue 12th Mar 2019

How do you go from a bright idea to a successful business? Planning. It's easy to imagine successful entrepreneurs played it by ear and got lucky. People often change direction but planning's a crucial part of testing a start-up idea and building a business.

This guide examines why you should write a business plan, what it needs to include and how to use it. We've also highlighted additional resources that can help you go through the process.

Why write a business plan?

Business plans provide accountability. They allow business owners to sense-check what they're doing and why. They provide an opportunity to get ideas out of your head and start working on them.

"Not having to report to anyone is attractive when you start up. As you grow it can be tricky not to have a sounding board. A business plan can be useful for that," said Jonathan Bareham , co-founder of accountancy firm Raeden.

He highlights the role of goal setting in the planning process. Why are you starting a business? Is it because you want a good work-life balance? Do you want to make an environmental impact? It's likely a combination of factors. Writing down your motivation provides a reference for big decisions and makes sure you don't lose focus.

Business plans help explain what you're doing to other people. The process of writing everything down makes sure you can answer key questions about what you're doing.

Hiring people, opening a premise or buying equipment requires significant investment. Planning and justifying what you're going to spend is important. Sharing them externally helps reassure partners, whether you're looking to borrow money or win over a mentor.

What basic things should a business plan include?

Whatever format and length you decide on there are several common topics to cover in a business plan. Bareham outlines five points to include:

A summary of what you're going to do

Details of the market you're going into

What you have that other businesses don't (your unfair advantage)

A cash-flow forecast

Personnel needed

Business owners need to think about the strengths and weaknesses they have, he added. Be honest and make sure you identify where you will need help.

Your cash-flow forecast is crucial. It shows the money coming into your business from customers and what you're spending. This includes costs like buying raw materials, office space, marketing and paying employees. This plan will evolve into a document you look at regularly when the business is up and running.

Enterprise Nation founder Emma Jones compares having a business plan to a route map and uses the acronym 'I'm off' as a memory aid on what to include:

Operations: What kit do you need?

Friends: A support network

You can tailor your business plans to specific audiences and we'll go into the main formats in the next section.

Watch this detailed video with Enterprise Nation adviser and accountant Jonathan Bareham sharing tips on business plans, cash flow, accounts and more.

What business plan format should I use?

There are several formats you can use to create a business plan. It's important to pick the one that's right for your situation. The key considerations are what you know so far and how you're going to use the plan.

You'll generally cover the sections we outlined in the section above but the amount of detail can vary.

If the plan's for the benefit of the business owner you need to think about how much you can know at this point. There are lots of assumptions around sales and costs that you won't know until they're tested. This will limit the level of detail you can include.

The audience is important too. You could write a five-page summary if the business plans just for you. If the business plan's for raising investment or applying for a loan it's going to require more detail and might be 15-20 pages long.

Organisations like the Prince's Trust and Start Up Loans , which offer start-up funding, have templates that they prefer or require applicants to fill out.

David Abrahamovitch, founder and CEO of London café-bar and restaurant company GRIND, told Enterprise Nation  that his founding team didn't create a business plan until they needed to borrow money. He believes a formal business plan doesn't provide much value at the concept stage.

"Business plans absolutely have their place but I see people who are spending months writing a business plan. They're worried about who's going to copy their idea about trademarks. All of these things are important, but at the moment you don't have a business. You don't have a brand to protect. You're worried about the wrong things. "You have to get to the minimum viable form of that business as quickly as possible and just test it."

Abrahamovitch added that things like pop-up stores and online tools mean the barriers to entry are lower than ever, reducing the risk of testing an idea.

What a traditional business plan looks like

What we're calling 'traditional business plans' are A4 documents that cover the key elements of your business. These include five main elements:

The executive summary: Summarise the main points of your business plan. Showcase what you're doing and sell your vision to the reader.

Opportunity analysis: Describe the business opportunity. Look at the size of the market, customer segments, competitors and the key trends.

Marketing: Highlight the key messages you want to communicate to customers and detail the channels you will use to reach them (telemarketing, social media etc.). Provide an idea of cost for this activity and, if possible, the level of business you expect to generate.

Logistics: Plan where and how you are going to operate your business. Include plans for manufacturing, transportation, office costs, staff needed etc.

Finance: Make sure that you detail all your associated costs - both your estimated start-up costs as well as your running costs. Include a cash-flow forecast that shows how your business will become sustainable.

Additional information like the founders' CVs can be included in your appendix. This often depends on what evidence your audience requires and may not be relevant for a document that's used internally.

Presentation is important because it provides credibility. Think about adding company logos, a cover page and other touches that make the document look professional.

Abrahamovitch said writing a business plan is useful to examine what's working, how much energy things take up and the margin of different products when you've tested ideas.

"Distill that down into its simplest form and put that in a business plan," he said. "Talk about how you're going to scale it. That's where it really adds value."

The lean canvas model

The length of traditional business plans can be intimidating. You may also lack the information to complete the document if you haven't started trading yet.

Lean canvas and business model canvas allow you to create a business plan on a single page. The structure examines whether a business idea is viable. The nine boxes capture entrepreneurs' key assumptions, covering topics like metrics and marketing channels.

Lean canvas is designed to provide a snapshot of your idea and challenge the assumptions you've made. It's not meant to be perfect. The inventor of lean canvas model suggests taking 20 minutes to fill everything out.

Test your assumptions through research

Launching and growing a small business is really exciting because you don't know what's going to happen. However, writing a business plan can be daunting as there are so many things you don't know yet.

Make phone calls and search the internet to strengthen your assumptions. It's possible to find information on standard services like accountants, renting desks or buying raw materials.

There are other aspects that are more difficult to predict. Projecting sales, for example, is one of the trickiest parts of forecasting. You love your product but will customers flock to the business?

One opportunity to solve this problem is to do a small amount of test trading. Paying for a market stall may cost you a thousand pounds after you pay for the stock and a location. But the investment may pay dividends if it gives you a reality check on what customers are willing to pay and how popular your offering is. What's the least you can spend to learn the most?

Research competitors offerings too. What are people paying for related products?

Service-based business can have the opportunity to trial their offering part-time. Perhaps you can take on a client while still working your day job.

Make sure you justify any forecasts in your business plan and provide a logical explanation of how you came to your conclusions.

Will a business plan guarantee success?

No. But business plans will help crystallise your goals and test your assumptions. The framework is really useful to develop ideas, particularly if they've been rattling around in your head for some time.

Make sure you return to your business plan regularly. Reinforcing your original goals will help keep you on track. Forecasting is a skill. Check your projections against performance and try to figure out what assumptions were correct and where there were issues.

The way you use business plans will evolve over time. Filling in a lean canvas might work if you have an idea and haven't started working on it yet. Eventually, you might need to create a business plan to land investment or it can provide an opportunity to reassess what you do.

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What is Business Plan? Importance, Setting Goals & Objective, Process, Format, Fails

• Post last modified: 14 March 2024
• Reading time: 27 mins read
• Post category: Entrepreneurship

What is Business Plan?

A business plan is an operating document that describes the dream of an entrepreneur with the objectives and plans to achieve them. A business plan shows the viability of the business idea from every aspect. A business plan is a crucial document that is utilized by both the company’s external and internal audiences.

A business plan seeks investment and it is reviewed and revised regularly to see whether goals are accomplished. A fresh business plan is sometimes written for an existing company that has opted to take a different path.

Table of Content

• 1 What is Business Plan?
• 2 Importance of Business Plan
• 3.1 Business Goals Vs. Business Objectives
• 3.2 How to Set Short-term Business Goals?
• 4.1.1 Determine Your Strategic Position
• 4.1.2 Prioritise Objectives
• 4.1.3 Develop a Plan
• 4.1.4 Execute and Manage the Plan
• 4.1.5 Review and Revise the Plan
• 5.1 Section 1: Executive Summary
• 5.2 Section 2: Industry Overview
• 5.3 Section 3: Market Analysis and Competition
• 5.4 Section 4: Sales and Marketing Plan
• 5.5 Section 5: Management Plan
• 5.6 Section 6: Operating Plan
• 5.7 Section 7: Financial Plan
• 5.8 Section 8: Appendices and Exhibits
• 6.1 Lack of planning
• 6.2 Leadership failure
• 6.3 No differentiation
• 6.4 Ignoring customer needs
• 6.5 Inability to learn from failure
• 6.6 Poor management
• 6.7 Lack of capital
• 6.8 Premature scaling
• 6.9 Poor location
• 6.10 Lack of profit

Importance of Business Plan

Let us discuss the importance of a business plan.

• It explains the vision and goals of the founder.
• It acts as a guide for the new entrepreneur.
• It serves as a blueprint for a company’s overall operation. Sales, expenditures, periods, and strategic direction can all be used to gauge a company’s success and progress.
• It may also assist an entrepreneur or management in identifying and focusing on possible areas both inside and outside the organization. Proposed remedies and contingency plans can be integrated into the company’s strategy once potentially difficult areas have been identified.
• It covers the marketing opportunities and future funding requirements, which demand managerial attention.
• In certain cases when an entrepreneur decides to transform a cherished pastime into a home-based business, the business plan can be as short as a one- or two-page document. A company’s proposal with substantial intricacy and financial ramifications, on the other hand, should have a far more detailed plan.

Setting Goals and Objectives

Business objectives are an important component of creating priorities and positioning an organization for long-term success. Setting company goals and developing separate targets to assist in achieving each goal will considerably improve the capacity to attain those goals. Here, we look at how to define company goals, the distinction between business goals and objectives, and examples of short- and long-term business goals.

Business objectives may be defined for a whole organization as well as specific departments, employees, managers, and clients. Goals are usually used to symbolize a company’s wider purpose and provide an end goal for personnel to work toward. Business objectives may not need to be precise or have well-defined activities. Business objectives, on the other hand, are broad results that a company aims to attain.

Business objectives are measures taken to achieve a company’s larger goals that are clearly stated and quantifiable. Objectives are particular and they are simple to establish and track. To fulfill their business objectives, companies must set objectives.

Business Goals Vs. Business Objectives

The distinction between business goals and business objectives is as follows:

• Business objectives establish the “how” of a company’s purpose, whereas business goals define the “what.”
• Business objectives specify concrete tasks, whereas business goals often merely give a broad direction for a firm to pursue.
• Business objectives are usually measurable, whereas business goals are not.
• Business objectives are more detailed, whereas business goals are more wide and inclusive.
• Business objectives are usually time-bound, whereas business goals are not.

How to Set Short-term Business Goals?

Short-term business objectives are those that you wish to attain in the next few weeks or months for a firm. When it comes to short-term business goals, you may take the following steps:

• Recognize the Short-term Business Goals of the Company for A Set period : In this step, short-term objectives of the company are established so that the set objective can be accomplished in a specific time frame. Many short-term goals are secondary to the fulfillment of long-term objectives. Consider your long-term objectives as well as what you want to achieve in the coming weeks or months and turn them into short-term objectives that will help your company grow.
• Break Goals Into Actionable Business Objectives: Here, management breaks the goals into specific targets. These goals should be represented by the measures an organization will take to achieve them. For example, the target for Kalyani is to convert 5 leads and get 5 new customers for the business within the next 2 months, objectives will be the job or work done for getting 5 customers’ such as placing a new advertisement in the newspaper, social media and posting three times a week on YouTube and Instagram.
• Objectives Should Be Measurable: The established business goals should be quantifiable or measurable. For example, if an employee has the short-term goal of posting an advertisement or banner on social media then, do not assign responsibility to him/her by just saying “post more and more on social media”. Instead, give him/her a per-day target to make it quantifiable or measurable. For example “Post on Instagram three times a week and Facebook two times a week for eight weeks,”.
• Goal-related Tasks Must Be Assigned to Employees: Once the objectives for each short-term goal have been determined, assign each one to an individual or team of employees who will see it through to completion.
• Check and Keep a Record of Performance regularly: Measure your short-term goals’ progress regularly to verify you are on pace to fulfill them within the timeframe you set. Measure any additional customer/potential customer contact you receive as a result of increasing your social media postings to three times a week as part of a business objective. Keep track of progress and, if necessary, change your targets to better fulfill your objectives.

Process of Writing the Business Plan

Every company should have a strategic plan, but you might be surprised by the number of companies that try to function without one (or at least one that is well expressed). According to Strategy research, 86 percent of executive teams spend less than one hour per month discussing strategy, while 95 percent of the average worker has no idea what their company’s strategy is. Because so many firms fail in these areas, strategic planning can help you get ahead of the game.

The strategic planning process is more comprehensive; it aids in the creation of a roadmap for which strategic objectives you should focus on and which projects will be less beneficial to the company. The phases of the strategic planning process are listed below.

Strategic Planning Process

Determine your strategic position.

This phase of preparation sets the tone for the rest of the project. To figure out where you need to go and how you will get there, you must first figure out where you are. Include the appropriate stakeholders from the start, taking into account both the internal and the external sources.

Identify significant strategic concerns by speaking with corporate management, gathering consumer feedback, and gathering industry and market data to acquire a comprehensive picture of your position in the market and the thoughts of your customers.

It is better to write a good idea, purpose, and vision statement for the company to get a clear picture of what success looks like. Additionally, you should analyze your firm’s basic principles to remind yourself of how your organization will achieve these goals.

To begin, identify the challenges that need to be solved using industry and market data, including consumer insights and current/future requests. Create a list of your company’s internal strengths and weaknesses, as well as external possibilities (ways your company may develop to meet requirements that the market doesn’t currently meet) and threats (your competition).

Use a SWOT diagram as a foundation for your initial analysis. You may easily classify your results as Strengths, Weaknesses, Opportunities, and Threats or SWOT to define your present position with input from executives, customers, and external market data.

Political, Economic, Socio-cultural, and Technological or PEST is a strategic technique for identifying dangers and possibilities for your company.

Prioritise Objectives

After you have determined your present market position, you will need to set targets to assist you reach your objectives. Your goals should be in sync with the mission and vision of your firm.

Ask important questions to help you prioritize your goals, such as:

• Which of these measures will have the biggest impact on attaining our company’s mission/vision and strengthening our market position?
• What are the most critical sorts of effects (e.g., client acquisition vs. revenue)?
• What will the competition’s response be?
• Which projects are the most critical?
• What will we have to do to achieve our objectives?
• How will we track our progress and see if we have met our objectives?

To assist you in achieving your long-term strategic goals and activities stated in step one, objectives should be unique and quantifiable. Updated website content, improved email open rates and new leads in the pipeline are all possible goals.

SMART goals may help you set a schedule and identify the resources you will need to reach your objectives, as well as track your progress with key performance indicators or KPIs.

Develop a Plan

Now is the time to develop a strategic strategy for achieving your objectives. This phase entails deciding the techniques required to achieve your goals, as well as establishing a timeframe and communicating responsibilities.

Strategy maps, which work from the top down, make it straightforward to see company processes and find areas for development.

True strategic decisions generally entail a cost-of-opportunity trade-off. For example, your organization could opt to spend less money on customer service to put more money into producing an intuitive user experience. Prepare to say “no” to efforts that will not improve your long-term strategic position, based on your values, mission statement, and defined priorities.

Execute and Manage the Plan

You are now ready to put your strategy into action. To begin, share necessary material with the organization to convey the plan. After that, the real job begins. By mapping your processes, you can turn your overall strategy into a tangible plan.

To communicate team roles, use KPI dashboards. The completion process and ownership for each stage of the journey are depicted in this detailed method. Establish frequent evaluations with individual contributors and their supervisors, as well as check-in points, to ensure you stay on track.

Review and Revise the Plan

The plan’s last step, review, and revision, allows you to examine your goals and make course corrections based on past successes and failures. Determine the KPIs your team has met and how you can continue to fulfill them every quarter, changing your plan as needed.

It is critical to assess your goals and strategic position every year to ensure that you stay on course for long-term success. Balanced scorecards can help you keep track of your progress and achieve strategic goals by giving you a complete picture of your company’s performance.

Your goal and vision may need to evolve; an annual assessment is an excellent time to examine such changes, draft a new strategy, and re-implement it.

Typical Business Plan Format and Content

Here is a simple template that any company may use to create a business plan:

Section 1: Executive Summary

• Give an overview of the company’s mission.
• Describe the product and/or service offerings of the firm.
• Give a brief overview of the target market’s demographics.
• Explain how the firm will gain a piece of the available market by summarising the industry competition.
• Provide an overview of the operations strategy, including inventory, office and labor requirements, and equipment needs.

Section 2: Industry Overview

• Describe the company’s industry position.
• Describe the industry’s current competitiveness and significant players.
• Provide details on the industry in which the company will operate, projected revenues, industry trends, government influences, and the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their requirements, and their location.
• Describe the market’s size, the number of units of the company’s products that potential consumers might buy, and any market changes that might occur as a result of broader economic developments.
• Give a summary of the projected sales volume in comparison to what your rivals sell.
• Give an outline of how the firm intends to compete with current competitors to achieve and maintain market share.

Section 4: Sales and Marketing Plan

• Describe the company’s items for sale as well as its unique selling proposition.
• List the many advertising outlets that the company will utilize to communicate with clients.
• Describe how the company intends to price its items so that it can earn a profit.
• Give specifics on how the company’s items will be delivered and shipped to the target market.

Section 5: Management Plan

• Describe the company’s organizational structure.
• Make a list of the company’s owners and their ownership percentages.
• Make a list of the top executives, their responsibilities, and their pay.
• List any internal and external professionals the organization intends to recruit, as well as their salaries.
• If available, include a list of the advisory board members.

Section 6: Operating Plan

• Describe the business’s location, including the need for an office and a warehouse.
• Describe the company’s workforce requirements. Outline the number of employees the firm need, their jobs, the skills training that will be required, and the length of time that each person will be with the organization (full-time or part-time).
• Describe the manufacturing process and how long one unit of a product will take to make.
• Describe equipment and machinery requirements, as well as whether the firm will lease or buy the equipment and machinery, as well as the estimated expenses.
• Provide a list of raw material needs, as well as how they will be procured and the primary vendors that will provide the necessary inputs.

Section 7: Financial Plan

• Include the projected income statement, projected cash flow statement, and projected balance sheet projection in your description of the company’s financial predictions.

Section 8: Appendices and Exhibits

• Lease quotes for buildings and machinery
• Plan for offices and warehouses that has been proposed
• An overview of the target market and market research
• The owners’ credit information
• Product and/or service list

Understand Why Business Plans Fail

The saddest aspect of a failing firm is that the owner is frequently completely oblivious to what is going on until it is too late. It makes sense because if the entrepreneur had truly understood what he/she was doing incorrectly, he/she may have been able to rescue the company.

The following is a list of some of the most common causes:

Lack of planning

Businesses fail due to a lack of both short- and long-term planning. The business strategy should address where a company will be in the coming months and years. Quantifiable objectives and outcomes and specific to-do lists with dates and deadlines will be included in the correct plan. Your business will suffer if you do not plan.

Leadership failure

Businesses collapse as a result of poor leadership. Leadership must be capable of making correct judgments the majority of the time. Leadership failures will affect all parts of your firm, from financial management to staff management. To develop their leadership qualities, the most successful entrepreneurs learn, research, and seek out mentors.

No differentiation

Having a fantastic product is not enough. You must also create a distinct value offer; otherwise, you will become lost in the crowd. What distinguishes your company from the competition? What distinguishes your company? Understanding what your rivals do better than you is critical. You won’t be able to develop a brand if you do not separate yourself.

Ignoring customer needs

Every company will tell you that a customer is number one, but only a small fraction of them do so. Failure causes businesses to lose contact with their customers. Keep an eye on your clients’ changing values. Check to see if they still enjoy your products. Are they looking for new features? Therefore, what exactly are they saying? Are you paying attention?

Inability to learn from failure

While we all know that failure is typically a terrible thing, businesses seldom learn from it. Realistically, businesses fail for a variety of reasons. Entrepreneurs are frequently blind to their errors. It is tough to learn from mistakes.

Poor management

Inability to listen, micro-managing – often known as a lack of trust – operating without standards or processes, poor communication, and a lack of feedback are all examples of poor management.

Lack of capital

This might prevent you from attracting investors. A lack of capital is a red flag. It indicates that a company may be unable to pay its payments, loans, and other financial obligations. Lack of finance makes it harder to expand the firm and puts day-to-day operations in jeopardy.

Premature scaling

Scaling is beneficial if done at the appropriate time. To put it another way, if you grow your firm too quickly, it will fail. You may, for example, be recruiting too many staff too rapidly or overspending on marketing. Do not expand your company unless you are ready.

Pets.com collapsed because it attempted to expand too quickly. They opened too many warehouses across the country too soon and it bankrupted them. Even their strong brand equity wasn’t enough to save them. Their stock dropped from $11 to $0.19 in a matter of months.

Poor location

Inconvenient location is a disadvantage that may be difficult to overcome. If your business relies on foot traffic, choosing the right location is crucial. Your client acquisition expenses may be excessively high due to a bad location.

Lack of profit

Revenue is not the same as profit. As an entrepreneur, you must always keep profitability in mind. Profit permits expansion. Only 40% of small firms are successful, 30% are breaking even and 30% are losing money, according to Small Business Trends.

• Pednekar, A. (2010). Entrepreneurship management. Himalaya Pub. House.
• Stutely, R. (2012). The definitive business plan. Pearson.

Marketing Management

( Click on Topic to Read )

• What Is Market Segmentation?
• What Is Marketing Mix?
• Marketing Concept
• Marketing Management Process
• What Is Marketing Environment?
• What Is Consumer Behaviour?
• Business Buyer Behaviour
• Demand Forecasting
• 7 Stages Of New Product Development
• Methods Of Pricing
• What Is Public Relations?
• What Is Marketing Management?
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• Types Of Sales Promotion
• Techniques Of Sales Promotion
• What Is Personal Selling?
• What Is Advertising?
• Market Entry Strategy
• What Is Marketing Planning?
• Segmentation Targeting And Positioning
• Brand Building Process
• Kotler Five Product Level Model
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• What Is DAGMAR?
• Consumer Behaviour Models
• What Is Green Marketing?
• What Is Electronic Commerce?
• Agricultural Cooperative Marketing
• What Is Marketing Control?
• What Is Marketing Communication?
• What Is Pricing?
• Models Of Communication

Sales Management

• What is Sales Management?
• Objectives of Sales Management
• Responsibilities and Skills of Sales Manager
• Theories of Personal Selling
• What is Sales Forecasting?
• Methods of Sales Forecasting
• Purpose of Sales Budgeting
• Methods of Sales Budgeting
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• Sales Budgeting Process
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• What is Sales Organisation?
• Types of Sales Force Structure
• Recruiting and Selecting Sales Personnel
• Training and Development of Salesforce
• Compensating the Sales Force
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• What Is Logistics System?
• Technologies in Logistics
• What Is Distribution Management?
• What Is Marketing Intermediaries?
• Conventional Distribution System
• Functions of Distribution Channels
• What is Channel Design?
• Types of Wholesalers and Retailers
• What is Vertical Marketing Systems?

Marketing Essentials

• What i s Marketing?
• What i s A BCG Matrix?
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• Marketing Mix For Services
• What Market Intelligence System?
• What i s Trade Union?
• What Is International Marketing?
• World Trade Organization (WTO)
• What i s International Marketing Research?
• What is Exporting?
• What is Licensing?
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• What is Turnkey Projects?
• What is Management Contracts?
• What is Foreign Direct Investment?
• Factors That Influence Entry Mode Choice In Foreign Markets
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• Integrated Marketing Communication (IMC)
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• Factors Affecting Promotion Mix
• Functions & Role Of Advertising
• What is Database Marketing?
• What is Advertising Budget?
• What is Advertising Agency?
• What is Market Intelligence?
• What is Industrial Marketing?
• What is Customer Value

Consumer Behaviour

• What is Consumer Behaviour?
• What Is Personality?
• What Is Perception?
• What Is Learning?
• What Is Attitude?
• What Is Motivation?
• Consumer Imagery
• Consumer Attitude Formation
• What Is Culture?
• Consumer Decision Making Process
• Applications of Consumer Behaviour in Marketing
• Motivational Research
• Theoretical Approaches to Study of Consumer Behaviour
• Consumer Involvement
• Consumer Lifestyle
• Theories of Personality
• Outlet Selection
• Organizational Buying Behaviour
• Reference Groups
• Consumer Protection Act, 1986
• Diffusion of Innovation
• Opinion Leaders

Business Communication

• What is Business Communication?
• What is Communication?
• Types of Communication
• 7 C of Communication
• Barriers To Business Communication
• Oral Communication
• Types Of Non Verbal Communication
• What is Written Communication?
• What are Soft Skills?
• Interpersonal vs Intrapersonal communication
• Barriers to Communication
• Importance of Communication Skills
• Listening in Communication
• Causes of Miscommunication
• What is Johari Window?
• What is Presentation?
• Communication Styles
• Channels of Communication
• Hofstede’s Dimensions of Cultural Differences and Benett’s Stages of Intercultural Sensitivity
• Organisational Communication
• Horizontal C ommunication
• Grapevine Communication
• Downward Communication
• Verbal Communication Skills
• Upward Communication
• Flow of Communication
• What is Emotional Intelligence?
• What is Public Speaking?
• Upward vs Downward Communication
• Internal vs External Communication
• What is Group Discussion?
• What is Interview?
• What is Negotiation?
• What is Digital Communication?
• What is Letter Writing?
• Resume and Covering Letter
• What is Report Writing?
• What is Business Meeting?
• What is Public Relations?

Business Law

• What is Business Law?
• Indian Contract Act 1872
• Essential Elements of a Valid Contract
• Types of Contract
• What is Discharge of Contract?
• Performance of Contract
• Sales of Goods Act 1930
• Goods & Price: Contract of Sale
• Conditions and Warranties
• Doctrine of Caveat Emptor
• Transfer of Property
• Rights of Unpaid Seller
• Negotiable Instruments Act 1881
• Types of Negotiable Instruments
• Types of Endorsement
• What is Promissory Note?
• What is Cheque?
• What is Crossing of Cheque?
• What is Bill of Exchange?
• What is Offer?
• Limited Liability Partnership Act 2008
• Memorandum of Association
• Articles of Association
• What is Director?
• Trade Unions Act, 1926
• Industrial Disputes Act 1947
• Employee State Insurance Act 1948
• Payment of Wages Act 1936
• Payment of Bonus Act 1965
• Labour Law in India

Brand Management

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Businessing Magazine

Strategizing     Logan    March 5, 2019     6 min read

10 Important Aspects of a Successful Business Plan

Every business needs to have a business plan, no matter the size. The main reason so many startups don’t survive past the first five years is because they didn’t set a strong business plan. You may have a great business idea, but then after setting out a plan and crunching the numbers, you find out it’s not such a great idea.

Your business plan is the roadmap for your business; it’ll contain future milestones, your budget and finances, marketing and sales strategy, and will help you overcome future obstacles. Whether your business plan is for bankers, venture capitalists, or just your employees, there are main elements set by the Small Business Administration ( www.sba.gov ) that should be included in every business plan.

What Are the Elements of a Business Plan?

• The Executive Summary This is the first section of the business plan. It can be from 1 to 5 pages. It serves as the table of content for your plan.
• Company Profile In this section, you explain what your business is, what your goals are, your vision, and mission, why you’re special and unique. Some companies mention the management and team members with short descriptions.
• Market Analysis Before starting a business, you need to learn about the market. Study your competitors. Find out their profit range, what they’re known for, and what technologies are used in the industry. Every detail matters and can give you an advantage in your business.
• Product/ Service Explain your products, different types or packages, your selling points, and answer all the questions a customer/ investor may have. Whoever reads your business plan should fully understand what you’re offering.
• Marketing and Sales Strategy The best product in the world wouldn’t sell if it has a poor marketing plan. Get into detail with how you’ll advertise your product. Detail your target audience, prices, and any promotional discounts.
• Funding This is the most important section in your plan because it states your initial budget, the funds you’ll need for the next five years, what you plan on doing with the funds, the creditors’ or investors’ return, and all business expenses such as salaries and equipment.
• Financial Forecast If you’re using your business plan for a loan or funds, you need to have the documents to back up your claim. You need to include all your financial statements and balance sheets, and any sources of income from the past few years.
• Business Overview Give a general overview of your business with info like the legal structure, operations plan, business address , whether it’s an online or physical business, number of employees, specific roles, etc.

What Are the Aspects of a Successful Business Plan?

Now that we’ve stated the main elements that should be included in a business plan, let’s get to the points you should focus on to create a successful business plan and not just a boring, lengthy one.

Use a Template or Hire Someone with Experience

You can write your business plan yourself, but with all the elements that need to be added, it can get complicated. If your business plan is short, then you might not need a template. If your plan is lengthy, you can find templates with a prepared structure online. In order to have a professional, well-written business plan, you can look into hiring someone with experience to get the job done. They would be able to better structure your plan and add charts and graphs when needed.

Do Your Research

Before jumping into writing your business plan, you need to ensure you’ve done an efficient amount of research. It’s your responsibility to have the answers to the questions that creditors or investors would ask. Whether it’s researching the market, competitors, or the industry, you need to know every small detail that can be an advantage or disadvantage to your business.

Define the Purpose of Your Business Plan

Your business plan will be your guide throughout the years, working as your roadmap, but you need to define why you’re creating it from the start. For example, are you making a plan for personal needs, as a guide for your employees, or are you planning on using it for investors and funding? If for funding, you’ll need to be very precise and clear with your targets and overall writing.

A Modified Business Plan

Your business plan is going to be read by various types of people from bankers, investors, and venture capitalists, to employees and yourself. Each audience type has certain points they’re looking for in your plan and you need to address those points accordingly. Make sure your plan can easily be modified according to your target audience. For example, banks would focus on balance sheets and statements while your employees will be focused on business goals or market research. You need to be able to make small alterations to serve different purposes.

Don’t Make It Too Long

The truth is no one is actually going to read your whole business plan. An executive summary is important so readers can easily find the sections they need. A typical business plan usually ranges from 20 to 50 pages. For example, venture capitalists are usually time restricted, so they’d want to find things like the financial forecast and investors’ return quickly. Knowing this, you should place this information in the beginning.

Regularly Update Your Business Plan

Your business plan needs to be updated as your business evolves and grows. Not all the sections will need updating, but the objectives set at the start of your business will change and your financial records will need to be up-to-date, especially if you’re still looking for funding. As mentioned before, your business plan is your roadmap, so don’t neglect it down the line.

Stand Out, but Don’t Overdo It

Your business plan is mostly stating the facts about your business but you need to capture the reader’s attention, mention why you’re different from your competitors, what makes you better. But sometimes businesses tend to oversell themselves, explain your passion, how much you care for your business, and the problems you want to solve but without unnecessary exaggeration.

Don’t Undersell Your Competitors

Every business has competitors and you need to clearly acknowledge these competitors in your business plan. Some startups think that not mentioning their competitors or underselling them helps their case, when in fact, it does the complete opposite.

You need to highlight what your competitors are good at, and state how you can do better. This will give you an edge with investors. Never talk bad about competitors or imply they’re not worthy of mentioning, this will lessen your credibility and make you look unprofessional.

Set Long-term and Short-term Goals

Every business plan should include five-year goals, but most importantly, it should include short-term goals such as annual and quarterly goals. It’s great to know where you want your business to be in the future, but investors need to know you have a clear plan to get there.

Back Up Your Plan with Documents, Charts, or Graphs

A business plan shouldn’t just be blocks of text; you need to make your plan appealing by adding images, charts, or graphs whenever possible. It won’t only improve your overall design; it can simplify and explain complicated sections. In order to strengthen your plan, you need to add supporting documents like articles about your business, financial statements, or contracts.

These were 10 important aspects that will help you create a successful and polished business plan. A great business plan from the start can change the trajectory of your whole business so giving it the right amount of work, focus, and dedication is vital for your business.

Logan is a passionate content creator, specializing in the business solutions sector. He loves to share his experience about technology, startups, entrepreneurs, and business-related updates.

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The Importance of Business, Strategic, and Operational Plans

21 June 2024   Reading Time:

In the early stages of a business, it's easy to get overwhelmed by everything you need to organize for growth. That's where creating a business plan, a strategic plan, and an operational plan comes into play. These plans help structure your business goals, strategies, and daily operations, ensuring you have a clear path forward. Additionally, having detailed employee information integrated into these plans is crucial for effective management and smooth execution of tasks.

A business plan outlines the "what" and "how" of your business, while a strategic plan sets the long-term vision. Operational plans deal with the day-to-day tasks. We'll explain what role they play, how they differ, and how they work together.

In this post, we'll break down these concepts, explain the differences between them, and highlight why all three are crucial. Understanding these plans, along with effective asset management , will provide you with the tools to steer your ship, set big goals, and navigate the day-to-day waters with confidence and success.

What is a business plan?

A business plan, much like a blueprint for a house, lays out the general path your business should take. Not only does it contain the most important facts, but it also communicates your vision to potential investors, partners, and your own team.

A business plan is the roadmap to your business's success. It's a detailed guide that helps you understand where you want your business to go and how you'll get there. In this plan, you outline your business goals , what products or services you'll offer, who your customers are, and how you plan to reach them.

Writing a business plan is one of many business startup tips you can use to get started.

Your business plan includes financial details

Your business plan also includes financial details, such as how much money you'll need and how you'll make money. It's important to outline everything because it will help you make smarter decisions, attract investors or loans, and stay on track as you grow.

Think of your business plan as a game plan that will help you be prepared for anything that comes your way.

What is a strategy plan?

A strategic plan is a detailed plan that lays out where you want your business to be in the future and how you're going to get there. In this plan, you outline your long-term goals, the actions you'll take to achieve those goals, and the key steps to take to achieve those goals.

A strategic plan helps you make smart decisions, such as which products to focus on, how to differentiate yourself from the competition, and where to expand. It's like a compass that helps you make decisions that align with your vision.

Goal Setting in Your Strategic Plan

Setting SMART (Specific, Measurable, Attainable, Relevant, Time-Limited) goals is a clear way to turn your strategic plan into actionable tasks.

This plan also allows you to remain flexible - you can adjust it as your business grows and the market changes. With a solid strategic plan, you set yourself up for success and ensure that all of your actions lead to the realization of the big dreams you have for your business.

What is an operational plan?

An operational plan is where the intricacies of running a business happen. An operational plan is like your playbook for day-to-day tasks.

It lays out exactly how you're going to implement the strategies laid out in your strategic plan and achieve the goals set out in your business plan.

In your operational plan, you break things down: who does what, when, and how. You give your team clear instructions on tasks, deadlines, and responsibilities.

From running the kitchen in a restaurant to processing customer orders in a hair salon, it's all included in the operational plan.

It also lays out how you're going to maintain quality, manage resources, and deal with any difficulties that arise. Think of it as your action plan, which will take your big ideas one step at a time and turn them into reality.

What is the difference between a business plan, a strategic plan, and an operational plan?

Business plan.

• Focus: This is the big plan for your entire business. It explains what your business does, who your customers are, how you will make money, and your long-term goals.
• Time frame: It usually spans several years and includes financial projections.
• Use: It serves as a case for investors and a guide for your business decisions.

Strategic plan:

• Focus: This is the long-term vision. It's about where you want your business to go and the key steps to take to get there.
• Time frame: Often spans 3-5 years.
• Use: It serves as a guide for big decisions like expansion, new products, and setting direction.

Operational plan:

• Focus: This is the detailed plan for your day-to-day business operations. This is about how you will execute your strategies.
• Time frame: It covers the short-term, usually a year or less.
• Use: It's instructions for your team on tasks, deadlines, and responsibilities.

In short, a business plan is your overall roadmap, a strategic plan provides direction for growth, and an operational plan keeps everything running smoothly day in and day out. They work together to keep your business on track and leading to success.

Why are a business plan, strategic plan, and operational plan so important?

A business plan, strategic plan, and operational plan are kind of like a superhero trio for your business. Here's why they're so important:

Business plan:

• Clarity: It gives you a clear path for your business. You know what you're doing, who your customers are, and how you're going to make money.
• Direction: It helps you make smart decisions and stay on track toward your goals.
• Attractiveness: Investors and lenders want to see a solid plan before they back your business.
• Direction: It's like a compass for your long-term vision. It tells you where you want your business to go and how to get there.
• Big Goals: You set ambitious goals like growing, launching new products, and standing out from the crowd.
• Adaptability: It helps you adapt when things change and keeps your business in line with your dreams.

Operational Plan:

• Smooth Sailing: It's your step-by-step guide to daily tasks. You know who's doing what and when.
• Efficiency: It keeps things running smoothly and helps you manage your resources well.
• Quality Control: It makes sure your products or services are top-notch and consistent.

Together, these plans are like your business' superpowers. They ensure that your business not only survives, but thrives.

Strategic Plan Example

Let's say your restaurant, Brenda's Bistro, wants to become the ultimate restaurant in your community, known for its amazing food and top-notch hospitality.

Brenda's Bistro is committed to creating memorable dining experiences by offering a diverse menu using locally sourced ingredients while providing excellent customer service.

• Increase sales by 20% within the next two years.
• Expand customer base by targeting families and young professionals through special promotions.
• Introduce a new themed menu each season to excite and retain customers.

Strategies and Initiatives:

• Strengthen Brenda's Bistro's online presence by regularly posting engaging content on your website and social media accounts.
• Work with local farmers to ensure your ingredients are fresh, sustainable and support the community.
• Introduce loyalty programs and offer discounts to encourage repeat visits.

Key Performance Indicators (KPIs):

• Monitor sales growth each quarter to track progress toward your goal.
• Collect customer feedback through surveys and online reviews to measure satisfaction.
• Evaluate the success of your seasonal menus by the number of orders and positive feedback.

How to Create a Strategic Plan

Developing a strategic plan is not a one-size-fits-all solution; each company's unique goals require a tailored approach.

Let's break down the essential steps to creating that core plan.

1.Gather the key people

Start by gathering the key voices together. This typically includes your board, managers, and sometimes outside investors.

Their insights and suggestions are like puzzle pieces that fit together to create a successful strategic plan.

2.Identify your company's strengths and weaknesses

Your strategy requires knowing where your company stands, both internally and externally. Start with a SWOT analysis, where you examine internal strengths and weaknesses as well as external opportunities and threats.

The insights from the gap analysis, looking at competitors, and listening to customer and employee feedback will give you the big picture.

3.Set goals

Now, from all this information, create goals. Align these goals with your mission, vision, and values.

Choose the goals that will have a big impact, make long-term sense, and align with your values. Examples include hitting certain sales targets or getting a certain number of followers on your company's social media.

4.Create a game plan

It's time for an action plan. Break each goal down into strategies, initiatives, and tactics. Depending on the goal, these could be marketing plans, tech upgrades, or smart partnerships.

You don't need a lot of detail here, that's what the operational plan is for. Also, set key performance indicators to measure your progress.

5.Review and tweak

Schedule regular meetings to review your plan. This is the time to reflect on your plan and adjust it if necessary. Good financial information is very helpful here.

How often you do this depends on the cadence of your business - perhaps monthly for new businesses or annually for established businesses.

Remember: your strategic plan is your path to success. Adjust it, review it, and let it guide you to your goals.

Now that your strategic plan is in order, let's dive into the power of operational planning to turn those goals into action.

How to create an operational plan

It's time to break the big-picture strategic plan down into doable steps. First, look at the long-term goals.

Figure out which departments need to work together to achieve which goal. Ask questions like: What resources does the company already have access to?

What's still missing? Are there financial risks looming? This will help you identify which areas of your business need a boost to achieve those goals.

1.Set your budget

Create a budget based on what each department of your business needs to achieve the big goals. What does your kitchen staff need? What about the front desk staff?

Align the goals and areas and distribute your budget where it offers the best value for money.

Remember to set some money aside for surprises and changes. A solid budget is like a shield against the unexpected.

2.Set goals

Every goal you pursue needs a target. Think carefully - not too high that your team gets discouraged, but also not too small that the big plan remains unattainable.

Realistic goals are your secret weapon. For example: You want to sell 100 orders for a certain dish by the end of the month.

3.Check in with your team regularly

Don't just set it and forget it. Schedule regular meetings with your employees to see how things are going.

Are you hitting your goals? Is everything running like clockwork?

These feedback sessions with your employees are like check-ups on your plan. If something is off, you can adjust the plan to get back on track.

IceHrm's free mobile app has a built-in messenger tool that makes it easy to stay connected. Send messages to individuals, groups, or your entire team.

4.Stay open and data-driven

Keep communication flowing during check-ins. And don't forget the data—it's your treasure map.

The numbers show where you're doing well and where you still have room to improve. Use your POS software or a people management tool like IceHrm to make data-driven decisions to improve your business operations.

IceHrm's workforce forecasting and smart planning tools can help you reduce labor costs for your business.

With all of this, your operations plan becomes a real powerhouse that ensures your company can achieve its big dreams.

Make your business plan, strategic plan and operational plan work for you

In the hectic world of business, a roadmap to success is essential. The triumphant trio of business plan, strategic plan and operational plan steers your ship toward greatness.

These plans aren't just paperwork - they're vital tools that guide you every step of the way.

Understanding the role and importance of each plan will give you the superpowers you need to navigate the complex corporate waters.

A business plan provides clarity, a strategic plan provides direction, and an operational plan keeps things running smoothly. Together, they will help your company evolve from survivor to contender, ensuring you're not just a player, but a true champion.

A solid business plan provides clarity, a strategic plan sets direction, and an operational plan ensures smooth daily operations. Together, they empower your business to thrive. Tools like IceHrm enhance efficiency, helping you stay connected and data-driven.

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More From Forbes

The importance of early commercialization planning for pharmaceutical startups.

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Anupam Nandwana is cofounder and CEO of P360 , a leading developer of technology for the life sciences industry.

Bringing groundbreaking new drugs to market is no small feat. The journey begins with navigating a complex landscape of research and intellectual property to discover a viable and patentable candidate. Then there's the arduous process of securing approval from the Food and Drug Administration, which often takes more than a decade from initial research and development to approval. Finally, if all goes well, it's time for one of the most overlooked phases: commercialization.

While successfully navigating the drug approval process is critically important, a startup's success also hinges on its ability to generate sales. That's why one of the cardinal rules for new pharmaceutical ventures is to start planning for commercialization as early as possible. Ideally, this should begin during the preclinical phase of drug development. While this might seem premature to some, the complexities of bringing a pharmaceutical product to market necessitate early preparation.

The Importance Of Early Planning

Starting the commercial planning process early enables companies to understand the market landscape comprehensively. This involves identifying potential competitors, understanding market needs and defining a drug's unique value proposition. The analysis will help inform critical decisions regarding drug development, including which indications to pursue or which patient populations to target. Early planning can also help companies better understand which stakeholder groups they need to target.

Relationships with key stakeholders—physicians, pharmacists, payers and regulatory bodies—are crucial in the pharmaceutical industry. Initiating these relationships early on can provide invaluable insights that shape commercial strategy. For example, forging solid lines of communication with regulatory bodies can help align commercial strategies with key requirements from the outset. Early planning can help teams better understand market-specific requirements, ensuring all marketing and sales materials meet compliance standards.

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Additionally, early planning can help teams nurture engaging relationships with key opinion leaders. A big advantage of this, especially during the preclinical phase, is that these relationships can help bolster credibility and facilitate market entry when products are ready. This will save precious time and enable teams to focus on other critical go-to-market tasks.

Six Steps To Effective Preparation

While the playbook for effective commercialization is deep and complex, here are six steps startups, and even seasoned biotechnology companies, can take to help build ample runway for an effective product launch.

1. Conduct comprehensive market research.

Understanding the market landscape is crucial for any business, and pharmaceutical startups are no exception. Early market analysis helps identify potential competitors, target demographics, pricing strategies and market entry barriers. This information is invaluable for developing a robust commercialization strategy. With it, companies can develop products that meet the needs of their target audience.

It's important to note that market research should be continuous and iterative. Teams should begin by mapping out the competitive landscape and identifying gaps their drug can fill. Primary research methods, such as surveys, interviews and secondary research, can provide a holistic market view.

2. Develop a commercialization plan.

A meticulously crafted plan is vital for commercial success, particularly for startups seeking venture capital to bring their drug to market. Such a plan serves as a roadmap for internal teams and is crucial in securing financial backing. Investors depend on clear, well-structured plans to understand investment opportunities better.

Beyond timelines, budgets and regulatory strategies, a comprehensive commercialization plan should also clearly define your product's target audience, value proposition, sales channels and promotion strategies. Addressing these essential components will give you a clear picture of what's needed to bring your product to market.

3. Understand regulatory requirements.

Navigating the industry's complex regulatory landscape is one of the most challenging aspects of commercialization. Regulatory bodies, such as the FDA in the U.S., the European Medicines Agency in Europe and other global entities, enforce stringent requirements that must be met before a product can enter the market.

Understanding these requirements from the beginning enables startups to plan effectively for audits. Moreover, building a relationship with regulatory agencies during the early stages of development can provide valuable insights and guidance. This can ensure teams are updated with any changes in regulatory requirements that could impact sales and marketing materials, patient engagement and more.

4. Engage with key opinion leaders.

Key opinion leaders can significantly influence the adoption of a drug. Engaging with them early can enable teams to garner support and insights that can refine product positioning. Their endorsement can also lend credibility to a drug and make it more attractive to potential buyers.

5. Develop a pricing model.

Understanding the pricing landscape and reimbursement environment is crucial. Conduct health economics and outcomes research to demonstrate the value of a drug to payers. Develop a pricing strategy that reflects a drug's value while ensuring patient accessibility.

6. Explore technology.

There is no arguing that the pharmaceutical industry is one of the world's most complex and highly regulated sectors. Going from drug discovery to market entry is fraught with challenges. However, by leveraging the right technologies early, companies can streamline commercialization processes, reduce costs and accelerate time-to-market. Customer relationship management systems, for example, help companies manage relationships with healthcare professionals and patients, track interactions and tailor marketing efforts to meet their needs. Digital marketing platforms are another consideration. These platforms enable startups to reach their target audience through various channels, such as social media, SMS messaging, email marketing and online advertising.

Final Thoughts

The journey from drug development to market is challenging, but early preparation can pave the way for a successful launch. By understanding the market, building relationships with stakeholders and using technology, startups can position themselves for long-term success.

Remember, the key to thriving in the competitive pharmaceutical landscape is to start planning for commercialization as early as possible—during the preclinical phase of drug development. By starting this early, your teams will have a clearer path to market and a head start toward achieving the ultimate goal: bringing life-saving drugs to patients who need them.

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• The increasing importance of India: 59% of German companies plan new investments there this year

Survey by KPMG in Germany and the Indo-German Chamber of Commerce

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Positive business expectations: 78% of respondents expect rising sales and 55% expect increasing profits for the current financial year – in both cases an increase of 7% against the previous year

• India's importance as an investment location for German companies is growing sustainably: 78% of surveyed companies are planning new investments by 2029 (+19% points compared to 2024)
• The top three location factors that make India attractive: low labor costs (54%), political stability (53%) and qualified specialists (47%)
• 45% want to use India as a production location for both, the local and the Asian market by 2029 (+12% points compared to 2024)
• The greatest challenges remain bureaucratic hurdles (64%), corruption (39%) and the tax system (27%)
• Demands towards the newly elected Indian government: the improvement of the regulatory framework and increased legal certainty (67%), better infrastructure (55%) and greater trade facilitation (48%)

Berlin, 18th June 2024

India is booming – and this is attracting more and more German companies to the subcontinent. Nearly six in ten German companies are planning to increase their investments in India during the current financial year.

In addition, 78% of companies expect rising sales, and 55% forecast higher profits.

Expectations for the next five years are even more positive: 82% expect an increase in turnover and 74% expect higher profits.

The companies assume that the growth rate will be very dynamic: By 2029, 37% of respondents expect sales growth of more than 20% and 25% of them anticipate profit growth of more than 20%.

These are the key findings of the " German Indian Business Outlook 2024 " presented today. The survey conducted by KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) took place between 9 April and 20 May 2024, and deals with the business expectations of German companies in India.

India is gaining importance as an investment location

The relevance of the sub-continent is demonstrated by the current investment plans of companies. 59% of the companies surveyed are planning to expand their investments this year. That is 23%-points more than in 2021. This proves: India is and remains an important investment destination for German companies.

This is even more obvious with a five-year perspective: three quarters (78%) of companies want to increase their investments, a doubling compared to 2021 (36%).

Only 7% of respondents are considering reducing their investments in 2024.

German companies are increasingly diversifying and regionalizing their business operations across the globe, engaging with new locations. In Asia, they prioritize India as one of their preferred locations for new investments, due to the size of the population, political stability and sustainable growth prospects.

Managing Partner International Business

KPMG AG Wirtschaftsprüfungsgesellschaft

The top three location factors that make India attractive: low labor costs, political stability and qualified specialists

When asked about the top 3 location factors in favor of India, 54% of German companies cite low wage costs first, followed by the country's political stability (53%). Then in third place, respondents state the availability of highly qualified specialists (47%). This represents an increase of 12%-points compared to the previous year.

However, companies expect wage costs to deteriorate over the next five years. In 2029, only 36% of companies still expect cost advantages in this respect.

In comparison with other Asian countries, 69% of German companies appreciate the steady growth of India’s economy as a particular advantage. The weakening economy in China compounds this view.

Using India as a production location for the local market: the strongest motive for investment

The world's most populated country offers German companies enormous potential. Currently, a third (33%) use India as a production location for the local market. By 2029, 45% of companies are intending to do so.

For more than one in four German companies (27%), India's impressive potential as a sales market - with over 1.44 billion consumers - is the second most important reason for doing business there. By 2029, 40% of companies are stating so.

The role of India as a global competence center or shared service center is becoming increasingly important for the respondents. Around one in five companies (21%) have set up such a center in India, and more than a third of companies (35%) intend so within the next five years.

"India continues to show enormous potential. And further to this, continues to gain in importance as a location for regional production and global development," emphasizes Stefan Halusa, Managing Director of AHK India .

High demands towards the newly elected government

The survey by KPMG and AHK was conducted shortly before the election results were announced. Nevertheless, it gives an indication of the demands of the German companies towards the new government.

Two thirds of respondents (67%) hope for simplified regulations, a fight against corruption and greater legal certainty in the country.

In second place comes the desire to expand and modernize the infrastructure. This is what 55% of companies want.

A liberalization of trade and a promotion of exports are hoped for by 48%.

"With Modi's re-election, German companies hope that many structural problems will be tackled. These include the infrastructure deficits in the areas of transportation, energy, information and communication, the complex tax system and the highly varying regional regulations. Only by solving those topics it will be possible that the growth expectations can be achieved in the medium term," explains Andreas Glunz (KPMG) .

Bureaucracy and corruption remain key issues

Despite the positive outlook, the German companies surveyed also see challenges in India. 64% of those surveyed consider the bureaucratic hurdles to be particularly burdensome. This corresponds to an increase of 11 percentage points compared to the previous year.

This is followed by corruption at 39%, although this is considered less relevant compared to the previous year (47%).

The third biggest challenge is the tax system. More than one in four German companies (27%) cite this as a problem.

"India offers a unique combination of market size, market potential and a talent pool for German companies. However, bureaucratic and regulatory hurdles are still the biggest problem. A more efficient administration, the continuous fight against corruption and a simplified tax system would further increase India’s attractiveness for German companies," explains Stefan Halusa (AHK).

Protectionism, cyber attacks and air pollution as further risks to future development

Rising import duties are seen as a further risk by 52% and non-tariff trade barriers by 43%.

When asked about exogenous risks, 40% of German companies put possible cyber-attacks at the top. 37% perceive the high level of air pollution in India's major cities as a risk. Increasing protectionism and bloc formation are named by 36% as further significant risks.

About the "German Indian Business Outlook 2024"

For the " German Indian Business Outlook 2024 ", KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) conducted a survey among the Indian subsidiaries of German corporations and companies with Indian activities in Germany. A total of 85 companies took part (99 companies in the previous year). The implementation period was between 9 April and 20 May 2024. The questions focused on the economic outlook of German companies in India as well as their challenges and business opportunities.

Press contact

Katrin Häbel

Head Corporate Communications KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 69 9587 4228 [email protected]

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Americans still waiting on biden broadband plan; rural high-speed internet stuck in dems’ red tape.

Not a single home connected three years after enactment

Residents in rural America are eager to access high-speed internet under a $42.5 billion federal modernization program, but not a single home or business has been connected to new broadband networks nearly three years after President Biden signed the funding into law, and no project will break ground until sometime next year.

Lawmakers and internet companies blame the slow rollout on burdensome requirements for obtaining the funds, including climate change mandates, preferences for hiring union workers and the requirement that eligible companies prioritize the employment of “justice-impacted” people with criminal records to install broadband equipment.

The Commerce Department, which is distributing the funds under the Broadband Equity Access and Deployment (BEAD) program, is also attempting to regulate consumer rates, lawmakers say. This puts them at odds with internet providers and congressional Republicans, who say the law prohibits such regulation.

The slow pace of funding allocation and compliance will push the project start dates for modernizing rural internet access to 2025 and 2026, according to a timeline officials outlined in a House budget hearing.

Federal Communications Commissioner Brendan Carr said the program’s goal of providing high-speed internet to most underserved areas will not be fully realized until 2030, nine years after its enactment.

Rural areas have been waiting a long time for broadband service. Many rely on slow internet that travels over copper lines and are unable to transmit large amounts of data. Some areas have no internet at all.

“There hasn’t been a single shovel’s worth of dirt that has even been turned towards connecting people,” Mr. Carr said.

As of this month, nine states and the District of Columbia have been approved for the BEAD program. President Biden signed the funding into law in November 2021 as part of the $1.2 trillion bipartisan Infrastructure Investment and Jobs Act. All 56 states and territories have submitted initial proposals seeking a portion of the $42.5 billion.

Alan Davidson , who runs the program as head of the Commerce Department’s National Telecommunications and Information Administration, praised the pace of the BEAD program. He told lawmakers in May that the first two years were consumed by “planning and preparation.”

Mr. Davidson said 2024 “is a year of execution — the year for which we’ve been planning.”

States and territories approved for funding, he said, “will be embarking on the challenge and subgrantee selection processes that will fund providers to build networks.”

On May 15, Mr. Davidson told Congress that the program “is really a 2025, 2026 shovels-in-the-ground project.”

Critics say the deployment of funding is taking far too long and government requirements are thwarting the approval process and threatening to derail broadband projects.

Mr. Carr accused the NTIA of taking too much time to approve applications from states.

“They just put too many steps in the process,” he said. “The addition of a substantive wish list of progressive ideas they’ve layered in certainly didn’t help with the timeline.”

Senators have repeatedly written to Mr. Davidson to complain about funding requirements related to labor, climate change, and diversity, equity and inclusion that they said were added to the BEAD program after it was signed into law.

“As numerous states and stakeholders have articulated, current BEAD rules divert resources away from bringing broadband service to rural America and are inconsistent with NTIA’s statutory authority in the Infrastructure Investment and Jobs Act,” 11 Republican senators wrote to Mr. Davidson . “NTIA’s failure to resolve these concerns will prolong the digital divide and put billions of scarce taxpayer dollars at risk.”

The letter outlines a list of stipulations for obtaining the funds that lawmakers say are not part of the law and should be eliminated.

They include:

• Preference for hiring union workers, who are scarce in some rural areas.

• Requiring providers to prioritize “certain segments of the workforce, such as individuals with past criminal records,” when building broadband networks.

• Requiring eligible entities to “account not only for current [climate-related] risks but also for how the frequency, severity, and nature of these extreme events may plausibly evolve as our climate continues to change over the coming decades.”

Lawmakers also protested provisions in the BEAD program giving preference to government-owned networks, which critics say put taxpayers at risk and have sustained financial losses around the country.

“Time and time again, such networks have squandered public dollars and left taxpayers holding the bag,” the National Taxpayers Union said in a letter to Sen. John Thune, South Dakota Republican.

A separate group of senators, all Republicans, wrote to Commerce Secretary Gina Raimondo to say that the BEAD program requirements conflict with congressional intent and would deter broadband deployment. One of the contested provisions allows only expensive fiber internet to qualify for funding, which could make rural and remote connections much harder and far more costly.

The senators said the program’s nine-step review process “is likely to mire State broadband offices in excessive bureaucracy and delay connecting unserved and underserved Americans as quickly as possible.”

They disputed a requirement added by NTIA that eligible states participate in federal digital equity programs, which “aim to ensure that all people and communities have the skills, technology, and capacity needed to reap the full benefits of our digital economy.”

The letter cited BEAD’s planning section on “climate resiliency,” which senators said requires extensive research, reporting and justifications “that are typically well beyond the focus or expertise of State broadband offices.”

The NTIA did not immediately respond to an inquiry about the complaints concerning the BEAD program requirements.

In a June 11 letter to Mr. Davidson , Sen. Eric Schmitt, Missouri Republican, accused the BEAD program of attempting to regulate broadband service rates, which he said violates the law.

Mr. Schmitt also accused Mr. Davidson of “aggressively insisting” that states, in this instance Virginia, offer a low-cost option “at a pre-set price” as a condition for receiving any of the federal funding.

Rate setting is illegal outside public utilities, and Mr. Davidson and Ms. Raimondo deny that they are engaging in rate regulation. Ms. Raimondo told senators at a budget hearing that low-cost proposals from states seeking BEAD funding “have to satisfy us.”

Mr. Schmitt accused Mr. Davidson and Ms. Raimondo of “engaging in double talk” on their rate demands and threatened to “use the fullest extent of our oversight authority” to hold them accountable.

In the meantime, the Biden administration is celebrating the rollout of the funding that started this year.

In April, Mr. Biden announced the approval of billions of dollars in funding for Kansas, Nevada and West Virginia to begin planning and implementing the high-speed internet rollout under the BEAD program.

“Today’s announcements mark another milestone in the effort to close the digital divide across America,” Mr. Davidson said.

• Susan Ferrechio can be reached at [email protected] .

Copyright © 2024 The Washington Times, LLC. Click here for reprint permission .

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• Best for customer satisfaction
• Best for older adults
• Best for long-term care
• Best for high returns
• Best for agent support
• Best for term life
• Why you should trust us

Best Life Insurance Companies of June 2024

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

Life insurance is as complicated as the policyholders and beneficiaries who use it. That means there's no single "best" life insurance company. Instead, you can find the best option based on what you want or what you prioritize.

Best Life Insurance of 2024 Summary

• Best for customer satisfaction: State Farm Life Insurance
• Best for older adults: Prudential Life Insurance
• Best for agent support: New York Life Insurance
• Best for long-term care: Columbus Life
• Best for high returns: Allianz Life
• Best for term life: North American Company

Top Life Insurance Companies of 2024

While there is no such thing as the objective best life insurance policy, you will be able to find the best insurance policy for your specific needs. Here are our picks for the best life insurance companies, whether you want to use your life insurance policy to build wealth through cash value or you're just looking for a term life insurance policy .

Best Life Insurance for Customer Satisfaction

State farm life insurance.

State Farm Life Insurance gets the best life insurance ranking in J.D Power's Individual Life Insurance Study, with a score of 843/1,000. The company is also ranked A++ with AM Best for its financial stability with term, universal, and whole life insurance options. 

All State Farm policies have to be purchased through a State Farm agent. Your agent can help you bundle and save or buy one policy. State Farm is also among the companies offering "survivorship universal life insurance ," which means the policy covers two people, and it kicks in after the second person dies. Couples looking to maximize their death benefit for beneficiaries with one premium payment each month may enjoy lower overall costs.

State Farm agents can run quotes and compare options to find the right plans for each applicant. The range of options, discounts, and familiar name all contribute to the popularity of State Farm's life insurance.

Read our State Farm Life Insurance review .

Best Life Insurance for Older Adults

Prudential vul protector life insurance.

Prudential Life Insurance is available in all states except New York. New York residents can buy the Pruco Life of New Jersey VUL Protector plan. This plan allows buyers to pull money out of their plan to pay for nursing home expenses. Cash value policy premiums are fixed, so you won't have to worry about extra costs later on. Internal costs are low, which minimizes risk. Due to age, many older adults want a safe investment option for their money. Prudential VUL Protector invests to avoid loss. That also means you're not as likely to see big increases in your available funds outside of what you deposit.

Read our Prudential Life Insurance review .

Best Life Insurance for Long-Term Care

Columbus life insurance.

Columbus Life offers a wide range of riders to customize your policy with affordable premiums. The company also allows you to convert term policies to whole life insurance policies until the end of your term (generally around age 70). For this and many other reasons, customer satisfaction is high.

When using living health benefits (otherwise known as accelerated death benefits), buyers are allowed to pull money from policies early to pay for medical bills, living costs, etc. under certain circumstances. Most companies use a discounted death benefit, which reduces your final payout using two models. Columbus uses the lien method, which makes it easier to calculate the financial impact of pulling money out early.

Best Life Insurance for High Returns on Income

Allianz life insurance.

Allianz Life plans are geared towards high-income adults looking for more tax-free income. Allianz offers a 40% multiplier bonus with a 1% annual assets charge. In short, the professionals managing your investments take 10%. Overall, your investments would pull in an extra 14%-1% asset charge. This means you end up with 3% more than what you deposit every year your life policy is active. This plan offers strong returns when using a life policy to supplement your retirement savings. Allianz also offers specialized plans to grow your income by as much as 20% according to some estimates.

Of note: Allianz also offers plans for foreign nationals, including those with H-1B visas.

Best Life Insurance for Agent Support

New york life insurance.

New York Life Insurance agents go through extensive training before they ever hit the sales floor. What does this get you? Policies vary widely, and New York Life offers both large and small payouts. Some policies have significant penalties for early withdrawal, but taking a loan offers more options. Whatever your questions, New York Life agents are trained to offer comprehensive support giving you accurate information about its policies every time. The company comes in at position eight in J.D. Power's latest life insurance customer satisfaction study.

Read our New York Life Insurance review here.

Best Life Insurance for Term Life

North american life insurance.

North American Company offers term policies alongside accelerated death benefits for critical, chronic, and terminal illnesses and more. The company allows one conversion on a 20-year policy at 15 years or 70 years old (whichever is earlier). The conversion cannot happen later than the five-year marker regardless of which policy you choose or the length. North American Company also offers a term policy with a lower premium renewable up to the age of 95 for qualifying insureds.

Types of Life Insurance

While there's many different types of life insurance policies , broadly speaking, there are two types of life insurance: temporary and permanent. Let's go over each in detail.

Temporary life insurance

Temporary life insurance is often called term life insurance. This type of policy covers you for a set amount of time before expiring, usually between 10-30 years. If you pass away after your policy expires, your family won't receive any benefits. Additionally, your policy won't accrue cash value like a permanent policy. That said, some term life insurance policies offer a conversion from term to whole life insurance, so you can extend your coverage. 

Because its benefits aren't guaranteed, term life policies are generally cheaper than permanent life insurance. That said, the vast majority of term life insurance policies never pay out. on

Permanent life insurance

Permanent life insurance is an umbrella term for a variety of life insurance policies that will insure you indefinitely and guarantee a payout as long as you maintain your policy. Policy types that fall under permanent life insurance includes:

• Whole life insurance
• Universal life insurance
• Variable life insurance
• Variable universal life insurance
• Simplified life insurance
• Guaranteed issue life insurance

These policies vary widely in purpose and intended buyers, but all guarantee death benefits to your loved ones. Some permanent life insurance policies, like whole, universal, and variable have a cash value component , which you can use as a savings tool or to leave your heirs a larger death benefit.

How to Pick the Best Life Insurance Policy for You

Finding the right fit in life insurance starts with finding a trusted insurance agent. Because there are so many state regulations, shopping for homeowners or auto insurance can be easily done online. Life insurance is not required. So it's a voluntary purchase. Many buyers don't know what they need or when they need it. Before making your selection, consider a few things:

Some companies will sell you a policy for your child as soon as they're born. While this may seem morbid, early sign-up means lower rates for a policy your child could enjoy in the future. Regardless, early sign-up equates to more policy for lower premiums and a higher likelihood of acceptance. At 20, you may be healthier and be able to pay into the policy for a longer period compared to when you're 50 with more age-related conditions.

As a general rule, never agree to more than you can afford. For the average life insurance agent, their job is to sell you a large policy with a large commission. Consider not only how much you make now, but how likely your current income is to continue. If you work on a project basis and your project is scheduled to end in 12 months, you may want to reconsider a policy premium outside your monthly savings.

How much are you prepared to buy? Some people only want a small policy to cover funerals and other end-of-life expenses. Others build a life policy into their retirement plan. Whatever direction you're going, involving a financial planner could help you make the right decisions. Depending on the carrier, customers can also compare set limits with index universal life policies, which set no limit. These policies never expire, and the value builds over the entirety of your life.

Living Benefits

Life happens unexpectedly. You could be healthy one day and in the hospital the next. Many life policies offer living benefits. These allow you to draw a limited amount out of your policy to cover medical and other bills you cannot pay while sick.

Much like a 401(k), many life insurance policies have penalties for early withdrawal. No matter what policy you want, this question is critical to an informed decision. It's a question of how early you can withdraw and how much you'll lose from the total to have the money in 10 years instead of 30 or after death.

Some policies require insured parties to pay premiums for at least one year before any significant payout would be available. Suicide exclusions are common. Even with no medical exam policies, the company may still do a check for known conditions. An insurance company has to mitigate its risk.

Flexibility

Once you've been denied a life insurance policy, a mark goes on your record. No matter the reasons, other insurance companies may deny you coverage based on the first denial. So consider your whole situation and choose your policy carefully before you submit any applications. Some policies have greater flexibility if you lose your job or otherwise can't make payments. Others will lapse if you miss even one payment.

Payment Type

Even within whole life or term life insurance policies, customers have the option to choose guaranteed fixed or variable rates. Some have guaranteed payouts, but you'll need to ask your agent for details.

What is your intended use? Why are you shopping for a life insurance policy in the first place, and what are your goals? Many successful financial planners also have a background in life insurance. So while they may not be able to find you a specific life insurance policy, financial planners can help you set out a blueprint for your purchase.

Why You Should Trust Us: How We Reviewed the Best Life Insurance Companies

In life insurance, it's easy to get "sold a bill of goods." Many life insurance agents pass a state test to be thrown into the deep end. Agents sell the company product, but not all know the products. In this vein, we look at the products each company offers. We also look at agent training.

A good life insurance agent may not volunteer all facts upfront. But a company's agents should answer questions about its products accurately and in a way the average consumer can digest. Agents should be able to inform you about the long-term benefits and limitations. This will help customers find the right policy for their long-term plan.

We consider affordability, policy sizes available, and performance for a comprehensive assessment in our life insurance rating methodology . If you can, we recommend also working with a financial advisor to make a plan for your future with life insurance.

Our Expert Panel for The Best Life Insurance Companies

To inform our choices for the best life insurance companies, we spoke with the following experts:

• Paul LaPiana , head of product at MassMutual
• Barbara Pietrangelo , CFP, CLU, and chair of the nonprofit Life Happens
• Wykeeta Peel , Corporate Vice President and Market Manager, African American Market Unit at New York Life

The Experts' Advice on Choosing The Best Life Insurance for You

How much life insurance coverage do you believe the average buyer should have.

Paul LaPiana, Head of Product at MassMutual

"There are different approaches to determining how much life insurance you need. One is the 'human life' approach, which estimates the current value of your future earning potential. Another is securing specific coverage to pay off debts such as a mortgage or provide for the education of children. A comprehensive protection plan should provide the right amount of coverage over the course of your working life and into retirement."

Barbara A. Pietrangelo, Chair of Life Happens

"There is no one-size-fits-all life insurance policy because everyone is different. One way to get a rough estimate is to multiply your income by 10 to 15; another is adding $100,00 to that amount, should you have a child and anticipate college education expenses.

Your best bet is to talk to a financial professional or use the Life Insurance Needs Calculator on LifeHappens.org to analyze what's right for you."

Wykeeta Peel, Corporate Vice President & Market Manager African American Market Unit at New York Life

"As you consider what policy best meets your needs, it can help to answer four key questions: First, how much death benefit do you need? Second, how long will you need that coverage? Third, what is your budget (or how much monthly premium can you afford to pay?), and finally, what is your investment risk tolerance?

To determine how much death benefit makes sense, it's helpful to think beyond using life insurance to cover funeral expenses and consider whether anyone is relying on the policy owner's income to maintain a lifestyle, pay rent or a mortgage, or fund a child's education and for how long.

There are various rules of thumb regarding the right amount of Life insurance coverage. Some tips can be found online, but they only provide an estimate and don't necessarily factor in an individual's specific needs. In my opinion, human guidance, powered by technology, is required. Basically, it comes down to how much money your loved ones would need to remain on firm financial ground if your earnings were no longer in the picture and that is different for everyone."

What is the biggest opportunity you see for improvement in the life insurance industry?

"Increased accessibility through digital and other channels as well as through underwriting enhancements. Increased tailoring of products and features. And an increased emphasis on health and wellness programs."

"Having enough qualified insurance professionals to walk potential buyers through the multiple benefits of life insurance will be pivotal to the growth of the industry. Education is a key factor here, as professional agents also need to be able to explain life insurance and its benefits in an easy, digestible way, especially when there are so many misconceptions about life insurance."

"The need for life insurance is greater than ever. In fact, a recent New York Life Wealth Watch survey found that 37% of adults have been thinking about life insurance more often these days – and half of adults report that financial products that provide protection (50%) and reliability (50%) are more important now compared to last year. This may be especially true for middle-market and Cultural Market families.

Our organizational structure of having Cultural Market agents embedded in the communities where we live and work allows us to understand the needs of diverse communities and develop solutions that resonate with them."

What advice would you give to buyers who are debating whether or not to buy life insurance?

"It is difficult to say with any certainty how healthy you will be years from now. That's why securing life insurance, and insuring your insurability, today, when you are the youngest you'll ever be again, and perhaps your healthiest is a wise decision."

"Do you love someone? If the answer is yes, then life insurance is certainly something you should consider. Many buy gifts and experiences to express their love, but haven't considered that life insurance is just another way to say I love you. Nothing says support like ensuring your family's financial security and peace of mind."

"If you have someone depending on your income, you should consider purchasing life insurance. A death benefit from a life insurance policy can replace income from the loss of a breadwinner, ensure a family can stay in their home, fund educational or retirement expenses, address debt and so much more.

A life insurance policy can also help you grow your family's wealth over time. Once the risk of an unexpected loss has been managed, you can begin to think more broadly about your family's financial future. Life insurance can enable your mindset to shift from death to growth."

What's the most important thing buyers should look for when choosing a life insurance agent/company to buy from?

"With life insurance, you are securing a future commitment that may be decades away. Research the company behind the policy to ensure it has high financial strength ratings, longevity, and an excellent track record of paying claims."

"When looking for an insurance agent or company, be sure to do your research. When comparing companies, be sure to remember that the policy features that fit you and your loved ones best is the most important factor. Don't automatically assume you should buy from the higher-rated company.

If the policy from the other company has more of what you're looking for, it might be the better choice. If you're unsure where to start, try the Life Happens Agent Locator to find an insurance professional in your area."

• "The insurers' track record: At its core, life insurance is protection - a hedge against the unexpected - and you are paying premiums in exchange for the promise that the insurer will be there when you need them, so the financial strength and track record of the company backing your policy is critical.
• Customer service: Are service professionals available by phone and digital channels? Is there is an online dashboard where you can manage your policy? Beyond ensuring assistance is available after you purchase a policy, it's also critical to ensure you have access to trusted advice and guidance before you buy.
• Flexibility in conversion: How easy is it to change? Life can be unpredictable and while term insurance can cover your loved ones through a critical period of time, you may decide that access to cash value is an important piece of your strategy.
• Accelerated online applications : Online applications are convenient but don't replace human guidance. Keep in mind that accelerated online applications may have a maximum coverage amount, meaning that you may not be able to get all the coverage you may need exclusively through an online process.
• A range of payment options: It's important to understand how often you're required to make premium payments and whether and how often you can change the frequency of payments."

Best Life Insurance FAQs

According to JD Power's 2023 life insurance study, State Farm is the highest-rated life insurance company when it comes to overall customer satisfaction. However, you still may want to shop around for quotes from various insurers if you're looking to purchase a new policy.

There isn't one best life insurance company, because the best option for you will depend on the type of policy you're looking for. It's best to work with a qualified insurance agent to help you find the best coverage. If you're deciding between multiple similar options, it's also worth consulting J.D. Power's life insurance customer satisfaction study . The latest study ranks State Farm as the top pick for individual life insurance, outpacing Nationwide by three points.

The best type of life insurance policy for you will differ from someone else's, as your policy should be tailored to your needs. The best policy for you will be affordable and will offer the benefits best suited to your situation. For example, some policies are only meant to cover end-of-life expenses such as burial and funeral arrangements, whereas others include living benefits like a cash value insurance plan , which you can borrow against during your lifetime.

Some life insurance policies are advertised as "no medical exam." This doesn't mean the insurer won't ask you about known conditions or look at medical records. Policies with no medical exam also tend to offer lower benefits with higher premiums. Most companies have a network of medical examiners, some of whom can come to your home. You can find our guide on the best no exam life insurance here.

Each situation is different and requires a knowledgeable life insurance agent to assess your best options. Bring all your questions and the coverage you're looking for to an insurance agent near you to explore your options.

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