What Is a Business Plan and How to Write One

Interested in starting a business? Writing a business plan should be one of your first steps.

The purposes of a business plan are guided by the goals of your business and should leave room for flexibility and future restructuring. Use this guide to help you get started.

What is a business plan?

A business plan is a written document to help businesses and startups identify their business objectives and lay out strategies for bringing them to fruition. It is a road map for your company to follow as it scales in size and complexity. What is in a business plan? Business plans include basic information about your company’s operational, financial and marketing goals. You can tailor the information you include to your company and its needs, but it’s generally a good idea to incorporate the following sections:

• Executive summary: An outline of your overall vision, business model, target market, products and services and basic financial information
• Company overview, or company description: An overview of your mission, location, legal structure, products and history that could also include a rundown of your industry’s major competitors and the competitive advantages that set your business apart
• Products and services: An explanation of the products and services your business offers, including the problems you solve for customers, intended audiences, use cases and pricing
• Market analysis: A breakdown of your value proposition, how you plan to reach your target market and where your business fits into the competitive landscape
• Management and organization plan: The legal structure of your business and the organizational structure and workflow; may include the biographies and resumes of your leadership team members to help illustrate how they will execute these operations
• Financial plan: An outline of the fiscal details of your business, including a balance sheet, profit and loss statement, cash flow statement and sales forecast
• Funding request: A detailed picture of the resources you will need for the next five years, where you plan to source them and how you’ll repay them
• Contact directory: An introduction of all key team members and an explanation of their roles, such as chief executive officer, chief financial officer, chief operations officer and other crucial management roles

Some business plans also attach appendices for additional documentation related to the business. These may include charts and graphs, details on products or services, legal or business documentation, research and more. A table of contents can be included to make it easier to navigate the document.

Why is a business plan important?

A winning business plan can help you lay out a strategy for growth. It can also be nearly impossible to secure financing without one. Banks, private investors and venture capital firms analyze business plans when making funding decisions, because they want to see how potential business loan recipients will work toward their goals and make their investments worthwhile.

Your company doesn’t have to follow the same plan forever. You can and should revise your business plan periodically.

Types of business plans

The Small Business Administration identifies two types of business plans:

Traditional business plan

A traditional business plan tends to be long and detailed. It includes all the sections mentioned above as well as information on the specific funding and human resources goals you hope to achieve. Traditional investors typically request traditional business plans.

Lean business plan

This type of business plan is shorter and includes only essential information: partnerships, activities, resources, market, value proposition and distribution channels. A lean business plan may also include your cost structure and revenue streams. Lean business plans are ideal for internal use.

Note that not every business plan explicitly follows one of these formats. Plans can be highly customized based on the needs of each business.

Ways companies use business plans

The following are four ways that your company may use a winning business plan to help it develop and grow:

1. Assess feasibility

Business plans can be used to help examine the feasibility of a business or product idea. As you research your market, crunch the numbers to develop a better sense of what you’d need to do to make a profit.

Ask for feedback on your business plan from people you trust, such as mentors, potential partners or prospective employees. If you can demonstrate that you have a plan to succeed, prospective clients or investors may be more confident about working with you.

2. Understand the market

Knowing your customers and marketplace dynamics is key to running a successful business. The market analysis section of your business plan positions your company within the industry and among your competitors. For example, your business plan might explain how you intend to solve a persistent problem in a way that your competitors cannot.

3. Create milestones

It can be challenging to keep your eye on the strategic big picture while also managing a business. Writing a business plan forces you to set aside your daily tasks and consider your goals. In turn, setting milestones will help guide your business and give it a greater purpose.

The milestones you create should be unique to your business. For example, your milestones might include reaching $1 million in revenue, expanding to a new region, or selling your business to a larger company.

4. Seek funding

Some companies have all the capital they need to launch, while others require outside financing. If you request funding from a bank or a private investor, you will need a winning business plan that allows investors to assess how your company will make money and grow.

Working toward future goals

Even as you continue to evolve your business strategies and objectives, you can use your business plan as a guide to help you decide what to do next and how to prioritize. Read our step-by-step guide on writing a business plan.

Once your business plan is in motion, you can meet with a Chase business banker to learn more about how to navigate your banking needs.