why it is important to have a written business plan

14 Reasons Why You Need a Business Plan

10 min. read

Updated April 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.

• 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.

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

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

Table of Contents

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

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6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

Starting a busine ss can be a daunting task, especially if you’re starting from square one.

It’s easy to feel stuck in the whirlwind of things you’ll need to do, like registering your company, building a team, advertising, the list goes on. Not to mention, a business idea with no foundation can make the process seem incredibly intimidating.

Thankfully, business plans are an antidote for the new business woes that many entrepreneurs feel. Some may shy away from the idea, as they are lengthy documents that require a significant amount of attention and care.

However, there’s a reason why those who take the time to write out a business plan are 16% more likely to be successful than those who don’t. In other words, business plans work.

What is a business plan, and why does it matter?

In brief, a business plan is a roadmap to success. It's a blueprint for entrepreneurs to follow that helps them outline, understand, and cohesively achieve their goals.

Writing a business plan involves defining critical aspects of your business, like brand messaging, conducting market research, and creating pricing strategies — all before starting the company.

A business plan can also increase your confidence. You’ll get a holistic view of your idea and understand whether it's worth pursuing.

So, why not take the time to create a blueprint that will make your job easier? Let’s take a look at six reasons why you should write a business plan before doing anything else.

Six Reasons You Really Need To Write a Business Plan

• Legitimize your business idea.
• Give your business a foundation for success.
• Obtain funding and investments.
• Hire the right people.
• Communicate your needs.
• It makes it easier to sell your business.

1. Legitimize your business idea.

Pursuing business ideas that stem from passions you’ve had for years can be exciting, but that doesn’t necessarily mean it’s a sound venture.

One of the first things a business plan requires you to do is research your target market. You’ll gain a nuanced understanding of industry trends and what your competitors have done, or not, to succeed. You may find that the idea you have when you start is not likely to be successful.

That may feel disheartening, but you can always modify your original idea to better fit market needs. The more you understand about the industry, your future competitors, and your prospective customers, the greater the likelihood of success. If you identify issues early on, you can develop strategies to deal with them rather than troubleshooting as they happen.

It’s better to know sooner rather than later if your business will be successful before investing time and money.

2. Give your business a foundation for success.

Let's say you’re looking to start a clean beauty company. There are thousands of directions you can go in, so just saying, “I’m starting a clean beauty company!” isn’t enough.

You need to know what specific products you want to make, and why you’re deciding to create them. The Pricing and Product Line style="color: #33475b;"> section of a business plan requires you to identify these elements, making it easier to plan for other components of your business strategy.

You’ll also use your initial market research to outline financial projections, goals, objectives, and operational needs. Identifying these factors ahead of time creates a strong foundation, as you’ll be making critical business decisions early on.

You can refer back to the goals you’ve set within your business plan to track your progress over time and prioritize areas that need extra attention.

All in all, every section of your business plan requires you to go in-depth into your future business strategy before even acting on any of those plans. Having a plan at the ready gives your business a solid foundation for growth.

When you start your company, and your product reaches the market, you’ll spend less time troubleshooting and more time focusing on your target audiences and generating revenue.

3. Obtain funding and investments.

Every new business needs capital to get off the ground. Although it would be nice, banks won’t finance loans just because you request one. They want to know what the money is for, where it’s going, and if you’ll eventually be able to pay it back.

If you want investors to be part of your financing plan, they’ll have questions about your business’ pricing strategies and revenue models. Investors can also back out if they feel like their money isn’t put to fair use. They’ll want something to refer back to track your progress over time and understand if you’re meeting the goals you told them you’d meet. They want to know if their investment was worthwhile.

The Financial Considerations section of a business plan will prompt you to estimate costs ahead of time and establish revenue objectives before applying for loans or speaking to investors.

You’ll secure and finalize your strategy in advance to avoid showing up unprepared for meetings with potential investors.

4. Hire the right people.

After you’ve completed your business plan and you have a clear view of your strategies, goals, and financial needs, there may be milestones you need to meet that require skills you don’t yet have. You may need to hire new people to fill in the gaps.

Having a strategic plan to share with prospective partners and employees can prove that they aren’t signing on to a sinking ship.

If your plans are summarized and feasible, they’ll understand why you want them on your team, and why they should agree to work with you.

5. Communicate your needs.

If you don’t understand how your business will run, it’ll be hard to communicate your business’s legitimacy to all involved parties.

Your plan will give you a well-rounded view of how your business will work, and make it easier for you to communicate this to others.

You may have already secured financing from banks and made deals with investors, but a business’ needs are always changing. While your business grows, you’ll likely need more financial support, more partners, or just expand your services and product offers. Using your business plan as a measure of how you’ve met your goals can make it easier to bring people onto your team at all stages of the process.

6. It makes it easier to sell your business.

A buyer won’t want to purchase a business that will run into the ground after signing the papers. They want a successful, established company.

A business plan that details milestones you can prove you’ve already met can be used to show prospective buyers how you’ve generated success within your market. You can use your accomplishments to negotiate higher price points aligned with your business’ value.

A Business Plan Is Essential

Ultimately, having a business plan can increase your confidence in your new venture. You’ll understand what your business needs to succeed, and outline the tactics you’ll use to achieve those goals.

Some people have a lifetime goal of turning their passions into successful business ventures, and a well-crafted business plan can make those dreams come true.

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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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What Is a Business Plan?

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

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

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

As a small business owner or aspiring entrepreneur, a business plan can seem more like a hurdle you have to overcome than a useful tool. It’s a barrier that’s keeping you from moving forward with your business. Maybe the bank won’t review your loan application without a business plan or a potential investor has asked to see your business plan before they will meet with you. 

But, writing a business plan doesn’t have to feel like a homework assignment. Instead, think of writing a business plan as an investment in your business. It’s a tool to figure out a strong and financially viable strategy for growth. And, it’s even been scientifically proven that planning will increase your chances of success and help you grow faster. 

Still not convinced? Read on for our definitive list of reasons why you should write a plan for your business.

What is the key purpose of a business plan? 

Imagine you’re setting out on a journey. You know what your final destination is, but you haven’t figured out how to get there. While it might be fun to just start driving and figure things out as you go, your trip will most likely take longer than you anticipated and cost you more. If you instead take a look at a map and chart the best way to get to your destination, you’ll arrive on time and on budget. Planning for your business isn’t that much different. 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you’re going to get there. It helps you set your direction and determine a winning strategy. A solid business plan will set your business up for success and help you build an unbeatable company.

If you start off without a plan, you may go down some interesting detours, but you’re unlikely to grow quickly or stick to your budget.

Why do you need to write a business plan?

Establishing a strategic roadmap for your business is the primary benefit of writing a business plan. But what does that really look like for you and your business? Here are our top 15 reasons why you should write a business plan.

1. Reduce your risk

Writing a business plan takes some of the risk out of starting a business. It ensures that you’re thinking through every facet of your business to determine if it can truly be viable. 

Does your solution fit the market? Are your startup or operational costs manageable? Will your proposed business model actually generate sales? What sort of milestones would you need to hit to achieve profitability? These are all questions associated with business risk that you can answer with your plan.

For those already running a business, writing a plan can help you better manage ongoing risk. Should you bring on a new employee? What does cash flow look like for your next month, quarter, or even year? Are you on track to meet your milestones or do you need to change your focus? Keep your plan up to date, review it regularly and you can easily answer these questions and mitigate risk.

2. Uncover your business’s potential

Writing a business plan helps you think about the customers you are serving and what their needs are. Exploring those customer needs will help you uncover new opportunities for your business to serve them and potentially expose new products and services that you could offer. When you use your business plan to manage your business, you’ll be able to see the parts of your strategy that are working and those that aren’t. For example, you may have invested in new marketing efforts to sell one of your products, but that strategy just isn’t working out. With a business plan in hand, you’ll be able to see what’s going to plan and where you need to make adjustments to your strategy, pivoting to new opportunities that will drive profitability.

3. Test a new business idea

When you have a new business idea, it really helps to spend a little time thinking through all the details. A business plan will help you think about your target market, your budget, how much money you’ll need to launch, and how your idea will actually work before you spend any real money. A business plan will also help you easily share your idea with other people to get input and feedback before you get started. 

We recommend using a one-page business plan to test ideas quickly and easily. 

4. Attract investors and get funding to start and grow your business

Sharing your business idea with investors requires a business plan. Now, you probably won’t share a long, detailed business plan to get investors interested, but you probably will share your executive summary — which is an overview of your business plan. Investors may never actually ask for your full business plan, but they will certainly ask you questions that you’ll only be able to answer if you’ve taken the time to write a plan. 

At the very least, they’ll want to see your financial forecasts , so you should be prepared for this. If you end up pitching your business to investors, whether in-person or remotely , having a business plan written makes it much easier to translate the right information into a pitch deck. In short, you’ll have all of the right information ready and available to show why your business is worth investing in.

5. Plan for different scenarios

Even if you have a plan in place, things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive on the scene. Having a plan allows you to experiment with different scenarios to see how changes to your business will impact your forecasts, budgets, profitability, and cash flow. 

6. Research shows that business plans definitely work

A Journal of Management Studies study found that businesses that take the time to plan grow 30% faster than those that don’t. Our own 2021 small business research study found that 58% of small business owners that have or are working on a plan feel confident in their business, even amidst a crisis. And a study in Small Business Economics found that entrepreneurs that write business plans for their ideas are 152% more likely to actually start their businesses. There’s plenty of additional research that links planning with success, so it’s a proven fact that you won’t be wasting your time when you write your plan.

7. Build a better budget and a financial forecast

A core component of any business plan is a financial forecast. When you take the time to plan, you’ll have to think through your expense budget, your sales goals, and the cash that it’s going to take to keep your doors open, purchase inventory, and more. 

The beauty of incorporating forecasts into your business plan is that you don’t need to have the exact numbers to start. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business. As you operate and collect financial data you can then begin to update your forecasts to generate a more accurate view of how your business will operate.

8. Determine your financial needs

Without a business plan, it’s impossible to really know how much money it’s going to take to start and run your business. You don’t just need money for your initial purchases. You need to have enough cash in the bank to keep your business afloat while you get fully up and running. A plan will help you determine exactly how much money you’ll need and help you keep track of your cash flow and runway .

9. Attract employees

Especially if you’re a young startup company, attracting employees can be hard. Without a proven track record, why should someone take a risk to work for you? Having a business plan can help solve that problem. Your plan can help a prospective employee understand your business strategy and plans for growth so that they can feel confident joining your team. It’s also incredibly useful in determining when and if it’s feasible for you to bring on more employees . 

10. Get your team all on the same page

A great strategy for your business can only be successful if your team understands it. By documenting your strategy with a business plan, you can easily get everyone on the same page, working towards the same goals. It’s even better if you regularly review your plan with members of your team. This ensures that everyone is consistently going back to the core strategy documentation, analyzing it, and exploring how it impacts individual and team goals .

11. Manage your business better 

A business plan is all about setting goals for your company — both financial goals and milestones you hope to accomplish. When you use your plan to regularly check in on your business to see how you’re doing and what your progress is, you’re managing your business. Regular review , ideally monthly, will help you build a strong, resilient business.

12. Understand your market and build a marketing plan

No matter how good your idea is, you have to figure out who your ideal customers are and how you’re going to get the word out to them. That’s where a marketing plan comes in. It can be an indispensable tool for figuring out how you get your first customers as well as your thousandth customer. 

13. It’s easier than you think

You may be procrastinating in writing a business plan because it sounds like a lot of work. The truth is that planning is much less complicated than you think. Start small with a one-page business plan that you complete in half an hour . From there, refine your plan until your idea is solid. At that point, you can invest a little more time in a more detailed business plan. Just start with the basics and expand from there.

14. You’ll sleep better at night

When you have a plan for your business, you have peace of mind. You know that you’ve invested the time to figure out a business model that actually works and you’ve considered different financial scenarios so you can handle the unexpected. And, you’ve got a management tool to run your business better than your competitors. 

15. Effectively navigate a crisis

Having a business plan not only helps you create a roadmap for your business but also helps you navigate unforeseen events. Large-scale economic downturns, supply shortages, payment delays, cash flow problems, and any number of other issues are bound to pop up. But, you can be prepared to face each crisis head-on by leveraging your business plan.

A plan helps you assess your current situation, determine how the crisis will alter your plan, and begin to explore what it will take to recover. With a little planning, you can even prepare your business for future downturns with this same process. It’ll make crisis planning easier and ideally recession-proof your business by having the right plan and processes in place.

Don’t wait, start writing your business plan today

There are plenty of reasons to write a business plan, but the real reason is about finding success for you and your business. Taking the time to plan is an investment in yourself and your business that will pay dividends, whether you’re starting a new business or taking your existing business to the next level. 

You can jump-start your business plan writing process with our article covering how to write a business plan in as little as 30-minutes .

If you’re looking for a tool to help you get more from your business plan, we recommend trying out LivePlan . Our business planning and management tool will guide you through the entire process, including all of your financial forecasts, without ever requiring that you open a spreadsheet.

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Noah Parsons

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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

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.

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.

Why Is a Business Plan Important? (+ How to Create One)

June 21st, 2022 |  Small Business Resources

A business plan is not something you create just for the sake of creating it—it’s a key factor in your company’s success. According to a SCORE survey , the next biggest source of support for small business owners just starting out—behind their friends and family—is having a solid business plan in place.

Aside box: What is a business plan?

A business plan is a written document that outlines what your business objectives are and how you will go about achieving them. Refresh your business plan regularly to reflect with your evolving business objectives.

Business plans can be both internal and external documents. If you’re looking to secure funding from an investor or get a loan from a bank, they will certainly want to evaluate your business plan first.

Why is this plan so important? Because entrepreneurship without a business plan is like traveling without a roadmap. You might reach your destination eventually without it, but the journey will be tough, if not impossible.

Know the location of your destination and what roads you’ll need to travel, and you’ll significantly increase your chances of success.

12 reasons why having a business plan is important

The process of creating your business plan encourages you to take a deep dive into every aspect of your company—helping you spot flaws and take steps to improve.

Beyond highlighting weaknesses, a strong business plan positively shapes a company’s reputation. It shows investors, partners, and even potential hires that your business is working toward clear objectives and is on a reliable growth path.

1. It helps confirm the viability of your business idea

The research that goes into creating your business plan will help you gauge whether your idea is a viable one. You’ll learn the size of your potential market, who your competitors are, who your target customers are, and what problem you’re solving for them.

With this information, you can evaluate your chances of creating a profitable and sustainable business.

2. It helps you make financial projections

According to CB Insights , almost 40% of startups ran out of cash or failed to raise new capital. Business plans require you to evaluate your current financials and projects in detail, so you can steer clear of draining your bank account.

3. It helps you protect your business from common risks

Very few companies and individuals are willing to work in any capacity with businesses that don’t protect their partners with professional liability policies. To form your business plan, you’ll need to learn about the business risks your company faces and put together an insurance plan that helps mitigate them.

4. It helps you form partnerships

Regardless of the type of partners you have—contractors, freelancers, vendors, manufacturers—you need to establish trust. Partners want to know the specifics of your proposed cooperation before they commit.

Successful partnerships depend on well-defined roles and responsibilities and clearly specified incentives and key performance indicators (KPIs).

Business plans clearly define what cooperation and success look like for partnerships, so external parties feel comfortable working with your company.

5. It helps you hire and retain top talent

You can’t hire good people if they don’t believe your business is viable. A business plan shows top talent that your company has potential and is a good place to work.

A clear business plan is also helpful when you’re seeking hiring advice from more experienced peers. Approaching them with a business plan in hand makes that process easier as well.

“Merely telling a friend or potential business mentor you’re aiming to start with ten employees, for example, is not an exceptionally detailed statement,” said Admir Salcinovic, co-founder and marketing manager of PriceListo . “Showing a business plan that outlines the exact duties, salaries, and expectations you have for employees gives far more information for people to provide advice about.”

6. It provides you with competitor analysis

Market analysis is one of the cornerstones of a business plan. This process involves identifying and researching your main competitors and their business models. This data can provide insights into how you should position your business on the market in order to be competitive and carve out a market share for yourself.

7. It helps you understand customer pain points

Along with highlighting competitors, your market research helps you pin down the problem you’re solving for customers and how you plan on helping them. This research often involves surveying customers to understand their pain points.

8. It helps you assemble the right executive team

According to CB Insights , 15% of new businesses failed because the team they had in place wasn’t right. A strong and experienced leadership team can help navigate the many bumps in the road that new business experience, like structural and personal problem solving, risk assessment, and dips in team morale.

Business plans must include a detailed analysis of your management—who they are, and what they bring to the table to evaluate your leadership internally and externally. Startups also commonly dedicate a section of their business plans to the type of culture they are looking to build.

9. It makes you more attractive to lenders/investors

Real talk—most investors and banks won’t even talk to you if you don’t have a business plan. Harvard Business Review research from 2017 showed that writing a business plan increases the chances of your team receiving funding, noting that having a business plan “builds legitimacy and confidence among investors that the entrepreneur is serious.” “When I went to banks to ask for loans, every one of them asked for my business plan,” said Marina Vaamonde, owner and founder of off-market house marketplace HouseCashin . “If I didn’t have mine ready at the time, I would have wasted time during a crucial growth phase of my business when I needed employees.”

Investors and banks will use your business plan to understand your revenue model, cash flow, and, most importantly, how you plan on using funding.

“No matter how great your idea, angel investors won’t invest without a formal business plan,” said Calloway Cook, president of Illuminate Labs . “It doesn’t need to be 50-pages long, but they want to see that you’ve done the work to validate your concept, both informally with customer interviews and formally with market research.”

Cook, whose team was able to raise a pre-seed round of slightly over $100,000, also recommends including directly sourced customer data in your business plan to attract investors.

“Get feedback from real users. This is what sways the minds of investors,” said Cook. “Anyone can create a hypothetical profitable scenario using market size and demographic information, but if investors can see real people interested in your product or service, they’ll be more likely to invest.”

10. It helps you create a marketing strategy

To form a business plan, you’ll need to research on customer demographics and preferences. This data can inform and strengthen your marketing and branding strategies—helping you target your ideal customer.

New companies often have a limited budget to work with and need to adopt strategies that can spark greater growth and cost less than traditional marketing channels. The market research you’re doing for your business plan makes it a perfect starting point for developing these strategies.

11. It helps you set your pricing

The market analysis you perform while writing your business plan will inform how you set your pricing. Your competitor pricing models, your cost of goods sold , and your break-even point are some of the valuable data points you’ll need to acquire to start shaping your pricing model and your sales strategy.

12. It helps you establish the right KPIs

You can’t report on the progress of your business without first establishing what metrics are important to track.

Business plans show what metrics are important to track, given your financial projections, sales goals, marketing plans, and budgets. When you know which metrics to track, everyone in your organization can report on the progress of your business.

KPIs are not just financial goals. They can include trackable data like customer count, the quality of customer service (first response time, customer service satisfaction), and staff-related data like attendance, quality of work, retention, and satisfaction levels.

How to write a business plan: What are the core components?

To provide a big-picture view of vital company insights that gives both your team and third parties an easy way to gauge your financial health and projected growth, a good business plan must include the following components:

Executive summary

The executive summary serves as a high-level synopsis of your business plan—like the Cliff Notes for a book. It gives a general overview of the topics that your business plan will cover.

An executive summary should always be fairly brief. But when presenting your plan to third parties, it’s also important to write a summary that’s compelling enough to intrigue them and make them want to read on.

Even though this summary appears first in a business plan, we recommend writing this section last. That way, you’ll be familiar enough with all of the business plan’s main sections to be able to write a concise and accurate summary to kick it off.

Business summary

The business summary covers how the products and services your company offers serve the market. This section of your business plan should focus on your value proposition—defining what pain points you solve for your customers and how.

Explain what differentiates your brand from competitors by showing customer reviews and listing success stories and accomplishments. Readers of the business summary should come away from it convinced that your business is a viable one.

It’s also a good idea to wait until you’ve written the market analysis section before writing this section. Your business summary should consist of condensed takeaways sourced from market research.

Market analysis

This component of your business plan answers questions about the market in which your company is competing, such as:

• How big are your target market segments?
• Where does your business fit within these segments?
• Who are the main competitors?
• Who are your customers?

Performing market research is difficult work, especially for less experienced business owners. If you have the funds to do so, hiring a market research/competitive analysis agency to perform the analysis for you is definitely worth it.

The good news is that there are plenty of available resources for those who want to perform their own research, especially online, such as:

• U.S. census data tools : These tools and free industry research reports can help you determine your market size and gain insight into potential customer demographics data.
• Statista : One of the best research data websites, Statista covers hundreds of industries, constantly performing market research and providing hard business data. The website also uses graphs and charts to make their data more understandable for those who might be new to market research.
• Google Trends : Google Trends can help you understand what potential customers are most interested in, allowing you to see into the minds of consumers and audiences. The tool offers robust filter options to create detailed reports about what the trending stories and most searched terms are in a particular demographic.

If you’d rather find mentors and learn about your market through personal interactions, you can look to join local business organizations such as your local chamber of commerce , the National Federation of Independent Business (NFIB) , or Business Network International (BNI) .

Your market research helps you nail down your ideal customer segments. Uncover key customer demographics: where they live, how much money they make, how old they are, what their level of education is, what their buying habits look like, and more.

Market analysis will help you uncover who your direct competitors are, what their strengths and weakness are, and how your offer differs from theirs.

“Going in blind, without understanding who my competitors were, as well as their core strengths and weaknesses, would have decimated any chances of me establishing a worthwhile competitive strategy,” said Lisa Richards, CEO of the health website the Candida Diet . “Knowing who my competition was made it possible for me to develop a differentiation strategy that set me apart from them in terms of brand perception, allowing me to capture a large share of the market from the very beginning,” she added.

Marketing and sales plan

Along with identifying your target market, a business plan should outline how you plan on reaching this audience and selling your product or service to them.

This section of your business plan should detail your branding and marketing strategy. You should also cover any promotional strategies you plan to implement and a description of the current and future strategic partnerships you plan on installing. For example, if your business sells homemade soap, you could list the brick-and-mortar and online shops you plan on partnering with to increase the reach of your sales.

It should also include pricing strategy—the methodology and process behind how you plan on setting prices for your product or services. Set your prices too low, and you could struggle to turn a profit. Set the price too high, and customers could turn to your more affordable competition.

“After creating our initial business plan, we immediately saw how our business is not profitable enough given the current pricing ranges we have and the target market,” said Sherry Morgan, founder of animal content hub Petsolino . “After further investigation, we found out the holes in our initial plan. From there, we adjusted our pricing and selling strategies.”

The management-related part of your business plan should explain your company hierarchy and introduce your business’s leaders by providing information about their professional backgrounds, education, and achievements.

If you’ve received funding, be sure to highlight your investors, shareholders, and any professional advisors. If you have imminent hiring needs within management, detail them in this section.

Financial plan

The three statements that are integral to your financial plan section are your cash flow statement, income statement, and balance sheet. You should include a short explanation or analysis of all three in your business plan. Don’t hesitate to ask for expert help here, especially if you don’t currently have an in-house accountant.

This section of your business plan is particularly important if you’re looking to attract potential investors or you want to take out a business loan. If that’s the case, in addition to the three mandatory financial statements, you must also provide a detailed list of what you need the money for (marketing, equipment, labor expenses, insurance costs, rent, etc.).

As you grow, your financial plan will help you develop a model for tracking your income and expenses that will enable you to allocate your resources more effectively.

Revisit and revise your business plan regularly

Business plans are never set in stone. They must evolve and change as your business grows and reaches new milestones. Set a regular review schedule to revisit your business plan and tweak it when necessary.

“Creating and evaluating your business plan on a regular basis is a wonderful approach to identify weaknesses, gaps, and assumptions you’ve made to establish contingency plans,” said Matthew Paxton, founder and owner of gaming website Hypernia .

As you make adjustments, don’t hesitate to pick the brains of more experienced business people and mentors to gain different perspectives on areas of improvement for your business plan.

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• Building Your Business
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Why You Should Write a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

To Test the Feasibility of Your Business Idea

To give your new business the best chance of success, to secure funding, to make business planning manageable and effective, to attract investors, frequently asked questions (faqs).

The Balance / Getty Images

A business plan  is the blueprint for your business. Starting a business without a business plan is like building a house without a blueprint. Yet, unlike a house, a business isn't static. We often make the mistake of thinking of a business plan as a single document that you put together once when you're starting out and never touch again. But as the business develops, so should its business plan. In fact, any particular business may have multiple business plans as its objectives change.

Writing a business plan is time-consuming, but it's essential if you want to have a successful business that's going to survive the startup phase.

Key Takeaways

• Writing a business plan reveals how tenable your idea is.
• Updating and amending a business plan as the business develops and its goals change is vital to your success.
• A good business plan helps you define your target market, competitive advantage, optimum pricing strategies, and better prepares the business for upcoming challenges.
• A business plan helps you secure funding and attract new investors.

Writing a business plan is the best way—other than going out and doing it—to test whether an idea for starting a business is feasible. In this sense, the business plan is your safety net. If working through a business plan reveals that your business idea is untenable, it will save you a great deal of time and money.

Often, an idea for starting a business is discarded at the marketing analysis or competitive analysis stage , freeing you to move on to a new (and better) idea.

Unfortunately, many prospective business owners are so convinced that their idea for a product or service is a can't-miss proposition, that they don't take the time to do the necessary research and work through a proper business plan. The more you know about your industry, your prospective customers, and the competition, the greater the likelihood that your business will succeed.

Writing a business plan will ensure that you pay attention to the broad operational and financial objectives of your new business and the small details, such as budgeting and market planning. The process will ultimately make for a smoother startup period and fewer unforeseen problems as your business gets up and running.

The exercise of budgeting and market planning will help you define your  target market , your unique selling proposition, optimum pricing strategies, and outline how you intend to sell and deliver your products to customers. In addition, developing a budget for implementation will assist with determining your startup and operating capital requirements.

According to the Small Business Administration, one of the most-cited reasons why businesses fail is inadequate planning. By starting too soon and without a sufficient plan, your business is setting itself up for failure.

Most new businesses need startup and operating capital to get off the ground. Without a well-developed business plan, there is no chance of getting  debt financing from established financial institutions such as banks or  equity financing  from angel investors.

Established businesses often need money, too, to buy new equipment or property, or because of market downturns. Having an up-to-date business plan gives you a much better chance of getting the money you need to keep operating or expand.

Even an angel investor will want to ensure their money is going to a business that knows what it's doing. The easiest way to prove this is via a well-developed business plan.

Investors and financiers are always looking at the risk of default, and word of mouth is no substitute for written facts and figures in a properly prepared business plan.

A business plan is essential if you're thinking of starting a business, but it's also an important tool for established businesses. Viable businesses are dynamic; they change and grow. Your company's original business plan needs to be revised as you set new goals .

Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company's growth should take.

Whether you want to shop your business to venture capitalists or attract angel investors , you need to have a solid business plan. A presentation may pique their interest, but they'll need a well-written document they can study before they'll be prepared to make any investment commitment.​​​

Be prepared to have your business plan scrutinized. Both venture capitalists and angel investors will want to conduct extensive background checks and competitive analyses to be certain that what's written in your business plan is indeed the case.

What are the sections of a business plan?

A comprehensive business plan should include the following sections:

• Executive summary
• Company description
• Competitor analysis
• Industry analysis
• Product and services description
• Financial data

What is the purpose of a business plan?

A business plan has four main purposes:

• Tests the feasibility and model of your business idea
• Attracts investors
• Sets a plan for growth
• Identifies capital needs

Small Business Administration. " Selecting a Business That Fits ."

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What is a Business Plan and Why is it Important?

What is a business plan.

Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.

While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

In fact, businesses that plan grow 30% faster than those that don’t. 1

For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.

Studies show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans. 2

Your plan should include explicit objectives for hiring new employees , market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.

Building an asset management business plan

Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on additional office, retail or work space.

Creating a marketing strategy

Marketing and market potential are important aspects of a plan for aspiring small businesses.

Getting your business in front of customers on a consistent basis is one of the keys to ensuring your business not only stays afloat but also thrives.

Marketing strategies can be simple, but before you decide on how you will get the word out, getting clear on your target audience and why your business solves their problem can make sticking to your marketing plan easier.

Knowing your unique market positioning can help you determine your messaging. Your marketing strategy should include who your target audience is, the platforms or methods you will connect with them on, and a measurement framework to determine if your efforts are working.

Take entrepreneur Scott Sultzer, who opened Sandwich Joint restaurant in downtown Los Angeles in 2009. “I included the potential marketing demographic of all those who lived in a certain area of the city,” he said of his marketing strategy. “My goal was to capture a certain percentage of all those people who lived and worked nearby.” 4

Created primarily as a marketing tool, Sulzer’s 10-page plan included such topics as target market breakdown, marketing strategy and market penetration. “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?” 4

Depending on your business, it’s important to have both brick-and-mortar marketing strategies as well as a plan for marketing your business online .

Seeking investment for your business

In addition to providing a roadmap for progress and a marketing plan , your business plan could also be important in securing funding .

Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether someone decides to invest – or how much they might choose to invest.

In fact, a study showed that businesses with a plan were more likely to receive formal financial support, such as funding, than businesses without one. 3

Hiring the right talent

A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. Sulzer used his business plan to secure a lease.

“I had to have a viable document that they could trust,” said Sulzer, who leased from one of the largest landowners in downtown Los Angeles. 4

“With a corporate landlord, they wouldn’t deal with me unless I had a business plan. I had to submit all my information and a plan that presented what I wanted to do, with financial breakdowns and percentages, demographics, and how I was going to get customers.” 4

For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan for hiring employees is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.

Setting business plan objectives for management

Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.

Ready to take the next step? Learn how to write a business plan .

Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going.

Find out how small business insurance from Nationwide can help you build and protect your business whether you are just starting up or already established.

1 https://www.effectuation.org/wp-content/uploads/2017/06/The-Multiple-Effects-of-Business-Planning-onNew-Venture-Performance-1.pdf , Accessed October 2021. 2 https://onlinelibrary.wiley.com/doi/abs/10.1111/0447-2778.00006 , Accessed October 2021. 3 https://www.tandfonline.com/doi/abs/10.1080/13504851.2014.967377 , Accessed October 2021. 4 Nationwide Interview with Scott Sultzer, 2016.

Disclaimer: The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide, Nationwide is on your side, and the Nationwide N and Eagle are services marks of Nationwide Mutual Insurance Company. © 2021 Nationwide.

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Why is Writing a Business Plan So Important?

Most people know that writing a professional business plan is important, but they may not understand why. In short, a business plan is an essential tool for any business because it helps to organize your thoughts and ideas and provides a roadmap for your business. It can also be used to secure financing, track progress, and assess performance.

New and existing businesses of all sizes can benefit from creating a business plan. If you’re thinking of starting a business, a business plan can help you determine whether your business idea is viable and provide direction for your business. If you already have a business, a business plan can help you improve your operations, assess your performance, and set goals for the future.

3 Main Purposes of a Business Plan

So, why is writing a professional business plan so important? There are many reasons, but some of the most important are:

1. To help you organize your thoughts and ideas

Having a great business idea is one thing, but turning it into a reality is another. A business plan forces you to think through your business concept in a logical, step-by-step manner and provides a framework for taking your idea from concept to reality.

2. To attract investors and secure financing

If you’re looking to secure financing for your business, whether it be from a bank, potential investor, or other sources, you will likely be required to submit a professional business plan. Your business plan needs to convince investors that your business is worth investing in and that you have a solid plan for how you will use their money to grow your business.

3. To track progress and assess the performance

Once your business is up and running, a business plan can be used to track progress and assess performance. This can help you identify areas where your business could be performing better and make changes accordingly.

While a business plan is not necessary for every business, it is a very important tool for any business owner who wants to achieve success. By understanding the purpose of a business plan and what it can do for your business, you’re well on your way to creating one that will help you reach your goals.

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20 More Reasons You Need a Business Plan

If you’re not convinced that you need a professional business plan for your company, consider these 20 additional benefits:

1. Helps you communicate your vision and goals to others

When you have a well-written business plan, it becomes easier to communicate your vision and goals to others. Your plan will outline exactly what you hope to achieve and how you plan to do it, which can help others understand your vision and give them confidence in your ability to succeed.

A business plan can also help you get feedback from others, such as potential customers, partners, or investors. This feedback can be invaluable in helping you fine-tune your business concept and make sure it is viable.

2. Helps you identify your target market

During the business planning process, you will identify your target market, which is an essential step in any business. By understanding your target market, you can create a product or service that meets their needs and is more likely to succeed. Targeting the right market can help you save time and money when marketing your business.

So how do you identify your target market? There are several factors to consider, such as demographics, psychographics, and geographic location. Once you’ve identified your target market, you can create a marketing plan that is tailored to their needs.

3. Helps you assess the competition

To be successful, it is important to understand your competition. A good business plan can help you do just that. By researching your competitive landscape and understanding what they are doing well and where they are falling short, you can learn from their mistakes and weaknesses and improve your own business.

Additionally, knowing your competition can help you price your products or services more effectively. You can also find potential partners and suppliers by examining your competition’s supply chains.

4. Helps you develop your marketing strategy

In today’s business climate, developing the proper marketing strategies is essential for any business. Market research can be tedious and the go-to plan of action is often to position oneself in opposition to other competitors. It’s not enough anymore just to know your competition; you need an edge to stand out among them.

A well-crafted plan will help you develop a sound marketing plan. By understanding your target market and the competition, you can create a mix of marketing strategies that are tailored to your specific needs. A good marketing strategy will help you save time and money by focusing on the most effective marketing channels where your target market is most likely to be reached.

Your strategy should outline how you plan to reach your target market, what methods you will use, and how much money you plan to spend.

5. Helps you manage and grow your business

A business plan is not just a document to be created and then forgotten. It should be a living, breathing document that you refer back to regularly. As your business grows and changes, so should your plan.

Regular reviews of your plan will help ensure that you are still on track with your goals and that your strategies are still effective. It can also help you identify any areas where you may need to make changes, such as your marketing strategy or your target market.

6. Helps you make better decisions

By having a well-written business plan, you will have a guide to help you make the important decisions for your business. Your plan will outline your goals and strategies, which can help you make informed decisions about areas such as marketing, finance, and operations.

Making good decisions is essential for the success of any business. A business plan can help you make better decisions by providing a framework for your decision-making process. When you have all of the detailed information about your business in one place, it is easier to see where things are going right and where they are going wrong.

7. Prevents missed opportunities

A business plan can help you identify opportunities that you may otherwise miss. By understanding your target market and the competition, you can find potential niches that you can exploit. A good business plan will help you stay on top of changes in your industry so that you can take advantage of any new opportunities that may arise.

By taking the time to research and plan for your business, you will be better equipped to take advantage of opportunities as they arise.

8. Encourages innovation and creativity

By outlining your goals and strategies, you can create an environment that is conducive to generating new ideas and experimenting with new approaches. When you have a plan in place, it is easier to take risks and try new things without fear of veering off course.

A business plan can help you encourage innovation and creativity by providing a roadmap for your business. By having a clear destination, you can focus on the best way to get there. By understanding your competition and your target market, you can come up with new and innovative ways to reach them.

9. Helps you identify problems and solutions

A well-crafted business plan can help you identify problems early on and come up with solutions to them. By understanding your business inside and out, you will be able to catch any potential problems before they become too big. Additionally, by having a plan in place, you will be able to track your progress and see how well your solutions are working.

A solid business plan can help you identify and solve problems by providing a framework for your problem-solving process. With a clear understanding of your business and your goals, you will be able to find and implement the best solutions for your company.

10. Helps you plan for the future

Creating a business plan is not just about planning for the present. It is also about planning for the future. By outlining your long-term goals and strategies, you can create a roadmap for your business that will help you achieve success in the future.

A well-written plan can help you achieve success in the future by providing a framework for your business. By understanding your goals and the steps you need to take to reach them, you can create a plan that will help you stay on track and reach your destination.

11. Helps you avoid costly mistakes

Making mistakes is a part of any business. However, by taking the time to plan for your business, you can minimize the chances of making costly mistakes. By understanding your target market and the competition, you can avoid making decisions that could potentially bankrupt your company.

Creating a plan can help you avoid costly mistakes by providing a framework for your decision-making process. By understanding your business inside and out, you will be less likely to make decisions that could hurt your company. By tracking your progress, you can see how well your decisions are working and make adjustments as needed.

12. Shows your dedication to your business

When you take the time to write a business plan or you hire a professional business plan writer , it shows that you are serious about your business and that you are willing to put in the work required to make it succeed. A well-written business plan is a sign of a healthy and thriving business.

Creating a plan demonstrates your dedication to your business and your willingness to put in the hard work necessary to make it succeed. By taking the time to research and plan for your business, you are indicating that you are serious about making your business a success.

13. Helps you stay organized

Running a business can be chaotic and disorganized. However, by taking the time to create a business plan, you can structure your business in a way that makes sense. A well-organized business is less likely to run into problems and is more likely to be successful.

A business plan can help you stay organized by providing a blueprint for your business. By understanding your goals and the steps you need to take to reach them, you can create a plan that will help you stay on track. By tracking your progress, you can see how well your organization is working and make adjustments as needed.

14. Keeps you motivated

It is easy to get discouraged when starting a business, but by having a plan in place, you can stay motivated and focused on your goals. Having a clear destination will help you stay on course, and understanding your competition and target market will give you the motivation you need to keep going.

A business plan can help you stay motivated by providing a framework for your business. By understanding your goals and the steps you need to take to reach them, you can create a plan that will help you stay on track. By tracking your progress, you can see how well your efforts are paying off and continue to push forward.

15. Helps you understand your business

To write a successful business plan, you need to have a clear understanding of your business. By conducting a market analysis and research, you can gain insights into your industry, competition, and your target audience. This will help you determine your business goals and objectives.

16. Helps you manage your time

Time is a precious commodity for any business owner. By taking the time to create a business plan, you can learn how to best use your time and resources. A well-organized plan will help you make the most of your time by providing a blueprint for your business.

Set business milestones and deadlines for yourself and your management team and track your progress. A business plan can help you manage your time by providing a framework for your problem-solving process. With a clear understanding of your business and your goals, you will be able to find and implement the best solutions for your company.

17. Helps you allocate resources efficiently

Running a business can be expensive, and it is important to allocate your resources efficiently. By taking the time to create a business plan, you can understand your target market and how to reach them. This will help you make wise decisions about where to allocate your resources.

Finding opportunities to save time and money is essential for any business owner. A business plan can help you find ways to be more efficient in your operations. By understanding your goals and the steps you need to take to reach them, you can create a plan that will help you stay on track and achieve your desired results.

18. Helps you understand your financial situation

To make sound business decisions, it is important to have a good understanding of your company’s financial situation. A business plan can help you do just that by providing an overview of your current business finances and creating financial projections.

You can use your plan to track your progress and make sure you are on track to reach your goals. Additionally, by understanding your financial situation, you can make informed decisions about how to best use your resources.

19. Gives you a sense of control

When you have a business plan, you have a sense of control over your business. By understanding your goals and strategies, you can make decisions that are in line with your overall vision. Additionally, by having a clear plan in place, you will be less likely to get sidetracked or make impulsive decisions.

While you can’t control everything in business, having a plan gives you a sense of control over your company. By understanding your goals and the steps you need to take to reach them, you can make decisions that are in line with your overall vision.

20. Helps you become a better business owner

As your business grows and changes, you will need to adapt your business plan to reflect these changes. A well-written business plan can help you become a better business owner by teaching you how to think strategically about your business.

The ability to think strategically is essential for any business owner. By taking the time to create a business plan, you can develop the skills you need to make smart decisions for your company. A well-organized business plan will help you understand your business inside and out, making you better equipped to manage it successfully.

As you can see, there are many reasons why writing a formal business plan is so important. By taking the time to create a plan, you can ensure that your business is organized and efficient, and you can stay motivated and focused on your goals. Additionally, a well-written, professional business plan will help you make the most of your time and resources, helping you to achieve success. So, what are you waiting for? Get started today!

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20 Reasons Why You Need a Business Plan in 2024

Written by Dave Lavinsky

What is the Purpose of a Business Plan?

The purpose of a business plan is to provide a clear roadmap for the company’s future. It outlines the vision, goals, and strategies of the business, guiding entrepreneurs and stakeholders in understanding its operations and objectives. A business plan template helps attract investors and funding by showcasing the potential for profitability and growth.

Top 20 Reasons Why you Need a Business Plan

1. to prove that you’re serious about your business.

A formal business plan is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business. Creating your plan forces you to think through and select the strategies that will propel your growth.

2. To Establish Business Milestones

The business plan should clearly lay out the long-term milestones that are most important to the success of your business. To paraphrase Guy Kawasaki, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death). Would you tell your spouse that you tweaked the company brochure? Probably not. But you’d certainly share the news that you launched your new website or reached $1M in annual revenues.

3. To Better Understand Your Competition

Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages. And if you don’t currently have competitive advantages, to figure out what you must do to gain them.

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4. To Better Understand Your Customer

Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to an effective business plan and to a successful business. Understanding your customers will not only allow you to create better products and services for them, but will allow you to more cost-effectively reach them via advertising and promotions.

5. To Enunciate Previously Unstated Assumptions

The process of actually writing the business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity. For example, you might have assumed that local retailers would carry your product; in your business plan, you could assess the results of the scenario in which this didn’t occur.

6. To Assess the Feasibility of Your Venture

How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. In some cases, the result of your planning will be to table the venture. And it might be to go forward with a different venture that may have a better chance of success.

7. To Document Your Revenue Model

How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model. And upon reading your plan, others may suggest additional revenue streams to consider.

8. To Determine Your Financial Needs

Does your business need to raise capital? How much? One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital. It will also enable you to plan ahead, particularly if you need to raise additional funding in the future.

9. To Attract Investors

A formal business plan is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service? What are the financial projections? What is the company’s exit strategy? While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your business plan.

10. To Reduce the Risk of Pursuing the Wrong Opportunity

The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.

11. To Force You to Research and Really Know Your Market

What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. And it will allow you to use this knowledge to make decisions to improve your company’s success.

12. To Attract Employees and a Management Team

To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its strategic goals. Importantly, as you grow your company, your employees and not you will do most of the work. So getting them aligned and motivated will be key to your success.

13. To Plot Your Course and Focus Your Efforts

The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones. You wouldn’t go on a long driving trip without a map; think of your business plan as your map.

14. To attract partners

Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed explanation of your company.

15. To Position Your Brand

Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.

16. To Judge the Success of Your Business

A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not).

17. To Reposition Your Business to Deal with Changing Conditions

For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new ideas and strategies.

18. To Document Your Marketing Plan

How are you going to reach your customers? How will you retain them? What is your advertising budget? What price will you charge? A well-documented marketing plan is essential to the growth of a business. And the marketing strategies and tactics you use will evolve each year, so revisiting your marketing plan at least annually is critical.

19. To Understand and Forecast Your Company’s Staffing Needs

After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a roadmap for your staffing needs, and thus helps to ensure smoother expansion. Importantly your plan can not only help you understand your staffing needs, but ensure your timing is right as it takes time to recruit and train great employees.

20. To Uncover New Opportunities

Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.

Business Plan FAQs

What is a business plan.

A business plan is a document that details your business concept and strategy for growth.

A business plan helps guide your company's efforts and, if applicable, gives investors and lenders the information they need to decide whether or not to fund your company. A business plan template helps you to most easily complete your plan.

Why Do You Need a Business Plan?

A business plan provides details about your company, competition, customers and industry so that you make the best possible decisions to grow your company.

What is the Importance of a Business Plan?

The 3 most important purposes of a business plan are 1) to create an effective strategy for growth, 2) to determine your future financial needs, and 3) to attract investors (including angel investors and VC funding ) and lenders.

Why is a Business Plan Important to an Entrepreneur?

Business plans help entrepreneurs take their visions and turn them into tangible action plans for success.

Need help with your business plan? 

• Speak with a professional business plan consultant from our team.
• Use our simple business plan template .
• Check out our business plan examples .
• Or, if you’re creating your own PPM, you can save time and money with Growthink’s private placement memorandum template .
• Learn more about us via our Growthink Business Plan Review page

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17 Reasons Why do you Need a Business Plan?

Free Business Planning E-Book

• Vinay Kevadia
• December 18, 2023

11 Min Read

When Meta was initially planning to go mass scale, founder Zuckerberg had a plan for the next three, five, and ten years.

As reported by Business Insider , they knew their expenses would increase by a whopping 70%, but they were confident because they had a foolproof business plan at their disposal.

Fast forward to today—we know where they stand—neither Facebook nor Mark need an introduction.

That’s enough evidence, I guess to prove why you need a business plan .

Any organization, regardless of size or age, needs a business plan as a fundamental document.

It helps you reach significant milestones and lead your company in the right direction, from luring potential investors to keeping it on course.

Convinced? No? Here are 17 reasons you need a well-prepared business plan as a business owner.

What is a Business Plan?

A business plan is a thorough document, detailing how to achieve the business goals, what products & services your business will provide, how will you work daily, how much finance will be needed, and all other information about your business.

It is a necessary document for every business especially if you need funding. Also, it is a living document, so you can alter it whenever you want according to the market situation.

In short, a business plan provides a comprehensive view, encourages visionary planning, helps in decision-making, and enhances the chances of overall success.

Benefits of having a business plan

A meticulously crafted business plan holds significant value, providing entrepreneurs, existing businesses, and their teams with a means to communicate goals and monitor progress as their business expands. Some other benefits are:

• Guides your business with a clear path to achieve goals
• Evaluate the feasibility of your business idea
• Identifies potential challenges and risks
• Outlines plans to reach and retain customers
• Essential for attracting potential investors and securing funding
• Defines business structure and operational processes
• A living document that adapts to changes in the business environment

17 Reasons why you need a business plan

1. to test the viability of your business idea.

Think about this—you have many business ideas, but how do you know which is better to start with and which one to shut permanently? Well, with a plan, it is easier to understand each aspect of the business.

A business plan forces you to think of everything about your business as:

• What is the market demand?
• Which market segment will you cater to?
• What is the profitability status of the particular business idea in the local market?
• Who are the competitors?
• What entry barriers do you have to go through?
• How much capital will you require to start a particular business?
• What is the financial forecasting of the business?

This way you will get a chance to question everything that takes to start a successful business, which will ultimately help you decide the viability of your business idea.

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2. To Reduce Potential Risks

Every business contains risks, and a solid plan is like taking some of that risk out of the business.

It not only helps you to know the viability of your business but also other aspects like:

• Are your operational costs manageable?
• Will your proposed model generate sales, or do you need to switch to another?
• What will be the break-even point , and when will your business achieve it according to the financial projections?
• What if the demand for the product or service you provide decreases?
• What will be your exit strategy?

These are all risk-related questions you will get answers to while creating a business plan.

For those who already have a business and are working on expanding it, a business plan will help you understand the ongoing risks & costs and how to manage them.

Hence, knowing potential risks beforehand will help you solve them smoothly without a big fuss.

3. To Determine Your Financing Needs

Can you go to investors, banks, or anyone else for funding without knowing your financing needs, Of course not!

A business plan will help you know the financing needs of your business. It will help you think about the financial projections practically by comparing the market situation with the competitor’s revenue.

Also, when you go for funding, there should be evidence of how much you need, your budget for each aspect of business, and where you will spend all the funding money.

Investors also need to see the break-even point and when the company will start turning profitable. This all is possible with a sound business plan.

4. To Outline a Perfect Marketing Strategy

A marketing plan is about how to reach new customers and retain them. With the help of a business plan, you can make a chart of SWOT analysis & competitor analysis to understand the USPs of your business.

All this will make your brand positioning clear for investors & readers to make their decisions. A business plan will help to define the target audience of your business.

You can also get an idea of the marketing budget and on which marketing strategies you should spend.

5. To Better Understand Your Competition

You have to first understand and describe who are your competitors, what is their price point, what is their USP, what is their market positioning, and what products or services they provide.

This stage helps you know the competitors, their working styles, target customers, and everything about them. It forces you to do 360° research about your competitors to know the exact brand positioning of your business.

6. It Helps You Grow 30% Faster

Creating a plan goes beyond trying to foresee the future of your company. The significance lies in the process itself. The business plan is a living document; you can revisit your plan and alter it according to the market situation to reach your goals and ensure success.

Studies confirm that companies engaging in regular planning experience a 30% faster growth rate.

Moreover, research indicates that planning contributes to overall better performance. Businesses that plan are less prone to becoming unfortunate failure statistics or facing cash flow crises that could jeopardize their existence.

7. To Get Funding

Finally! Getting funding is a relief, right? But you can’t just go to them with an elevator pitch, you will need a solid business plan and everything else in one place to show them about your business.

All readers will want to know your business plan and review it for their benefit. Although investors will mainly focus on the financial aspects of the plan, they will also understand your industry and market before making any decision.

Without enough funding, your business will collapse. So, first, write a business plan, make necessary financial assumptions, and then go to investors for funding. In short, having a business plan will increase your chances of having funding.

8. To Attract Investors

A business plan is the basis for investors’ decisions. The business plan answers a lot of questions of investors like:

• Is there any market demand for your products and services?
• What are the financial forecasts?
• When will the company turn profitable?
• What is the company’s exit strategy?

They will review your plan thoroughly and make their investing decision accordingly. Thus, make sure you have the perfect length business plan and not just a long essay.

9. To set goals for everyone

Setting goals and deadlines for everyone from the management team to other employees will make everyone’s task clear. This way everyone can make their mini-plan and organize things according to the priority.

Business planning makes everything clear in your head before you communicate it with your team and makes sure that you all are on the same page.

10. To make sound decisions

After mentioning everything in detail about your business in the business plan, you will be confident enough to know the market scenarios and make decisions.

It serves as a roadmap for your business and a reference point for any kind of decision-making. Think of it as your business guide, which will eventually bring everything into place.

11. Catch Critical Cash-Flow Problems Early

Smooth cash flow is one of the main bricks of any business. It is one of the key financial statements your investors will review.

Reviewing your cash flow statement regularly will help you see potential cash flow disturbances and challenges at the earliest. It will also support you in avoiding any cash-related crisis where you can’t pay your bills timely.

12. To Position Your Brand In The Market

Luckily, there is one section of competitive analysis that will give you all the information about your competitors. According to that, you can place your brand in the market. It points out certain questions like:

• What are the strengths and weaknesses of your competitors?
• What are your USPs?
• How can you make your business stand out?
• What is your target market, and what are your competitors’ customers?

Answering these questions will help you to know your strengths and market position in the industry.

13. Future-Proof Your Business

Whether it is a new business or an existing one: everyone is interested in what will be there in the future. To understand the financial position of the future, you need to write a business plan thoroughly with practical assumptions.

This proves to be risk-saving and future-oriented for your business by saving time on predicted problems.

14. Tracks Your Progress

One of the main overlooked sides of a business plan is the success metric it provides. An integral part of creating a plan involves mentioning all your goals and predictions.

By regularly reviewing that, you will be able to know which business milestones you have reached and what is the next one. Furthermore, you can even know about the setbacks of your business and then re-edit your business plan according to the market analysis and situation.

15. Your Business Plan Is An Asset When Considering Selling Your Business

Out of the woods down the road if you ever decide to merge your business with someone else or want to sell it. A business plan will be an asset that will support you in selling your business.

It will help to showcase the brand position and finances of your business to any third party. Also, how many milestones have you achieved, and what is the experience of your business; one can get everything from your business plan.

16. To Allot Resources

As a business owner, you know there are many investments and expenses you need to make before & after starting a business. Thus, allocating those resources to different segments of the business is necessary.

Here there are different activities like purchasing raw materials, marketing costs, or some other production costs.

A business plan provides an exact idea of your investments and resources needed in each segment of the business.

17. To Make An Exit Plan

Beyond guiding day-to-day operations, your business plan is a valuable tool for planning your exit strategy. While many entrepreneurs focus extensively on launching their businesses, not as many plan for the eventual need to liquidate or transfer ownership.

Your chosen exit strategy could be driven by various factors, such as achieving your business goals and shifting focus or selling to an acquirer. Therefore, even for partnership or dissolvation, an exit strategy is necessary.

Worried about creating a Business Plan?

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Start Writing Your Business Plan With Upmetrics

Told you, there are various reasons why you should not skip writing a business plan. Though daunting, you can not skip this part. Now the question is, how to write a business plan? Well, a business plan software like Upmetrics can resolve your problem.

It has an amazing AI feature that can bring the essence of your idea into the document. Here you can even make financial calculations without complicated formulas. Apart from that, there are various tools and guides to make your business plan writing process smoother.

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Frequently Asked Questions

What is the purpose of a business plan.

There are three main purposes of a business plan:

• Secure funding
• Guiding operations
• Evaluating the progress of your business

How long should a business plan be?

Generally, the length of a business plan depends on the niche of the business and the purpose of the business plan. Ideally, a business plan should be 15-35 pages.

What resources are available to help write a business plan?

To secure funding and impress potential investors, an engaging business plan is necessary. Here are some resources from where you can find business plans:

• Library of 400+ sample business plans
• SBA’s business plans
• AI business plan generators
• Consultants and advisors
• Business plan writers

Should you write a business plan even if you don't need funding?

A business plan will help you detect the problems beforehand. It also helps you in creating marketing & operational strategy. A business plan also guides you as a roadmap. Thus, even if you don’t need funding for your small business, a business plan is necessary.

When should you write a business plan—before or after starting a business?

If you need funding, you have to write a business plan before you start any business. But if you are expanding an existing business or writing a business plan as a guide for your new business, then anytime is okay. Note: Sooner is always better in this case.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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Why is a business plan important? Five reasons why you need one

Table of Contents

1) Plan for viability and growth

2) setting milestones and objectives, 3) supporting critical decisions and avoiding mistakes, 4) securing investors and financing, 5) minimise risk, making informed business decisions.

Why is a business plan important? A business plan is like a roadmap: you can start driving without one, but you’ll be more likely to get lost on the way.

To save yourself driving in circles, prepare a business plan from day one. This will help you focus on the details of your venture and give you the chance to do important groundwork before you begin trading.  

Typically, a business plan will include detailed insights such as market analysis, competitor research, audience profiles, marketing goals, logistics and operations plans, cash flow information, and an overall strategy on how they will grow. 

This guide will demonstrate why a business plan is important, including:

• Planning for viability and growth
• Setting milestones and objectives
• Supporting decision making and avoiding mistakes
• Securing finance and investors
• Minimising risk

If you have a business idea brewing or want to turn your passion, hobby, or side project into a full-time job, first do your research to understand if your business will be viable. A business plan can help you confirm that your business idea is sustainable in the current market.

To do this, carry out market research. Considering answers to the following questions will start to give you a more detailed picture of where your business belongs in the sector:

• Who are your customers? 
• What do you offer them? 
• What problems are you solving for them?
• Why would they buy from you over your competitors?
• Who are your competitors? What are you doing differently? Are you cheaper?
• Who dominates the industry? How can you improve on what is already out there?

Answering these questions will highlight gaps in the market that your business can occupy and give your company a better chance at survival long-term.

You may have in mind some future milestones that you would like to hit. In your business plan, it’s important to plot some top-level goals, then plan what objectives will get you there.

As an example, for an artisan craft business, one goal might be to sell 1,000 handmade products in the first year. Setting an objective such as ‘ Use social media advertising to drive half of the sales ’ will help you focus on the activity you need to achieve the goal. 

Or if you offer professional services, like marketing support or a financial advisor, you might want to grow your client base by 50%. In order to grow this number consistently, you must also keep your existing clients on board. Therefore, an objective might be to improve customer relations to retain clients for longer. Then you can begin to research strategies to support your overall business goals.

By checking in regularly on your business plan, you will be able to track your progress toward important growth milestones and change tactics as you learn more about your customers. By having your plan in writing, you are setting yourself up to grow at a faster rate than businesses that don’t create a business plan .

Your aims and objectives will keep you accountable when making decisions for your business. As you grow, you will encounter chances to invest back into the business. Consulting the long-term vision you set for yourself will help you separate the ‘needs’ from the ‘wants’. 

Including financial information such as cash flow and forecast reports in your business plan will make it easier to make informed decisions when it comes to major spending, growth or expansion. You will be able to know with confidence whether an idea aligns with what you have set out to achieve.

Consulting a detailed plan will also help you avoid common pitfalls of start-ups. You will have already done your research and spotted any gaps in your knowledge or strategy before it becomes an issue. Some mistakes that unprepared businesses make include:

• Not enough demand for what you’re selling
• Cash flow issues due to poor forecasting .
• Too much competition in the marketplace, when you don’t have a marked difference to them.
• Setting your price mark too high or too low for the industry.

Business plans are typically a requirement if you are looking to secure finance. Whether it comes from a bank, an outside venture capital firm, or a friend who wants to go into business with you. They will want to see the forecasts that prove your business is viable in the long run. 

Also, if you ever consider selling your business in the future, a business plan will be needed to pitch for a higher valuation.

Another exercise to include in your business plan is a SWOT analysis. This is a process of identifying Strengths, Weaknesses, Opportunities and Threats that face your business. By doing this activity you are reducing risk by highlighting areas that may need contingency plans, and a thorough SWOT analysis will allow you to plan in advance for potential difficulties.

With all the data you’ve pulled together on your market, operational plans, finances and sales projections, you will have reduced any potential risks that arise from being uninformed. In doing your research, you can spot potential issues before they arise in real life, and create contingency plans as a safety net. 

As the saying goes “if you fail to prepare, you prepare to fail”. Revisiting your business plan regularly will help you avoid as much risk as possible when you start trading. It will also keep your mind focused on the bigger picture instead of the daily trials and tribulations of running a  business.

Now that you are equipped with answers to ‘why is a business plan important’, you can start preparing a business plan to set your new venture up for success. 

When you’re starting a business, it’s important to keep on top of your financial admin from day one. Countingup offers a business current account and an app with built-in accounting software, that will save you time and money when it comes to your bookkeeping. Find out more here .

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Business Plan: What It Is + How to Write One

Discover what a business plan includes and how writing one can foster your business’s development.

What is a business plan? 

Think of a business plan as a document that guides the journey to start-up and beyond. Business plans are written documents that define your business goals and the strategies you’ll use to achieve those goals. In addition to exploring the competitive environment in which the business will operate, a business plan also analyses a market and different customer segments, describes the products and services, lists business strategies for success, and outlines financial planning.  

How to write a business plan 

In the sections below, you’ll build the following components of your business plan:

Executive summary

Business description 

Products and services 

Competitor analysis 

Marketing plan and sales strategies 

Brand strategy

Financial planning

Explore each section to bring fresh inspiration and reveal new possibilities for developing your business. Depending on your format, you may adapt the sections, skip over some, or go deeper into others. Consider your first draft a foundation for your efforts and one you can revise, as needed, to account for changes in any area of your business.  

1. Executive summary 

This short section introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, development goals, and why it will succeed. If you are seeking funding, summarise the basics of the financial plan. 

2. Business description 

Use this section to provide detailed information about your company and how it will operate in the marketplace. 

Mission statement: What drives your desire to start a business? What purpose are you serving? What do you hope to achieve for your business, the team, and your customers? 

Revenue streams: From what sources will your business generate revenue? Examples include product sales, service fees, subscriptions, rental fees, licence fees, and more. 

Leadership: Describe the leaders in your business, their roles and responsibilities, and your vision for building teams to perform various functions, such as graphic design, product development, or sales.  

Legal structure: If you’ve incorporated your business, include the legal structure here and the rationale behind this choice. 

3. Competitor analysis 

This section will assess potential competitors, their offers, and marketing and sales efforts. For each competitor, explore the following: 

Value proposition: What outcome or experience does this brand promise?

Products and services: How does each solve customer pain points and fulfill desires? What are the price points? 

Marketing: Which channels do competitors use to promote? What kind of content does this brand publish on these channels? What messaging does this brand use to communicate value to customers?  

Sales: What sales process or buyer’s journey does this brand lead customers through?

4. Products and services

Use this section to describe everything your business offers to its target market. For every product and service, list the following: 

The value proposition or promise to customers, in terms of how they will experience it

How the product serves customers, addresses their pain points, satisfies their desires, and improves their lives

The features or outcomes that make the product better than those of competitors

Your price points and how these compare to competitors

5. Marketing plan and sales strategies 

In this section, you’ll draw from thorough market research to describe your target market and how you will reach it. 

Who are your ideal customers?   

How can you describe this segment according to their demographics (age, ethnicity, income, location, etc.) and psychographics (beliefs, values, aspirations, lifestyle, etc.)? 

What are their daily lives like? 

What problems and challenges do they experience? 

What words, phrases, ideas, and concepts do consumers in your target market use to describe these problems when posting on social media or engaging with your competitors?  

What messaging will present your products as the best on the market? How will you differentiate messaging from competitors? 

On what marketing channels will you position your products and services?

How will you design a customer journey that delivers a positive experience at every touchpoint and leads customers to a purchase decision?

6. Brand strategy 

In this section, you will describe your business’s design, personality, values, voice, and other details that go into delivering a consistent brand experience. 

What are the values that define your brand?

What visual elements give your brand a distinctive look and feel?

How will your marketing messaging reflect a distinctive brand voice, including tone, diction, and sentence-level stylistic choices? 

How will your brand look and sound throughout the customer journey? 

Define your brand positioning statement. What will inspire your audience to choose your brand over others? What experiences and outcomes will your audience associate with your brand? 

7. Financial planning  

In this section, you will explore your business’s financial future. Suppose you are writing a traditional business plan to seek funding. In that case, this section is critical for demonstrating to lenders or investors you have a strategy for turning your business ideas into profit. For a lean start-up business plan, this section can provide a useful exercise for planning how to invest resources and generate revenue [ 1 ].  

To begin your financial planning, use past financials and other sections of this business plan, such as your price points or sales strategies. 

How many individual products or service packages do you plan to sell over a specific period?

List your business expenses, such as subscribing to software or other services, hiring contractors or employees, purchasing physical supplies or equipment, etc.

What is your break-even point or the amount you must sell to cover all expenses?

Create a sales forecast for the next three to five years: (No. of units to sell X price for each unit) – (cost per unit X No. of units) = sales forecast

Quantify how much capital you have on hand.

When writing a traditional business plan to secure funding, you may append supporting documents, such as licences, permits, patents, letters of reference, resumes, product blueprints, brand guidelines, the industry awards you’ve received, and media mentions and appearances.

Business plan key takeaways and best practices

Remember: Creating a business plan is crucial when starting a business. You can use this document to guide your decisions and actions and even seek funding from lenders and investors. 

Keep these best practices in mind:

Your business plan should evolve as your business grows. Return to it periodically, such as quarterly or annually, to update individual sections or explore new directions your business can take.

Make sure everyone on your team has a copy of the business plan, and welcome their input as they perform their roles. 

Ask fellow entrepreneurs for feedback on your business plan and look for opportunities to strengthen it, from conducting more market and competitor research to implementing new strategies for success. 

Start your business with Coursera 

Ready to start your business? Watch this video on the Lean approach from the Entrepreneurship Specialisation on Coursera: 

Article sources

Inc. “ How to Write the Financial Section of a Business Plan ,   https://www.inc.com/guides/business-plan-financial-section.html.” Accessed April 15, 2024.

Keep reading

Coursera staff.

Editorial Team

Coursera’s editorial team is comprised of highly experienced professional editors, writers, and fact...

This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

Do You Really Need a Business Plan?

The art of storytelling, from net margin to sales.

Why is a business plan important?

• Who will the reader be?
• What do you want their response to be?

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

More by this contributor:

• Challenges Become Opportunities
• Discontinuing Healthy Workplace Consultancy
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How to Write a Business Plan for Your Small Business

Small Business Trends

How to create a farm business plan.

If you buy something through our links, we may earn money from our affiliate partners. Learn more .

Crafting a comprehensive farm business plan is a crucial step towards transforming your agricultural visions into tangible realities. This plan serves as a blueprint, enabling you to formally articulate your thoughts, ideas, and aspirations. Engaging in this process can lead to profound insights, illuminating the path to a thriving agricultural enterprise.

Even though the term ‘farm business plan’ might evoke a sense of formal rigidity, it’s important to remember that this document is, in fact, a living, evolving entity. Just like a seedling that sprouts, grows, and changes with the seasons, your business plan is not meant to be static.

It’s something you nurture, revise, and expand as circumstances dictate and as your farm business matures. Feeling pressure to perfect your business plan from the outset could be paralyzing. Instead, we suggest you view this document as a foundation that can be continuously built upon.

To get you started, we offer a detailed farm business plan template. This invaluable resource can be tailored and expanded to suit your unique agricultural venture, whether you’re cultivating a sprawling wheat field or nurturing a boutique organic herb garden.

The most effective business plans are those that exhibit flexibility and resilience, characteristics that are at the heart of any successful farm business. Agriculture, by its very nature, is a domain subject to the whims of Mother Nature. From unpredictable weather patterns to seasonal variations, farmers of all kinds grapple with an array of external factors.

Therefore, your farm business plan should not only anticipate these challenges but also prescribe adaptive measures to navigate through them. It’s this inherent adaptability that transforms a good farm business plan into a great one.

Writing a Farm Business Plan Template: 15+ Things Entrepreneurs Should Include

A farm business plan, like any strategic document, should be comprehensive, encompassing all aspects of your operation, be it agricultural (crops) or product-based. Utilize these 15 key sections to shape your farm business plan template.

Do bear in mind that while these sections are integral, they are by no means exhaustive. Your farm business plan may necessitate additional topics based on your specific farming operations.

Creating a robust business plan is of paramount importance, whether you’re kickstarting a farm venture or acquiring an existing one. Our farm business plan template starts off with an executive summary.

Executive Summary

The executive summary provides an essential overview of your farm business. It helps to streamline communication and understanding between various stakeholders, such as internal team members, potential lenders, business partners, and customers. When drafting your executive summary, consider the following key components:

• Business Profile : Provide a snapshot of your farm business, describing its nature and scope. Are you into crop cultivation, livestock rearing, or any specialized farming practices?
• Products : Clearly outline what product or products your farm will produce. These could range from dairy products to specific crops or even services like agrotourism.
• Production Methodology : Describe how you plan to achieve your production goals. This could involve discussing your farming techniques, usage of technology, or unique methodologies.
• Target Audience : Identify the individuals or groups who will be interested in your farm products or services. These might be local consumers, restaurants, farmers’ markets, or even online customers.
• Key Strategies : Highlight the strategies you plan to implement to run and grow your business. This could cover marketing techniques, sustainability practices, or partnerships.
• Mission and Vision : Briefly outline the mission and vision of your farm business. This helps to convey your long-term objectives and core values.

Remember, your executive summary is essentially the first impression of your business plan. Making it comprehensive, clear, and compelling will help attract interest and support from stakeholders.

Goals and Objectives

A well-crafted business plan should encapsulate both personal and economic goals and objectives. Many successful farm business plans also address environmental stewardship and community outreach. You may want to include goals around preserving farm resources for future generations, ensuring that both the operational and stewardship aspects remain within the family.

Introduction

Your introduction should provide information about the business owners, including their backgrounds and levels of industry experience.

Mission Statement and Values of Your Farming Business Plan

This section enables you to express the core values that led you to the farming business, whether it’s an urban farming venture or a homemade product-based farm. Your mission statement should reflect these values. Sustainable practices and conservation are often key motivations that draw people to farming, so don’t be shy to share your commitment to such principles.

Industry History

Understanding your place within the wider agricultural landscape is key. Be sure to research farms that have historically dominated your region, whether they specialize in vineyards, urban farming, or livestock rearing. Use this research to make educated projections about the future.

Company Background and History

Share the history of your farm if it has been a long-standing family venture or the journey leading up to your purchase if it wasn’t. If your farm business is a startup, focus on the business experience and backgrounds of the involved parties.

Competitor Analysis

Understanding your competition is crucial. In the agricultural sector, farmers often share resources, such as a high-tech corn planter , or cooperate in marketing endeavors. Factor in such synergies when analyzing competitors.

Target Market

Clearly define your target market. This can include area groceries, farmers’ markets, or online customers. If you’ll be relying on online sales, ensure your website is professionally designed, keyword optimized, and easily discoverable.

Products and Services

Describe each product or service offered by your farm, highlighting those features most appealing to your target market.

Organization, Human Resources, and Management Plans

These interconnected elements cover your farm’s day-to-day operations, employee roles and responsibilities (including their job descriptions ), and overarching management plans.

SWOT Analysis

Conduct a SWOT analysis to identify your farm’s strengths, weaknesses, opportunities, and threats. This will help you strategize on how to leverage your strengths, mitigate your weaknesses, exploit opportunities, and neutralize threats.

Your vision is the roadmap for your farm’s future. It should express not just your financial aspirations but also your plans for the farm operation in the long run.

Growth Strategy

A comprehensive growth strategy should outline your plans for debt reduction, savings, and business expansion. Keeping detailed farm production records is key to evaluating the effectiveness of your growth strategy.

Financial Plan

Your financial plan should include elements like balance sheets, income statements, projected cash flows, loan repayment schedules, and depreciation factors.

Marketing Strategy

A robust marketing strategy is essential for your farm’s success. Look into brochures, advertisements, and joining co-op groups. Resources from institutions like the University of Minnesota and Cornell University offer comprehensive insights into effective marketing strategies for farm businesses.

Establishing a Farming Business Entity

Discuss the legal structure of your farm business. Will it be a sole proprietorship, a partnership, an LLC, or a corporation? Outline the pros and cons of each and why the chosen structure is the best fit for your farm business.

Detailed Description of Farm Operations

Include a section that provides an in-depth look at your day-to-day farm operations. This can cover everything from crop rotation plans, livestock breeding programs, to the use of technology and machinery in your farming activities.

Risk Management Strategies

Address potential risks and challenges your farm might face, such as natural disasters, market fluctuations, or pest infestations. Discuss the strategies you plan to implement to mitigate these risks, like insurance coverage, diversification, and emergency response plans.

Sustainability and Environmental Impact

Highlight your farm’s approach to sustainability and its impact on the environment. Discuss practices like organic farming, conservation techniques, and renewable energy usage, which demonstrate your commitment to environmental stewardship.

Community Involvement and Social Responsibility

Describe how your farm business plans to engage with and contribute to the local community. This could include hosting educational farm tours, participating in farmers’ markets, or supporting local food programs.

Supply Chain and Vendor Relationships

Detail your farm’s supply chain and vendor relationships. Explain how you plan to source inputs like seeds, feed, or equipment, and any partnerships with local suppliers or distributors.

Technology and Innovation

Discuss the role of technology and innovation in your farm business. This could include the use of precision agriculture, innovative irrigation systems, or the adoption of farm management software to enhance efficiency and productivity.

Training and Development Plans

Explain how you intend to train and develop your staff. Include plans for ongoing education, skill development, and potentially, leadership training for future farm managers.

Expansion and Diversification

Outline your long-term plans for expansion and diversification. This could involve adding new crops, branching into agrotourism, or exploring value-added products like farm-produced jams or cheeses.

Exit Strategy

Consider including an exit strategy for your farming business. This could be a plan for succession, selling the business, or transitioning to a different type of agricultural operation.

Wrap up your business plan with a conclusion that reiterates your farm’s core mission and vision, and express your enthusiasm and commitment to making your farm business a success.

Frequently Asked Questions

Include a FAQ section at the end of your business plan to address common questions potential investors or partners may have about your farm business. This can include queries about your business model, funding needs, or market potential.

Provide an addendum for additional documents that support your business plan. This can include resumes of key team members, detailed financial projections, market research data, or letters of support from future customers or partners.

Do I Need a Business Plan for My Farm?

Even if you’re knee-deep in the dirt, tending to your crops or livestock, every farming enterprise has the core elements of a business at its heart. These include aspects such as operations, marketing, human resources, and finances. When you embark on developing a farm business plan, it might astonish you to see where the journey takes you. You could end up discovering facets of your farm business that you hadn’t previously considered.

One of the many advantages of constructing your business plan is the opportunity it affords to involve others. Employees, family members, even your loyal farm dog might have innovative small farm business ideas that could significantly enhance your farm’s productivity and marketability. A different perspective can often yield solutions for issues you might not have even been aware of. Therefore, encourage an open exchange of thoughts and ideas. Who knows, the next great idea could be lying right under your hay bale!

More than just a document outlining your farm’s structure, your farm business plan should serve as a valuable decision-making tool. With it, you can confidently navigate the varied terrain of farm management, from daily operations to larger strategic initiatives. When you’ve got a meticulously crafted, robust farm business plan, it doesn’t just narrate your farm’s story, but also provides you with a roadmap to future growth and success.

Beyond this, a top-notch farm business plan can also be a lever that helps you access critical financing. Lenders and investors are more likely to support your venture when they see a well-structured, thoughtful business plan that articulates your vision, illustrates your understanding of the market, and demonstrates your commitment to fiscal responsibility.

So, where to begin? Let’s dive into our fundamental guide to crafting a farm business plan using our adaptable template. This resource has been designed to help you capture every aspect of your agricultural venture, laying a strong foundation for a bountiful future.

How Do I Write a Small Farm Business Plan?

Don’t sit down to write the whole thing. Chip away, one section at a time. Keep in mind that the plan doesn’t have to be the definitive last word. You can make adaptations.

How do you start a farm business plan?

Start with one piece of the business plan. One of the hardest sections of a business plan to write is the Mission Statement . If you get bogged down there, continue and come back to it later.

How much do farm owners make a year?

As you can imagine, the net income varies greatly by type of farm business.

The bottom line after expenses may not be high. Farmers need to consider net worth as assets grow and the farm property increases in value.

How much does it cost to start a small farm?

Getting set up to raise 100 beef cattle costs lots more than getting set up to raise 100 rabbits.

Things like property acquisition, soil preparation, equipment and machinery and the key costs. Other costs may be i rrigation systems , packaging and trucking.

What is the most profitable farming business?

Poultry farming is currently the most profitable – and common – farm business in the world. It includes chicken, turkey, quail, ducks and goose, that are being raised for meat or eggs.

It’s also one of the most expensive businesses to start, requiring significant capital investment. The industry is very labor-intensive and labor costs are high.

Image: Depositphotos

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NPR defends its journalism after senior editor says it has lost the public's trust

David Folkenflik

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust. Saul Loeb/AFP via Getty Images hide caption

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust.

NPR's top news executive defended its journalism and its commitment to reflecting a diverse array of views on Tuesday after a senior NPR editor wrote a broad critique of how the network has covered some of the most important stories of the age.

"An open-minded spirit no longer exists within NPR, and now, predictably, we don't have an audience that reflects America," writes Uri Berliner.

A strategic emphasis on diversity and inclusion on the basis of race, ethnicity and sexual orientation, promoted by NPR's former CEO, John Lansing, has fed "the absence of viewpoint diversity," Berliner writes.

NPR's chief news executive, Edith Chapin, wrote in a memo to staff Tuesday afternoon that she and the news leadership team strongly reject Berliner's assessment.

"We're proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories," she wrote. "We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world."

NPR names tech executive Katherine Maher to lead in turbulent era

She added, "None of our work is above scrutiny or critique. We must have vigorous discussions in the newsroom about how we serve the public as a whole."

A spokesperson for NPR said Chapin, who also serves as the network's chief content officer, would have no further comment.

Praised by NPR's critics

Berliner is a senior editor on NPR's Business Desk. (Disclosure: I, too, am part of the Business Desk, and Berliner has edited many of my past stories. He did not see any version of this article or participate in its preparation before it was posted publicly.)

Berliner's essay , titled "I've Been at NPR for 25 years. Here's How We Lost America's Trust," was published by The Free Press, a website that has welcomed journalists who have concluded that mainstream news outlets have become reflexively liberal.

Berliner writes that as a Subaru-driving, Sarah Lawrence College graduate who "was raised by a lesbian peace activist mother ," he fits the mold of a loyal NPR fan.

Yet Berliner says NPR's news coverage has fallen short on some of the most controversial stories of recent years, from the question of whether former President Donald Trump colluded with Russia in the 2016 election, to the origins of the virus that causes COVID-19, to the significance and provenance of emails leaked from a laptop owned by Hunter Biden weeks before the 2020 election. In addition, he blasted NPR's coverage of the Israel-Hamas conflict.

On each of these stories, Berliner asserts, NPR has suffered from groupthink due to too little diversity of viewpoints in the newsroom.

The essay ricocheted Tuesday around conservative media , with some labeling Berliner a whistleblower . Others picked it up on social media, including Elon Musk, who has lambasted NPR for leaving his social media site, X. (Musk emailed another NPR reporter a link to Berliner's article with a gibe that the reporter was a "quisling" — a World War II reference to someone who collaborates with the enemy.)

When asked for further comment late Tuesday, Berliner declined, saying the essay spoke for itself.

The arguments he raises — and counters — have percolated across U.S. newsrooms in recent years. The #MeToo sexual harassment scandals of 2016 and 2017 forced newsrooms to listen to and heed more junior colleagues. The social justice movement prompted by the killing of George Floyd in 2020 inspired a reckoning in many places. Newsroom leaders often appeared to stand on shaky ground.

Leaders at many newsrooms, including top editors at The New York Times and the Los Angeles Times , lost their jobs. Legendary Washington Post Executive Editor Martin Baron wrote in his memoir that he feared his bonds with the staff were "frayed beyond repair," especially over the degree of self-expression his journalists expected to exert on social media, before he decided to step down in early 2021.

Since then, Baron and others — including leaders of some of these newsrooms — have suggested that the pendulum has swung too far.

Author Interviews

Legendary editor marty baron describes his 'collision of power' with trump and bezos.

New York Times publisher A.G. Sulzberger warned last year against journalists embracing a stance of what he calls "one-side-ism": "where journalists are demonstrating that they're on the side of the righteous."

"I really think that that can create blind spots and echo chambers," he said.

Internal arguments at The Times over the strength of its reporting on accusations that Hamas engaged in sexual assaults as part of a strategy for its Oct. 7 attack on Israel erupted publicly . The paper conducted an investigation to determine the source of a leak over a planned episode of the paper's podcast The Daily on the subject, which months later has not been released. The newsroom guild accused the paper of "targeted interrogation" of journalists of Middle Eastern descent.

Heated pushback in NPR's newsroom

Given Berliner's account of private conversations, several NPR journalists question whether they can now trust him with unguarded assessments about stories in real time. Others express frustration that he had not sought out comment in advance of publication. Berliner acknowledged to me that for this story, he did not seek NPR's approval to publish the piece, nor did he give the network advance notice.

Some of Berliner's NPR colleagues are responding heatedly. Fernando Alfonso, a senior supervising editor for digital news, wrote that he wholeheartedly rejected Berliner's critique of the coverage of the Israel-Hamas conflict, for which NPR's journalists, like their peers, periodically put themselves at risk.

Alfonso also took issue with Berliner's concern over the focus on diversity at NPR.

"As a person of color who has often worked in newsrooms with little to no people who look like me, the efforts NPR has made to diversify its workforce and its sources are unique and appropriate given the news industry's long-standing lack of diversity," Alfonso says. "These efforts should be celebrated and not denigrated as Uri has done."

After this story was first published, Berliner contested Alfonso's characterization, saying his criticism of NPR is about the lack of diversity of viewpoints, not its diversity itself.

"I never criticized NPR's priority of achieving a more diverse workforce in terms of race, ethnicity and sexual orientation. I have not 'denigrated' NPR's newsroom diversity goals," Berliner said. "That's wrong."

Questions of diversity

Under former CEO John Lansing, NPR made increasing diversity, both of its staff and its audience, its "North Star" mission. Berliner says in the essay that NPR failed to consider broader diversity of viewpoint, noting, "In D.C., where NPR is headquartered and many of us live, I found 87 registered Democrats working in editorial positions and zero Republicans."

Berliner cited audience estimates that suggested a concurrent falloff in listening by Republicans. (The number of people listening to NPR broadcasts and terrestrial radio broadly has declined since the start of the pandemic.)

Former NPR vice president for news and ombudsman Jeffrey Dvorkin tweeted , "I know Uri. He's not wrong."

Others questioned Berliner's logic. "This probably gets causality somewhat backward," tweeted Semafor Washington editor Jordan Weissmann . "I'd guess that a lot of NPR listeners who voted for [Mitt] Romney have changed how they identify politically."

Similarly, Nieman Lab founder Joshua Benton suggested the rise of Trump alienated many NPR-appreciating Republicans from the GOP.

In recent years, NPR has greatly enhanced the percentage of people of color in its workforce and its executive ranks. Four out of 10 staffers are people of color; nearly half of NPR's leadership team identifies as Black, Asian or Latino.

"The philosophy is: Do you want to serve all of America and make sure it sounds like all of America, or not?" Lansing, who stepped down last month, says in response to Berliner's piece. "I'd welcome the argument against that."

"On radio, we were really lagging in our representation of an audience that makes us look like what America looks like today," Lansing says. The U.S. looks and sounds a lot different than it did in 1971, when NPR's first show was broadcast, Lansing says.

A network spokesperson says new NPR CEO Katherine Maher supports Chapin and her response to Berliner's critique.

The spokesperson says that Maher "believes that it's a healthy thing for a public service newsroom to engage in rigorous consideration of the needs of our audiences, including where we serve our mission well and where we can serve it better."

Disclosure: This story was reported and written by NPR Media Correspondent David Folkenflik and edited by Deputy Business Editor Emily Kopp and Managing Editor Gerry Holmes. Under NPR's protocol for reporting on itself, no NPR corporate official or news executive reviewed this story before it was posted publicly.