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How To Write the Company Summary in a Business Plan

Company Overviews Show How the Pieces of a Business Work

What To Include in Your Company Summary

Getting started on your company summary, examples of a company summary, tips for writing a company summary, frequently asked questions (faqs).

Image by Theresa Chiechi © The Balance 2019

The company summary in a business plan —also known as the company description or overview—is a high-level look at what you are as a company and how all the elements of the business fit together.

An effective company summary should give readers, such as potential investors, a quick and easy way to understand your business, its products and services, its mission and goals, how it meets the needs of its target market, and how it stands out from competitors.

Before you begin writing your company summary, remember to stick to the big picture. Other sections of your business plan will provide the specific details of your business. The summary synthesizes all of that information into one page.

Key Takeaways

• The company summary in a business plan provides an overview containing a description of your company at a high level.
• A company summary might include your mission statement, goals, target market, products, and services, as well as how it stands out from competitors.
• The company summary can also be customized for a specific objective or audience, such as to secure financing from investors or banks.

The company summary section of a business plan should include:

• Business name
• Legal structure (i.e., sole proprietorship ,  LLC ,  S Corporation , or  partnership )
• Management team
• Mission statement
• Company history (when it started and important milestones)
• Description of products and services and how they meet the needs of the marketplace
• Target market (who will buy your product or services)
• Competitive advantage (what sets you apart in the marketplace to allow you to succeed)
• Objectives and goals (plans for growth)

The U.S. Small Business Administration (SBA) website has a lot of information available if you've never written a business plan before. The SBA provides examples of business plans for different types of companies.

Before you begin, you should decide whether you want to go with a traditional business plan format or a lean startup format. The traditional format is appropriate if you want to have a comprehensive, detail-oriented plan or if you are requesting financing. The lean startup format is best for those who have a relatively simple business and want to start it quickly or as a starting point for those who plan to refine and change the plan regularly.

No matter which type of business plan you choose, you'll need to include a company summary.

Although there are many blueprints for writing a company summary, below are a couple of examples to get you started.

Consulting Firm

You can opt for a concise opening paragraph such as this one:

XYZ Consulting is a new company that provides expertise in search marketing solutions for businesses worldwide, including website promotion, online advertising, and search engine optimization techniques to improve its clients' positioning in search engines. We cater to the higher education market, including colleges, universities, and professional educational institutions.

Several elements of the company summary are covered here, including the name (XYZ Consulting), history (new company), description of services (web promotion, SEO, advertising) and why it's needed (improve positioning in search engines), and the target market (higher education).

Starbucks Coffee Company Overview

Starbucks breaks down the company overview on their website into the following sections:

"Our Heritage"

Here the company describes how long the company has been in business, citing its roots, the founder, Howard Schultz, and how he was inspired to open the first Starbucks in Seattle after visiting Italy. It briefly mentions the growth of millions of customers and how the company's heritage remains important to its long-term success.

"Coffee & Craft"

The overview describes the high-quality products and services being offered and why they stand out from the competition by describing the detailed process of choosing and growing coffee beans. You'll notice they don't suggest their product is a low-cost product but instead provide a high level of "experiences to savor."

"Our Partners"

Starbucks describes its employees as partners that work together in an inclusive manner to achieve success. It highlights how they are at the center of the experience.

"Pursuit of Doing Good"

The company describes its values and how it gives back to the community.

Tesla Inc. Business Overview

Below are excerpts of the business overview pages from the annual 10-K filing on Dec. 31, 2021, for Tesla Inc.

"We design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer services related to our products. We generally sell our products directly to customers, including through our website and retail locations.

We also continue to grow our customer-facing infrastructure through a global network of vehicle service centers, mobile service technicians, body shops, supercharger stations and destination chargers to accelerate the widespread adoption of our products.

We emphasize performance, attractive styling and the safety of our users and workforce in the design and manufacture of our products and are continuing to develop full self-driving technology for improved safety.

Our mission to accelerate the world’s transition to sustainable energy, engineering expertise, vertically integrated business model and focus on user experience differentiate us from other companies."

Competition

Tesla highlights the competitive automotive market and how the company differentiates itself from the larger, more established competitors.

"The worldwide automotive market is highly competitive and we expect it will become even more competitive in the future as we introduce additional vehicles in a broader cross-section of the passenger and commercial vehicle market and expand our vehicles’ capabilities. We believe that our vehicles compete in the market both based on their traditional segment classification as well as based on their propulsion technology.

Competing products typically include internal combustion vehicles from more established automobile manufacturers; however, many established and new automobile manufacturers have entered or have announced plans to enter the market for electric and other alternative fuel vehicles."

Intellectual Property

The company highlights its intellectual property, including trademarks and patents.

"We place a strong emphasis on our innovative approach and proprietary designs which bring intrinsic value and uniqueness to our product portfolio. As part of our business, we seek to protect the underlying intellectual property rights of these innovations and designs such as with respect to patents, trademarks, copyrights, trade secrets and other measures, including through employee and third-party nondisclosure agreements and other contractual arrangements."

Mission Statement

The company highlights its mission statement and its sustainability goals using environmental, social, and governance (ESG) and human capital resources.

"The very purpose of Tesla's existence is to accelerate the world's transition to sustainable energy. We believe the world cannot reduce carbon emissions without addressing both energy generation and consumption, and we are designing and manufacturing a complete energy and transportation ecosystem to achieve this goal. As we expand, we are building each new factory to be more efficient and sustainably designed than the previous one, including with respect to waste reduction and water usage, and we are focused on reducing the carbon footprint of our supply chain."

There are other items you can include in your company summary to expand on the areas that you'd like people to focus on, depending on your objective.

You might provide more information about the company's location, legal structure, and management team. You can also include more information about the:

• Company's history, such as a family business that's been in operation for multiple generations
• Business objectives, including short-term and long-term goals
• Business strengths, highlighting anything that might give your company a competitive advantage in the field

You can also customize the summary if you have a specific objective or a targeted audience. For example, if the goal of your business plan is to secure funding, you might focus on areas that appeal to investors and lending institutions, including:

• Why you're the best person to manage the business
• Your experience in your field, as well as the total years of experience of your management team
• Expertise or special talents of your team, including training, licenses, certifications
• How you plan to make the business a success
• Financial information, such as a high-level discussion of your track record of revenue growth and the financial opportunities that can be realized as a result of securing financing

You may also want to address any areas of perceived weakness by explaining how you'll overcome them or compensate.

How do you write a company overview?

You might provide a description of the company, its location, legal structure, and management team. You can also highlight the company's business objectives, goals, and strengths. You can also customize the summary to a specific audience, such as a bank or lender, focusing on your competitive advantages and highlights of recent financial success.

What should an organizational overview include?

Some of the discussion points to include in a company overview might be:

• Company name and location
• Legal structure such as a sole proprietorship, LLC, or partnership
• Mission statement and management team
• Description of your products and services and how they are needed
• Target market or who are your customers
• Competitive advantage or what makes your company different

The Clute Institute. " Using Business Plans for Teaching Entrepreneurship ," Page 734.

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

Starbucks Coffee Company. " Our Company ."

United States Securities and Exchange Commission. " Form 10-K, Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2021, Tesla, Inc., " Pages 3-12.

How to Expertly Write the Company Description in Your Business Plan

Written by Dave Lavinsky

A key section of your business plan is the one in which you describe your company. This section comes second in your business plan, after the Executive Summary .

The Company Analysis section of your business plan has three main goals:

• to give a brief description and profile of your company
• to detail your past accomplishments
• to specify your unique qualifications.

Note that a detailed description of your products/services generally does not belong in your company section; rather that will go in the Products/Services section of your marketing plan.

Here’s what to include in your business plan company overview:

1. Company Profile

Start with a detailed profile of your company including your:

• Date of formation
• Legal structure (LLC vs. C-Corp., etc.)
• Office location(s)
• Business stage (start-up vs. undergoing R&D vs. serving customers, etc.)
• Type of business: this is where you’ll give a general description of the type of business (e.g., restaurant, software, etc.) you operate

2. Past Accomplishments

Include a chart (or bullets) of your company’s past accomplishments, including descriptions and dates when:

• Prior funding rounds were received
• Products and services were launched
• Revenue milestones were reached (e.g., date when sales surpassed the million dollar mark)
• Key partnerships were executed
• Key customer contracts were secured
• Key employees were hired

This information is critical to investors as it indicates the company’s ability to execute upon a previous game plan. Attaining milestones is an excellent indicator for potential investors that their money will be used to create value and lead to a liquidity event.

3. Unique Qualifications

Finally, detail why your company is uniquely qualified to succeed.

This is often referred to as the company’s “unfair competitive advantage.”

This advantage could include one or more of the following:

• a world-class management team
• proprietary technology
• proven operational systems
• key partnerships
• long-term contracts with major customers
• other successes-to-date

To learn how to expertly complete the other sections of your business plan, reference our complete simple business plan template .  

Other Resources for Writing Your Business Plan

• How to Write an Executive Summary
• How to Write the Market Analysis Section of a Business Plan
• The Customer Analysis Section of Your Business Plan
• Completing the Competitive Analysis Section of Your Business Plan
• The Management Team Section of Your Business Plan
• Financial Assumptions and Your Business Plan
• How to Create Financial Projections for Your Business Plan
• Everything You Need to Know about the Business Plan Appendix
• Business Plan Conclusion: Summary & Recap

Other Helpful Business Plan Articles & Templates

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How to Write a Killer Business Plan: Your Step-by-Step Guide

By Danine Alati

All products featured on Architectural Digest are independently selected by our editors. However, when you buy something through our retail links, we may earn an affiliate commission.

If you're wondering how to write a business plan, you’ve likely been considering launching your own design firm for quite a while. You have a ton of ideas—you’ve seen how others have done it, and you’re ready to take a crack at striking out on your own. But where to begin? When getting your new business off the ground, one of your initial steps should be learning how to write a business plan. It’s crucial to structure your ideas formally into a road map for your firm’s success. If you plan to seek funding for your company, you’ll need to draft a traditional business plan; if you’re self-funding, a simple outline will suffice. Scroll on to find AD PRO’s guide, filled with strategies and details on what to include.

Typically, business plans fall into one of three categories:

1. A one-page business plan

This document summarizes your business goals in a simplified format. It’s ideal for introducing your concept to potential investors, who may not have time to peruse a lengthy document. This easy-to-read format, viewable at a glance, is perfect for initial meetings, and it offers a substantial jumping-off point—though you may need a more detailed plan in the future.

2. A lean startup plan

Slightly longer than the one-page plan, this one includes a summary and a bulleted list that contains your firm’s financial information, business strategies, metrics, and forecasts. Since this type of business plan mainly functions as an internal tool, it’s not necessary to include all the sections and information of a formal traditional business plan (see below). This simple-to-navigate five- to 10-page document should contain your strategy, the tasks you need to complete to achieve your goals and their due dates, projected sales, spending, and cash flow. It’s advisable to update this plan regularly (at least twice a year), as it is intended to guide the growth of your company—and help keep all internal members of your team in the loop. As such, it should evolve organically as your business does.

3. An external business plan (a.k.a. a traditional standard plan)

You'll need to create a more formal business plan if you intend to share company information with key players: potential investors to fund your endeavor, banks to support loan applications, or even future employees. Since you’ll be using this document to explain your strategies for your business with those who may finance or join your company, you’ll want to clearly delineate your plan in detailed sections.

Where to begin?

Your business plan is a living document that will evolve with your business. It should plot out how your business will operate, state your goals, and precisely express your vision for your company. Regardless of the type of plan you opt to create, check out these solid tips before you begin drafting the document.

1. Keep it simple

No need to complicate the already stressful process of starting your own business by constructing a convoluted plan. Create a simple bulleted plan that cites goals and your strategies for achieving them, then update it as your company grows. If you choose to draft a traditional business plan, keep it to less than 40 pages. If you’re having trouble distilling the essence of your company down to 30-35 pages, consider hiring an expert to help you write it. Fit Small Business lists Wise Business Plans as its top-choice service, but keep in mind this argument about why it’s often better to do the writing yourself.

Even if you go with a traditional, external business plan, keep it concise. Cut to the chase as quickly and efficiently as possible—you don’t want to lose a potential investor out of boredom! And don’t spend too much time making your business plan pretty. As a designer, your instinct may be to focus on stunning graphics, and while they can indeed enhance the appearance of the document, the actual content is what’s most important. Use graphs, charts, and photos to break up the text and illustrate your message without obscuring it.

2. Know your audience

Tailor your business plan to suit your needs, and craft it so that the intended audience can clearly understand it. Avoid using lingo only an A&D professional would understand—especially if you intend to use the plan as a pitch to investors or for a loan application. Use straightforward rather than insider-y language to avoid alienating your target audience.

3. Know your competition

Never speak disparagingly about your competitors. Get familiar with who they are, know what they are doing well (and poorly), and make it evident in your business plan how you will distinguish your brand from the rest. What makes your company stand out against the competition? Perhaps your firm offers online design services, specializes in custom millwork, or provides clients with assistance from a personal account director. Highlight whatever sets you apart transparently in your business plan.

4. Keep it real

Keep your expectations in check and never inflate your financials. While we encourage you to think positively and believe that your business will succeed financially, do not overestimate your earning potential and revenue forecast. What services will you offer, and how much will you bill for them? What do comparable companies bill for similar services? Make your projections realistic, particularly if you are seeking funding. Explain your business model and how you plan to earn money, as well as the reasoning behind your figures. And be certain to root all financial information in solid facts.

5. Work backward

Figure out what you want to accomplish and by what date, and then backtrack from there. Consider: Where would you like your company to be financially one year from now? What revenue goals would you like to achieve by that time? Then determine what you must do in 12 months, six months, and three months to arrive at your objective in a timely fashion. Work these milestones into your business plan. You'll be pleased as you see results accumulate throughout the year—even more so when you realize your objective by your firm’s one-year anniversary.

6. Just get it started

Don’t let the task of drafting your business plan paralyze you. If you sit down to write and come up empty, start jotting down your ideas—remembering what inspired you to launch your company in the first place—and worry about shaping your formal business plan later.

If it helps you to get started, begin with a simple one-page plan; you can always use that document as an outline and go back and fill in more details later. Remember: No one knows your business better than you do. Let your passion for starting your new company motivate you as you begin writing and don’t be afraid to let that emotion to come through in the final document. It will better convey your vision and help your readers understand what your small business is all about.

The essential components of a business plan

Now that you have an idea of what type of business plan will be right for your company and understand how to approach the task, the question remains: What do you need to include in your business plan? Entrepreneurs have varying ideas on what’s essential and what you can skip. But when starting your first-ever business, consider following the advice of the U.S. Small Business Administration, and make sure that your business plan contains these nine recommended sections.

1. Executive summary

As the single most important part of your business plan, the executive summary should pique the curiosity of your audience. It should be a brief synopsis of your company’s mission, your immediate as well as long-term goals, and your strategies for attaining these goals. Make it evident what exactly your business is: What’s the product or service? Why will your company be successful? What sets it apart from the competition? What do you plan to do differently? Get this information out there immediately. Also, include basic facts about your employees, leadership team, location, and financial statistics.

Sometimes investors will ask to see only your executive summary as they consider whether or not to grant you funding. If they are intrigued by what they read, they will ask for your entire business plan. So be sure to hit the highlights in the executive summary. And while this summary appears first in the document, it’s actually smart to write it last, since it encompasses all components of your plan, whittled down to a brief synopsis. Think of it as the whole document in a nutshell. Don’t let it exceed a page or two.

2. Company overview

Here’s where you go into detail about the concept behind your business, what you do, and what you plan to accomplish. What problem does your firm address? And what are your solutions? What target audience will your small business serve? Name specific businesses, design firms, organizations, and/or clients. Explain what you have to offer and what you’re selling. Be sure to use concrete examples and eliminate superfluous language. Outline what makes your company distinct from the competition. You’ve touched on this point in the executive summary, but go into specific detail in this section. It’s the place where you can toot your own horn—tastefully and succinctly, of course—so take advantage of the opportunity, play up your strengths, and sell your company.

3. Market research

Demonstrate that you understand your industry by doing comprehensive market analysis. Look for emerging trends and themes in the marketplace. Have a crystal-clear picture of who your customer is. Research your potential competitors, see what their strengths and weaknesses are, and determine how you can create more effective solutions. It’s critical that you stay on top of what the competition is offering.

When attempting to discern who your target audience is and who your ideal consumers are, a strong small business plan will identify market segments, the size of each, and additional segments that could be interested in your business. The typical way to distinguish market segments is to use a method called the TAM, SAM, and SOM approach, defined as:

• TAM: Your Total Available or Addressable Market. This group includes everyone you wish to reach with your product/service.

• SAM: Your Segmented Addressable Market or Served Available Market. This is the portion of the total available market you will target.

• SOM: Your Share of the Market. This is a category within your SAM that you will realistically reach in the early days of your business.

Once you establish your market segments, figure out who your ideal customer, or “buyer persona,” is within each segment. In this exercise, you should attribute specific demographics to your buyer persona—for example, a name, gender, income level, and preferences in the marketplace. This fictitious persona of your ideal customer will help you to better understand your consumer base, create stronger marketing and sales tools targeted to your consumer, and be able to attract the right type of client to your business.

4. Organization and management

Delineate your company’s business structure—whether it’s set up as a sole proprietorship, partnership, LLC, C-corp, or S-corp. Explain who is in charge, list your employees by job function, and elaborate on each person’s responsibilities. If you already have staff in place, include employees’ names and experiences, describe what each of your workers is contributing to your small firm, and how each will help it succeed. This is your opportunity to demonstrate how you’ve amassed a stellar team or explain your strategy for attracting and retaining one.

You know the old axiom: A company is only as good as its employees. Kathryn Minshew, CEO and cofounder of career-planning platform The Muse, elaborates on this tenet in a widely circulated piece of advice that was published in Colleen DeBaise's book, Inc.: Start a Successful Business : “The hard part is actually building the team that will embody your company culture and propel you forward.” This is a critical point: You must hire good people who understand your vision and who are dedicated to helping your small business flourish.

5. Description of products or services

Outline the products or services your company offers as specifically as possible. Focus first on what you will initially bring to market, rather than long-term plans. Though it’s exciting to speculate on just how big your company can become—after all, it’s that type of guts, vision, and big thinking that enabled you to launch your own business in the first place—there's no point in focusing too heavily on the distant future in the initial business plan.

You do, however, need to illustrate exactly what your company is offering, so spend a few paragraphs expanding on your concept for products and services. Discuss your service or product’s life cycle, be very specific about how it will impact consumers, and divulge whether you plan to file for copyrights or patents. Also, describe the research and development you plan to do to enhance your offerings in the near future.

6. Marketing and sales

Spelling out your complete sales and marketing strategy will provide you with a point of reference for the future. You’ll likely refer to this section and continue to tweak and update it as your company grows. Here, discuss how you plan to reach your target audience. Be sure that you have your buyer persona explicitly defined before doing this (see number 3 above).

Within the marketing strategy portion of your business plan, delineate how you plan to position your company to consumers and how you will deliver the goods and/or services you will offer. Include a positioning statement that expresses your essential value proposition and distinguishes your competitive edge. According to Bplans , a free online resource for entrepreneurs, your positioning statement needn’t be lengthy; Bplans recommends using this simple formula to construct your statement: “For [target market description] who [target market need], [this product] [how it meets the need]. Unlike [key competition], it [most important distinguishing feature].”

This sales and marketing section is the place to address product and service pricing. Although there is no exact science to setting your pricing, consider the following:

• You must break even. Plan to charge customers enough to cover your costs in creating and delivering goods or services.

• Plan for primary and secondary profit center pricing. You may decide to sell your product or services at cost or less-than-cost to offer an appealing price— but then require support or maintenance that would push the price over the amount that would make it profitable for you.

• Adhere to market rate. Your pricing should be aligned with what your audience expects. You’ll walk a fine line here: You don’t want to alienate potential customers with high pricing, yet you shouldn’t devalue your offerings with pricing that’s too low.

How you will promote and advertise your business should also be addressed in this section. Do you plan to rely on traditional advertising avenues, such as print media? Would an online platform better suit your business and reach your target audience? How about public relations? Outline how you'll get the word out about your new company.

You can also market yourself online through social media channels. It’s a business necessity to have an online presence, and deciding which social media platform will serve you best depends on your target audience. Consider your consumer demographic when deciding on where to focus your time and efforts. You’ll want to make sure to keep your brand message and voice consistent across all marketing, advertising, and promotional materials—in print and online.

7. Funding request

If you’re using your plan to seek funding, this section is where you clearly express how much you need and how you will use it. Will you opt for debt or equity? This is a question you should ponder ahead of time: Are you willing to relinquish equity in your company for the funds to get your business off the ground? What are the terms you’re seeking? What is the length of time in business that your request will cover? Make note of collateral you have to put against loans, if any. Be prepared to explain to potential investors in depth how you will use their funds. Paint them a picture in broad strokes, and highlight the major areas that need funding (for example, purchasing an inventory, funding a marketing budget, etc.).

8. Financial projections

Follow up your funding request with a detailed explanation of future financial plans. Investors want to believe they’re making a sound decision by supporting your business. When do you plan to pay off debt? Do you intend to build up your business and then sell it? Include projections for the next five years.

Don’t fret if you do not have a solid foundation in finance. It’s not as complex to create these financial projections as you might assume. This section is where you might employ some of your design savvy to create visuals such as charts and graphs to spice up otherwise dull financial details.

Your financial forecast should include the following (this information can be projected if your business is not yet established enough to have the actual documents):

• Income statement (a.k.a., profit and loss or P&L): This document essentially shows whether you’re making money. It includes a compilation of all your numbers and data, and shows your expenses deducted from your earnings to reveal whether you’re poised to be profitable.

• Cash flow statement: This statement differs from your P&L in that it’s the record of how much money you have in the bank at any given moment. In this document, you’ll calculate cash you have plus cash you receive minus cash you pay out, which equals your total cash flow. This cash flow statement helps you to understand at what points you may be low on cash (for example, while you’re waiting for a client to pay a bill), indicating that it may not be the optimal time to spend on non-urgent expenses. This document can help you determine how much funding you may need to get your small business up and running.

• Balance sheet: This statement helps determine the net worth of your company. It subtracts your assets and equity from your liabilities to arrive at your company’s net worth. From this balance sheet, investors can see the overall financial picture of your endeavor.

9. Appendix

Here you’ll include any requested documentation, such as résumés, reference letters, credit reports, permits, licenses, contracts, patents, or other legal paperwork. It’s also where you can add any supplemental information that an investor might want or need when considering whether or not to help you with funding.

Keeping these strategies in mind, you should be ready to get started on your business plan. This documentation is essential to plotting the future of your company, so it's important to spend time on it and make sure it represents you and your business in the best way possible.

By Tim Nelson

By Rachel Davies

By Hannah Martin

How to Write a Business Plan

Last Updated: February 16, 2024, 12:05 pm by  TRUiC Team

Writing a business plan can be an intimidating endeavor. Whether you’ve decided to start a business , or you already have a business and need to write a business plan to apply for a loan or to pitch to investors , we cover the process in-depth.

Recommended: Our business plan generator walks you through topics like marketing and financial projections so that your business is prepared to succeed.

What Is a Business Plan?

The traditional business plan is typically a 20 to 40-page formal document that describes what your business does, what your objectives are, and how you plan to achieve them.

It lays out your plans for operating, marketing, and managing your business, along with your goals and financial projections.

There are many different types of business plans, depending on the stage of your venture and the purpose of your business plan. In the earliest stages of your business idea, you may want to start small with a three-sentence business plan , or perhaps by sketching out a lean canvas or business model canvas .

Once your business idea has been developed, you’ll be ready to begin writing your business plan .

Why Do You Need a Business Plan?

Writing a business plan requires you to think through all of the key elements of your business. This gives you insights into the challenges you’ll face and the strengths you bring.

A business plan is also often requested by lenders or investors when you are ready to seek financing.

While many companies do not need a formal business plan unless they are planning on seeking investors or applying for a business loan , writing a business plan has extensive benefits.

The process of writing your business plan allows you to take an in-depth look at your industry , market , and competitive position . It helps you set goals , determine your keys to success , and plan your strategies . It also allows you to explore your financial projections and manage cash. So, even if you do not need a formal business plan, the process of planning may still reap huge rewards.

Your Audience

You need to think carefully about who is going to read your business plan.

Although you might begin writing a business plan only to convince yourself, there are a number of stakeholders who may end up reading your business plan.

Your plan might be read by your:

• Partners or potential partners
• Board of directors
• Senior management team
• Current employees
• Employment candidates

Outside the organization , the following stakeholders may want to read your business plan before they decide to do business with you:

• Distributors
• And independent contractors

Think about your primary audience when you are writing your business plan. What are the aspects that are most important to them? This is where you will want to put the majority of your focus.

For example, lenders will be most interested in your financial projections — your cash flow statement and balance sheet.

Investors might be most interested in your business model, the uniqueness of your product or service, and your competitive advantage.

Partners, your senior management team, and current employees might be most interested in your strategic plans- your vision, your operational plan, and your organizational plan.

Find Sample Business Plans in Your Industry

One great resource you should check out before sitting down to write your business plan are sample business plans in your industry.

Not only will you have the opportunity to gain insights on your industry and your competitors, you also might be able to find troves of industry and market research that will make conducting your own analysis of the industry and market much easier.

To find example business plans in your industry, try searching the web for “ your industry business plan example.”

Writing Your Business Plan

Once you have spent some time looking at sample business plans in your industry, it is now time to start writing your business plan . An easy place to begin is by outlining the major sections you will need in your plan.

What you need to include in your business plan will depend on the type of business you are creating, your business model, and who your intended audience is.

Common business plan sections include:

• Executive Summary — a high-level overview of your business or business idea
• Venture Overview — a description of your company, vision, mission, and goals
• Product or Service Description — a detailed description of your product or service
• Industry and Market Analysis — an analysis of the industry and market you compete in
• Marketing Plan — your overall strategy and specific plans to capture market share
• Organizational Plan — the legal form of the business and the key players
• Operational Plan — how you will operate the business and your key resources
• Goals, Milestones, and Risks — short and long-term goals, milestones, and risks
• Financial Statements — Financial statements or the projected financials of your business

Not every type of venture will require every one of these sections to be included in their business plans. However, most business plans will at least include an executive summary, venture overview, a description of the products and services, and some form of financial projections.

Executive Summary

As suggested in its name, an executive summary is a summary of the key points in your business plan . This is your first chance to convey to readers the what, why, who, and how of your business or business idea.

Although there is no set structure for an executive summary, a good executive summary should summarize :

• The problem you are solving
• Your solution
• Your target market
• Any competitive advantages
• The team you’ll build
• Goals and objectives
• An overview of your financials or financial forecast

If you are writing your business plan for the purpose of acquiring funding , you will also need to discuss the amount of funding required, the purpose of the funds, as well as how your investors will get paid back.

The executive summary should be clear and concise . Ideally, this section should be one to two pages and typically follows either a synopsis or story approach, depending on the intended audience.

In the synopsis approach, you would provide a brief summary of each of the key sections of your business plan. In the story approach, your executive summary reads like a narrative, allowing you to tell the “story” of your business or idea.

With either approach to writing the executive summary, the information you want to convey remains the same. The executive summary needs to provide an overall picture of your current business or business idea.

The executive summary should include:

• A brief description of you and your venture,
• The problem your product or service is solving,
• Some information on your target market, including size, potential, & competition, and
• The solution you are offering.

The executive summary should also include:

• A statement of where you are now,
• A statement of your objectives and future plans,
• A list of what you see as keys to your success, and (if you are seeking investors)
• Any relevant financial information such as start-up costs, funding required, and how you will use investor funding.

Although the executive summary is the first section in the business plan, because it is a summary of the rest of your business plan, it is often written last.

Venture Overview

The venture overview is a top-level depiction of your company.

It contains the:

Description of the Venture

• Vision Statement
• Mission Statement
• Goals & Objectives
• Keys to Your Success

The first part of your venture overview is a description of your venture.

The description of your venture should include what you do (a brief description of your products or services), the value you provide to customers, your current operating status or a brief history of the venture, and a short description of the industry or niche in which you compete.

How to Write a Vision Statement

After describing your venture, a vision statement is a very simple, 5 to 10 word sentence or tagline that expresses the fundamental goals of your firm. Good vision statements reflect your company’s long term passion and purpose, often in a way that evokes emotion.

Take a look at the vision statements below for some inspiration:

Disney —  To make people happy. Oxfam —  A world without poverty. Stanford —  To become the Harvard of the West. Marriott —  To be the #1 hospitality company in the world. Microsoft —  A computer on every desk and in every home; all running Microsoft software.

How to Write a Mission Statement

After having crafted your vision statement, you should also create a mission statement. A mission statement explains your company's goals in terms of what you do for your customers. A good mission statement should tell your reader what your company does, who you do it for, and why you do what you do.

Check out these excellent examples of compelling mission statements:

Patagonia —  “Our Reason For Being: Build the best products, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Trader Joes —  “Our mission is to give our customers the best food and beverage values that they can find anywhere and to provide them with the information required to make informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit.” Facebook —  "Founded in 2004, Facebook's mission is to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them."

Goals and Objectives

In this section of the business plan, break down your most important short-term and long-term goals and objectives.

Aim for five to seven of your most important short and long term goals.

This subsection of your venture description should be kept short. You will come back to your goals at the end of your business plan.

However, your key short-term and long-term goals should be highlighted early on in your business plan as well. The rest of your business plan will act as evidence of how you plan on achieving your goals.

Keys to Success

Your keys to success are your insights into what it takes to be successful in your industry, market, or niche.

Your keys to success can include several of the most important milestones that you will need to accomplish in order to achieve your goals.

These may include providing high quality products and services, your ability to attract customers or users and gain market share, or even your ability to develop the technology to deliver your products or services.

Your keys to success may also include the major milestones that you will need to reach along the way in order to achieve your vision. You will come back to your milestones and objectives at the end of your business plan.

Product or Service Description

The product or service description section is where you will go into detail in describing your products or services.

Not only will you describe your product in more detail, you should also discuss the uniqueness of your product, and what gives you an advantage over your competitors.

These are the three main parts of the Product (or Service) Description:

Description of Products or Services

Uniqueness of product, competitive advantage.

In this subsection of your business plan, describe the products or services you will provide, why they are a fit in the market, and how you will compete with similar products and services.

Begin by clearly describing the products or services you will provide. Make sure to explain the features and characteristics of your products and services. Your product or service description does not have to be highly technical. Rather, in addition to describing the features, focus on highlighting the advantages and benefits associated with your products or services.

Also, let your reader know why your product or service is needed. How does your product or service differ from those offered by your competitors? How does it better fill your customers wants and needs?

This is where you tell your reader why your solution is unique. Is it different from everything else out there? How is it different? Why would potential users choose your product or service over your competitors? In order to stand out, you need to distinguish yourself in some way.

To describe your product or service’s uniqueness, you may want to come up with a unique value proposition (or unique selling point). A value proposition is a short description of what you do, who you do it for, and how this benefits them.

A value proposition is similar to a mission statement. However, it differs in that a mission statement is written from the perspective of the company, while a value proposition is written from the perspective of the customer.

Your value proposition should be the center of your customer messaging. It should be front and center on your website, in your marketing materials, and in your advertising.

Here a few examples of great value propositions:

Dollar Shave Club —  A Great Shave for a Few Bucks a Month. No Commitment. No Fees. No B.S. Unbounce —  Build, Publish, & A/B Test Landing Pages Without IT Freshbooks —  Small Business Accounting Software Built for You, the Non-Accountant Skype —  Skype Keeps the World Talking, for Free. Share, Message, and Call - Now with Group Video on Mobile and Tablet Too.

What makes you better than competitors?

Does your competitive advantage come from superior products and services, customer service, technical support, logistics, price? What are the factors that give you an advantage over your competitors?

Clearly defining your competitive advantage is important.

Your competitive advantage is not just some abstract concept. It is at the core of how you deliver value to your customers. Your competitive advantage lays the foundation for your business model and should be a key component of your strategic plans.

Common areas where businesses find competitive advantages include:

• Intellectual Property
• Resources/Capital
• Economies of Scale
• Knowledge/Experience
• Connections and Network
• Customer Service
• Technical Support
• Customization
• Brand Recognition/Loyalty

Industry and Market Analyses

The industry and market analysis is the “big picture” view of your industry and market.

Conducting an industry and market analysis is going to take a good deal of research. You will likely need to research your industry, your competitors, and your customers. But do not rush through this section of your business plan.

A good understanding of your industry and market is critical to your success. By understanding the forces at play within your industry, you will be better able to find additional ways to create value that will allow you to succeed in the current and anticipated competitive environment.

Conducting an industry and market analysis can be intimidating, especially if you do not know what to look for or how to find the information you need. In the next section, we will discuss what should be included in your industry analysis. Then, we will tell you where to begin looking.

Industry Analysis

The industry analysis is a big picture analysis of the industry you will compete in. What does your overall industry look like today? There are a number of insights that will help you assess the attractiveness of your idea and form a big picture view of the industry and segment you are considering competing in.

Key insights to be alert for include:

• The dominant economic features of the industry
• The industry’s driving forces
• The industry’s competitive environment
• The competitive position of major players and key competitors
• Key industry success factors

To arrive at meaningful insights from your industry analysis, try to find answers to the following questions:

• What primary products or services are provided by your industry?
• What is the size and trajectory of the industry?
• What was the annual growth rate of the industry over the past year? Three years? Five years? Ten years?
• What is the forecasted annual growth rate over the next three years? Five years? Ten years?
• What is the average profitability of firms in your industry?
• What trends are affecting your industry?
• Who are the major customer segments served by your industry?
• Who are the major players in your industry?
• Who will be your key competitors in your industry?
• What key factors determine success or failure?

Industry Research

Now that you have a better idea of what to look for, you will need to know where to begin your search. There are a number of great free resources to begin looking for industry research. However, the first step is to determine the industry you are in.

While by this point, you should have some idea of the industry you are in, it is not always so clear. You could try an internet search to see what information you can find on your industry, but you will also want to find the NAICS code. You can do a NAICS Code Lookup and find the NAICS Code for LLC that matches your industry.

Here, you use the NAICS identification tool to drill-down through a list of industries to find the appropriate NAICS code for your business.

Once you know your industry, you can begin collecting more information about the industry trends and trajectory.

www.Bizstats.com provides free industry statistics including industry averages for income statement revenues and expenses, balance sheets, and key financial ratios. This is very helpful in making financial forecasts and setting benchmarks.

The US Census Bureau also provides several tools to help you conduct industry research:

• The Economic Census provides information on employer businesses, including data sorted by industry, state, region, and more.
• Statistics of US Businesses (SUSB) provides additional data on US businesses by enterprise size and industry. Both of these tools may help in conducting your industry analysis.

Target Market Analysis

Once you have a better understanding of the industry, you can begin to narrow down to your target market. In this section of the business plan you describe who your target market is and what you know about them.

What is a target market? Your target market is the specific group of customers to whom your product is intended. And no, it is not everyone. Although many new venture founders would like to sell their product or service to everyone, you should focus your efforts on your most likely customers.

Narrowing your target market requires understanding the three types of markets for your products or services. Your venture’s market can be narrowed down into three categories, the TAM, the SAM, and the SOM.

The total available market (TAM) is the total market for your products and services. Everyone in the universe who might be your customer.

The serviceable available market (SAM) is the subset of the total market that you can actually reach. Although anyone in your universe might be your customer, you are limited in your ability to reach them all.

The share of market (SOM) is the subset of the serviceable available market that you will actually reach. These are your most likely customers. Your target market.

Target markets can be segmented in many different ways. The idea is to narrow down to your most likely customers. This is where your focus should be.

Ways you can segment the market include:

• Demographic (e.g., age, gender, family size, education, income)
• Geographic (e.g., country, state, region, city, neighborhood)
• Psychographic (e.g., benefits sought, personality, social class, lifestyle)
• Behavioral (e.g., benefits sought, usage, attitude, loyalty)

Once you understand who your target market segments are, you will be able to start determining how you can reach them. To do this, consider:

• Where does your target market get information to make purchasing decisions?
• What is it they are looking for when considering buying this product/service?
• What will your target market pay attention to?

Market Research

To determine your target market and conduct a market analysis, you will most likely have to do market research.

Market research is the collection, analysis, and interpretation of data related to your target market and target customer to support strategic decision making.

There are two types of market research : secondary market research, and primary market research.

Secondary market research is the collection, analysis, and interpretation of data that has already been collected for other purposes. Secondary market research may include the collection of data from a number of sources such as the U.S. Census Bureau, consumer agencies, and for-profit organizations.

Primary market research is the collection of new information to gain a further understanding of the problem at hand. Primary market research involves you collecting the data or hiring a market research firm to collect data for you. This is you going out and actually collecting the opinions of your potential customers.

Common methods of primary market research include customer observation, focus groups, customer surveys, and customer interviews .

Because primary market research typically takes more time to complete and may incur significant costs , secondary market research is often conducted before conducting primary market research. This allows you to gather enough insights that you can narrow your primary market research to those more likely to be your customers.

To begin conducting secondary market research, consider these sources:

Think with Google provides a number of free tools and resources to help you find and understand your target market. From tools like Find My Audience and an Insights Library to a wealth of information on customer trends and the consumer journey, Think with Google is a valuable tool in conducting your market analysis.

City Town Info provides free statistics on people and places, colleges and universities, and jobs and careers. You can search for data on more than 20,000 U.S. communities at the city and state levels.

Google Trends is another useful tool for conducting market research. Google Trends allows you to explore what people are searching on the internet. You can examine trending topics, see trends by year, or search your own topic to discover interest over time, by region, or by related queries.

Social Mention allows you to conduct a real-time social media search for topics across more than 100 social media platforms. Social Mention provides you with information on the sentiment behind topic mentions, top keywords, top hashtags, and the social media platforms where these topics are being discussed.

Needless to say, there are several other great sources for both industry and market research. The key is to get creative to find the data and information to both guide your strategy as well as justify your business opportunity.

Competitive Analysis

Once you understand your industry and market, you should also include an analysis of your major competitors.

Your competitors may include anyone offering alternatives to your solution that people are using now to solve the same problem.

You will want to understand and explain who your competitors are along with their market share , price, major competitive advantages and disadvantages, and what makes your product unique from theirs.

Start by identifying the major competitors within your industry. You should focus on your closest competitors. Those that compete with you directly.

Next, for each competitor, describe their strategies, their strengths, and their weaknesses. In doing so, try to answer the following questions:

• What are their primary products and or services?
• Who are their target customers?
• What differentiates your product or service from theirs?
• What is their pricing strategy?
• What is their marketing strategy?
• What is their main message or value proposition?
• What are their strengths and weaknesses?
• What are their competitive advantages?

You should complete a competitive analysis for your top three to five competitors. Doing so will allow you to gain a much better perspective on the competitive landscape and may provide insight into how you can distinguish yourself from your competitors and even how you can take advantage of areas where your competitors fall short.

Marketing Plan

The marketing plan depicts the overall strategy your venture pursues to capture market share.

The marketing plan describes all aspects of marketing for your venture, including the product, price, place, and promotion . This includes a big picture view of your marketing strategy, your planned marketing mix, as well as your pricing strategy, sales strategy, and advertising strategy.

The marketing plan should be well informed by your industry and market analysis. By now, you have a plethora of knowledge about who your target customer is, the problem and pain points that you are alleviating for them, and how your competitors are positioned. All of this knowledge allows you to hone your marketing plan to reach your target market with the right message in the channels they turn to for information.

Marketing Strategy

The first section of your marketing plan is your marketing strategy. Your marketing strategy refers to your overall strategy of how you will market your product. How will you get your message out to your potential customers?

Your marketing strategy should consider the four essential elements of marketing:

The 4 Ps of Marketing:

The product is everything the customer gets, whether it be a physical product, a service, or an experience.

It is what you deliver. This includes the product or service itself, along with its branding, packaging, labeling, and even benefits.

The price is what you charge. What the customer gives you. Your business plan should discuss your pricing strategy and where this fits in your marketing mix.

Are you competing on price and thus offer low pricing? Or are you focusing on value at a medium price point? Or maybe you are positioned as a luxury label or item, and compete at a high price point? Why did you choose this strategy? Does it fit with your target market and within your marketing mix?

Location refers to where your customers find you, or where you find them.

While much of today’s marketing is done online, location is still as important as ever. Once you understand the place, you will have a much better idea on how to deploy your marketing mix. Where do your ideal customers get their information? Where do they shop? What forms of social media do they use?

Promotion is how you tell customers about your products and services.

Simply put, promotion is how you raise awareness of your products, services, or brand. Promotion strategies may include public relations, content creation and curation, marketing, and advertising.

But, keep in mind, your promotional strategies should be focused on one thing: your target customer and the strategies and messaging that works for them.

Your Marketing Mix

Your marketing mix is how you allocate resources to the marketing channels that you plan to pursue. In this section of your marketing plan, you will describe the marketing messaging and channels that you plan to use, and why these are appropriate for your target market.

Inbound Marketing

Inbound marketing, or content marketing, is a form of marketing designed to draw traffic to your website by providing valuable content to your target market. This is often achieved by posting useful web content, content, videos, and blogs.

The idea behind inbound marketing is pretty simple- by providing knowledge and information on your products, services, and other information that is valuable to your customers, you generate more leads and, hopefully, more sales.

Social Media Marketing

With over 3.5 billion people around the world using social media, social media marketing is another powerful tool to reach potential customers.

Social media marketing has many advantages, including allowing you to get your message in front of your specified target audience at little to no cost.

Although there is an overabundance of social media channels to choose from. Focus on the ones that your target market uses to get their information.

For instance, if your target market is middle age or older people, you may want to focus on platforms that are more popular with these demographics such as Facebook, Twitter, and Pinterest. However, if your target market is teen agers and young adults, you are more likely to find them on platforms such as Instagram and TikTok.

The Power of Video Marketing

Do not forget to discuss the use of video marketing in your marketing mix.

In both inbound and social media marketing, video has begun to play an increasingly important role. Video marketing can be employed in inbound marketing, email marketing, and social media marketing to serve a variety of purposes. The most common uses of video marketing include explainer videos, presentation videos, testimonial videos, sales videos, and video ads.

Not only can video marketing be used in a variety of methods and contexts, it is a highly consumed type of advertising. In fact, in 2020, 96% of consumers watched an explainer video to find out more about a product or service. Video works. And marketers believe this too. 92% of marketers who utilize video marketing say that it is a key part of their marketing strategy.

Email Marketing

Depending on the type of venture your company is, email marketing may also be an important element in your marketing mix. A good email marketing strategy balances gaining new customers with keeping your existing customers engaged with your company.

Although you do not want to overdo it, and a lot of email marketing seems “spammy”, email marketing can be very effective in the right form. Welcome notes, confirmation emails, informational emails, newsletters, digital magazines, promotional emails, and seasonal and birthday campaigns are just a few of the many types of email marketing.

Referral Marketing

Another common type of marketing in a company's marketing mix is referral or recommendation marketing. Referral or recommendation marketing can take many forms. Referral marketing might include good old organic word-of-mouth marketing wherein you ask customers for referrals, or even a formal system for rewarding customers who refer new clients.

Pricing Strategy

The Marketing Plan section of the business plan should also describe your pricing strategy. How are you going to price your products and services?

There are a number of ways you can approach pricing:

Markup Pricing —  Markup pricing is pricing based on your costs, plus a predetermined markup. The amount you mark up your product or service is usually expressed as a percentage, known as the gross margin. Markup pricing is most often found in high volume manufacturing industries where manufacturers must cover the cost of the products they are making.

Competitive Pricing —  Competitive pricing is pricing based on your competitors prices for similar products or services. Competitive pricing is most often seen in products or services where there are numerous competitors or substitutes.

Value Pricing —  Value pricing is pricing based on the value or perceived value that you deliver to your customers. In value-based pricing, you set the prices of your products and services in line with what the customer believes your product or service is worth. Value-based pricing is most often seen in higher value products and services, those that cater to self-image, or those that are niche or unique.

Penetration Pricing —  Penetration pricing is setting a low initial price, and then raising it as demand increases. Penetration pricing is designed to capture market share. It is a strategy often used by a new business or in launching new products and services. The idea is to set the price low enough to draw customers from your competition.

Price skimming —  Price skimming pricing is setting a high initial price and then reducing this price as the market evolves. Price skimming is most often used on new or trendy products and services. As initial demand slows and alternatives or competitors emerge, the high initial pricing must then be lowered to stay competitive in the market.

Sales Strategy

A sales strategy is how you plan on selling your products or services to your target market. This includes your sales channels (where will your product or service be available for sale) as well as how you will sell your product or service.

Your sales strategy depends on your business model and the nature of your business. If your business involves retailing, food services, or personal services where your customers come to you to make a purchase, your sales strategy may be quite simple (or even unnecessary to income). However, if your business involves personal selling, you may need a more thought-out sales strategy.

Some questions to ask to determine and document your sales strategy in your business plan:

• Will your products or services be available on your website?
• On a third-party website?
• In retail locations?
• In your own stores?
• In other retail stores?
• Directly to consumers? (Business to Consumer or B2C)
• To businesses? (Business to Business or B2B)
• Cold calling?
• Networking?
• Inside salespeople?
• Outside sales representatives?
• Sales through strategic partners?

Advertising Strategy

An advertising strategy is how you plan to use sponsored, non-personal messaging to reach and inform potential customers of your product, service, or brand.

Your advertising plan should describe the mediums you are going to advertise in , who you are targeting advertising in these mediums, your advertising message(s), and your advertising budget. A good advertising plan is also measurable, so be sure to consider how you are going to measure the effect of your advertising strategy to see if it is working.

Advertising Mediums

The most common advertising mediums typically fall into the categories of traditional advertising and digital advertising.

Traditional advertising includes print advertising such as newspapers, magazines, flyers, direct mail, and even billboards, as well as radio and tv advertising.

Digital advertising includes email advertising, search engine advertising, website advertising, social media advertising, influencer advertising, among many, many more.

The secret to finding the right advertising strategy and advertising mediums for your business is knowing where to find your most likely customers. Where is your target market, and where do they go to get their information?

Organizational Plan

The organizational (or management) plan describes:

• The legal form of the business
• Its organizational structure
• The background and roles of the leadership team
• Key personnel that are already in place or you will need to fill.

Organizational Type and Structure

The first part of your organizational plan describes your organizational type and structure . Who owns your company? And what is its legal business structure?

There are four primary types of organizational structures:

Sole Proprietorships

Partnerships.

• Limited Liability Companies (LLCs)

Corporations

Sole Proprietorships and Partnerships are informal business structures , while LLCs and Corporations are more formal business structures .

The best type of structure for your business will depend on your business’s particular characteristics and needs. A partnership structure may be the best choice for some businesses, while an LLC or a corporation might work better for others.

Sole proprietorships are an informal type of business structure. While many businesses start out as sole proprietorships because they are an informal business structure the owner is liable for 100% of the business's liabilities and risks. Thus sole proprietorships are typically not the preferred ownership structure for small businesses.

Similar to a sole proprietorship, a partnership is also an informal type of business structure. While a sole proprietorship involves only one owner, a partnership is a business structure with two or more partners where there is still no legal distinction between the owners of a partnership and their business.

An LLC is a formal business structure that distinguishes the owners from the business itself.

LLCs offer the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.

It is the simplest way of structuring your business to protect your personal assets in the event your business is sued.

LLCs can be owned by one or more people, who are known as LLC “members.” An LLC with one owner is known as a single-member LLC, and an LLC with more than one owner is a multi-member LLC.

LLCs require operating agreements . Operating agreements are legal documents that outline the ownership and member duties of your LLC. This agreement allows you to set out the financial and working relations among business owners ("members") and between members and managers.

Recommended: Learn how to form an LLC in your state using our free guides.

A corporation is a legal business entity that is owned by shareholders, run by a board of directors, and created through registration with the state.

Corporations offer limited liability and tax benefits but are required to follow more complex operating procedures than their counterpart, the limited liability company (LLC).

Ownership and Executive Team

Now it’s time to sell the single most important element in your business plan. You!

This subsection of your business plan tells readers who is in your ownership and executive team and outlines the accomplishments of your team.

You should include a short profile on each member of your ownership and executive team that will play a role in company decision making.

Who is on your ownership and executive team? What roles will each perform? What knowledge, experience, and accomplishments do you and your team bring to the table? What roles do you still need to fill, and how and when do you plan on filling them?

It is well known that many investors consider the experience and ability of the ownership and management team to be just as important as the idea itself. Do not pass over this opportunity to highlight how your knowledge, experience, and accomplishments set you up to succeed.

Also, remember that when you are writing your descriptions of your ownership team, talk about your accomplishments- as opposed to experience. Accomplishments signify that you have a track record and can get things done.

Key Personnel

This section of the business plan highlights the key personnel associated with the business . This may include members of the management team outside of the owners and executive management, the board of directors, and any outside advisors.

Here, include profiles on each key figure associated with your company, focusing on their accomplishments and the knowledge and skill they bring to the business.

Operational Plan

The operational plan describes how you will operate. The processes, strategies, and resources that you will use to operate your business on a daily basis.

This includes descriptions of production (if you produce a product) or the process you will use to carry out your service. The operational plan may also include, as necessary, descriptions of your logistics and supply chain, physical resources and needs, human resources and needs, technological resources and needs, and timetables for carrying out your plan.

Production Plan or Service Description

The production plan or service description explains how you are going to make and deliver your product(s) or provide your service(s). Although the production plans for products and services may look slightly different, both describe how your company will operate in the day-to-day.

If you are making a product , the production plan is where you will describe the process for making the product. What are your methods of production? What are the steps in your processes? How will you ensure quality? Maintain inventory? Handle Logistics?

If you are providing a service , the production plan is where you can describe the process you go through providing that service. What are your service methods? What will your sales and customer service look like? What is the customer experience like?

Most importantly, which of these might give you an advantage over your competitors? If you have any superior methods, processes, or other advantages, make sure to highlight them in your production plan or service description.

Logistics and Supply Chain

This section of the business plan describes your logistics and where you fall within the supply chain in your industry.

If you produce a product , you should discuss how you source materials, where your materials come from, and who your suppliers are. You will also need to discuss how you handle inventory, how you warehouse, and how you distribute your product(s).

If you are a service business , you may still have to discuss how you source materials used in your service, who your suppliers are, and how you handle inventory.

Physical Resources

In this section of the operational plan, you describe the physical resources that you have and the physical resources that you need to acquire. Think through everything you might need. This will become important when it is time to make financial projections.

• What facilities, machinery, equipment, and supplies do you require?
• Do you require raw materials?
• Who will be your primary suppliers?
• Secondary suppliers?
• Do you have back up suppliers and contingency plans if you cannot acquire raw materials?

Technological Resources

You should discuss the technological resources that you are developing, have, or need to create or acquire. Technological resources may include any software, applications, or websites that you have or will need to create, outsource, or purchase.

• What hardware or machinery will you require?
• What software or applications will you require?
• Can you purchase the software and applications you need?
• Are the software and applications you will need off-the-shelf or specialty?
• Will you have to create the software and applications you need?
• Do you need a website?
• Will you create and maintain your website inside the company or have it created and maintained by someone else?

Human Resources

Here, you describe the people that are a part of your team, and the human resources that you need to add to your team, hire, or outsource. Since you have already described the ownership and management team as well as key personnel, this section is more focused on production level workers and lower management.

• How much staffing will you need?
• What skills will your staff require?
• What will your staffing typically look like?
• How will you recruit, train, and retain employees?

Goals, Milestone, and Risk

The goals, milestones, and risks section of your business plan is the place to outline your goals, set key milestones, and explore and explain your preparation for the risks you will face.

Goals lay the foundation of where you intend to take your company and how you are going to get there. It is important to ascertain the short and long-term goals for your company.

Your goals should be connected to your mission and vision, your business model, and your strategic plans. They should also reflect your ambition to move the company forward and are often reflected in key performance indicators (KPIs) , such as numbers of users and customers, revenues, expenses, retention, satisfaction, and other indicators of performance.

Here are some questions to help you develop the goals for your company:

• When do you expect to break even?
• What do you expect your revenue to be in one year? Three years? Five years?
• What market share do you expect to capture in the next year? Three years? Five years?
• Where do you plan to expand from here?
• What KPIs do you need to achieve or improve?
• When do you expect to implement major objectives?
• What level of customer satisfaction do you hope to achieve?

When developing your goals, in addition to defining what your goals are, you also need to consider the how , the when , and the who . First, consider how your goals will get accomplished? What actions need to be taken to achieve your goals? What milestones do you need to accomplish along the way?

Your goals should also include your plan on when you plan on attaining each goal . Not only will your readers be curious about when you plan to achieve your goals, due dates and deadlines make for really powerful motivators.

Finally, you should also determine who is going to be responsible for working toward each goal. In a sole-proprietorship or startup it may be you, the business owner, or your founding team. However, as your organization grows, it will become more and more important to define who is responsible for pushing toward and achieving each goal.

SMART Goals

Your goals should be SMART: S pecific, M easurable, A ttainable, R ealistic, and T imely.

• Specific —  Your goals should be clear and specific. They should be narrow enough that you can determine the appropriate steps to attain them. In addition to what , in planning your goals, do not forget to be specific about how , when , and who . How will your goals be attained? When do you anticipate achieving them? Who is going to be responsible?
• Measurable —  Your goals should be measurable. There should be some objective metric or performance indicator by which you can tell if you have met your goals? How are you going to measure your goals? What metrics or performance indicators will you use? How will you know if you achieve your goals?
• Attainable —  Your goals must also be realistic and attainable. For a goal to be attainable you must be able to achieve it. Do not be afraid to push yourself, but setting unrealistic goals will cast doubt on your entire business plan. Ask yourself, can your goals be accomplished? By you? What will it take to attain them?
• Relevant —  Your goals also need to be relevant. To be relevant, they should contribute to the mission, vision, and success of your venture. Do your goals align with your company’s values? Are they within the scope of and aligned with your operational plan? Your marketing plan? Are they within the budget?
• Timely —  Your goals should also be timely and time-bound. Their process and progress should be clearly defined and they should have a starting and ending date. Without a timeframe, there is no sense of urgency, or motivation to get started. Make your goals time-bound. How long do you expect it to take? When do you plan on getting started? When do you anticipate achieving each goal?

Milestones are important events in your venture’s growth that mark significant change or stage of development.

Creating a list of milestones can act as a checklist of what you need to accomplish for your venture to reach its goals. They tell the story of how you are going to get from where you are to where you are going.

Milestones might include major events and accomplishments, such as:

• Forming an LLC
• Writing a Business Plan
• Securing Seed Capital
• Develop a Prototype
• Begin Production
• First Major Sale
• Reach 10,000 Downloads
• Achieve 1,000 Paying Customers

It is alright to list a few milestones that you have already completed. Or to leave them in your business plan once you complete them. Accomplished milestones show that you are making traction.

Milestones act as a signal to potential investors and other stakeholders what to expect from your venture and when to expect it. They also signal whether the venture is progressing and growing as expected.

Implementation Timeline

The implementation timeline is where you describe where your company is in its lifespan . You should set a timeline to reach your goals and milestones. This should include a short-term timeframe as well as where you anticipate being in the long term.

This section of the business plan should not be long. A simple chart will do. You can find several free timeline templates online to plug in your milestones and the time frame you expect to achieve them.

You will also want to include a section in your business plan showing that you understand the critical risks that your business may be subject to . The risks you will face in your business include both internal and external risks. These are any areas that expose your venture to any kind of loss- assets, customers, sales, profits, and reputation, among others.

By exploring your assumptions and identifying possible risks in those assumptions, you can show that you have assessed and are prepared to handle risks and threats that may arise. There are several tools available to analyze business risks, including SWOT Analysis and contingency planning .

SWOT Analysis

You may want to conduct a SWOT analysis or even include it in your business plan. A SWOT analysis is an analysis of your strengths, weaknesses, opportunities, and threats.

A SWOT analysis can help you understand your industry and market, your venture, and the strategies that you should pursue.

To conduct a SWOT analysis, you will need to assess factors both inside and outside your venture.

Here is how to conduct your own:

• What does your company do well?
• What are your company’s advantages?
• What do you do better than your competitors?
• What unique or low-cost assets do you have access to?
• What does your company not do well?
• What are your company’s disadvantages?
• What do your competitors do better than you?
• What needs to be improved?
• Where can you improve?
• Where can you grow?
• How can you turn your strengths into opportunities?
• How can you turn your weaknesses into opportunities?
• Do the trends of the industry or market represent a threat?
• Is the number of competitors growing?
• Do changes in technology or regulation threaten your success?
• Do your weaknesses represent a threat?

Contingency Plans

After assessing your risks and your SWOT analysis, you should address any major threats or risks that your venture faces with contingency plans.

Contingency plans are plans to help mitigate these risks by establishing a plan of action should an adverse event happen.

Contingency plans show that you understand the threats and risks to your venture, and you have a plan in place to lessen the damage should these risks emerge. There are various ways to prepare for adverse events. One is through planning- identifying alternatives and determining the best course of action. Another is business insurance.

Business Insurance

Business insurance protects against risk from several sources. The type of business insurance you will need varies greatly depending on the nature of your business.

While there are standard types of coverage like general liability insurance , professional liability insurance , workers’ compensation , insurance for commercial property and commercial auto insurance , there are also insurance policies that cover specific business activities and specialized equipment.

You can bundle most of these into what is called a Business Owner’s Policy (BOP) by a trusted insurance provider to get you started doing business.

Financial Statements

Your financial statements should include detailed projections of your income statement , cash flow statement, and balance sheet for the first year. You should also provide quarterly projections for the first three (or preferably five) years as well.

You also will likely need to include some sort of financial statement in your business plan. If you are a new venture, you will supply pro forma financial statements. Pro forma financial statements are simply financial projections.

Financial statements can help you to evaluate the cash needs of your venture, determine whether your venture is feasible and desirable, compare your expected returns with the alternatives, identify milestones and benchmarks, and demonstrate the value of your venture to investors.

Financial Assumptions

Before you begin completing your financial statements, you should first sit down and list the assumptions you will rely on to project your financial statements .

These should include projections concerning your:

• Initial revenue level per month
• Your growth and factors affecting growth
• Your inventory and inventory turnover
• And your operating expenses.

One of the biggest mistakes new ventures make is in making unrealistic assumptions .

Remember, revenue assumptions are key assumptions in determining whether your business will be viable. However, many entrepreneurs are overly optimistic about their revenue assumptions and tend to underestimate their expenses.

In order to make more accurate financial assumptions, back up your assumptions with data whenever possible. To find data to back up your assumptions, look for things like industry averages, market trends, and comparisons with similar ventures. You should already have a substantial amount of this data from your industry and market research.

Pro Forma Income Statements

The income statement , also known as the profit and loss statement , is a statement that shows the projections of your venture’s income and expenses over a fiscal year. On the income statement, you will detail your revenue and sources of revenue based on the assumptions you have made. You will also detail your anticipated expenses and use these to estimate your net income.

The typical income statement includes:

• Revenue —  the total amount of sales, or revenue, projected to be brought in by your business.
• Cost of Goods Sold —  the total direct cost of producing your product or delivering your service.
• Gross Margin —  the difference between revenue and cost of goods sold.
• Operating Expenses —  this section of your income statement details all of the expenses associated with operating your business. Common operating expenses might include rent, utilities, office
• expenses, salary expenses, and marketing and advertising expenses, among others.
• Total Operating Expenses —  the total of your operating expenses, excluding interest, depreciation, and taxes.
• Operating Income —  the difference between your gross margin and operating expenses.
• Interest, Depreciation, and Taxes —  this section of your income statement lists your non-operating expenses- expenses such as interest, depreciation, amortization, and taxes.
• Net Profit —  the total of how much you actually made. This is calculated by subtracting interest, depreciation, and taxes from your operating income.

Pro Forma Cash Flow Statements

The cash flow statement is a financial statement that shows when and where cash (and cash equivalents) flow in and out of your venture. This tells you how much cash you will have on hand at any single point in time.

• Cash from Operating —  Cash flowing into and out of your venture from operating, beginning with “cash on hand.” Cash flowing into your venture from operating includes cash from sales, payments from credit sales, investment income, and any other types of cash income related to operations. Cash flowing out of your venture from operations, your expenses, includes costs of raw goods, materials, inventory, salary expenses, office expenses, marketing and advertising expenses, rent, interest, taxes, insurance, or any other expenses that are paid by the venture.
• Capital Cash Flow —  Cash flow, in or out of the venture, for capital assets such as the purchase or sale of fixed assets.
• Cash from Financing —  Cash flow from financing includes cash flowing in or out of your venture relating to venture financing activities. Inflows of cash from financing include the investments by founders or owners, any loans taken out during the period, or the issuance of any equity. The outflow of cash from financing may include the payment of the principal of any loans, along with the repurchase of any outstanding equity.

Pro Forma Balance Sheet

The balance sheet is a financial statement that balances a venture's finances at a specific point in time. It describes how much the company is worth. The balance sheet uses the accounting equation: assets = liabilities + equity . In fact, these are the main components of the balance sheet:

• Assets —  Resources that hold economic value. A business's assets include current assets and fixed assets. Current assets are resources that can be accessed in the short term. These include cash, accounts receivable, inventory, and other currently available resources. Fixed assets are resources that are intended for long-term use but hold economic value. These include land and buildings, machinery and equipment, furniture and fixtures, vehicles, and other fixed resources.
• Liabilities —  What the business owes. Like assets, a business’s liabilities are also current liabilities and long-term liabilities. Current liabilities are liabilities that are due within 12 months. Current liabilities include accounts payable, loans, and taxes. Long-term liabilities are liabilities that are due after one year. These include long-term loans, notes, and other long-term debts.
• Equity —  What the owners or shareholders own. Equity is also composed of two parts: Capital and Retained Earnings. Retained earnings is the amount of profit that has been retained by the company over the life of the venture. Capital earnings , then, is what’s left. It is what has been invested. For new ventures, this may be the founder’s or early investors’ initial investments. For larger corporations, this would be the value of their shares of stock.

Break-Even Analysis

The break-even analysis shows you how much you have to sell before you break even. The break-even analysis uses fixed and variable costs in order to determine the sales volume you have to attain to reach a break-even point. This is the point where your sales volume covers both your fixed costs and your variable costs.

The break-even point is most often expressed as a number of units. You can calculate the break-even point by dividing fixed cost by the average profit per unit (average price per unit minus the variable cost).

Break-Even Point = Fixed Costs/ Profit Per Unit (Avg. Price - Avg. Variable Costs)

You can also calculate the break-even point in terms of $ of sales. To calculate the break-even point in $ of sales, you can divide total fixed costs for the period by the contribution margin ratio (net sales minus total variable cost / net sales).

Break-Even Point ($ of Sales) = Fixed Costs / Contribution Margin Ratio Contribution Margin Ratio = (Net Sales - Total Variable Cost) / Net Sales

Startup/Funds Required

If you are writing your business plan for the purpose of seeking funding, you should conclude your business plan by describing the investment opportunity.

With your financial projections in place, you will now be able to determine the amount of startup capital or investment you require.

This is because the funding you need is highly dependent on your profit and loss, cash flow, and break-even point. With well-researched assumptions and the evidence to back them up, you are ready to make the case that your business is worth the investment and will be able to pay it back or reward investors in the future.

In this section of the business plan, you will need to explain the amount of funding you are requesting as well as describe what those funds will be used for. The startup funding request will need to cover all expenses (maybe even your own personal expenses) at least until you reach your break-even point.

Business Plan Appendices (Optional)

If you have additional evidence to support your business idea, your business model, or your ability to achieve your goals and meet your financial objectives, you may want to consider including it as an appendix to your business plan.

Additional / Optional Evidence

Owners’ Resumes —  One thing you may want to consider including in your business plan is the resume for each owner. Investors often invest as much in the startup team as they do in the idea itself. Illustrations of Product —  Another helpful appendix is pictures or illustrations of your product. These are especially helpful for new products or those which are difficult to depict with words. Storyboard of Customer Experience — If your business is a service business, you could also consider including a storyboard depicting your customer’s experience. Customer Survey Results — You can also include any market research that you have conducted in an appendix. Showing that you have solicited feedback from real customers or potential customers provides further credence to your venture and venture idea.

Develop Your Business Idea

Before writing your business plan, it is important to take some time to develop your business idea .

If you are starting a new company, there are likely many details of the venture that have not been fully worked through. If you already have an existing venture, the following tools can also be useful in evaluating your business model:

• A three-sentence business plan

The Lean Canvas

The business model canvas, three-sentence business plan.

An easy place to start is with a three-sentence business plan . The three-sentence business plan is easy to construct, and consists of three parts:

• your product or service
• your market and marketing
• your revenue model.

Your Product or Service

The first sentence of your business plan clearly yet simply states your business's primary product or service. This includes the what and the where.

Example: “CoffeeMe is an upscale bakery and coffee shop specializing in imported coffees and international delicacies that will be located in downtown Atlanta.”

Your Market(ing)

The second sentence of your three-sentence business plan describes who your target market is and how you will promote to them.

Example: “CoffeeMe’s target market is urban professionals living and working in downtown Atlanta, marketed and promoted through traditional advertising, company partnerships, and social media.”

Your Revenue Model

The third sentence of your three-sentence business plan explains your revenue model. How will you make money?

Example: “CoffeeMe’s revenue model includes one-time retail sales as well as a unique subscription model featuring all-you-can-drink coffee for subscribers.”

Put it all together, and you have your three-sentence business plan:

Example: “CoffeeMe is an upscale bakery and coffee shop specializing in imported coffees and international delicacies that will be located in downtown Atlanta. CoffeeMe’s target market is urban professionals living and working in downtown Atlanta, marketed and promoted through traditional advertising, company partnerships, and social media. Our revenue model includes one-time retail sales as well as a unique subscription model featuring all-you-can-drink coffee for subscribers.”

Another useful tool for developing your business idea is the Lean Canvas . The Lean Canvas takes a problem-solution approach to helping you plan your business, focusing on the problems you are solving for your customers.

The Lean Canvas helps you describe and visualize your problem, solution, customers, value proposition, key performance indicators, and competitive advantage.

The steps to complete the Lean Canvas are:

• Define your target customers or users
• List the problems you are solving for them and how they are currently solving those problems today
• Describe your solution
• Explain your unique value proposition
• Describe your revenue streams
• Depict how you will reach customers
• Define the key metrics that will tell if you are doing well
• Detail your cost structure
• Explain your unfair advantage

The Lean Canvas, created by Ash Maurya, and licensed under Creative Commons Attribution-Share Alike 3.0 Unported License: https://leanstack.com/lean-canvas

The Business Model Canvas helps you describe and visualize the key aspects of your venture including your customers, value proposition, infrastructure, and revenue and cost models.

If you have already completed a Lean Canvas, you will already have several of the central parts of the Business Model Canvas complete.

The steps to complete the Business Model Canvas are:

• Explain your value proposition
• Describe how you interact with customers
• List the key activities that you will need to do to deliver on your value proposition
• List the key assets that you will need to deliver on your value proposition
• Describe the key partnerships that you will need to put in place to deliver on your value proposition

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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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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? 

A business plan is a written document that defines your business goals and the tactics to achieve those goals. A business plan typically explores the competitive landscape of an industry, analyzes a market and different customer segments within it, describes the products and services, lists business strategies for success, and outlines financial planning.  

In your research into business plans, you may come across different formats, and you might be wondering which kind will work best for your purposes. 

Let’s define two main types of business plans , the traditional business pla n and the lean start-up business plan . Both types can serve as the basis for developing a thriving business, as well as exploring a competitive market analysis, brand strategy , and content strategy in more depth. There are some significant differences to keep in mind [ 1 ]: 

The traditional business plan is a long document that explores each component in depth. You can build a traditional business plan to secure funding from lenders or investors. 

The lean start-up business plan focuses on the key elements of a business’s development and is shorter than the traditional format. If you don’t plan to seek funding, the lean start-up plan can serve mainly as a document for making business decisions and carrying out tasks. 

Now that you have a clear business plan definition , continue reading to begin writing a detailed plan that will guide your journey as an entrepreneur.  

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 to the surface and reveal new possibilities for developing your business. You may choose to adapt the sections, skip over some, or go deeper into others, depending on which format you’re using. Consider your first draft a foundation for your efforts and one that you can revise, as needed, to account for changes in any area of your business.  

Read more: What Is a Marketing Plan? And How to Create One

1. Executive summary 

This is a short section that 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, your goals for developing it, and why it will be successful. If you are seeking funding, summarize 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, your customers? 

Revenue streams: From what sources will your business generate revenue? Examples include product sales, service fees, subscriptions, rental fees, license 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 or registered it with your state as a legal entity such as an S-corp or LLC, include the legal structure here and the rationale behind this choice. 

3. Competitor analysis 

This section will include an assessment of 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 one 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?

Read more: What Is Competitor Analysis? And How to Conduct One

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 them. 

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?

Read more: Market Analysis: What It Is and How to Conduct One   

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 the 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? 

Read more: What Is a Brand Strategy? And How to Create One

7. Financial planning  

In this section, you will explore your business’s financial future. If you are writing a traditional business plan to seek funding, this section is critical for demonstrating to lenders or investors that 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 you will invest resources and generate revenue [ 2 ].  

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

How many individual products or service packages do you plan to sell over a specific time 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 have to 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 choose to append supporting documents, such as licenses, 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 every quarter or year, 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. 

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Ready to start your business? Watch this video on the lean approach from the Entrepreneurship Specialization : 

Article sources

1. US Small Business Administration. “ Write Your Business Plan , https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan." Accessed April 19, 2022.

2. Inc. " How to Write the Financial Section of a Business Plan ,   https://www.inc.com/guides/business-plan-financial-section.html." Accessed April 14, 2022.

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How to Write a Business Plan, Step by Step

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What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

On a similar note...

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The 7 Best Business Plan Examples (2024)

As an aspiring entrepreneur gearing up to start your own business , you likely know the importance of drafting a business plan. However, you might not be entirely sure where to begin or what specific details to include. That’s where examining business plan examples can be beneficial. Sample business plans serve as real-world templates to help you craft your own plan with confidence. They also provide insight into the key sections that make up a business plan, as well as demonstrate how to structure and present your ideas effectively.

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Example business plan

To understand how to write a business plan, let’s study an example structured using a seven-part template. Here’s a quick overview of those parts:

• Executive summary: A quick overview of your business and the contents of your business plan.
• Company description: More info about your company, its goals and mission, and why you started it in the first place.
• Market analysis: Research about the market and industry your business will operate in, including a competitive analysis about the companies you’ll be up against.
• Products and services: A detailed description of what you’ll be selling to your customers.
• Marketing plan: A strategic outline of how you plan to market and promote your business before, during, and after your company launches into the market.
• Logistics and operations plan: An explanation of the systems, processes, and tools that are needed to run your business in the background.
• Financial plan: A map of your short-term (and even long-term) financial goals and the costs to run the business. If you’re looking for funding, this is the place to discuss your request and needs.

7 business plan examples (section by section)

In this section, you’ll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together. 

• Executive summary

Your executive summary offers a high-level overview of the rest of your business plan. You’ll want to include a brief description of your company, market research, competitor analysis, and financial information. 

In this free business plan template, the executive summary is three paragraphs and occupies nearly half the page:

• Company description

You might go more in-depth with your company description and include the following sections:

• Nature of the business. Mention the general category of business you fall under. Are you a manufacturer, wholesaler, or retailer of your products?
• Background information. Talk about your past experiences and skills, and how you’ve combined them to fill in the market. 
• Business structure. This section outlines how you registered your company —as a corporation, sole proprietorship, LLC, or other business type.
• Industry. Which business sector do you operate in? The answer might be technology, merchandising, or another industry.
• Team. Whether you’re the sole full-time employee of your business or you have contractors to support your daily workflow, this is your chance to put them under the spotlight.

You can also repurpose your company description elsewhere, like on your About page, Instagram page, or other properties that ask for a boilerplate description of your business. Hair extensions brand Luxy Hair has a blurb on it’s About page that could easily be repurposed as a company description for its business plan. 

• Market analysis

Market analysis comprises research on product supply and demand, your target market, the competitive landscape, and industry trends. You might do a SWOT analysis to learn where you stand and identify market gaps that you could exploit to establish your footing. Here’s an example of a SWOT analysis for a hypothetical ecommerce business: 

You’ll also want to run a competitive analysis as part of the market analysis component of your business plan. This will show you who you’re up against and give you ideas on how to gain an edge over the competition. 

• Products and services

This part of your business plan describes your product or service, how it will be priced, and the ways it will compete against similar offerings in the market. Don’t go into too much detail here—a few lines are enough to introduce your item to the reader.

• Marketing plan

Potential investors will want to know how you’ll get the word out about your business. So it’s essential to build a marketing plan that highlights the promotion and customer acquisition strategies you’re planning to adopt. 

Most marketing plans focus on the four Ps: product, price, place, and promotion. However, it’s easier when you break it down by the different marketing channels . Mention how you intend to promote your business using blogs, email, social media, and word-of-mouth marketing. 

Here’s an example of a hypothetical marketing plan for a real estate website:

Logistics and operations

This section of your business plan provides information about your production, facilities, equipment, shipping and fulfillment, and inventory.

Financial plan

The financial plan (a.k.a. financial statement) offers a breakdown of your sales, revenue, expenses, profit, and other financial metrics. You’ll want to include all the numbers and concrete data to project your current and projected financial state.

In this business plan example, the financial statement for ecommerce brand Nature’s Candy includes forecasted revenue, expenses, and net profit in graphs.

It then goes deeper into the financials, citing:

• Funding needs
• Project cash-flow statement
• Project profit-and-loss statement
• Projected balance sheet

You can use Shopify’s financial plan template to create your own income statement, cash-flow statement, and balance sheet. 

Types of business plans (and what to write for each)

A one-page business plan is a pared down version of a standard business plan that’s easy for potential investors and partners to understand. You’ll want to include all of these sections, but make sure they’re abbreviated and summarized:

• Logistics and operations plan
• Financials 

A startup business plan is meant to secure outside funding for a new business. Typically, there’s a big focus on the financials, as well as other sections that help determine the viability of your business idea—market analysis, for example. Shopify has a great business plan template for startups that include all the below points:

• Market research: in depth
• Financials: in depth

Internal 

Your internal business plan acts as the enforcer of your company’s vision. It reminds your team of the long-term objective and keeps them strategically aligned toward the same goal. Be sure to include:

• Market research

Feasibility 

A feasibility business plan is essentially a feasibility study that helps you evaluate whether your product or idea is worthy of a full business plan. Include the following sections:

A strategic (or growth) business plan lays out your long-term vision and goals. This means your predictions stretch further into the future, and you aim for greater growth and revenue. While crafting this document, you use all the parts of a usual business plan but add more to each one:

• Products and services: for launch and expansion
• Market analysis: detailed analysis
• Marketing plan: detailed strategy
• Logistics and operations plan: detailed plan
• Financials: detailed projections

Free business plan templates

Now that you’re familiar with what’s included and how to format a business plan, let’s go over a few templates you can fill out or draw inspiration from.

Bplans’ free business plan template

Bplans’ free business plan template focuses a lot on the financial side of running a business. It has many pages just for your financial plan and statements. Once you fill it out, you’ll see exactly where your business stands financially and what you need to do to keep it on track or make it better.

PandaDoc’s free business plan template

PandaDoc’s free business plan template is detailed and guides you through every section, so you don’t have to figure everything out on your own. Filling it out, you’ll grasp the ins and outs of your business and how each part fits together. It’s also handy because it connects to PandaDoc’s e-signature for easy signing, ideal for businesses with partners or a board.

Miro’s Business Model Canvas Template

Miro’s Business Model Canvas Template helps you map out the essentials of your business, like partnerships, core activities, and what makes you different. It’s a collaborative tool for you and your team to learn how everything in your business is linked.

Better business planning equals better business outcomes

Building a business plan is key to establishing a clear direction and strategy for your venture. With a solid plan in hand, you’ll know what steps to take for achieving each of your business goals. Kickstart your business planning and set yourself up for success with a defined roadmap—utilizing the sample business plans above to inform your approach.

Business plan FAQ

What are the 3 main points of a business plan.

• Concept. Explain what your business does and the main idea behind it. This is where you tell people what you plan to achieve with your business.
• Contents. Explain what you’re selling or offering. Point out who you’re selling to and who else is selling something similar. This part concerns your products or services, who will buy them, and who you’re up against.
• Cash flow. Explain how money will move in and out of your business. Discuss the money you need to start and keep the business going, the costs of running your business, and how much money you expect to make.

How do I write a simple business plan?

To create a simple business plan, start with an executive summary that details your business vision and objectives. Follow this with a concise description of your company’s structure, your market analysis, and information about your products or services. Conclude your plan with financial projections that outline your expected revenue, expenses, and profitability.

What is the best format to write a business plan?

The optimal format for a business plan arranges your plan in a clear and structured way, helping potential investors get a quick grasp of what your business is about and what you aim to achieve. Always start with a summary of your plan and finish with the financial details or any extra information at the end.

Want to learn more?

• Question: Are You a Business Owner or an Entrepreneur?
• Bootstrapping a Business: 10 Tips to Help You Succeed
• Entrepreneurial Mindset: 20 Ways to Think Like an Entrepreneur
• 101+ Best Small Business Software Programs 

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8 Things You Need in a Business Plan

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

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

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

What is a business plan?

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

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

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

Need assistance in writing a business plan?

Contact our award-winning business plan writers now!

Eight Key Components of Business Plans

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

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

1. Executive Summary

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

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

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

2. Business Description

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

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

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

Free Example Business Plans

Explore our free business plan samples now!

3. Market Analysis

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

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

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

4. Marketing and Sales Strategy

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

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

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

5. Operations Plan

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

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

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

6. Management and Organization

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

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

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

7. Financial Plan

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

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

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

8. Appendix

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

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

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

Hire our professional business plan writing consultants now!

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

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

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11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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Starting a law firm can be a rewarding and lucrative venture, but it requires careful planning and strategy. A well-crafted business plan is a crucial tool for any law firm looking to establish itself, secure funding, or grow its practice. The business plan will serve as a roadmap, outlining the law firm’s objectives, strategies, and unique selling proposition

Why Every Law Firm Needs a Business Plan

A well-structured business plan is imperative for every law firm, regardless of its size or specialization. While legal expertise is undoubtedly crucial, having a clear vision and strategic direction is equally essential. A business plan serves as a guiding light, defining the firm’s mission, values, and long-term goals. This clarity is vital for aligning the entire firm towards a common purpose, ensuring that everyone understands the objectives and the path to achieving them. Without a business plan, a law firm may find itself navigating uncertain waters, reacting to circumstances rather than proactively pursuing its ambitions.

The Key Components of a Law Firm Business Plan

A well-structured law firm business plan consists of several key components, each playing a crucial role in guiding the firm’s operations and ensuring its long-term success. Here are the essential elements of a comprehensive law firm business plan:

• Executive summary
• Law firm description
• Market analysis
• Organization and management
• Services 
• Marketing Strategy
• Financial plan
• Start-up budget

Section One: Executive Summary

The executive summary is arguably the most critical section of your law firm’s business plan. While it appears at the beginning, it is often written last, as it serves as a concise yet comprehensive overview of your entire plan. This section should capture the reader’s attention, providing them with a clear understanding of your law firm’s essence, mission, and what to expect from the rest of the document. In your executive summary:

• Introduce your law firm: Briefly describe your law firm’s name, location, and legal specialization.
• Mission and vision: State your firm’s mission and vision, highlighting your commitment to serving clients’ legal needs effectively.
• Your unique selling proposition: Clearly state your USP, and present what is unique about your firm that will ensure success.

The executive summary sets the stage for your entire business plan. It should be a concise yet compelling introduction to your firm’s mission, values, and potential. If crafted well, it can grab the reader’s attention and encourage them to explore other sections in detail. If you feel overwhelmed by this, you can write this section last. 

Section Two: Law Firm Description

This section of your business plan provides a deeper dive into your firm’s background, history, legal specializations, and legal structure and ownership. This section should provide a concise yet informative overview of your firm’s identity and history. Here’s what this section should cover:

• Mission Statement: Briefly reiterate your law firm’s mission statement. This statement should encapsulate your firm’s overarching purpose and guiding principles.
• Geographic Location: State out the physical location of your law firm’s office(s). This should include the city or region where your primary office is situated.
• Legal Structure and Ownership: State the legal structure of your law firm, whether it’s an LLC, S-Corp, or another legal entity. This choice is a fundamental aspect of your business model, influencing ownership, liability, and taxation. If your firm’s ownership is not that of a sole proprietorship, provide details on the ownership structure. Explain how the chosen structure aligns with your firm’s business model, decision-making processes, and long-term goals.
• Firm History: Provide the history of your law firm. Highlight key milestones, achievements, and notable moments in your firm’s journey. If your firm is well-established, briefly summarize its history, showcasing your accomplishments and contributions to the legal field.

Remember that brevity is key in this section. Don’t spend too much time, just touch on important points and achievements. 

Section Three: Market Analysis

A well-conducted market analysis will not only demonstrate your understanding of the legal industry but also inform your law firm’s strategies and decision-making. It goes beyond understanding your competition; it delves deep into your potential clients’ needs and expectations. 

Through market analysis, you can segment your target market based on demographics, industry, legal needs, and preferences. This segmentation allows you to tailor your services to meet the specific needs of different client groups. It also helps you identify the pain points and challenges that potential clients face. By understanding their concerns, you can offer solutions that directly address these pain points.

Your market analysis should also reveal the pricing strategies of your competitors. By benchmarking your pricing against theirs, you can position your services competitively. You can choose to price higher if you offer unique value or lower if you aim to attract price-sensitive clients. Your market analysis should reveal areas where your competitors may be falling short. Use this information to frame your services as the solution to these weaknesses. For example, if competitors have slow response times, emphasize your firm’s commitment to timely communication. 

Showcase your firm’s USPs that directly address client needs and preferences. If you excel in a particular practice area, have a reputation for excellent client service, or offer innovative fee structures, use these strengths to attract your preferred clientele. Ultimately, a well-documented market analysis not only informs your law firm’s business model but also guides your approach to client acquisition, pricing, and service delivery. It ensures that your legal services align with client expectations and positions your firm for success in a competitive legal industry

Section Four: Organization and Management

Image Source – Creately

This section provides a clear picture of your firm’s internal structure and leadership. Name the key stakeholders in your law firm and what they bring to the table. Highlight any unique experiences or expertise that each partner brings to the firm. This could include prior work at prestigious law firms, involvement in landmark cases, or specialized knowledge in a specific area of law. Explain how these experiences set your firm apart and enhance its capabilities. You can also include an organizational chart that visually represents your law firm’s structure. This chart should showcase the hierarchy, roles, and reporting lines within the firm. By including the names, educational backgrounds, unique experiences, and organizational chart, you paint a comprehensive picture of your law firm’s leadership and structure. This not only builds confidence in your team’s capabilities but also showcases the depth and expertise of your staff to potential clients, partners, or investors.

Section Five: Services

This section is the core of your law firm business plan. Here, you will go into detail about all aspects of your services. Present in simple words:

• The problem(s) your law firm is addressing and your approach to how to alleviate those pain points? Answer these questions, and provide in detail how your firm is in the best position to tackle this problem. 
• The solution(s) you are providing. This should describe how your law firm resolves your prospective market’s needs. This should include the work you do, and the benefits that each client will receive if they work with your firm. 
• Your law firm competition.  This should describe what advantages your law firm has over your competitors? What you do differently when providing your solutions and how your clients will gain additional benefits when they work with your law firm.

Section Six: Marketing Strategy

As you craft your business plan, keep these four essential questions in mind:

• What Is Your Firm’s Value Proposition? Clearly define what sets your law firm apart from others. This should guide your marketing and sales strategies, emphasizing the unique value you offer to clients.
• Who Is Your Target Audience? Identify your ideal client profile. Understanding your target audience helps tailor your marketing efforts to reach those most likely to benefit from your services.
• What Are Your Growth Goals? Set specific, measurable growth goals for your firm. These goals should inform your sales and marketing strategies, outlining how you plan to achieve them.
• How Will You Measure Success? Determine key performance indicators (KPIs) to measure the success of your marketing and sales efforts. Whether it’s tracking client acquisition rates, website traffic, or revenue growth, having measurable metrics will help you gauge your progress and make informed adjustments.

It is also valuable to perform a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to assess your law firm’s internal and external factors. Describe your online marketing efforts, including your website, social media presence, and email marketing campaigns. Explain how you plan to leverage marketing  to reach and engage potential clients effectively. You should also define your pricing structure and fee arrangements. This may include hourly rates for specific legal services, retainer agreements for ongoing representation, or flat fees for standardized services. 

Section Seven: Financial Plan

If you want to expand your law firm and ensure a steady income, it’s essential to create a financial strategy for your practice. While you might not have all the answers regarding your firm’s finances, provide comprehensive details. Your goal should be to establish a financial plan, particularly for the initial year of your firm’s operation.

Provide comprehensive financial projections that cover the anticipated income, expenses, and cash flow for your law firm. These forecasts should offer a clear picture of how your firm expects to perform financially. You should also Incorporate income statements, which show your firm’s revenue and expenses, balance sheets that detail your assets and liabilities, and cash flow projections, which illustrate how money moves in and out of your business. These financial statements offer a holistic view of your firm’s financial health.

Explain the assumptions underlying your financial projections. This may include factors like growth rates, market trends, client acquisition strategies, and pricing models. Describe your strategies for achieving growth and how they translate into financial outcomes. This section is critical for demonstrating your law firm’s financial preparedness and sustainability. Investors, lenders, or partners will scrutinize these sections to assess the viability of your firm, making it essential to provide detailed and well-supported financial information.

Section Eight: Start-up Budget

When developing a business plan for your law firm, it is essential to create a realistic startup budget. This involves carefully considering various initial and ongoing expenses and factoring them into your revenue objectives. Here are some instances of expenses to incorporate into your budget:

• Hardware costs, such as laptops, printers, scanners, and office furniture.
• Office space expenses, whether you plan to rent space or work from home.
• Malpractice insurance fees.
• Staff salaries, including potential hires like administrative assistants or paralegals.
• Utility expenses, covering phone and internet services, among others.
• Expenses on practice management software or other tech tools

After itemizing these costs, review them thoroughly. Clearly state the total amount of funding you require to start and sustain your law firm. Explain how this funding will be allocated, including how much goes into covering startup costs and how much is reserved for ongoing operations. Be specific about the purpose of each funding component. 

Additionally, explore tools and solutions that can streamline non-billable tasks, freeing up more time for your legal practice. This not only enhances your overall productivity but also allows you to allocate more time to your legal practice. One exceptional solution that can significantly benefit your law firm operations is a legal practice management software. 

DigitsLaw: The Legal Practice Management Software for Law Firms

DigitsLaw is an all-in-one practice management software that streamlines and simplifies the day-to-day operations of a law firm. Whether you are a small firm or you have law firms in major cities, DigitsLaw can meet the unique needs of your legal practice. Our simple and intuitive tool offers a wealth of features that can make a substantial difference in the success and efficiency of your firm.

Here’s how DigitsLaw can help your new law firm scale:

• Effortless Case Management: DigitsLaw simplifies case management by centralizing all your client information, documents, and communications in one secure location. This ensures that you have easy access to everything you need, right at your fingertips.
• Time Tracking and Billing: With DigitsLaw, tracking billable hours and generating invoices is seamless. You can accurately record your time, expenses, and activities, allowing for transparent and error-free billing processes.
• Conflict Check: DigitsLaw provides a robust conflict check system that assists law firms in maintaining ethical standards and preventing conflicts of interest. By incorporating DigitsLaw conflict check capabilities into your law firm’s workflow, you can enhance your due diligence processes, reduce the risk of conflicts of interest, and uphold the highest ethical standards in your legal practice. 
• Client Collaboration: Foster better client relationships through DigitsLaw’s client portal . Clients can securely access case information, share documents, and communicate with your firm, enhancing transparency and trust.
• Legal Document Management: Say goodbye to the hassle of paper documents and disorganized files. DigitsLaw enables efficient document storage, organization, and collaboration, saving you time and reducing the risk of errors.
• Secure and Compliant: DigitsLaw prioritizes security and compliance, ensuring that your client data and sensitive information are protected at the highest standards.

By leveraging DigitsLaw’s capabilities, you can significantly reduce administrative overhead, minimize errors, and provide a more streamlined and responsive experience for your clients. It’s a strategic investment that will pay dividends as your firm grows and prospers.

Sample Business Plan and Fillable Template

If you’re in the early stages of creating your business plan, we’ve prepared an example that can serve as a reference. You can also download a blank version of our template here. Remember to tailor your plan to your specific requirements and objectives. 

Download your copy of our law firm business plan template HERE

Final thoughts.

In conclusion, crafting a law firm business plan is not just a formality; it’s a roadmap that guides your firm toward success. Whether you’re launching a new law firm or seeking to revitalize an existing one, a well-thought-out plan helps you.  From defining your firm’s mission and values to conducting a thorough market analysis every section of your plan plays a crucial role in shaping your law firm’s journey. It’s not just about impressing potential investors; it’s about setting clear goals, making informed decisions, and ensuring that your firm is well-prepared for the challenges and opportunities that lie ahead.

As you start planning, remember that your business plan is a living document. It should evolve and adapt as your firm grows and the legal industry changes. Regularly revisit and update your plan to stay aligned with your mission, serve your clients better, and achieve your long-term vision.

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How to Draft a Law Firm Business Plan

Law firms are something more than a business. Law firms and the lawyers within them are engaged in a profession, with obligations that go beyond purely commercial concerns.

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This truth can obscure the need for lawyers to pay attention to the business management side of their practices: their finances, marketing plans, business development efforts, IT purchases, lease terms and capital needs. For the highly trained lawyer, such concerns may feel at best like an afterthought, or at worst a nuisance that steals time from their true occupation: the “practice of law.”

And yet, those annoying business details are responsible for keeping the lights on. While law firms may be more than a business, there is, in fact, a large and necessary business element to them. For solo practices and small firms in particular, investing time into the business management side of legal practice can make a major difference in the financial rewards they derive from it—or even their survival. Firms that have failed to do so in the past (and even those that haven’t) can get a handle on their law practice business management by taking the step of drafting a business plan.

THE POINT OF A BUSINESS PLAN

We’ll discuss the components of a business plan in a moment, but first, let’s talk about why this exercise is valuable. For another type of business, a business plan may be useful in attracting investors or securing financing. Law firms should not think of their business plans as utilitarian documents in that sense (although someday one could prove helpful in obtaining a line of credit, say, or attracting lateral partners). Instead, the primary value of the business plan, particularly for the solo practice or small firm drafting one for the first time, lies in the fact that it forces the firm to think about business issues that it otherwise would not have considered.

As the D.C. Bar says in its advice to startup law offices : “The act of planning helps you think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.”

Of course, a business plan does little for anyone if it is quickly forgotten. But the mere act of generating a business plan gives a firm a direction to head in and goals to point toward. If the firm makes it a practice to revisit the business plan on an annual basis (if not more regularly), its business considerations will stay top-of-mind and the firm will continually refine them in ways that improve its performance.

THE CONTENTS OF A BUSINESS PLAN

Creating a strong business plan will require an investment of time and energy. At the same time, no one wants to write, or read, a massive document. To improve the chances that the project gets done, and gets read, it is best to keep a business plan to a reasonable length. Anything over 20 pages may stretch attention spans to the breaking point, and there’s no harm in going shorter if you have covered all the territory you need to by that point.

So, what, exactly, is the territory that you should cover? Most authorities agree that a sound business plan for a law firm should address the following broad areas:

• Overview of the Firm

This section should include basic information about the firm: its name, legal structure, practice areas and leadership positions. It should also contain some deeper information about the firm's identity and aspirations.

This would include:

A mission statement about the firm’s purpose

A vision statement or recitation of medium- and long-term goals for the firm

Important aspects of the firm’s history

Any important philosophies that the firm brings to legal practice

• Market Analysis

This section should discuss the business trends affecting the firm’s important practice areas and clients. It should evaluate any technologies that are affecting your practice area and consider how the firm may leverage or keep up with them. This section should also devote substantial energy to identifying the firm’s major competitors in each of its important practice areas and comparing their services to the firm’s.

In this section, identify the firm’s major clients, breaking them down by important characteristics like size, location, industry and practice groups used. Go through a similar exercise for major client prospects and targets. It’s worth examining how the firm can improve its relationships with both of these groups.

Important financial information includes the firm’s fixed and variable costs, backward- and forward-looking revenue, realization rate, collection rate, monthly overhead, assets and liabilities. A 12-month profit and loss projection should be included and could be considered the heart of the business plan.

There is a great amount of detail that any firm could get into on this front. Don’t get overwhelmed by it; at the same time, this is some of the most important information in the business plan, so it’s not advisable to gloss over it.

This section will address key operational issues like the office lease, equipment purchases and technology plans. You may assign roles to various staff members for operational issues.

Think about what marketing the firm currently performs, how it obtains clients and what marketing goals it wants to set for the future.

After completing these and any other sections the firm might want to address, then go back and draft an executive summary to be included at the beginning of the business plan document. The summary should be professional, but don’t be afraid to give it some optimistic energy. After all, with your eyes on the business management fundamentals of your firm, things should be looking up for the future.

• Growing Your Business
• Law Practice Management

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

Elon Glucklich

6 min. read

Updated April 3, 2024

Free Download:   Sample Law Firm Business Plan Template

It’s a dynamic time to be in the legal industry. Over 63,000 new attorneys have started practicing in the U.S. in the past decade, and they’re joining law firms that are increasingly leveraging new technologies like AI to work more efficiently.

Owning your own law practice offers numerous advantages, from greater control of your caseloads to flexibility in setting billing rates. 

But running a successful firm requires more than a deep knowledge of the law. 

You need to market yourself, understand potential clients’ motivations and desires, and clearly explain to them why they should hire you over another firm. All of which you can figure out by going through the process of writing a business plan.

• What should you include in a law firm business plan?

Here are a few sections we recommend including in any law firm business plan:

Executive summary

Market analysis, marketing plan, company overview, financial plan.

The details of your plan will vary based on factors like the size of your legal practice and whether or not you need funding

If you’re seeking a bank loan or investment, you’re best off following the traditional approach to writing a business plan . Otherwise, don’t feel bound to writing a full plan. You can just focus on the business plan sections that are most relevant to your situation. 

The executive summary is your opening pitch to the reader. Although it comes first in a business plan, you should write it last, since it distills your entire plan into a concise, one- to two-page overview. 

Start by outlining your law firm’s focus and current status. Are you:

• A newly founded practice
• An established firm seeking expansion
• A multi-location enterprise

Then, summarize your practice areas and target clientele. Describe the issues you’re solving for potential clients, and why they should choose you over competitors. 

Maybe your team has experience that’s relevant to your ideal client, or you offer an appealing fee structure. Anyone who reads the executive summary should be able to understand what makes your law firm unique .

Your executive summary briefly touches on your law firm’s area of focus. But the services section is where you give readers a detailed look at the expertise your legal practice offers, and how you address specific client needs.

What are your core practice areas? Do you represent:

Businesses: Contract disputes, regulatory compliance, employment law issues

Individuals: Personal injury claims, divorce proceedings, estate planning

Simply list all of your legal services. If you run an existing law practice, you can mention your existing client base. Also, specify if your law firm specializes in courtroom litigation, drafting contracts, or legal advisory services.

When writing out your services, consider what sets your firm apart. Maybe you provide free or low-cost initial consultations or specialize in areas underserved by competitors. Any services that might give you a competitive advantage are worth mentioning.

Understanding your potential client base is vital. Do you know the size of your market ? What are their characteristics? 

To conduct a market analysis , start by profiling your ideal client. Consider basic demographic information , like their:

• Income level
• Geographic location

Take their life circumstances into account as well. Are they navigating events like:

• Recovering from an injury
• Being charged with a crime
• Running a business
• Planning an estate

Depending on their circumstances, you’ll need to research relevant trends in your area to determine whether there’s a growing demand for the services you offer. 

Document who your competitors are as well. What other law firms might potential clients turn to? Note their strengths and weaknesses and compare them to your own in your market analysis. 

This research will help you develop a unique value proposition—something only your firm offers that you can emphasize in your marketing strategy.

The marketing and sales plan is where you describe how you will stand out and attract clients.

Where are your potential clients seeking out legal information? Common channels for law firms to market their services include:

• Television and radio commercials
• Print and online advertisements
• Company website

You’ll likely want to consider a combination of these tactics. 

But before spending your marketing budget, take some time in your business plan to determine how you’ll position yourself. If you’ve determined your law practice’s unique value proposition , it should be incorporated into all of your messaging.

Say you offer a unique combination of legal services in your market, such as financial compliance services for businesses and high-net-worth individuals. Your marketing plan is where you develop engaging messaging around your services that are tailored to your ideal client and the medium you’re promoting your services on.

Examples could include:

• Hiring a video production team to film a commercial for your legal practice
• Ensuring your law firm’s website is optimized for visibility on search engines.
• Creating pamphlets highlighting your service to distribute at business networking events or places where high net worth individuals frequent, like upscale health clubs or financial advisory offices.

One key point to remember is that the legal profession has specific marketing restrictions, to ensure law firms are promoting their services in an honest, ethical way. Make sure your plans adhere to the bar association’s guidelines .

The company overview isn’t an exhaustive history of your firm’s experience. It’s meant to quickly give the reader an understanding of your background, experience, and the structure of your firm.

Start with the basics:

Founding date: When was the firm established?

Legal structure: Is it a partnership, LLC, corporation, or other structure?

Location(s): List the communities your firm serves

Provide some detail about you and your team as well:

Founding partners: Summarize their legal experience, specializations, and any notable accomplishments.

Key Associates & staff: Briefly outline their roles and credentials

If your legal practice is already established, note any milestones you’ve achieved, such as major cases or community recognition. But even if you’re just starting, listing milestones like securing office space or building an initial client base are worth noting here as well.

Your law firm’s financial plan is crucial to determining if you have a strategy for running a viable business over the long term. 

Here’s a breakdown of what you need:

Sales forecast : Project revenue based on billable hours, retainer fees, contingency cases (if applicable), and any other income sources. Be realistic, especially in the early stages.

Expense budget : List all of your costs, including:

• Salaries and benefits:
• Rent and office expenses
• Malpractice insurance and bar dues
• Technology (i.e. case management software)
• Marketing and client development

Profit & Loss (P&L) : Your income minus your expenses, showing if you expect to be profitable.

Cash flow statement : Predicts when cash comes in and goes out of your business. Cash flows are crucial to ensure you can cover bills and payroll.

Balance sheet : An overview of your law practice’s financial health, listing assets (cash, accounts receivable), liabilities (loans), and equity.

If you’re seeking outside financing to start your legal practice, list startup costs like office build-outs, initial marketing, and technology investments separately from your expenses, since these are areas you’ll be looking to fund with lender or investor funds.

Additionally, be clear about assumptions you’re making when forecasting your revenue streams (case volume, hourly rates, etc.). Researching similar law firms can help you ensure your projections are reasonable.

• Download your free law firm sample business plan

Download our law firm sample business plan for free right now and use it for reference as you write your own plan. You can even copy and paste sections from the sample plan and customize them for your business. Just make sure you’re taking the time to do your own research.

You can also view other legal business plans , or browse the full Bplans library of over 550 sample business plans across numerous industries.

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

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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4 Types of Business Structures — and Their Tax Implications

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

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

What Is a Business Structure?

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

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

Key Takeaways

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

Business Structures Explained

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

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

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

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

What Are the Four Types of Business Structures?

1. sole proprietorship.

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

Overview of liabilities

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

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

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

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

Pass-through entity

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

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

2. Partnership

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

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

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

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

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

3. Limited liability company

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

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

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

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

4. Corporation

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

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

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

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

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

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

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

Choosing a business structure.

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

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

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

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

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

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

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LSEG Chief’s Potential £13.2 Million Pay Package Draws Scrutiny

By Ellie Harmsworth

A prominent proxy-advisory firm encouraged London Stock Exchange Group Plc shareholders to vote down a plan that could allow the company to more than double Chief Executive Officer David Schwimmer ’s pay for his work this year.

LSEG has asked investors to approve a revamped remuneration policy at the company’s annual meeting of shareholders in the coming weeks. With the changes, Schwimmer could be handed as much as £13.2 million ($16.7 million) for his work this year, up from a maximum of £6.35 million in 2023, according to Glass Lewis & Co.

Glass Lewis, a major voice on annual ...

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If your tax plan goes awry, maybe your adviser ends up footing the CRA bill

The KPMG logo at the high profile startups and high tech leaders gathering, Viva Tech, in Paris on May 16, 2019. CHARLES PLATIAU/Reuters

Allan Lanthier is a retired partner of an international accounting firm and has been an adviser to both the Department of Finance and the Canada Revenue Agency.

Recently, the Quebec Superior Court found that Big Four accounting firm KPMG committed professional misconduct by not properly advising its client of the risk involved in a tax plan. The court awarded the client about $3.9-million: the tax and interest owing when the plan failed.

Advisers who market aggressive tax plans have been put on notice. The March 6 court decision is a stark warning that, unless risks are clearly set out when providing tax advice, the adviser may bear the consequences.

The company in question, Gennium, is a Canadian corporation involved in generic drug distribution, owned by entrepreneur Louis Pilon and by a trust for the Pilon family. Mr. Pilon wanted to use the company’s profits to expand into drug manufacturing. But drugs can be a risky business – lawsuits are common – and he wanted to protect his assets by using separate corporations for the two businesses.

While there were some fairly simple ways to achieve asset protection – in fact, the family trust had been created partly for this purpose – KPMG presented a different plan to Mr. Pilon in 2005 that also offered potential tax benefits.

A new trust was created, and, after a complex series of transactions, Gennium’s cash was paid as dividends to the new trust from 2005 to 2007. The relevant Canadian tax rules were black and white: There was no tax to Mr. Pilon or the new trust, and the trust invested all of the cash in new corporations for the drug manufacturing business.

And here’s the best part: Years from now, when Mr. Pilon wanted to take assets from the new trust for personal use, there would be no tax either.

There was only one problem: Canada’s general anti-avoidance rule. Under the GAAR, the Canada Revenue Agency can recharacterize the tax results if a plan is “abusive,” unless it is put in place primarily for non-tax purposes.

Two of the four big accounting firms failed to meet quality standards last year, Canadian audit regulator says

KPMG’s own internal “GAAR committee” had reviewed the plan and concluded that, unless there was a primary non-tax purpose such as asset protection, the CRA would likely prevail in the event of a dispute, and the dividends would be taxed at personal tax rates.

However, Mr. Pilon was never advised of the committee’s conclusion. The CRA issued assessments taxing the dividends received by the new trust, and Mr. Pilon went to tax court. The government prevailed, and Mr. Pilon sued KPMG for the taxes and interest he had suffered.

In finding against KPMG, the Quebec Superior Court came to a number of conclusions.

KPMG’s view was that the primary purpose of the plan was asset protection and that the GAAR should therefore not apply. But what if the CRA disagreed? After all, Mr. Pilon already had a family trust protecting his assets. The court said that KPMG had an obligation to discuss the risk with Mr. Pilon. It did not: Rather, there was at best only a general discussion of the GAAR supported by a PowerPoint presentation.

The court also said that taxation is constantly evolving, and that KPMG had a duty to keep Mr. Pilon advised of developments after any initial advice was given and the plan was in place – something KPMG failed to do. For example, the CRA issued an interpretation letter in 2006 stating that the use of a trust similar to that involved in the KPMG plan could result in the application of the GAAR. KPMG never advised Mr. Pilon of this new CRA position.

This conclusion will be of concern to many tax advisers. While KPMG remained the tax adviser to Mr. Pilon in 2006 and subsequent years, what would the court have concluded had it not? Is there also a duty to advise former clients of new developments, and, if so, when does that duty end?

Finally, did Mr. Pilon suffer damages, or would he have had to pay the $3.9-million anyway? There were damages, the court said, because were it not for the KPMG plan, all cash would have remained in Mr. Pilon’s corporate group to fund new acquisitions.

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JPMorgan Chase is preparing for the day when Jamie Dimon is no longer head of the banking behemoth.

The board of directors at JPMorgan Chase said a top priority for the bank is to “plan for an orderly CEO transition in the medium term,” according to its latest proxy statement which was released on Monday.

According to the bank, the board “is spending significant time on developing Operating Committee members who are well-known to shareholders as strong potential CEO candidates.”

The proxy statement makes mention of several potential successors to Dimon who were promoted to new positions.

Jennifer Piepszak and Troy Rohrbaugh were recently elevated to co-CEOs of JPMorgan’s commercial and investment banking division while Marianne Lake assumed the CEO role at consumer and community banking.

Mary Erdoes, CEO of asset and wealth management, and Daniel Pinto, president and chief operating officer, were also mentioned in the proxy statement.

The board said that “these senior management changes and new alignment will help the Firm better serve its clients as well as further develop the Firm’s most senior leaders.”

Pinto was singled out by the board as someone who “is immediately ready to fulfill the responsibilities” of the CEO “should the need arise in the near-term.”

JPMorgan, which is the nation’s largest lender when measured by assets under its management, has made no secret of its fondness for Pinto. At its “investor day” two years ago, the bank said Pinto was ready to step in for Dimon.

JPMorgan’s succession plans for the post-Dimon era have long been fodder for speculation on Wall Street, which in recent months has been rocked by high-profile leadership changes at Morgan Stanley and Lazard.

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James Gorman stepped down at the helm of Morgan Stanley after 14 years as head of the bank. He was replaced by reputed “party animal” and foul-mouthed executive Ted Pick.

Peter Orszag, vice chairman of investment banking at the advisory firm Lazard, will take over for outgoing CEO Ken Jacobs in November.

Dimon, who has run JPMorgan Chase for more than 18 years, indicated last year that he plans to depart in three-and-a-half years.

He has so far refused to rule out a potential post-banking political career.

Bill Ackman, the billionaire hedge fund manager, last year endorsed a potential Dimon presidential candidacy.

When asked if he would ever consider entering politics, Dimon told Bloomberg News last year that “maybe one day I’ll serve my country in one capacity or another.”

The 68-year-old Dimon, who has a net worth estimated by Forbes at $2.2 billion, is credited with leading JPMorgan Chase out of the tumultuous 2008 financial crisis.

Last year, Dimon stepped in to help the ailing banking industry following the collapse of Silicon Valley Bank, Signature Bank of New York and First Republic.

JPMorgan acquired a majority of First Republic’s assets and assumed the deposits and other liabilities from the California-based lender.

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