What Is a Business Plan?

There are many components to starting, running, growing and maintaining a business. Companies utilize business plans to set goals and document the steps required to meet those goals. Understanding what a business plan is and how to create one can help you determine and achieve your business objectives.

In this article, we discuss what a business plan is, types of business plans and how to create your own.

What is a business plan?

A business plan is a guide for a company that identifies its goals and outlines the steps for achieving those goals. Business plans help pinpoint a company's priorities and metrics while also holding employees accountable in their roles. When companies develop business plans, it allows employees at all levels to see the company as a whole enterprise.

Business plans can be used to start a company, apply for a business loan, plan long-term strategies and maintain a business. Business plans vary by type, but most business plans contain the following parts:

• Executive summary

• Company description

• List of company milestones

• Market analysis

• Organization and management information

• Service or product information

• Marketing and sales information and reports

• Funding requests

• Financial plan

• Appendix with resumes

Business plans are important because they act as a guide for the owners, management and investors in all stages. In a business plan, every aspect of the organization is analyzed, which helps to highlight strengths and weaknesses. Business plans illustrate to company leaders where the company is in terms of its goals and how it can be successful in the future.

Related: SWOT Analysis Guide (With Examples)

Types of business plans

For your business plan to be effective, ensure you are using the correct type of plan, such as a:

• Start-up business plan

• Internal business plan

• Strategic business plan

• Feasibility business plan

• Operations business plan

• Growth business plan

Start-up business plan

With a start-up business plan, new companies can describe the steps for initiation. This type of business plan explains what the company does and the product it supplies and provides marketing reports and evaluations for the company's management team. For example, a start-up business plan is useful to potential investors because it analyzes all aspects of the company. Once investors have all the information regarding the business, they can determine if they wish to invest in the company.

Internal business plan

Internal business plans focus on specific teams or groups within the organization. This type of plan highlights the company's current operational costs, profitability, hiring and technology costs. For instance, a project development team needs to assess a proposed project. Using an internal business plan will be beneficial in determining if the company has the funding for such a project. An internal business plan also includes a detailed market analysis.

Strategic business plan

A strategic business plan describes all of the goals of a business and how it will achieve them. With this type of plan, all levels of employees know the company goals as well as strategies for meeting them. When all employees understand the business objectives, they tend to work together to help the company succeed.

Related: Ultimate Guide to Strategic Planning

Feasibility business plan

A feasibility business plan focuses on a company's viability and future. This plan details the services and products of the business as well as its profitability. Feasibility business plans usually include sections that explain the need for the company's product or service, target demographics and required capital. In this way, the feasibility business plan would be beneficial for investors or loan officers, as it lays out the financial details.

Operations business plan

An operations business plan consists of the policies and procedures of a company's functions. This plan organizes deadlines and other operational information that is crucial to the functionality of the business. For example, an operations business plan identifies employee responsibilities, so every member of the team understands their role in the company.

Growth business plan

Growth business plans look to the future and provide detailed explanations of the company's growth. These business plans may include descriptions of the company and its leaders, sales projections and financial reports. Investors commonly use this type of plan so they can decide whether to provide a company with capital or not.

Business plan components

Business plans consist of multiple parts that examine all factors that go into the business. All business plans should address the following:

• Need for the business: Within the business plan, identify the need or objective of the document.

• How to satisfy the need: Your business plan should describe the company in detail, including how the product meets the demand in today's market.

• How to compete with others in the market: In your plan, you can discuss your business model to explain how the company plans to be competitive in the market.

• The key players in the organization: This section lists and describes the management team, board of directors and any other leaders or advisors in the business. You can list the experience and credentials of each one.

• The size of the target market: You will need to research the industry in-depth to gain an understanding of the target market. Your research may consist of product attractiveness and profitability.

• Target customers: You should define your ideal customer to develop a successful marketing strategy.

• Effective marketing strategies to implement: After you have defined your target customers, design a marketing strategy to promote the product. Your business plan should define a marketing strategy in detail.

• The financial aspects of the business: A business plan must delve into the finances of the company. In this section, document the financial components of your business, such as pricing structure, costs, margins and expenses.

• The amount of capital needed: Determine if you need further investment capital to move forward. Calculate how much money you require. If you need supplemental capital from investors, explain how much and what the money will go toward in the business.

How to create a business plan

If you're involved in writing a business plan for your company, follow these steps:

1. Conduct research.

2. Identify the purpose of the business plan.

3. Develop a company profile.

4. Document all parts of the business.

5. Create a strategic marketing plan into action.

6. Make the plan adaptable.

7. Explain your passion.

1. Conduct research

First, research and analyze your product, target market and industry. When researching, you can read about the industry and interview potential customers from your target market.

2. Identify the purpose of the business plan

It is important to use the right type of plan for your business venture. For example, if you need a business loan, use a plan that focuses on finances and sales projections. Include sections for the executive summary, company description and company milestones.

3. Develop a company profile

Develop a company profile that explains the history of the business, products or services, target market and other relevant information. You can also display the company profile on your website.

4. Document all parts of the business

It is important to document every component of the company, especially when seeking capital. Be sure to document financial aspects like expenses, cash flow, funding requests, financial plans and projections. You should also include sections for organization, management and the company's product information.

5. Create a strategic marketing plan

Develop an actionable strategic marketing plan. Your business plan should include a marketing plan for promoting and selling the product. This marketing plan can include ideas and strategies for introducing new products, entering new territories, increasing sales and improving product delivery. You may include a section with a market analysis and related marketing and sales information and reports.

6. Make the plan adaptable

Make your business plan adaptable to whoever reads it. If your audience is investors, tailor your plan to them by adding financial sections that relate directly to them. All data should remain consistent, no matter the type of business plan used.

7. Explain your passion

More than explaining goals and priorities, a business plan should relay your passion for the product to the reader, whether that is an investor or an employee. Show how much you care about the business and its goals, as well as your plan for achieving those goals.