Business Planning: A Guide to Business Start-Up by David Butler

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Chapter 2    The structure of Chapter 2    the business Chapter 2    plan

In Chapter 1 we examined the reasons and justification for preparing and using business plans, both for new and established enterprises. This chapter examines the ways in which business plans are presented, and suggests a basic structure which would be acceptable to most potential banks or financiers, in order to give the proposer of the plan plenty of flexibility in its content and presentation. This basic structure will also facilitate an efficient way of meeting the evidence requirements of the National Vocational Qualification (NVQ) Level 3 Business Planning qualification.

What format should the business plan take?

There are a multitude of ‘ideal’ business plans around, ...

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chapter two of the business plan

  • 11.4 The Business Plan
  • Introduction
  • 1.1 Entrepreneurship Today
  • 1.2 Entrepreneurial Vision and Goals
  • 1.3 The Entrepreneurial Mindset
  • Review Questions
  • Discussion Questions
  • Case Questions
  • Suggested Resources
  • 2.1 Overview of the Entrepreneurial Journey
  • 2.2 The Process of Becoming an Entrepreneur
  • 2.3 Entrepreneurial Pathways
  • 2.4 Frameworks to Inform Your Entrepreneurial Path
  • 3.1 Ethical and Legal Issues in Entrepreneurship
  • 3.2 Corporate Social Responsibility and Social Entrepreneurship
  • 3.3 Developing a Workplace Culture of Ethical Excellence and Accountability
  • 4.1 Tools for Creativity and Innovation
  • 4.2 Creativity, Innovation, and Invention: How They Differ
  • 4.3 Developing Ideas, Innovations, and Inventions
  • 5.1 Entrepreneurial Opportunity
  • 5.2 Researching Potential Business Opportunities
  • 5.3 Competitive Analysis
  • 6.1 Problem Solving to Find Entrepreneurial Solutions
  • 6.2 Creative Problem-Solving Process
  • 6.3 Design Thinking
  • 6.4 Lean Processes
  • 7.1 Clarifying Your Vision, Mission, and Goals
  • 7.2 Sharing Your Entrepreneurial Story
  • 7.3 Developing Pitches for Various Audiences and Goals
  • 7.4 Protecting Your Idea and Polishing the Pitch through Feedback
  • 7.5 Reality Check: Contests and Competitions
  • 8.1 Entrepreneurial Marketing and the Marketing Mix
  • 8.2 Market Research, Market Opportunity Recognition, and Target Market
  • 8.3 Marketing Techniques and Tools for Entrepreneurs
  • 8.4 Entrepreneurial Branding
  • 8.5 Marketing Strategy and the Marketing Plan
  • 8.6 Sales and Customer Service
  • 9.1 Overview of Entrepreneurial Finance and Accounting Strategies
  • 9.2 Special Funding Strategies
  • 9.3 Accounting Basics for Entrepreneurs
  • 9.4 Developing Startup Financial Statements and Projections
  • 10.1 Launching the Imperfect Business: Lean Startup
  • 10.2 Why Early Failure Can Lead to Success Later
  • 10.3 The Challenging Truth about Business Ownership
  • 10.4 Managing, Following, and Adjusting the Initial Plan
  • 10.5 Growth: Signs, Pains, and Cautions
  • 11.1 Avoiding the “Field of Dreams” Approach
  • 11.2 Designing the Business Model
  • 11.3 Conducting a Feasibility Analysis
  • 12.1 Building and Connecting to Networks
  • 12.2 Building the Entrepreneurial Dream Team
  • 12.3 Designing a Startup Operational Plan
  • 13.1 Business Structures: Overview of Legal and Tax Considerations
  • 13.2 Corporations
  • 13.3 Partnerships and Joint Ventures
  • 13.4 Limited Liability Companies
  • 13.5 Sole Proprietorships
  • 13.6 Additional Considerations: Capital Acquisition, Business Domicile, and Technology
  • 13.7 Mitigating and Managing Risks
  • 14.1 Types of Resources
  • 14.2 Using the PEST Framework to Assess Resource Needs
  • 14.3 Managing Resources over the Venture Life Cycle
  • 15.1 Launching Your Venture
  • 15.2 Making Difficult Business Decisions in Response to Challenges
  • 15.3 Seeking Help or Support
  • 15.4 Now What? Serving as a Mentor, Consultant, or Champion
  • 15.5 Reflections: Documenting the Journey
  • A | Suggested Resources

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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Business Plan Development Guide

(6 reviews)

chapter two of the business plan

Lee Swanson, University of Saskatchewan

Copyright Year: 2017

Publisher: OPENPRESS.USASK.CA

Language: English

Formats Available

Conditions of use.

Attribution-ShareAlike

Learn more about reviews.

Reviewed by Kevin Heupel, Affiliate Faculty, Metropolitan State University of Denver on 3/4/20

The text does a good job of providing a general outline about writing and developing a written business plan. All of the important steps and components are included. However, the text is light on details, examples, and rationale for each element... read more

Comprehensiveness rating: 3 see less

The text does a good job of providing a general outline about writing and developing a written business plan. All of the important steps and components are included. However, the text is light on details, examples, and rationale for each element of the business plan. Some examples from actual business plans would be helpful.

Content Accuracy rating: 4

For the most part, the content is accurate. The content covers all important aspects of drafting a business plan. I thought the industry analysis could use more information about collecting primary and secondary sources; instead, this information was referenced in the marketing plan section.

Relevance/Longevity rating: 5

Most of the content relies on cites as far back as 2006; however, when it comes to developing and writing a business plan nothing has changed. Thus, the content is current and there is no concern about it becoming obsolete in the near future.

Clarity rating: 4

The text is clear. There are no difficult terms used and the writing is simple. The text uses a lot of bullet points though, which gets tedious to read for a few pages.

Consistency rating: 5

The text does a good job of maintaining consistency in terms of framework and terminology. The text is organized where it's easy to find the information you want in a quick manner.

Modularity rating: 3

The text has a lot of bullet points and the paragraphs are dense. However, the use of subheading is excellent.

Organization/Structure/Flow rating: 5

The book is organized as if you're writing a business plan from start to finish, which is helpful as a practical guide.

Interface rating: 5

There are no navigation problems, distortion of images/charts, or any other display features that may distract or confuse the reader.

Grammatical Errors rating: 5

The text is free of grammatical errors. The sentence structure is simple with many bullet points, which helps to avoid any grammatical issues.

Cultural Relevance rating: 5

This book was written by a Canadian professor and provides references to Canadian sources. However, the information in this text can be used for U.S. schools.

This book is very short and provides a good, general overview about the process of creating and writing a business plan. It won't help a reader if he/she is confused about a certain part of the business plan. The reader will have to find another source, such as "Preparing Effective Business Plans" by Bruce Barringer, Ph.D. The book provides links to good resources and a finished business plan that the reader can reference. I would recommend the book for undergraduate courses.

chapter two of the business plan

Reviewed by Kenneth Lacho, Professor of Management, The University of New Orleans on 6/19/18

1. Text is relevant to Canada. Not the United States 2. Needs to cover resources available to entrepreneur, e.g., federal government agencies, trade associations, chambers of commerce, economic development agencies. 3. Discuss local economy or... read more

1. Text is relevant to Canada. Not the United States 2. Needs to cover resources available to entrepreneur, e.g., federal government agencies, trade associations, chambers of commerce, economic development agencies. 3. Discuss local economy or economic area relevant to this proposed business. 4. Business model ok as a guide. 5. Suggested mission statement to cover: product/business, target customer, geographical area covered. 6. Need detailed promotion plan, e.g., personal selling, advertising, sales promotion, networking publicity, and social media. 7. How do you find the target market? 8. Chapter 6 too much detail on debt and equity financing. 9. Discuss how to find sources of financing, e.g., angels. 10. Expand coverage of bootstring, crowdfunding. 11. Chapter 4 – good checklist. 12. Chapter 3 - overlaps. 13. Chapter 7 – 3 pages of executive summary – double or single spaced typing. Number all tables, graphs. 14. Some references out-of-date, mostly academic. Bring in trade magazines such as Entrepreneur.

Content Accuracy rating: 5

In my opinion, the content is accurate and error free.

Relevance/Longevity rating: 4

The material is relevant to writing a business plan. I wonder if the Porter, SWOT VRIO, etc. material is too high level for students who may not be seniors or have non-business degrees (e.g., liberal arts). Porter has been around for a while and does have longevity. The author has to be more alert to changes in promotion, e.g., social media and sources of financing, e.g., crowdfunding.

Clarity rating: 3

As noted in No. 9, the tone of the writing is too academic, thus making the material difficult to understand. Paragraphs are too long. Need to define: Porter, TOWS Matrix, VRIO, PESTEL. A student less from a senior or a non-business major would not be familiar with these terms.

Consistency rating: 4

The text is internally consistent. The model approach helps keep the process consistent.

Modularity rating: 4

The process of developing a business plan is divided into blocks which are parts of the business plan. Paragraphs tend to be too long in some spots.

Organization/Structure/Flow rating: 4

The topics are presented in a logical step-wise flow. The language style is too academic in parts, paragraphs too long. Leaves out the citations. Provides excellent check lists.

There are no display features which confuse the reader.

Grammatical Errors rating: 4

The text has no grammatical errors. On the other hand, I found the writing to be too academic in nature. Some paragraphs are too long. The material is more like an academic conference paper or journal submission. Academic citations references are not needed. The material is not exciting to read.

The text is culturally neutral. There are no examples which are inclusive of a variety of races, ethnicities, and backgrounds.

This book best for a graduate class.

Reviewed by Louis Bruneau, Part Time Faculty, Portland Community College on 6/19/18

The text provides appropriate discussion and illustration of all major concepts and useful references to source and resource materials. read more

Comprehensiveness rating: 5 see less

The text provides appropriate discussion and illustration of all major concepts and useful references to source and resource materials.

Contents of the book were accurate, although it could have benefited from editing/proofreading; there was no evidence of bias. As to editing/proofreading, a couple of examples: A. “Figure 1 – Business Plan… “ is shown at the top of the page following the diagram vs. the bottom of the page the diagram is on. (There are other problems with what is placed on each page.) B. First paragraph under heading “Essential Initial Research” there is reference to pages 21 to 30 though page numbering is missing from the book. (Page numbers are used in the Table of Contents.)

The book is current in that business planning has been stable for sometime. The references and resources will age in time, but are limited and look easy to update.

Clarity rating: 5

The book is written in a straightforward way, technical terms that needed explanations got them, jargon was avoided and generally it was an easy read.

The text is internally consistent in terms of terminology and framework.

Modularity rating: 5

The book lends itself to a multi-week course. A chapter could be presented and students could work on that stage of Plan development. It could also be pre-meeting reading for a workshop presentation. Reorganizing the book would be inappropriate.

The topics in the text are presented in a logical, clear fashion.

Generally, the book is free of interface problems. The financial tables in the Sample Plan were turned 90° to maintain legibility. One potential problem was with Figure 6 – Business Model Canvas. The print within the cells was too small to read; the author mitigated the problem by presenting the information, following Figure 6, in the type font of the text.

I found no grammatical errors.

The text is not culturally insensitive or offensive in any way.

I require a business plan in a course I teach; for most of the students the assignment is a course project that they do not intend to pursue in real life. I shared the book with five students that intended to develop an actual start-up business; three of them found it helpful while the other two decided not to do that much work on their plans. If I were planning a start-up, I would use/follow the book.

Reviewed by Todd Johnson, Faculty of Business, North Hennepin Community College on 5/21/18

The text is a thorough overview of all elements of a business plan. read more

Comprehensiveness rating: 4 see less

The text is a thorough overview of all elements of a business plan.

The content is accurate and seems to lack bias.

Content seems relevant and useful . It does not help an entrepreneur generate ideas, and is very light on crowdfunding and other novel funding source content. It is more traditional. This can be easily updated in future versions, however. "Social Media" appears once in the book, as does "Crowd Funding".

The book is comprehensive, but perhaps not written in the most lucid, accessible prose. I am not sure any college student could pick this up and just read and learn. It would be best used as a "teach along guide" for students to process with an instructor.

The text seems consistent. The author does a nice job of consistently staying on task and using bullets and brevity.

Here I am not so certain. The table of contents is not a good guide for this book. It does make the book look nicely laid out, but there is a lot of complexity within these sections. I read it uncertain that it was well organized. Yes there are many good bits of information, however it is not as if I could spend time on one swathe of text at a time. I would need to go back and forth throughout the text.

Organization/Structure/Flow rating: 2

Similar to the above. I did not like the flow and organization of this. An editor would help things be in a more logical order.

Interface rating: 2

The interface is just OK. It is not an attractice interface, as it presents text in a very dense manner. The images and charts are hard to follow.

I did not find any grammatical errors.

Cultural Relevance rating: 4

I a not certain of the origins of Saskatchewan, but I do feel this is a different read. It is more formal and dense than it has to be. This would be a difficult read for my students. I do not feel it is insensitive in any way, or offensive in any way.

I would not adopt this book if given the chance. It is too dense, and not organized very well, even though the information is very good. The density and lack of modularity are barriers to understanding what is obviously very good information.

Reviewed by Mariana Mitova, Lecturer, Bowling Green State University on 2/1/18

Though this textbook has a prescriptive nature, it is quite comprehensive. The author strikes a good balance between presenting concepts in a concise way and providing enough information to explain them. Many every-day examples and live links to... read more

Though this textbook has a prescriptive nature, it is quite comprehensive. The author strikes a good balance between presenting concepts in a concise way and providing enough information to explain them. Many every-day examples and live links to other resources add to the completeness of the textbook.

Content seems accurate.

Since the content is somewhat conceptual, the text will not become obsolete quickly. In addition, the author seems to be updating and editing content often hence the relevance to current developments is on target.

The text is very clear, written in clear and straight-to-the point language.

The organization of content is consistent throughout the entire text.

The textbook is organized by chapters, beginning with overview of the model used and followed by chapters for each concept within the model. Nicely done.

The flow is clear, logical and easy to follow.

Overall, images, links, and text are well organized. Some headlines were misaligned but still easy to follow.

No concerns for grammar.

No concerns for cultural irrelevance.

Reviewed by Darlene Weibye, Cosmetology Instructor, Minnesota State Community and Technical College on 2/1/18

The text is comprehensive and covers the information needed to develop a business plan. The book provides all the means necessary in business planning. read more

The text is comprehensive and covers the information needed to develop a business plan. The book provides all the means necessary in business planning.

The text was accurate, and error-free. I did not find the book to be biased.

The content is up-to-date. I am reviewing the book in 2017, the same year the book was published.

The content was very clear. A business plan sample included operation timelines, start up costs, and all relevant material in starting a business.

The book is very consistent and is well organized.

The book has a table of contents and is broken down into specific chapters. The chapters are not divided into sub topics. I do not feel it is necessary for sub topics because the chapters are brief and to the point.

There is a great flow from chapter to chapter. One topic clearly leads into the next without repeating.

The table of contents has direct links to each chapter. The appearance of the chapters are easy to read and the charts are very beneficial.

Does not appear to have any grammatical errors.

The text is not culturally insensitive or offensive.

I am incorporating some of the text into the salon business course. Very well written book.

Table of Contents

Introduction

  • Chapter 1 – Developing a Business Plan
  • Chapter 2 – Essential Initial Research
  • Chapter 3 – Business Models
  • Chapter 4 – Initial Business Plan Draft
  • Chapter 5 – Making the Business Plan Realistic
  • Chapter 6 – Making the Plan Appeal to Stakeholders and Desirable to the Entrepreneur
  • Chapter 7 – Finishing the Business Plan
  • Chapter 8 – Business Plan Pitches

References Appendix A – Business Plan Development Checklist and Project Planner Appendix B – Fashion Importers Inc. Business Plan Business Plan Excel Template

Ancillary Material

About the book.

This textbook and its accompanying spreadsheet templates were designed with and for students wanting a practical and easy-to-follow guide for developing a business plan. It follows a unique format that both explains what to do and demonstrates how to do it.

About the Contributors

Dr. Lee Swanson is an Associate Professor of Management and Marketing at the Edwards School of Business at the University of Saskatchewan. His research focuses on entrepreneurship, social entrepreneurship, Aboriginal entrepreneurship, community capacity-building through entrepreneurship, and institutional-stakeholder engagement. Dr. Swanson’s current research is funded through a Social Sciences Humanities Research Council grant and focuses on social and economic capacity building in Northern Saskatchewan and Northern Scandinavia. He is also actively studying Aboriginal community partnerships with resource based companies, entrepreneurship centres at universities, community-based entrepreneurship, and entrepreneurial attitudes and intentions. He teaches upper-year and MBA entrepreneurship classes and conducts seminars on business planning and business development.

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How to Write a Business Plan: Step-by-Step Guide + Examples

Determined female African-American entrepreneur scaling a mountain while wearing a large backpack. Represents the journey to starting and growing a business and needing to write a business plan to get there.

Noah Parsons

24 min. read

Updated March 4, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

  • The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

  • Raise money
  • Grow strategically
  • Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

What’s your biggest business challenge right now?

  • What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

  • A summary of the problem you are solving
  • A description of your product or service
  • An overview of your target market
  • A brief description of your team
  • A summary of your financials
  • Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

  • Supply chain management
  • Manufacturing processes
  • Equipment and technology
  • Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

  • A description of each task
  • The proposed due date
  • Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

  • Website launch date
  • Store or office opening date
  • First significant sales
  • Break even date
  • Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

  • Conversion rates
  • Customer acquisition costs
  • Profit per customer
  • Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

  • Sole proprietor
  • Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

  • Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
  • Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
  • Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
  • Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
  • Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

  • Company logo
  • Business name
  • Value proposition (optional)
  • Business plan title
  • Completion and/or update date
  • Address and contact information
  • Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

  • Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information you need to cover in a business plan sometimes isn’t quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

If you’re looking for a free downloadable business plan template to get you started, download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

  • Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
  • Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
  • Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
  • Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
  • Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

  • Did you meet your sales goals?
  • Is spending following your budget?
  • Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

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Free business plan template

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Explore over 500 real-world business plan examples from a wide variety of industries.

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

  • Write a brief executive summary
  • Describe your products and services.
  • Conduct market research and compile data into a cohesive market analysis.
  • Describe your marketing and sales strategy.
  • Outline your organizational structure and management team.
  • Develop financial projections for sales, revenue, and cash flow.
  • Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

  • 1. Not taking the planning process seriously.
  • Having unrealistic financial projections or incomplete financial information.
  • Inconsistent information or simple mistakes.
  • Failing to establish a sound business model.
  • Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

  • How will your business make money?
  • Is there a need for your product or service?
  • Who are your customers?
  • How are you different from the competition?
  • How will you reach your customers?
  • How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

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Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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Table of Contents

  • Use AI to help write your plan
  • Common planning mistakes
  • Manage with your business plan
  • Templates and examples

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This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

  • Defines the vision for the company
  • Establishes the company’s strategy
  • Describes how the strategy will be implemented
  • Provides a framework for analysis of key issues
  • Provides a plan for the development of the business
  • Helps the entrepreneur develop and measure critical success factors
  • Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles

Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The  liabilities of newness  make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific  communication principles .

First, business plans must be written to meet the  expectations  of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the  milestones  that investors or other targeted readers need to know. Finally, writers must clearly outline the  opportunity , the  context  within the proposed venture will operate (internal and external environment), and the  business model  (Hindle & Mainprize, 2006).

There are also five  business plan credibility principles  that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture  team . Writers need to  elaborate  on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must  integrate scenarios  to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic  financial links  between all relevant components of the plan. Finally, they must outline  the deal , or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.

2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.

3. Make certain all of your pages are ordered and numbered correctly.

4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the  styles  and  references  features in Word to automatically number and format your section titles and to generate your table of contents.  Be sure that the last thing you do before printing your document  is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan,  be 100% certain  each of the following requirements are met:

  • Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
  • All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
  • Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
  • Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
  • In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid  unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
  • You should include all the information necessary for readers to understand everything in your document.
  • The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.” This statement might mean there is a total shortage of 100,000 units, but competitors are filling this gap by producing 25,000 per year; in which case there will only be a shortage for four years. However, it could mean that the annual shortage is 100,000 units and only 25,000 are produced each year, in which case the total shortage is very high and is growing each year.
  • You must always provide the complete perspective by indicating the appropriate time frame, currency, size, or other measurement.
  • If you use a percentage figure, you must indicate to what it refers—otherwise the number is meaningless to a reader.
  • If your plan includes an international element, you must indicate in which currency or currencies the costs, revenues, prices, or other values are quoted. This can be solved by indicating up-front in the document in which currency all values will be quoted. Another option is to indicate each time which currency is being used, and sometimes you might want to indicate the value in more than one currency. Of course, you will need to assess the exchange rate risk to which you will be exposed and describe this in your document.

6. Ensure credibility is both established and maintained (Hindle & Mainprize, 2006).

  • If a statement presents something as a fact when this fact is not generally known, always indicate the source. Unsupported statements damage credibility.
  • Be specific. A business plan is simply not of value if it uses vague references to high demand, carefully set prices, and other weak phrasing. It must show hard numbers (properly referenced, of course), actual prices, and real data acquired through proper research. This is the only way to ensure your plan is considered credible.
  • Your strategies must be integrated. For example, your pricing strategy must complement and mesh perfectly with your product/service strategy, distribution strategy, and promotions strategy. For example, you probably shouldn’t promote your product as a premium product if you plan to charge lower-than-market prices for it.

7. Before finalizing your business plan, re-read each section to evaluate whether it will appeal to your targeted readers.

Existing business plans

The Word and Excel templates in this book

  • Business Plan Template (Word)
  • Business Plan Template (Excel)

Business Plan Development Tools

Credibility and communication.

According to Hindle and Mainprize (2006), strong business plans effectively communicate the necessary information to the targeted readers while also establishing the credibility of the plan and the entrepreneur. The Credibility and Communication Meter icon is used throughout this book to highlight where and how business plan writers can improve the quality of the information and enhance their and their plan’s credibility.

Use the following tools to improve the information in and credibility of your plans:

The Ratchet Effect

A ratchet is a tool that most of us are familiar with. It is useful because it helps its user accomplish something with each effort expended while guarding against losing past advancements.

With each word, sentence, paragraph, heading, chart, figure, and table you include in your final business plan, the ratchet should move ahead a notch because you achieve two important things.

First, only needed and relevant information is included.

Second, your additions build credibility in a relevant way.

Apply the ratchet effect by making sure that each and every sentence and paragraph conveys needed and relevant information that adds to your and your plan’s credibility. Use the following principles:

Rarely—and only if it truly needs to be said again—repeat something that you have already said in your plan.

Avoid using killer phrases, like “there is no competition for our product” or “our product will sell itself, so we will not need to advertise it.” Any savvy reader will understand that these kinds of statements are naive and demonstrate a lack of understanding about how the market and other real-life factors actually work.

Avoid contradicting yourself. Make sure that what is said in the written part of your plan completely syncs with what is said in the other parts of your plan. Likewise, ensure that what you include in the financial parts of your plan is completely in sync with what is said the written part.

The Magic Formula

Apply the following magic formula throughout your write your plan.

(a)…  consideration X affects my business because …

(b)… consideration X is subject to this trend into the future …

(c)… which means that we have decided to do this … (or) will implement this strategy … in response to how the expected trends for consideration X will affect my business

Here is an example of how you can use the magic formula to develop part of the pricing strategy in the marketing plan part of your business plan:

We expect that our expenses to run our business will rise with the rate of inflation, which means that we must plan to increase the prices on our products to establish and maintain our profitability. The Bank of Canada (201x) has projected that the general inflation rate in <the city in which my business will operate> will be 3.0% in 201x, 3.5% in 201y, and 4.0% in 201z. In our projected financial statements, therefore, we have inflated both our expenses and our prices by those rates in those years.

Context and Framing

You must provide the right context when you describe situations, strategies, and other components of your plan. Business plan readers should never be left to guess why you indicate in a business plan that you will do something. Proper context is needed to help you frame the information you present.

When you frame the stories you tell correctly, the ratchet effect will happen and your plan will be stronger. One example of effective framing is when you, as the writer of the plan and the entrepreneur, clearly indicate how your education, expertise, relevant experiences, and network of contacts will make up for any lack of direct experience you have in running this particular kind of business. An example of ineffective framing is when you indicate that you lack experience with this type of business, or when you fail to specify how and why your levels of experience will affect the business’s development.

Prioritizing Problems

Don’t get hung up on something that doesn’t need an immediate solution. Instead, flag it for future consideration and move on. When you return to re-address the issue, it might no longer be a problem or you might have by then figured out a solution.

Process for Developing Business Plans

The business plan development process described next has been extensively tested with entrepreneurship students and has proven to provide the guidance entrepreneurs need to develop a business plan appropriate for their needs: a  high power business plan .

Developing a high power business plan has six stages, which can be compared to a process for hosting a dinner for a few friends. A host hoping to make a good impression with their anticipated guests might analyze the situation at multiple levels to collect data on new alternatives for healthy ingredients, what ingredients have the best prices and are most readily available at certain times of year, the new trends in party appetizers, what food allergies the expected guests might have, possible party themes, and so on. This analysis is the  Essential Initial Research  stage.

In the  Business Model  stage, the host might construct a menu of items to include with the meal along with a list of decorations to order, music to play, and costume themes to suggest to the guests. The mix of these kinds of elements chosen by the host will aid in the success of the party.

The  Initial Business Plan Draft  stage is where the host rolls up their sleeves and begins to make some of the food items, puts up some of the decorations, and generally gets everything started for the party.

During this stage, the host will begin to realize that some plans are not feasible and that changes are needed. The required changes might be substantial, like the need to postpone the entire party and ultimately start over in a few months, and others might be less drastic, like the need to change the menu when an invited guest indicates that they can’t eat food containing gluten. These changes are incorporated into the plan during the  Making the Business Plan Realistic  stage to make it realistic and feasible.

The  Making the Plan Appeal to Stakeholders and Desirable to the Entrepreneur  stage involves further changes to the party plan to make it more appealing to both the invited guests and to make it a fun experience for the host. For example, the host might learn that some of the single guests would like to bring dates and others might need to be able to bring their children to be able to attend. The host might be able to accommodate those desires or needs in ways that will also make the party more fun for them—maybe by accepting some guests’ offers to bring food or games, or maybe hiring a babysitter to entertain and look after the children.

The final stage— Finishing the Business Plan— involves the host putting all of the final touches in place for the party in preparation for the arrival of the guests.

chapter two of the business plan

Figure 1 – Business Plan Development Process (Illustration by Lee A. Swanson)

Essential Initial Research

A business plan writer should analyze the environment in which they anticipate operating at each of the levels of analysis:  Societal ,  Industry ,  Market , and  Firm . This stage of planning is called the  Essential Initial Research  stage, and it is a necessary first step to better understand the trends that will affect their business and the decisions they must make to lay the groundwork for, which will improve their potential for success.

In some cases, much of this research should be included in the developing business plan as its own separate section to help show readers that there is a market need for the business being considered and that it stands a good chance of being successful.

In other cases, a business plan will be stronger when the components of the research are distributed throughout the business plan to provide support for the outlined plans and strategies outlined. For example, the industry- or market-level research might outline the pricing strategies used by identified competitors, which might be best placed in the  Pricing Strategy  part of the business plan to support the decision made to employ a particular pricing strategy.

Business Model

Inherent in any business plan is a description of the  Business Model  chosen by the entrepreneur as the one that they feel will best ensure success. Based upon their analysis from the Essential Initial Research stage, an entrepreneur should determine how each element of their business model—including their revenue streams, cost structure, customer segments, value propositions, key activities, key partners, and so on—might fit together to improve the potential success of their business venture (see  Chapter 3 – Business Models ).

For some types of ventures, at this stage an entrepreneur might launch a lean start-up (see the “Lean Start-up” section in  Chapter 2 – Essential Initial Research ) and grow their business by continually pivoting, or constantly adjusting their business model in response to the real-time signals they get from the markets’ reactions to their business operations. In many cases, however, an entrepreneur will require a business plan. In those cases, their initial business model will provide the basis for that plan.

Of course, throughout this and all of the stages in this process, the entrepreneur should seek to continually gather information and adjust the plans in response to the new knowledge they gather. As shown in Figure 1 by its enclosure in the  Progressive Research  box, the business plan developer might need to conduct further research before finishing the business model and moving on to the initial business plan draft.

Initial Business Plan Draft

The  Initial Business Plan Draft  stage involves taking the knowledge and ideas developed during the first two stages and organizing them into a business plan format. Many entrepreneurs prefer to create a full draft of the business plan with all of the sections, including the front part with the business description, vision, mission, values, value proposition statement, preliminary set of goals, and possibly even a table of contents and lists of tables and figures all set up using the software features enabling their automatic generation. Writing all of the operations, human resources, marketing, and financial plans as part of the first draft ensures that all of these parts can be appropriately and necessarily integrated. The business plan will tell the story of a planned business startup in two ways: 1) by using primarily words along with some charts and graphs in the operations, human resources, and marketing plans and 2) through the financial plan. Both must tell the same story.

The feedback loop shown in Figure 1 demonstrates that the business developer may need to review the business model.  Additionally, as shown by its enclosure in the  Progressive Research  box, the business plan developer might need to conduct further research before finishing the Initial Business Plan Draft stage and moving on to the Making Business Plan Realistic stage.

Making Business Plan Realistic

The first draft of a business plan will almost never be realistic. As the entrepreneur writes the plan, it will necessarily change as new information is gathered. Another factor that usually renders the first draft unrealistic is the difficulty in making certain that the written part—in the front part of the plan along with the operations, human resources, and marketing plans—tells the exact same story as the financial part does. This stage of work involves making the necessary adjustments to the plan to make it as realistic as possible.

The  Making Business Plan Realistic  stage has two possible feedback loops. The first means going back to the Initial Business Plan Draft stage if the initial business plan needs to be significantly changed before it is possible to adjust it so that it is realistic. The second feedback loop circles back to the Business Model stage if the business developer needs to rethink the business model. As shown in Figure 1 by its enclosure in the  Progressive Research  box, the business plan developer might need to conduct further research before finishing the Making Business Plan Realistic stage and moving on to the Making Plan Appeal to Stakeholders stage.

Making Plan Appeal to Stakeholders and Desirable to the Entrepreneur

A business plan can be realistic without appealing to potential investors and other external stakeholders, like employees, suppliers, and needed business partners. It might also be realistic (and possibly appealing to stakeholders) without being desirable to the entrepreneur. During this stage, the entrepreneur will keep the business plan realistic as they adjust plans to appeal to potential investors, stakeholders, and themselves.

If, for example, investors will be required to finance the business’s start, some adjustments might need to be relatively extensive to appeal to potential investors’ needs for an exit strategy from the business, to accommodate the rate of return they expect from their investments, and to convince them that the entrepreneur can accomplish all that is promised in the plan. In this case, and in others, the entrepreneur will also need to get what they want out of the business to make it worthwhile for them to start and run it. So, this stage of adjustments to the developing business plan might be fairly extensive, and they must be informed by a superior knowledge of what targeted investors need from a business proposal before they will invest. They also need to be informed by a clear set of goals that will make the venture worthwhile for the entrepreneur to pursue.

The caution with this stage is to balance the need to make realistic plans with the desire to meet the entrepreneur’s goals while  avoiding becoming discouraged enough to drop the idea of pursuing the business idea . If an entrepreneur is convinced that the proposed venture will satisfy a valid market need, there is often a way to assemble the financing required to start and operate the business while also meeting the entrepreneur’s most important goals. To do so, however, might require significant changes to the business model.

One of the feedback loops shown in Figure 1 indicates that the business plan writer might need to adjust the draft business plan while ensuring that it is still realistic before it can be made appealing to the targeted stakeholders and desirable to the entrepreneur. The second feedback loop indicates that it might be necessary to go all the way back to the Business Model stage to re-establish the framework and plans needed to develop a realistic, appealing, and desirable business plan. Additionally, this stage’s enclosure in the  Progressive Research  box suggests that the business plan developer might need to conduct further research.

Finishing the Business Plan

The final stage involves putting the important finishing touches on the business plan so that it will present well to potential investors and others. This involves making sure that the math and links between the written and financial parts are accurate. It involves ensuring that all the needed corrections are made to the spelling, grammar, and formatting. The final set of goals should be written to appeal to the target readers and to reflect what the business plan says. An executive summary should be written and included as a final step.

Chapter Summary

This chapter described the internal and external purposes for business planning. It also explained how business plans must effectively communicate while establishing and building credibility for both the entrepreneur and the venture. The general guidelines for business planning were covered as were some important business planning tools. The chapter concluded with descriptions of the stages of the business development process for effective business planning.

Business Plan Development Guide  by Lee A. Swanson is licensed under a  Creative Commons Attribution-ShareAlike 4.0 International License , except where otherwise noted.

MBA 705 Workbook Copyright © by kstuke is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License , except where otherwise noted.

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5.6 The Business Plan

Learning objective.

  • Discuss the importance of planning for your business, and identify the key sections of a business plan.

If you want to start a business, you must prepare a business plan. This essential document should tell the story of your business concept, provide an overview of the industry in which you will operate, describe the goods or services you will provide, identify your customers and proposed marketing activities, explain the qualifications of your management team, and state your projected income and borrowing needs.

Purpose of a Business Plan

The business plan is a plan or blueprint for the company, and it’s an indispensable tool in attracting investors, obtaining loans, or both. Remember, too, that the value of your business plan isn’t limited to the planning stages of your business and the process of finding start-up money. Once you’ve acquired start-up capital, don’t just stuff your plan in a drawer. Treat it as an ongoing guide to your business and its operations, as well as a yardstick by which you can measure your performance. Keep it handy, update it periodically, and use it to assess your progress.

In developing and writing your business plan, you must make strategic decisions in the areas of management, operations, marketing, accounting, and finance—in short, in all the functional areas of business that we described in Chapter 1 “The Foundations of Business” . Granted, preparing a business plan takes a lot of time and work, but it’s well worth the effort. A business plan forces you to think critically about your proposed business and reduces your risk of failure. It forces you to analyze your business concept and the industry in which you’ll be operating, and it helps you determine how you can grab a percentage of sales in that industry.

The most common use of a business plan is persuading investors, lenders, or both, to provide financing. These two groups look for different things. Investors are particularly interested in the quality of your business concept and the ability of management to make your venture successful. Bankers and other lenders are primarily concerned with your company’s ability to generate cash to repay loans. To persuade investors and lenders to support your business, you need a professional, well-written business plan that paints a clear picture of your proposed business.

Sections of the Business Plan

Though formats can vary, a business plan generally includes the following sections: executive summary, description of proposed business, industry analysis, mission statement and core values, management plan, goods or services and (if applicable) production processes, marketing, global issues, and financial plan. Let’s explore each of these sections in more detail. ( Note : More detailed documents and an Excel template are available for those classes in which the optional business plan project is assigned.)

Executive Summary

The executive summary is a one- to three-page overview of the business plan. It’s actually the most important part of the business plan: it’s what the reader looks at first, and if it doesn’t capture the reader’s attention, it might be the only thing that he or she looks at. It should therefore emphasize the key points of the plan and get the reader excited about the prospects of the business.

Even though the executive summary is the first thing read, it’s written after the other sections of the plan are completed. An effective approach in writing the executive summary is to paraphrase key sentences from each section of the business plan. This process will ensure that the key information of each section is included in the executive summary.

Description of Proposed Business

Here, you present a brief description of the company and tell the reader why you’re starting your business, what benefits it provides, and why it will be successful. Some of the questions to answer in this section include the following:

  • What will your proposed company do? Will it be a manufacturer, a retailer, or a service provider?
  • What goods or services will it provide?
  • Why are your goods or services unique?
  • Who will be your main customers?
  • How will your goods or services be sold?
  • Where will your business be located?

Because later parts of the plan will provide more detailed discussions of many of these issues, this section should provide only an overview of these topics.

Industry Analysis

This section provides a brief introduction to the industry in which you propose to operate. It describes both the current situation and the future possibilities, and it addresses such questions as the following:

  • How large is the industry? What are total sales for the industry, in volume and dollars?
  • Is the industry mature or are new companies successfully entering it?
  • What opportunities exist in the industry? What threats exist?
  • What factors will influence future expansion or contraction of the industry?
  • What is the overall outlook for the industry?
  • Who are your major competitors in the industry?
  • How does your product differ from those of your competitors?

Mission Statement and Core Values

This portion of the business plan states the company’s mission statement and core values . The mission statement describes the purpose or mission of your organization—its reason for existence. It tells the reader what the organization is committed to doing. For example, one mission statement reads, “The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit” (Southwest Airline’s, 2011).

Core values are fundamental beliefs about what’s important and what is (and isn’t) appropriate in conducting company activities. Core values are not about profits, but rather about ideals. They should help guide the behavior of individuals in the organization. Coca-Cola, for example, intends that its core values—leadership, passion, integrity, collaboration, diversity, quality, and accountability—will let employees know what behaviors are (and aren’t) acceptable (The Coca-Cola Company, 2011).

Management Plan

Management makes the key decisions for the business, such as its legal form and organizational structure. This section of the business plan should outline these decisions and provide information about the qualifications of the key management personnel.

A. Legal Form of Organization

This section dentifies the chosen legal form of business ownership: sole proprietorship (personal ownership), partnership (ownership shared with one or more partners), or corporation (ownership through shares of stock).

B. Qualifications of Management Team and Compensation Package

It isn’t enough merely to have a good business idea: you need a talented management team that can turn your concept into a profitable venture. This part of the management plan section provides information about the qualifications of each member of the management team. Its purpose is to convince the reader that the company will be run by experienced, well-qualified managers. It describes each individual’s education, experience, and expertise, as well as each person’s responsibilities. It also indicates the estimated annual salary to be paid to each member of the management team.

C. Organizational Structure

This section of the management plan describes the relationships among individuals within the company, listing the major responsibilities of each member of the management team.

Goods, Services, and the Production Process

To succeed in attracting investors and lenders, you must be able to describe your goods or services clearly (and enthusiastically). Here, you describe all the goods and services that you will provide the marketplace. This section explains why your proposed offerings are better than those of competitors and indicates what market needs will be met by your goods or services. In other words, it addresses a key question: What competitive advantage will the company’s goods and services have over similar products on the market?

This section also indicates how you plan to obtain or make your products. Naturally, the write-up will vary, depending on whether you’re proposing a service company, a retailer, or a manufacturer. If it’s a service company, describe the process by which you’ll deliver your services. If it’s a retail company, tell the reader where you’ll purchase products for resale.

If you’re going to be a manufacturer, you must furnish information on product design, development, and production processes. You must address questions such as the following:

  • How will products be designed?
  • What technology will be needed to design and manufacture products?
  • Will the company run its own production facilities, or will its products be manufactured by someone else?
  • Where will production facilities be located?
  • What type of equipment will be used?
  • What are the design and layout of the facilities?
  • How many workers will be employed in the production process?
  • How many units will be produced?
  • How will the company ensure that products are of high quality?

This critical section focuses on four marketing-related areas—target market, pricing, distribution, and promotion:

  • Target market . Describe future customers and profile them according to age, gender, income, interests, and so forth. If your company will sell to other companies, describe your typical business customer.
  • Pricing . State the proposed price for each product. Compare your pricing strategy to that of competitors.
  • Distribution . Explain how your goods or services will be distributed to customers. Indicate whether they’ll be sold directly to customers or through retail outlets.
  • Promotion . Explain your promotion strategy, indicating what types of advertising you’ll be using.

In addition, if you intend to use the Internet to promote or sell your products, also provide answers to these questions:

  • Will your company have a Web site? Who will visit the site?
  • What will the site look like? What information will it supply?
  • Will you sell products over the Internet?
  • How will you attract customers to your site and entice them to buy from your company?

Global Issues

In this section, indicate whether you’ll be involved in international markets, by either buying or selling in other countries. If you’re going to operate across borders, identify the challenges that you’ll face in your global environment, and explain how you’ll meet them. If you don’t plan initially to be involved in international markets, state what strategies, if any, you’ll use to move into international markets when the time comes.

Financial Plan

In preparing the financial section of your business plan, specify the company’s cash needs and explain how you’ll be able to repay debt. This information is vital in obtaining financing. It reports the amount of cash needed by the company for start-up and initial operations and provides an overview of proposed funding sources. It presents financial projections, including expected sales, costs, and profits (or losses). It refers to a set of financial statements included in an appendix to the business plan.

Here, you furnish supplemental information that may be of interest to the reader. In addition to a set of financial statements, for example, you might attach the résumés of your management team.

Key Takeaways

  • A business plan tells the story of your business concept, provides an overview of the industry in which you will operate, describes the goods or services you will provide, identifies your customers and proposed marketing activities, explains the qualifications of your management team, and states your projected income and borrowing needs.
  • In your business plan, you make strategic decisions in the areas of management, operations, marketing, accounting, and finance. Developing your business plan forces you to analyze your business concept and the industry in which you’ll be operating. Its most common use is persuading investors and lenders to provide financing.

A business plan generally includes the following sections:

  • Executive summary . One- to three-page overview.
  • Description of proposed business . Brief description of the company that answers such questions as what your proposed company will do, what goods or services it will provide, and who its main customers will be.
  • Industry analysis . Short introduction to the industry in which you propose to operate.
  • Mission statement and core values . Declaration of your mission statement , which are fundamental beliefs about what’s important and what is (and isn’t) appropriate in conducting company activities.
  • Management plan . Information about management team qualifications and responsibilities, and designation of your proposed legal form of organization.
  • Goods, services, and the production process . Description of the goods and services that you’ll provide in the marketplace; explanation of how you plan to obtain or make your products or of the process by which you’ll deliver your services.
  • Marketing . Description of your plans in four marketing-related areas: target market, pricing, distribution, and promotion.
  • Global issues . Description of your involvement, if any, in international markets.
  • Financial plan . Report on the cash you’ll need for start-up and initial operations, proposed funding sources, and means of repaying your debt.
  • Appendices . Supplemental information that may be of interest to the reader.

(AACSB) Analysis

Let’s start with three givens: (1) college students love chocolate chip cookies, (2) you have a special talent for baking cookies, and (3) you’re always broke. Given these three conditions, you’ve come up with the idea of starting an on-campus business—selling chocolate chip cookies to fellow students. As a business major, you want to do things right by preparing a business plan. First, you identified a number of specifics about your proposed business. Now, you need to put these various pieces of information into the relevant section of your business plan. Using the business plan format described in this chapter, indicate the section of the business plan into which you’d put each of the following:

  • You’ll bake the cookies in the kitchen of a friend’s apartment.
  • You’ll charge $1 each or $10 a dozen.
  • Your purpose is to make the best cookies on campus and deliver them fresh. You value integrity, consideration of others, and quality.
  • Each cookie will have ten chocolate chips and will be superior to those sold in nearby bakeries and other stores.
  • You expect sales of $6,000 for the first year.
  • Chocolate chip cookies are irresistible to college students. There’s a lot of competition from local bakeries, but your cookies will be superior and popular with college students. You’ll make them close to campus using only fresh ingredients and sell them for $1 each. Your management team is excellent. You expect first-year sales of $6,000 and net income of $1,500. You estimate start-up costs at $600.
  • You’ll place ads for your product in the college newspaper.
  • You’ll hire a vice president at a salary of $100 a week.
  • You can ship cookies anywhere in the United States and in Canada.
  • You need $600 in cash to start the business.
  • There are six bakeries within walking distance of the college.
  • You’ll bake nothing but cookies and sell them to college students. You’ll make them in an apartment near campus and deliver them fresh.

The Coca-Cola Company, “Workplace Culture,” The Coca-Cola Company, http://www.thecoca-colacompany.com/citizenship/workplace_culture.html (accessed August 31, 2011).

Southwest Airline’s company Web site, about SWA section, http://www.southwest.com/about_swa/mission.html (accessed August 31, 2011).

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Chapter 2 The Foundations of Business

Learning objectives.

  • Describe the concept of stakeholders and identify the stakeholder groups relevant to an organization.
  • Discuss and be able to apply the PESTEL macro-business-environment model to an industry or emerging technology.
  • Explain other key terms related to this chapter including entrepreneur, profit, and revenue.

Why Is Apple Successful?

In 1976 Steve Jobs and Steve Wozniak created their first computer, the Apple I. [1] They invested a mere $1,300 and set up business in Jobs’ garage. Three decades later, their business—Apple Inc.—has become one of the world’s most influential and successful companies. Jobs and Wozniak were successful entrepreneurs : those who take the risks and reap the rewards associated with starting a new business enterprise. Did you ever wonder why Apple flourished while so many other young companies failed? How did it grow from a garage start-up to a company generating over $260 billion in sales in 2019? How was it able to transform itself from a nearly bankrupt firm to a multinational corporation with locations all around the world? You might conclude that it was the company’s products, such as the Apple I and II, the Macintosh, or more recently its wildly popular iPod, iPhone, and iPad. Or, you could decide that it was its dedicated employees, management’s wiliness to take calculated risks, or just plain luck—that Apple simply was in the right place at the right time.

Black and white photo of Steve Jobs wearing characteristic black turtleneck and pinching his chin between forefinger and thumb

Before we draw any conclusions about what made Apple what it is today and what will propel it into a successful future, you might like to learn more about Steve Jobs, the company’s cofounder and former CEO. Jobs was instrumental in the original design of the Apple I and, after being ousted from his position with the company, returned to save the firm from destruction and lead it onto its current path. Growing up, Jobs had an interest in computers. He attended lectures at Hewlett-Packard after school and worked for the company during the summer months. He took a job at Atari after graduating from high school and saved his money to make a pilgrimage to India in search of spiritual enlightenment. Following his India trip, he attended Steve Wozniak’s “Homebrew Computer Club” meetings, where the idea for building a personal computer surfaced. [2] “Many colleagues describe Jobs as a brilliant man who could be a great motivator and positively charming. At the same time his drive for perfection was so strong that employees who did not meet his demands [were] faced with blistering verbal attacks.” [3] Not everyone at Apple appreciated Jobs’ brilliance and ability to motivate. Nor did they all go along with his willingness to do whatever it took to produce an innovative, attractive, high-quality product. So at age thirty, Jobs found himself ousted from Apple by John Sculley, whom Jobs himself had hired as president of the company several years earlier. It seems that Sculley wanted to cut costs and thought it would be easier to do so without Jobs around. Jobs sold $20 million of his stock and went on a two-month vacation to figure out what he would do for the rest of his life. His solution: start a new personal computer company called NextStep. In 1993, he was invited back to Apple (a good thing, because neither his new company nor Apple was doing well).

Steve Jobs was definitely not known for humility, but he was a visionary and had a right to be proud of his accomplishments. Some have commented that “Apple’s most successful days occurred with Steve Jobs at the helm.” [4]

Jobs did what many successful CEOs and managers do: he learned, adjusted, and improvised. [5] Perhaps the most important statement that can be made about him is this: He never gave up on the company that once turned its back on him. With Jobs being one of the most admired CEOs of all time, Tim Cook, Apple’s current CEO, had big shoes to fill when he took over from Jobs in 2011. Despite doubt from many, Apple has released popular products under Cook’s leadership, such as the Apple Watch and AirPods, with Apple worth approximately $2 trillion as of 2020.

Introduction

As the story of Apple suggests, today is an interesting time to study business. Advances in technology are bringing rapid changes in the ways we produce and deliver goods and services. The Internet and other improvements in communication, such as smartphones, video conferencing, and social networking, now affect the way we do business. Companies are expanding international operations, and the workforce is more diverse than ever. Corporations are being held responsible for the behavior of their executives, and more people share the opinion that companies should be good corporate citizens. Because of the role they played in the worst financial crisis since the Great Depression, businesses today face increasing scrutiny and negative public sentiment. [6]

Economic turmoil that began in the housing and mortgage industries as a result of troubled subprime mortgages quickly spread to the rest of the economy. In 2008, credit markets froze up and banks stopped making loans. Lawmakers tried to get money flowing again by passing a $700 billion Wall Street bailout, however now-cautious banks became reluctant to extend credit. Without money or credit, consumer confidence in the economy dropped and consumers cut back on spending. Unemployment rose as troubled companies shed the most jobs in five years, and 760,000 Americans marched to the unemployment lines. [7] The stock market reacted to the financial crisis and its stock prices dropped by 44 percent while millions of Americans watched in shock as their savings and retirement accounts took a nosedive. In fall 2008, even Apple, a company that had enjoyed strong sales growth over the past five years, began to cut production of its popular iPhone. Without jobs or cash, consumers would no longer flock to Apple’s fancy retail stores or buy a prized iPhone. [8] Apple eventually recovered and continued to grow, reaching an all time high stock price of $325 in February 2020. However, Apple then faced economic turmoil yet again with the COVID-19 pandemic causing its stock prices to plummet almost 30% to $224. By June 2020, Apple had rebounded from this, reaching a new record stock price of $362. [9]

As you go through the course with the aid of this text, you’ll explore the exciting world of business. We’ll introduce you to the various activities in which business people engage—accounting, finance, information technology, management, marketing, and operations. We’ll help you understand the roles that these activities play in an organization, and we’ll show you how they work together. We hope that by exposing you to the things that businesspeople do, we’ll help you decide whether business is right for you and, if so, what areas of business you’d like to study further.

Getting Down to Business

A business is any activity that provides goods or services to consumers for the purpose of making a profit. Be careful not to confuse the terms revenue and profit. Revenue represents the funds an enterprise receives in exchange for its goods or services. Profit is what’s left (hopefully) after all the bills are paid. When Steve Jobs and Steve Wozniak launched the Apple I, they created the Apple Computer in Jobs’ family garage in the hope of making a profit. Before we go on, let’s make a couple of important distinctions concerning the terms in our definitions. First, whereas Apple produces and sells goods (Mac, iPhone, iPod, iPad, Apple Watch), many businesses provide services . Your bank is a service company, as is your Internet provider. Hotels, airlines, law firms, movie theaters, and hospitals are also service companies. Many companies provide both goods and services. For example, your local car dealership sells goods (cars) and also provides services (automobile repairs). Second, some organizations are not set up to make profits. Many are established to provide social or educational services. Such not-for-profit (or nonprofit) organizations include the United Way of America, Habitat for Humanity, the Boys and Girls Clubs, the Sierra Club, the American Red Cross, and many colleges and universities. Most of these organizations, however, function in much the same way as a business. They establish goals and work to meet them in an effective, efficient manner. Thus, most of the business principles introduced in this text also apply to nonprofits.

Business Participants and Activities

Let’s begin our discussion of business by identifying the main participants of business and the functions that most businesses perform. Then we’ll finish this section by discussing the external factors that influence a business’ activities.

Participants

Every business must have one or more owners whose primary role is to invest money in the business. When a business is being started, it’s generally the owners who polish the business idea and bring together the resources (money and people) needed to turn the idea into a business. The owners also hire employees to work for the company and help it reach its goals. Owners and employees depend on a third group of participants— customers . Ultimately, the goal of any business is to satisfy the needs of its customers in order to generate a profit for the owners.

Stakeholders

Consider your favorite restaurant. It may be an outlet or franchise of a national chain (more on franchises in a later chapter) or a local “mom and pop” without affiliation to a larger entity. Whether national or local, every business has stakeholders —those with a legitimate interest in the success or failure of the business and the policies it adopts. Stakeholders include customers, vendors, employees, landlords, bankers, and others (see Figure 2.2). All have a keen interest in how the business operates, in most cases for obvious reasons. If the business fails, employees will need new jobs, vendors will need new customers, and banks may have to write off loans they made to the business. Stakeholders do not always see things the same way—their interests sometimes conflict with each other. For example, lenders are more likely to appreciate high profit margins that ensure the loans they made will be repaid, while customers would probably appreciate the lowest possible prices. Pleasing stakeholders can be a real balancing act for any company.

Nine circles, all labeled with different business stakeholders. Listed from top to bottom: owners, employees, service users, managers, funders, shareholders, suppliers, policy makers, and customers.

Functional Areas of Business

The activities needed to operate a business can be divided into a number of functional areas . Examples include: management, operations, marketing, accounting, and finance. Let’s briefly explore each of these areas.

Managers are responsible for the work performance of other people. Management involves planning for, organizing, leading, and controlling a company’s resources so that it can achieve its goals. Managers plan by setting goals and developing strategies for achieving them. They organize activities and resources to ensure that company goals are met and staff the organization with qualified employees and managers lead them to accomplish organizational goals. Finally, managers design controls for assessing the success of plans and decisions and take corrective action when needed.

All companies must convert resources (labor, materials, money, information, and so forth) into goods or services. Some companies, such as Apple, convert resources into tangible products—Macs, iPhones, Apple Watch, etc. Others, such as hospitals, convert resources into intangible products—e.g., health care. The person who designs and oversees the transformation of resources into goods or services is called an operations manager . This individual is also responsible for ensuring that products are of high quality.

Marketing consists of everything that a company does to identify customers’ needs (i.e., market research) and design products to meet those needs. Marketers develop the benefits and features of products, including price and quality. They also decide on the best method of delivering products and the best means of promoting them to attract and keep customers. They manage relationships with customers and make them aware of the organization’s desire and ability to satisfy their needs.

Managers need accurate, relevant and timely financial information, which is provided by accountants. Accountants measure, summarize, and communicate financial and managerial information and advise other managers on financial matters. There are two fields of accounting. Financial accountants prepare financial statements to help users, both inside and outside the organization, assess the financial strength of the company. Managerial accountants prepare information, such as reports on the cost of materials used in the production process, for internal use only.

Finance involves planning for, obtaining, and managing a company’s funds. Financial managers address questions such as the following: How much money does the company need? How and where will it get the necessary money? How and when will it pay the money back? What investments should be made in plant and equipment? How much should be spent on research and development? Good financial management is particularly important when a company is first formed, because new business owners usually need to borrow money to get started.

External Forces That Influence Business Activities

Apple and other businesses don’t operate in a vacuum; they’re influenced by a number of external factors. These include the economy, government, consumer trends, technological developments, public pressure to act as good corporate citizens, and other factors. Collectively, these forces constitute what is known as the “ macro-environment ”—essentially the big picture world external to a company over which the business exerts very little if any control. Figure 2.3 sums up the relationship between a business and the outside forces that influence its activities. One industry that’s clearly affected by all these factors is the fast-food industry. Companies such as Taco Bell, McDonald’s, Cook-Out and others all compete in this industry. A strong economy means people have more money to eat out. Food standards are monitored by a government agency, the Food and Drug Administration. Preferences for certain types of foods are influenced by consumer trends , for example, fast food companies are being pressured to make their menus healthier. Finally, a number of decisions made by the industry result from its desire to be a good corporate citizen. For example, several fast-food chains have responded to environmental concerns by eliminating Styrofoam containers. [10]

A list of the PESTEL Analysis process. Each item is contained inside an arrow pointing right spelling PESTEL from Top to bottom. From P to L the steps are: P) Political: the impact of government including taxes, tariffs, trade agreements, and labor regulations. E) Economic: includes inflation, employment rates, exchange rates, oil prices, GDP growth and others. S) Sociocultural: includes cultural attitudes and demographic factors such as age, race, and income. T) Technological: includes the impact of the internet, smart devices, and automation on business and technology. E) Environmental: includes availability and care for natural resources, pollution levels, and carbon footprints. L) Legal: requirements related to labor and consumer protection, equality, and product safety.

Of course, all industries are impacted by external factors, not just the food industry. As people have become more conscious of the environment, they have begun to choose new technologies , like all-electric cars to replace those that burn fossil fuels. Both established companies, like Nissan with its Nissan Leaf, and brand new companies like Tesla have entered the market for all-electric vehicles. While the market is still small, it is expected to grow at a compound annual growth rate of 21.1 percent between 2019 and 2030. [11]

PESTEL Analysis

One useful tool for analyzing the external environment in which an industry or company operates is the PESTEL model. PESTEL is an acronym, with each of the letters representing an aspect of the macro-environment that a business needs to consider in its planning. Let’s briefly run through the meaning of each letter.

P stands for the political environment. Governments influence the environment in which businesses operate in many ways, including taxation, tariffs, trade agreements, labor regulations, and environmental regulations.

E represents the economic environment. As we will see in detail in a later chapter, whether the economy is growing or not is a major concern to business. Numerous economic indicators have been created for the specific purpose of measuring the health of the economy.

S indicates the sociocultural environment, which is a category that captures societal attitudes, trends in national demographics, and even fashion trends. The term demographics applies to any attribute that can be used to describe people, such as age, income level, gender, race, and so on. As a society’s attitudes or its demographics change, the market for goods and services can shift right along with it.

T is for technological factors. In the last several decades, perhaps no force has impacted business more than the emergence of the internet. Nearly instantaneous access to information, e-commerce, social media, and even the ability to control physical devices from remote locations have all come about due to technological forces.

The second E stands for environmental forces, which in this case means natural resources, pollution levels, recycling, etc. While the attitudes of a society towards the natural environment would be considered a sociocultural force, the level of pollution, the supply of oil, etc. would be grouped under this second E for environment.

Finally, the L represents legal factors. These forces often coincide with the political factors already discussed, because it is politicians (i.e., government) that enacts laws. However, there are other legal factors that can impact businesses as well, such as decisions made by courts that may have broad implications beyond the case being decided.

When conducting PESTEL analysis, it is important to remember that there can be considerable overlap from category to category. It’s more important that businesses use the model to thoroughly assess its external environment, and much less important that they get all the forces covered under the “right” category. It is also important to remember that an individual force, in itself, is not inherently positive or negative but rather presents either an opportunity or a threat to different businesses. For example, societal attitudes moving in favor of green energy are an opportunity for those with capabilities in wind, solar, and other renewables, while presenting a threat, or at least a need to change, to companies whose business models depend exclusively on fossil fuels.

As you read through the description of the PESTEL model, it may have occurred to you to ask, “Where would COVID-19 fit in using this model?” since this pandemic had a major impact on all sorts of businesses and on every economy in the world. In other models that analyze the macro-environment, there is a force called “Natural” that essentially equates to the environmental force in the PESTEL model. So, the natural environment is usually equated to the forces described above, like natural resources and pollution, but a broader view of this force would logically include something like a pandemic. And consistent with other types of forces, COVID-19 has been hugely unfavorable to some industries and yet a boost to business for others. Any business in the realm of tourism has probably suffered large revenue losses and employee layoffs and furloughs, while makers of personal protective equipment (PPE) [12]  have been challenged just to meet the increase in demand. 13

Chapter Video

This video covers the six macro-environmental forces that make up the PESTEL model.

(Copyrighted material)

Key Takeaways

  • The main participants in a business are its owners , employees , and customers .
  • Every business must consider its stakeholders , and their sometimes conflicting interests, when making decisions.
  • The activities needed to run a business can be divided into functional areas. The business functions correspond fairly closely with many majors found within a typical college of business.
  • Businesses are influenced by such external factors as the economy , government , and other forces external to the business. The PESTEL model is a useful tool for analyzing these forces.

Image Credits: Chapter 2

Figure 2.1: “Steve Jobs.” (2011). Flickr. CC BY 2.0 . Retrieved from: https://www.flickr.com/photos/8010717@N02/6216457030

Video Credits: Chapter 2

Alyssa Duong (2019). “The PESTEL Model.” VTech Works. Retrieved from: https://vtechworks.lib.vt.edu/handle/10919/88014

  • This vignette is based on an honors thesis written by Danielle M. Testa (2007). “Apple, Inc.: An Analysis of the Firm’s Tumultuous History, in Conjunction with the Abounding Future.” Lehigh University. ↵
  • Lee Angelelli (1994). “Steve Paul Jobs.” Retrieved from: http://ei.cs.vt.edu/~history/Jobs.html ↵
  • Ibid. ↵
  • Cyrus Farivar (2006). “Apple’s first 30 years; three decades of contributions to the computerIndustry.” Macworld. p. 2. ↵
  • Dan Barkin (2006). “He made the iPod: How Steve Jobs of Apple created the new millennium’s signature invention.” Knight Ridder Tribune Business News. p. 1. ↵
  • Jon Hilsenrath, Serena Ng, and Damian Paletta (2008). “Worst Crisis Since ’30s, With No End Yet in Sight.” Wall Street Journal, Markets. Retrieved from: http://www.wsj.com/articles/SB122169431617549947 ↵
  • Steve Hargreaves (2008). “How the Economy Stole the Election.” CNN.com. Retrieved from: http://money.cnn.com/galleries/2008/news/0810/gallery.economy_election/index.html ↵
  • Dan Gallagher (2008). “Analyst Says Apple Is Cutting Back Production as Economy Weakens.” MarketWatch. Retrieved from: http://www.marketwatch.com/story/apple-cutting-back-iphone-production-analyst-says?amp;dist=msr_1 ↵
  • Shawn Tully (2020). "After Apple's Stratospheric Rise, Investors are Facing a New Threat: Simple Math." Fortune. Retrieved from https://fortune.com/2020/06/30/apple-stock-aapl-shares-whats-next-coronavirus-pandemic-covid-19-nasdaq ↵
  • David Baron (2003). “Facing-Off in Public.” Stanford Business. pp. 20-24. Retrieved from: https://www.gsb.stanford.edu/sites/gsb/files/2003August.pdf ↵
  • Markets and Markets (2018). "Electric Vehicle Market by Vehicle, Vehicle Class, Propulsion, EV Sales, Charging Station & Region - Global Forecast to 2030." Retrieved from: https://www.marketsandmarkets.com/Market-Reports/electric-vehicle-market-209371461.html ↵
  •  Kate Rogers and Betsy Spring (2020). “Personal Protective Equipment Is in High Demand as Coronavirus Spreads.” CNBC. Retrieved from: https://www.cnbc.com/2020/03/06/personal-protective-equipment-is-in-high-demand-as-coronavirus-spreads.html13 Taylor Borden and Allana Akhtar (2020). “The Coronavirus Outbreak Has Triggered Unprecedented Mass Layoffs and Furloughs. Here Are the Major companies That Have Announced They Are Downsizing Their Workforces.” Business Insider. Retrieved from: https://www.businessinsider.com/coronavirus-layoffs-furloughs-hospitality-service-travel-unemployment-2020#airbnb-announced-it-is-laying-off-about-25-of-its-workforce-or-1900-employees-on-may-5-its-severance-package-includes-several-months-pay-a-year-of-healthcare-and-support-finding-a-new-job-2 ↵

Fundamentals of Business, 3rd edition Copyright © 2020 by Stephen J. Skripak and Ron Poff is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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5 Chapter 5 – The Business Plan

Developing your strategy.

As mentioned in Chapter 2 , it is critically important for any business organization to be able to accurately understand and identify what constitutes customer value. To do this, one must have a clear idea of who your customers are or will be. However, simply identifying customer value is insufficient. An organization must be able to provide customer value within several important constraints. One of these constraints deals with the competition—what offerings are available and at what price. Also, what additional services might a company provide? A second critically important constraint is the availability of resources to the business organization. Resources consist of factors such as money, facilities, equipment, operational capability, and personnel.

Here is an example: a restaurant identified its prime customer base as being upscale clientele in the business section of a major city. The restaurant recognized that it has numerous competitors that are interested in providing the same clientele with an upscale dining experience. Our example restaurant might provide a five-course, five-star gourmet meal to its customers. It also provides superlative service. If a comparable restaurant failed to provide a comparable meal than the example restaurant, the example restaurant would have a competitive advantage. If the example restaurant offered these sumptuous meals for a relatively low price in comparison to its competitors, it would initially seem to have even more of an advantage. However, if the price charged is significantly less than the cost of providing the meal, the service in this situation could not be maintained. In fact, the restaurant inevitably would have to go out of business. Providing excellent customer service may be a necessary condition for business survival but, in and of itself, it is not a sufficient condition.

So how does one go about balancing the need to provide customer value within the resources available while always maintaining a watchful eye on competitors’ actions? We are going to argue that what is required for that firm is to have a strategy .

The word strategy is derived from the Greek word strategos , which roughly translates into the art of the general, namely a military leader. Generals are responsible for marshaling required resources and organizing the troops and the basic plan of attack. Much in the same way, executives as owners of businesses are expected to have a general idea of the desired outcomes, acquire resources, hire and train personnel, and generate plans to achieve those outcomes. In this sense, all businesses, large and small, have strategies, whether they are clearly written out in formal business plans or reside in the mind of the owner of the business.

There are many different formal definitions of strategy with respect to business. The following is a partial listing of some of the definitions given by key experts in the field:

“A strategy is a pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or to be .” [1] “The determination of the long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals .” [2] “What business strategy is all about, in a word, is competitive advantage .” [3]

We define the strategy of a business as follows: A firm’s strategy is the path by which it seeks to provide its customers with value, given the competitive environment and within the constraints of the resources available to the firm.

Whatever definition of strategy is used, it is often difficult to separate it from two other terms: strategic planning and strategic management. Both terms are often perceived as being in the domain of large corporations, not necessarily small to midsize businesses. This is somewhat understandable. The origin of strategic planning as a separate discipline occurred over fifty years ago. It was mainly concerned with assisting huge multidivisional or global businesses in coordinating their activities. In the intervening half-century, strategic planning has produced a vast quantity of literature. Mintzberg, Lampel, Ahlstrand, in a highly critical review of the field, identified ten separate schools associated with strategic planning. [4] With that number of different schools, it is clear that the discipline has not arrived at a common consensus. Strategic planning has been seen as a series of techniques and tools that would enable organizations to achieve their specified goals and objectives. Strategic management was seen as the organizational mechanisms by which you would implement the strategic plan. Some of the models and approaches associated with strategic planning and strategic management became quite complex and would prove to be fairly cumbersome to implement in all but the largest businesses. Further, strategic planning often became a bureaucratic exercise where people filled out forms, attended meetings, and went through the motions to produce a document known as the strategic plan. Sometimes what is missed in this discussion was a key element—strategic thinking. Strategic thinking is the creative analysis of the competitive landscape and a deep understanding of customer value. It should be the driver (see “Strategy Troika”) of the entire process. This concept is often forgotten in large bureaucratic organizations.

Strategy Troika

Strategy Troika - Strategic management, strategic planning, and strategic thought

Strategic thinkers often break commonly understood principles to reach their goals. This is most clearly seen among military leaders, such as Alexander the Great or Hannibal. Robert E. Lee often violated basic military principles, such as dividing his forces. General Douglas MacArthur shocked the North Koreans with his bold landings behind enemy lines at Inchon. This mental flexibility also exists in great business leaders.

Solomon and Friedman recounted a prime example of true strategic thinking. [5] Wilson Harrell took a small, closely held, cleaning spray company known as Formula 409 to the point of having national distribution. In 1967, the position that Formula 409 held was threatened by the possible entry of Procter & Gamble into the same spray cleaning market. Procter & Gamble was a huge consumer products producer, noted for its marketing savvy. Procter & Gamble began a program of extensive market research to promote its comparable product they called Cinch. Clearly, the larger firm had a much greater advantage. Harrell knew that Procter & Gamble would perform test market research. He decided to do the unexpected. Rather than directly confront this much larger competitor, he began a program where he reduced advertising expenditures in Denver and stopped promoting his Formula 409. The outcome was that Procter & Gamble had spectacular results, and the company was extremely excited with the potential for Cinch. Procter & Gamble immediately begin a national sales campaign. However, before the company could begin, Harrell introduced a promotion of his own. He took the Formula 409 sixteen-ounce bottle and attached it to a half-gallon size bottle. He then sold both at a significant discount. This quantity of spray cleaner would last the average consumer six to nine months. The market for Procter & Gamble’s Cinch was significantly reduced. Procter & Gamble was confused and confounded by its poor showing after the phenomenal showing in Denver. Confused and uncertain, the company chose to withdraw Cinch from the market. Wilson Harrell’s display of brilliant strategic thinking had bested them. He leveraged his small company’s creative thinking and flexibility against the tremendous resources of an international giant. Through superior strategic thinking, Harrell was able to best Procter & Gamble.

Do You Have a Strategy and What Is It?

We have argued that all businesses have strategies, whether they are explicitly articulated or not. Perry stated that “small business leaders seem to recognize that the ability to formulate and implement an effective strategy has a major influence on the survival and success of small business.” [6]

The extent to which a strategy should be articulated in a formal manner, such as part of a business plan, is highly dependent on the type of business. One might not expect a formally drafted strategy statement for a nonemployee business funded singularly by the owner. One researcher found that formal plans are rare in businesses with fewer than five employees. [7] However, you should clearly have that expectation for any other type of small or midsize business.

Any business with employees should have an articulated strategy that can be conveyed to them so that they might better assist in implementing it. Curtis pointed out that in the absence of such communication, “employees make pragmatic short-term decisions that cumulatively form an ad-hoc strategy.” [8] These ad hoc (realized) strategies may be at odds with the planned (intended) strategies to guide a firm. [9] However, any business that seeks external funding from bankers, venture capitalists, or “angels” must be able to specify its strategy in a formal business plan.

Clearly specifying your strategy should be seen as an end in itself. Requiring a company to specify its strategy forces that company to think about its core issues, such as the following:

  • Who are your customers?
  • How are you going to provide value to those customers?
  • Who are your current and future competitors?
  • What are your resources?
  • How are you going to use these resources?

One commentator in a blog put it fairly well, “It never ceases to amaze me how many people will use GPS or Google maps for a trip somewhere but when it comes to starting a business they think that they can do it without any strategy, or without any guiding road-map.” Harry Tucci, comment posted to the following blog: [10]

Types of Strategies

In 1980, Michael Porter a professor at Harvard Business School published a major work in the field of strategic analysis— Competitive Strategy . [11] To simplify Porter’s thesis, while competition is beneficial to customers, it is not always beneficial to those who are competing. Competition may involve lowering prices, increasing research and development (R&D), and increasing advertising and other expenses and activities—all of which can lower profit margins. Porter suggested that firms should carefully examine the industry in which they are operating and apply what he calls the five forces model. These five forces are as follows: the power of suppliers, the power of buyers, the threat of substitution, the threat of new entrants, and rivalry within the industry. We do not need to cover these five forces in any great detail, other than to say that once the analysis has been conducted, a firm should look for ways to minimize the dysfunctional consequences of competition. Porter identified four generic strategies that firms may choose to implement to achieve that end. Actually, he initially identified three generic strategies, but one of them can be bifurcated. These four strategies are as follows (see “Generic Strategies”): cost leadership, differentiation, cost focus, and differentiation focus. These four generic strategies can be applied to small businesses. We will examine each strategy and then discuss what is required to successfully implement them.

Generic Strategies

Generic Strategies Diagram - Cost Leadership, Differentiation, Cost Focus, Differentiation Focus

Low-Cost Advantage

A  cost leadership strategy requires that a firm be in the position of being the lowest cost producer in its competitive environment. By being the lowest-cost producer, a firm has several strategic options open to it. It can sell its product or service at a lower price than its competitors. If price is a major driver of customer value, then the firm with the lowest price should sell more. The low-cost producer also has the option of selling its products or services at prices that are comparable to its competitors. However, this would mean that the firm would have a much higher margin than its competitors.

Obviously, following a cost leadership strategy dictates that the business be good at curtailing costs. Perhaps the clearest example of a firm that employs a cost leadership strategy is Walmart. Walmart’s investment in customer relations and inventory control systems plus its huge size enables it to secure the “best” deals from suppliers and drastically reduce costs. It might appear that cost leadership strategies are most suitable for large firms that can exploit economies of scale. This is not necessarily true. Smaller firms can compete on the basis of cost leadership. They can position themselves in low-cost areas, and they can exploit their lower overhead costs. Family businesses can use family members as employees, or they can use a web presence to market and sell their goods and services. A small family-run luncheonette that purchases used equipment and offers a limited menu of standard breakfast and lunch items while not offering dinner might be good example of a small business that has opted for a cost leadership strategy.

Differentiation

A  differentiation strategy involves providing products or services that meet customer value in some unique way. This uniqueness may be derived in several ways. A firm may try to build a particular brand image that differentiates itself from its competitors. Many clothing lines, such as Tommy Hilfiger, opt for this approach. Other firms will try to differentiate themselves on the basis of the services that they provide. Dominoes began to distinguish itself from other pizza firms by emphasizing the speed of its delivery. Differentiation also can be achieved by offering a unique design or features in the product or the service. Apple products are known for their user-friendly design features. A firm may wish to differentiate itself on the basis of the quality of its product or service. Kogi barbecue trucks operating in Los Angeles represent such an approach. They offer high-quality food from mobile food trucks.” [12] They further facilitate their differentiation by having their truck routes available on their website and on their Twitter account.

Adopting a differentiation strategy requires significantly different capabilities than those that were outlined for cost leadership. Firms that employ a differentiation strategy must have a complete understanding of what constitutes customer value. Further, they must be able to rapidly respond to changing customer needs. Often, a differentiation strategy involves offering these products and services at a premium price. A differentiation strategy may accept lower sales volumes because a firm is charging higher prices and obtaining higher profit margins. A danger in this approach is that customers may no longer place a premium value on the unique features or quality of the product or the service. This leaves the firm that offers a differentiation strategy open to competition from those that adopt a cost leadership strategy.

Focus—Low Cost or Differentiation

Porter identifies the third strategy—focus. He said that focus strategies can be segmented into a  cost focus and a differentiation focus .

In a focus strategy, a firm concentrates on one or more segments of the overall market. Focus can also be described as a niche strategy. Focus strategy entails deciding to some extent that we do not want to have everyone as a customer. There are several ways that a firm can adopt a focus perspective:

  • Product line. A firm limits its product line to specific items of only one or more product types. California Cart Builder produces only catering trucks and mobile kitchens.
  • Customer. A firm concentrates on serving the needs of a particular type of customer. Weight Watchers concentrates on customers who wish to control their weight or lose weight.
  • Geographic area. Many small firms, out of necessity, will limit themselves to a particular geographic region. Microbrewers generally serve a limited geographic region.
  • Particular distribution channel. Firms may wish to limit themselves with respect to the means by which they sell their products and services. Amazon began and remains a firm that sells only through the Internet.

Firms adopting focus strategies look for distinct groups that may have been overlooked by their competitors. This group needs to be of sufficiently sustainable size to make it an economically defensible option. One might open a specialty restaurant in a particular geographic location—a small town. However, if the demand is not sufficiently large for this particular type of food, then the restaurant will probably fail. Companies that lack the resources to compete on either a national level or an industry-wide level may adopt focus strategies. Focus strategies enable firms to marshal their limited resources to best serve their customers.

As previously stated, focus strategies can be bifurcated into two directions—cost focus or differentiation focus. IKEA sells low-priced furniture to those customers who are willing to assemble the furniture. It cuts its costs by using a warehouse rather than showroom format and not providing home delivery. Michael Dell began his business out of his college dormitory. He took orders from fellow students and custom-built computers to their specifications. This was a cost focus strategy. By building to order, it almost totally eliminated the need for any incoming, work-in-process, or finished goods inventories.

A focus differentiation strategy concentrates on providing a unique product or service to a segment of the market. This strategy may be best represented by many specialty retail outlets. The Body Shop focuses on customers who want natural ingredients in their makeup. Max and Mina is a kosher specialty ice cream store in New York City. It provides a constantly rotating menu of more than 300 exotic flavors, such as Cajun, beer, lox, corn, and pizza. The store has been written up in the New York Times and People magazine. Given its odd flavors, Max and Mina’s was voted the number one ice cream parlor in America in 2004. [13]

Evaluating Strategies

The selection of a generic strategy by a firm should not be seen as something to be done on a whim. Once a strategy is selected, all aspects of the business must be tied to implementing that strategy. As Porter stated, “Effectively implementing any of these generic strategies usually requires total commitment and supporting organizational arrangements.” [14] The successful implementation of any generic strategy requires that a firm possess particular skills and resources. Further, it must impose particular requirements on its organization (see “Summary of Generic Strategies”).

Even successful generic strategies must recognize that market and economic conditions change along with the needs of consumers. Henry Ford used a cost leadership strategy and was wildly successful until General Motors began to provide different types of automobiles to different customer segments. Likewise, those who follow a differentiation strategy must be cautious that customers may forgo “extras” in a downturn economy in favor of lower costs. This requires businesses to be vigilant, particularly with respect to customer value.

Summary of Generic Strategies

Key Takeaways

  • Any firm, regardless of size, needs to know how it will compete; this is the firm’s strategy.
  • Strategy identifies how a firm will provide value to its customers within its operational constraints.
  • Strategy can be reduced to four major approaches—cost leadership, differentiation, cost focus, and differentiation focus.
  • Once a given strategy is selected, all of a firm’s operations should be geared to implementing that strategy.
  • No strategy will be successful forever and therefore needs to be constantly evaluated.

The Necessity for a Business Plan

An intelligent plan is the first step to success. The man who plans knows where he is going, knows what progress he is making and has a pretty good idea of when he will arrive. Planning is the open road to your destination. If you don’t know where you’re going, how can you expect to get there? – Basil Walsh

In Chapter 1, we discussed the issue of failure and small businesses. Although research on small business failure has identified many factors, one reason that always appears at the top of any list is the failure to plan. Interestingly, some people argue that planning is not essential for a start-up business, but they are in a distinct minority. [15] The overwhelming consensus is that a well-developed plan is essential for the survival of any small (or large) business. [16] Perry found that firms with more than five people benefit from having a well-developed business plan. [17]

A recent study found that there was a near doubling of successful growth for those businesses that completed business plans compared to those that did not create one. It must be pointed out that this study might be viewed as being biased because the founder of the software company whose main product is a program that builds business plans conducted the study. However, the results were examined by academics from the University of Oregon who validated the overall results. They found that “except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say the completing of a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to produce a successful business.” [18]

Basically, there are two main reasons for developing a comprehensive business plan: (1) a plan will be extraordinarily useful in ensuring the successful operation of your business; and (2) if one is seeking to secure external funds from banks, venture capitalists, or other investors, it is essential that you be able to demonstrate to them that they will be recovering their money and making a profit. Let us examine each reason in detail.

Many small business owners operate under a mistaken belief that the only time that they need to create a business plan is at the birth of the company or when they are attempting to raise additional capital from external sources. They fail to realize that a business plan can be an important element in ensuring day-to-day success.

The initial planning process aids the operational success of a small business by allowing the owner a chance to review, in detail, the viability of the business idea. It forces one to rigorously consider some key questions:

  • Is the business strategy feasible?
  • What are the chances it will make money?
  • Do I have the operational requirements for starting and running a successful business?
  • Have I considered a well-thought-out marketing plan that clearly identifies who my customers will be?
  • Do I clearly understand what value I will provide to these customers?
  • What will be the means of distribution to provide the product or the service to my customers?
  • Have I clarified to myself the financial issues associated with starting and operating the business?
  • Do I have to reexamine these notions to ensure success?

Possessing an actual written plan enables you to have people outside the organization evaluate your business plan. Using friends, colleagues, partners, or even consultants may provide you with an unbiased evaluation of the assumptions.

It is not enough to create an initial business plan; you should anticipate making the planning process an annual activity. The Prussian military theorist von Moltke once argued that no military plan survives the first engagement with the enemy. Likewise, no company evolves in the same way as outlined in its initial business plan.

Overcoming the Reluctance to Formally Plan

By failing to prepare, you will prepare them to fail . -Benjamin Franklin

Unfortunately, it appears that many small businesses do not make any effort to build even an initial business plan, let alone maintain a planning process as an ongoing operation, even though there is clear evidence that the failure to plan may have serious consequences for the future success of such firms. This unwillingness to plan may be understandable in nonemployee businesses, but it is inexcusable as a business grows in size. Why, therefore, do some businesses fail to begin the planning process?

  • We do not need to plan. One of the prime reasons individuals fail to produce a business plan is that they believe that they do not have to plan. This may be attributable to the size of the firm; nonemployee firms that have no intention of seeking outside financing might sincerely believe that they have no need for a formal business plan. Others may believe that they so well understand the business and/or industry that they can survive and prosper without the burdensome process of a business plan. The author of Business Plan for Dummies , Paul Tiffany, once argued that if one feels lucky enough to operate a business successfully without resorting to a business plan, then he or she should forget about starting a business and head straight to Las Vegas.
  • I am too busy to plan. Anyone who has ever run a business on his or her own can understand this argument. The day-to-day demands of operating a business may make it seem that there is insufficient time to engage in any ancillary activity or prepare a business plan. Individuals who accept this argument often fail to recognize that the seemingly endless buzz of activities, such as constantly putting out fires, may be the direct result of not having thought about the future and planned for it in the first place.
  • Plans do not produce results. Small-business owners (entrepreneurs) are action- and results-oriented individuals. They want to see a tangible outcome for their efforts, and preferably they would like to see the results as soon as possible. The idea of sitting down and producing a large document based on assumptions that may not play out exactly as predicted is viewed as a futile exercise. However, those with broader experience understand that there will be no external funding for growth or the initial creation of the business without the existence of a well-thought-out plan. Although plans may not yield the specified results contained within them, the process of thinking about the plan and building it often yield results that the owner might not initially appreciate.
  • We are not familiar with the process of formal planning. This argument might initially appear to have more validity than the others. Developing a comprehensive business plan is a daunting task. It might seem difficult if not impossible for someone with no experience with the concept. Several studies have indicated that small business owners are more likely to engage in the planning process if they have had prior experience with planning models in their prior work experience. [19] Fortunately, this situation has changed rather significantly in the last decade. As we will illustrate, there are numerous tools that provide significant support for the development of business plans. We will see that software packages greatly facilitate the building of any business plan, including marketing plans and financial plans for small businesses. We also show that the Internet can provide an unbelievably rich source of data and information to assist in the building of these plans.

Although one could understand the reticence of someone new to small business (or in some cases even seasoned entrepreneurs), their arguments fall short with respect to the benefits that will be derived from conducting a structured and comprehensive business planning process.

Plans for Raising Capital

Every business plan should be written with a particular audience in mind. The annual business plan should be written with a management team and for the employees who have to implement the plan. However, one of the prime reasons for writing a business plan is to secure investment funds for the firm. Of course, funding the business could be done by an individual using his or her own personal wealth, personal loans, or extending credit cards. Individuals also can seek investments from family and friends. The focus here will be on three other possible sources of capital—banks, venture capitalists, and angel investors. It is important to understand what they look for in a business plan. Remember that these three groups are investors, so they will be anticipating, at the very least, the ability to recover their initial investment if not earn a significant return.

Bankers, like all businesspeople, are interested in earning a profit; they want to see a return on their investment. However, unlike other investors, bankers are under a legal obligation to ensure that the borrower pledge some form of collateral to secure the loan. [20] This often means that banks are unwilling to fund a start-up business unless the owner is willing to pledge some form of collateral, such as a second mortgage on his or her home. Many first-time business owners are not in a position to do that; securing money from a bank occurs most frequently for an existing business that is looking to expand or for covering a short-term cash-flow need. Banks may lend to small business owners who are opening a second business provided that they can prove a record of success and profitability.

Banks will require a business plan. It should be understood that bank loan officers will initially focus on the financial components of that client, namely, the income statement, balance sheet, and the cash-flow statement. The bank will examine your projections with respect to known industry standards. Therefore, the business plan should not project a 75 percent profit margin when the industry standard is 15 percent, unless the author of the plan can clearly document why he or she will be earning such a high return.

Some businesses may raise funds with the assistance of a Small Business Administration (SBA) loan. These loans are always arranged through a commercial bank. With these loans, the SBA will pledge up to 70 percent of the total value of the loan. This means that the owner still must provide, at the very least, 30 percent of the total collateral. The ability to secure one of these loans is clearly tied to the adequacy of the business plan.

Venture Capitalists

Another possible source of funding is venture capitalists . The first thing that one should realize about venture capitalists is that they are not in it just to make a profit; they want to make returns that are substantially above those to be found in the market. For some, this translates into the ability to secure five to ten times their initial investment and recapture their investment in a relatively short period of time—often less than five years. It has been reported that some venture capitalists are looking for returns in the order of twenty-five times their original investment. [21]

The financial statement, particularly the profit margin, is obviously important to venture capitalists, but they will also be looking at other factors. The quality of the management team identified in the business plan will be examined. They will be looking at the team’s experience and track record. Other factors needed by venture capitalists may include the projected growth rate of the market, the extent to which the product or the service being offered is unique, the overall size of the market, and the probability of producing a highly successful product or service.

Businesses that are seeking financing from banks know that they must go to loan officers who will review the plan, even though a computerized loan assessment program may make the final decision. With venture capitalists, on the other hand, you often need to have a personal introduction to have your plan considered. You should also anticipate that you will have to make a presentation to venture capitalists. This means that you have to understand your plan and be able to present it in a dynamic fashion.

Angel Investors

The third type of investor is referred to as angel investors , a term that originally came from those individuals who invested in Broadway shows and films. Many angel investors are themselves successful entrepreneurs. As with venture capitalists, they are looking for returns higher than they can normally find in the market; however, they often expect returns lower than those anticipated by venture capitalist. They may be attracted to business plans because of an innovative concept or the excitement of entering a new type of business. Being successful small business owners, many angel investors will not only provide capital to fund the business but also bring their own expertise and experience to help the business grow. It has been estimated that these angel investors provide between three and ten times as much money as venture capitalists for the development of small businesses. [22]

Angel investors will pay careful attention to all aspects of the proposed business plan. They expect a comprehensive business plan—one that clearly specifies the future direction of the firm. They also will look at the management team not only for its track record and experience but also their (the angel investor’s) ability to work with this team. Angel investors may take a much more active role in the management of the business, asking for positions on the board of directors, taking an equity position in the firm, demanding quarterly reports, or demanding that the business not take certain actions unless it has the approval of these angel investors. These investors will take a much more hands-on approach to the operations of a firm.

  • Planning is a critical and important component of ensuring the success of a small business.
  • Some form of formal planning should not only accompany the start-up of a business but also be a regular (annual) activity that guides the future direction of the business.
  • Many small business owners are reluctant to formally plan. They can produce many excuses for not planning.
  • Businesses may have to raise capital from external sources—bankers, venture capitalists, or angel investors. Each type of investor will expect a business plan. Each type of investor will be more or less interested in different parts of the plan. Business owners should be aware of what parts of the plan each type of investor will focus on.

Building a Plan

Before talking about writing a formal business plan, someone interested in starting a business might want to think about doing some personal planning before drafting the business plan. Some of the questions that he or she might want to answer before drafting a full business plan are as follows:

  • Why am I going into this business?
  • What skills and resources do I possess that will help make the business a success?
  • What passion do I bring to this business?
  • What is my risk tolerance?
  • Exactly how hard do I intend to work? How many hours per week?
  • What impact will the business have on my family life?

What do I really wish from this business?

  • Am I interested in financial independence?
  • What level of profits will be required to maintain my personal and/or family’s lifestyle?
  • Am I interested in independence of action (no boss but myself)?
  • Am I interested in personal satisfaction?
  • Will my family be working in this business?
  • What other employees might I need? [23]

Having addressed these questions, one will be in a much better position to craft a formal business plan.

Gathering Information

Building a solid business plan requires knowing the economic, market, and competitive environments. Such knowledge transcends “gut feelings” and is based on data and evidence. Fortunately, much of the required information is available through library resources, Internet sources, and government agencies and, for a fee, from commercial sources. Comprehensive business plans may draw from all these sources.

Public libraries and those at educational institutions provide a rich resource base that can be used at no cost. Some basic research sources that can be found at libraries are given in this section— be aware that the reference numbers provided may differ from library to library .

Library Sources

Background sources.

  • Berinstein, Paula. Business Statistics on the Web: Find Them Fast—At Little or No Cost (Ref HF1016 .B47 2003).
  • The Core Business Web: A Guide to Information Resources (Ref HD30.37 .C67 2003).
  • Frumkin, Norman. Guide to Economic Indicators , 4th ed. (Ref HC103 .F9 2006). This book explains the meanings and uses of the economic indicators.
  • Solie-Johnson, Kris. How to Set Up Your Own Small Business , 2 volumes (Ref HD62.7 .S85 2005). Published by the American Institute of Small Business.

Company and Industry Sources

  • North American Industry Classification System, United States (NAICS), 2007 (Ref HF1042 .N6 2007). The NAICS is a numeric industry classification system that replaced the Standard Industrial Classification (SIC) system. An electronic version is available from the US Census Bureau .
  • Standard Industrial Classification Manual (Ref HA40 .I6U63 1987). The industry classification system that preceded the NAICS.
  • Value Line Investment Survey (Ref HG4751 .V18). Concise company and industry profiles are updated every thirteen weeks.

Statistical Sources

  • Almanac of Business and Industrial Financial Ratios (Ref HF5681 .R25A45 2010).
  • Business Statistics of the United States (Ref HC101 .A13123 2009). This publication provides recent and historical information about the US economy.
  • Economic Indicators (1971–present). The Council of Economic Advisers for the Joint Economic Committee of Congress publishes this monthly periodical; recent years are in electronic format only. Ten years of data are presented. Electronic versions are available in ABI/INFORM and ProQuest from September 1994 to present and Academic OneFile from October 1, 1991.
  • Industry Norms and Key Business Ratios (Dun & Bradstreet; Ref HF5681 .R25I532 through Ref HF5681 .I572 [2000–2001 through 2008–2009]).
  • Rma Annual Statement Studies (Ref HF5681 .B2R6 2009–2010). This publication provides annual financial data and ratios by industry.
  • Statistical Abstract of the United States (Ref HA202 .S72 2010). This is the basic annual source for statistics collected by the government. Electronic version is available at www.census.gov/compendia/statstatab .
  • Survey of Current Business (1956–present). The Bureau of Economic Analysis publishes this monthly periodical; recent years are in electronic format only.

At some libraries, you may find access to the following resources online:

  • Mergent Webreports. Mergent (formerly Moody’s) corporate manuals are in digitized format. Beginning with the early 1900s, the reports include corporate history, business descriptions, and in-depth financial statements. The collection is searchable by company name, year, or manual type.
  • ProQuest Direct is a database of general, trade, and scholarly periodicals, with many articles in full text. Many business journals and other resources are available.
  • Standard and Poor’s Netadvantage is a database that includes company and industry information.

Internet Resources

In addition to government databases and other free sources, the Internet provides an unbelievably rich storehouse of information that can be incorporated into any business plan. It is not feasible to provide a truly comprehensive list of useful websites; this section provides a highly selective list of government sites and other sites that provide free information.

Government Sites

  • US Small Business Administration (SBA) . This is an excellent site to begin researching a business plan. It covers writing a plan, financing a start-up, selecting a location, managing employees, and insurance and legal issues. A follow-up page at http://www.sba.gov provides access to publications, statistics, video tutorials, podcasts, business forms, and chat rooms. Another page— http://www.sba.gov/about-offices-list/2 —provides access to localized resources.
  • SCORE Program . The SCORE program is a partner of the SBA. It provides a variety of services to small business owners, ranging from online (and in-person) mentoring, workshops, free computer templates, and advice on a wide range of small business issues.

In developing a business plan, it is necessary to anticipate the future economic environment. The government provides extensive statistics online.

  • Consumer Price Index . This index provides information on the direction of prices for industries and geographic areas.
  • Producer Price Index . Businesses that provide services or are focused on business-to-business (B2B) operations may find these data more appropriate for estimating future prices.
  • National Wage Data . This site provides information on prevailing wages and can be broken down by occupation and location down to the metropolitan area.
  • Consumer Expenditures Survey . This database provides information on expenditures and income. It allows for a remarkable level of refinement by occupation, age, or race.
  • State and Local Personal Income and Employment . These databases provide a breakdown of personal income by state and metropolitan area.
  • GDP by State and Metropolitan Region . This will provide an accurate guide to the overall economic health of a region or a city.
  • US Census . This is a huge site with databases on population, income, foreign trade, economic indicators, and business ownership.

There are nongovernment websites, either free or charging a fee, that can provide assistance in building a business plan. A simple Google search for the phrase small business plan yields more than 67 million results. Various sites will either help with writing the plan, offer to write the plan for a fee, produce reports on industries, or assist small businesses by providing a variety of support services. The Internet offers a veritable cornucopia of information and support for those working on their business plans.

Forecasting for the Plan

Prediction is very difficult, especially about the future. Nils Bohr, Nobel Prize winner

Any business plan is a future-oriented document. Business plans are required to look between three and five years into the future. To produce them and accurately forecast sales, you will need estimates of expenses and other items, such as the required number of employees, interest rates, and general economic conditions. There are many different techniques and tools that can be used to forecast these items. The type of techniques used will be influenced by many factors, such as the following:

  • The size of the business. Smaller businesses may have fewer resources to apply a wide variety of forecasting techniques.
  • The analytical sophistication of people who will be conducting the forecast. The owner of a home business may have no prior experience with forecasting techniques.
  • The type of the organization. A manufacturing concern that sells to a stable and relatively predictable environment that has been in existence for years might be able to employ a variety of standard statistical forecasting techniques; however, a small firm operating in a new or a chaotic environment might have to rely on significantly different techniques.
  • Historical records. Does the firm have historical records for sales that can be used to project into the future?

There is no universal set of forecasting techniques that can be used for all types of small and midsize businesses. Forecasting can fall into a fairly comprehensive range of techniques with respect to level of sophistication. Some forecasting can be done on an intuitive basis (e.g., back-of-the-envelope calculations); others can be done with standard computer programs (e.g., Excel) or programs that are specifically dedicated to forecasting in a variety of environments.

A brief review of basic forecasting techniques shows that they can be divided into two broad classes:  qualitative forecasting methods and quantitative forecasting methods . Actually, these terms can be somewhat misleading because qualitative forecasting methods do not imply that no numbers will be involved. The two techniques are separated by the following concept: qualitative forecasting methods assume that one either does not have historical data or that one cannot rely on past historical data. A start-up business has no past sales that can be used to project future sales. Likewise, if there is a significant change in the environment, one may feel uncomfortable using past data to project into the future. A restaurant operates in a small town that contains a large automobile factory. After the factory closes, the restaurant owner should anticipate that past sales will no longer be a useful guideline for projecting what sales might be in the next year or two because the owner has lost a number of customers who worked at the factory. Quantitative forecasting, on the other hand, consists of techniques and methods that assume you can use past data to make projections into the future.

“Overview of Forecasting Methods” provides examples of both qualitative forecasting methods and quantitative forecasting methods for sales forecasting. Each method is described, and their strengths and weaknesses are given.

Overview of Forecasting Methods

Forecasting key items such as sales is crucial in developing a good business plan. However, forecasting is a very challenging activity. The further out the forecast, the less likely it will be accurate. Everyone recognizes this fact. Therefore, it is useful to draw on a variety of forecasting techniques to develop your final forecast for the business plan. To do that, you should have a fairly solid understanding of the strengths and weaknesses of the various approaches. There are many books, websites, and articles that could assist you in understanding these techniques and when they should or should not be used. In addition, one should be open to gathering additional information to assist in building a forecast. Some possible sources of such information would be associations, trade publications, and business groups. Regardless of what technique is used or the data source employed in building a forecast for business plan, one should be prepared to justify why you are employing these forecasting models.

Web Resources for Forecasting

  • Three methods of sales forecasting ( sbinfocanada.about.com/od/cashflowmgt/a/salesforecast.htm ). This site provides three simplified approaches to sales forecasting.
  • Time-critical decision making for business administration ( home.ubalt.edu/ntsbarsh/stat-data/forecast.htm ). This site has an e-book format with several chapters devoted to analytical forecasting techniques.

Building your first business plan may seem extremely formidable. This may explain why there are so many software packages available to assist in this task. After building your first business plan, that steep learning curve should make subsequent plans for the business or other businesses significantly easier.

In preparing to build a business plan, there are some problem areas or mistakes that you should be on guard to avoid. Some may be technical in nature, while others relate to content issues. For the technical side, first and foremost, one should make sure that there are no misspellings or punctuation errors. The business plan should follow a logical structure. No ideal business plan clearly specifies the exact sections that need to be included nor is there an ideal length. Literature concerning business plans indicates that the appropriate length of the body of a business plan line should be between twenty and forty pages. This does not include appendixes that might provide critical data for the reader.

In developing a lengthy report, sometimes it is easy to fall into clichés or overused expressions. These should be avoided. Consider the visuals in the report. Data should be placed in either clearly mapped-out tables or well-designed graphs. The report should be as professional-looking as possible. Anticipate the audience that will be reading the report and write in a way that easily reaches them; avoid using too much jargon or technical terms.

The content in any business plan centers on two areas: realism and accuracy.

Components of the Plan

There is no idealized structure for a business plan or a definitive number of sections that it must contain. The following subsections discuss the outline of a plan for a business start-up and identify some of the major sections that should be part of the plan.

The cover page provides the reader with information about either the author of the plan or the person to contact concerning the business plan. It should contain all the pertinent information to enable the reader to contact the author, such as the name of the business, the business logo, and the contact person’s address, telephone number, and e-mail address.

The table of contents enables the reader to find the major sections and components of the plan. It should identify the key sections and subsections and on which pages those sections begin. This enables the reader to turn to sections that might be of particular importance.

Executive Summary

The  executive summary is a section of critical importance and is perhaps the single most important section of the entire business plan. Quite often, it is the first section that a reader will turn to, and sometimes it may be the only section of the business plan that he or she will read. Chronologically, it should probably be the last section written. [24] The executive summary should provide an accurate overview of the entire document, which cannot be done until the whole document is prepared.

If the executive summary fails to adequately describe the idea behind the business or if it fails to do so in a captivating way, some readers may discard the entire business plan. As one author put it, the purpose of the executive summary is to convince the reader to “read on.” [25] The executive summary should contain the following pieces of information:

  • What is the company’s business?
  • Who are its intended customers?
  • What will be its legal structure?
  • What has been its history (where one exists)?
  • What type of funding will be requested?
  • What is the amount of that funding?
  • What are the capabilities of the key executives?

All this must be done in an interesting and captivating way. The great challenge is that executive summaries should be relatively short—between one and three pages. For many businesspeople, this is the great challenge—being able to compress the required information in an engaging format that has significant size limitations.

Business Section

Goals. These are broad statements about what you would like to achieve some point in the near future. Your goals might focus on your human resource policies (“We wish to have productive, happy employees”), on what you see as the source of your competitive advantage (“We will be best in service”), or on financial outcomes (“We will produce above average return to our investors.”) Goals are useful, but they can mean anything to anyone. It is therefore necessary to translate the goals into objectives to bring about real meaning so that they can guide the organization. Ideally, objectives should be SMART —specific, measurable, achievable, realistic, and have a specific timeline for completion. Here is an example: one organizational goal may be a significant rise in sales and profits. When translating that goal into an objective, you might word the objectives as follows: a 15 percent increase in sales for the next three years followed by a 10 percent increase in sales for the following two years and a 12.5 percent increase in profits in each of the next five years. These objectives are quite specific and measurable. It is up to the decision-maker to determine if they are achievable and realistic. These objectives—sales and profits—clearly specify the time horizon. In developing the plan, owners are often very happy to develop goals because they are open to interpretation, but they will avoid objectives. Goals are sufficiently ambiguous, whereas objectives tie you to particular values that you will have to hit in the future. People may be concerned that they will be weighed on a scale and found wanting for failing to achieved their objectives. However, it is critical that your plan contains both goals and objectives. Objectives allow investors and your employees to clearly see where the firm intends to go. They produce targeted values to aim for and, therefore, are critical for the control of the firm’s operations.

Vision and Mission Statements. To many, there is some degree of confusion concerning the difference between a vision statement and a mission statement.  Vision statements articulate the long-term purpose and idealized notion of what a business wishes to become. In the earliest days of Microsoft, when it was a small business, its version of a vision statement was as follows: “A computer on every desk and in every home.” In the early 1980s, this was truly a revolutionary concept. Yet it gave Microsoft’s employees a clear idea (vision) that to bring that vision into being, the software being developed would have to be very “user-friendly” in comparison to the software of that day. Mission statements , which are much more common in small business plans, articulate the fundamental nature of the business. This means identifying the type of business, how it will leverage its competencies, and possibly the values that drive the business. Put simply, a mission statement should address the following questions:

  • Who are we? What business are we in?
  • Who do we see as our customers?
  • How do we provide value for those customers?

Sometimes vision and mission statements are singularly written for external audiences, such as investors or shareholders. They are not written for the audience for whom it would have the greatest meaning—the management team and the employees of the business. Unfortunately, many recognize that both statements can become exercises of stringing together a series of essentially meaningless phrases into something that appears to sound right or professional . You can find software on the web to automatically generate such vacuous and meaningless statements.

Sometimes a firm will write a mission statement that provides customers, investors, and employees with a clear sense of purpose of that company. Zappos has the following as its mission statement: “Our goal is to position Zappos as an online service leader. If we can get customers to associate Zappos as the absolute best in service, then we can expand beyond shoes.” [26] The mission statement of Ben & Jerry’s Ice Cream focuses both on defining their product and their values: “To make, distribute and sell the finest quality all-natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.” [27]

Keys to Success . This section identifies those specific elements of your firm that you believe will ensure success. It is important for you to be able to define the competencies that you intend to leverage to ensure success. What makes your product or service unique? What specific set of capabilities do you bring to the competitive scene? These might include the makeup of and the experience of your management team; your operational capabilities (e.g., unique skills in design, manufacturing, or delivery); your marketing skill sets: your financial capabilities (e.g., the ability to control costs); or the personnel that make up the company.

Industry Review

In this section, you want to provide a fairly comprehensive overview of the industry. A thorough understanding of the industry that you will be operating in is essential to understand the possible returns that your company will earn within that industry. Investors want to know if they will recover their initial investment. When will they see a profit? Remember, investors often carefully track industries and are well aware of the strengths and limitations within a particular industry. Investors are looking for industries that can demonstrate growth. They also want to see if the industry is structurally attractive. This might entail conducting Porter’s five forces analysis; however, this is not required in all cases. If there appear to be some issues or problems with industry-level growth, then you might want to be able to identify some segments of the industry where growth is viable.

Products or Services

This section should be an in-depth discussion of what you are offering to customers. It should provide a complete and clear statement of the products or the services that you are offering. It should also discuss the core competencies of your business. You should highlight what is unique, such as a novel product or service concept or the possession of patents. You need to show how your product or service specifically meets particular market needs. You must identify how the product or the service will satisfy specific customers’ needs. If you are dealing with a new product or service, you need to demonstrate what previously unidentified needs it will meet and how it will do so. At its birth, Amazon had to demonstrate that an online bookstore would be preferable to the standard bookstore by offering the customer a much wider selection of books than would be available at an on-site location.

This section could include a discussion of technical issues. If the business is based on a technological innovation—such as a new type of software or an invention—then it is necessary to provide an adequate discussion of the specific nature of the technology. One should take care to always remember the audience for whom you are writing the plan. Do not make this portion too technical in nature. This section also might discuss the future direction of the product or service—namely, where will you be taking (changing) the product or the service after the end of the current planning horizon? This may require a discussion of future investment requirements or the required time to develop new products and services. This section may also include a discussion of pricing the product or the service, although a more detailed discussion of the issue of pricing might be found in the marketing plan section. If you plan to include the issue of pricing here, you should discuss how the pricing of the product or the service was determined. The more detailed you are in this description, the more realistic it will appear to the readers of the business plan. You may wish to discuss relationships that you have with vendors that might have an impact on reducing cost and therefore an impact on price. It is important to discuss how your pricing scheme will compare with competitors. Will it be higher than average or below the average price? How does the pricing fit in with the overall strategy of the firm?

This section must have a high degree of honesty. Investors will know much about the industry and its limitations. You need to identify any areas that might be possible sources of problems, such as government regulations, issues with new product development, securing distribution channels, and informing the market of your existence. Further, it is important to identify the current competitors in the industry and possible future competitors.

Marketing Plan

An introductory marketing course always introduces the four Ps: product, price, place, and promotion. The marketing section of the business plan might provide more in-depth coverage of how the product or the service better meets customer value than that of competitors. It should identify your target customers and include coverage of who your competitors are and what they provide. The comparison between your firm and its competitors should highlight differences and point to why you are providing superior value. Pricing issues, if not covered in the previous section, could be discussed or discussed in more detail.

The issue of location, particularly in retail, should be covered in detail. Perhaps one of the most important elements of the marketing plan section is to specify how you intend to attract customers, inform them of the benefits of using your product or service, and retain customers. Initially, customers are attracted through advertising. This section should delineate the advertising plan. What media will be used—flyers, newspapers, magazines, radio, television, web presence, direct marketing, and/or social media campaigns? This section should cover any promotional campaigns that might be used.

The Management Team

Physical resources are not the only determinant of business success. The human resources available to a firm will play a critical role in determining its success. Readers of your business plan and potential investors should have a clear sense of the management team that will be running a business. They should know the team with respect to the team’s knowledge of the business, their experience and capabilities, and their drive to succeed. Arthur Rock, a venture capitalist, was once quoted as saying, “I invest in people, not the idea.” [28]

This section of the business plan has several elements. It should contain an organizational chart that will delineate the responsibilities and the chain of command for the business. It should specify who will occupy each major position of the business. You might want to explain who is doing what job and why. For every member of the management team, you should have a complete résumé. This should include educational background (both formal and informal) and past work experience, including the jobs they have held, responsibilities, and accomplishments. You might want to include some other biographical data such as age, although that is not required.

If you plan to use specific advisers or consultants, you should mention the names and backgrounds of these people in this section of the plan. You should also specify why these people are being used.

An additional element of your discussion of the management team will be the intended compensation schemes. You should specify the intended salaries for the management team while also including issues of their benefits and bonuses or any stock position that they may take in the company. This section should also identify any gaps in the management team and how you intend to fill these positions.

Depending on the nature of the business, you might wish to include in this section the personnel (employees) that will be required. You should identify the number of people that are currently working for the firm or that will have to be hired; you should also identify the skills that they need to possess. Further discussion should include the pay that will be provided: whether they will be paid a flat salary or paid hourly, if and when you intend to use overtime, and what benefits you intend to provide. In addition, you should discuss any training requirements or training programs that you will have to implement.

Financial Statements

The financial statements section of the business plan should be broken down into three key subsections: the income statement, the balance sheet, and the cash-flow statement. Before proceeding with these sections, we discuss the assumptions used to build these sections. The opening section of the financial statements section should also include, in summary format, projections of sales, the sales growth rate, key expenses and their growth rates, net income across the forecasting horizon, and assets and liabilities. [29]

As previously discussed, bankers—and to lesser extent venture capitalists—will be primarily concerned with this section of the business plan. It is vital that this section—whether you are an existing business seeking more funding or a start-up—have realistic financial projections. The business plan should contain clear statements of the underlying assumptions that were used to make these financial projections. The clearer the statements and the more realistic the assumptions behind these statements, then the greater the confidence the reader will have in these projections. Few businesspeople have a thorough understanding of these financial statements; therefore, it is advisable that someone with an accounting or a financial background review these statements before they are included in the report. We will have a much more in-depth discussion of these statements in Chapter 9 .

The future planning horizon for financial projections is normally between three and five years. The duration that you will use will depend on the amount of capital that the business is seeking to raise, the type of industry the business is in, and the forecasting issues associated with making projections. Also, the detail required in these financial statements will be directly tied to the type and size of the business.

Income Statement

The  income statement examines the overall profitability of a firm over a particular period of time. As such, it is also known as a profit-and-loss statement. It identifies all sources of revenues generated and expenses incurred by the business. For the business plan, one should generate annual plans for the first three to five years. Some suggest that the planner develop more “granulated” income statements for the first two years. By granulated, we mean that the first year income statement should be broken down on a monthly basis, while the second year should be broken down on a quarterly basis.

Some of the key terms (they will be reviewed in much greater detail in Chapter 10 ) found in the income statement are as follows:

  • Income. All revenues and additional incomes produced by the business during the designated period.
  • Cost of goods sold. Costs associated with producing products, such as raw materials and costs associated directly with production.
  • Gross profit margin. Income minus the cost of goods sold.
  • Operating expenses. Costs in doing business, such as expenses associated with selling the product or the service, plus general administration expenses.
  • Depreciation. This is a special form of expense that may be included in operating expenses. Long-term assets—those whose useful life is longer than one year—decline in value over time. Depreciation takes this fact into consideration. There are several ways in which this declining value can be determined. It is a noncash expenditure expense.
  • Total expenses. The cost of goods sold plus operating expenses and depreciation.
  • Net profit before interest and taxes. This is the gross profit minus operating expenses; another way of stating net profit is income minus total expenses.
  • Interest. The required payment on all debt for the period.
  • Taxes. Federal, state, and local tax payments for the firm.
  • Net profit. This is the net profit after interest and taxes. This is the term that many will look at to determine the potential success of business operations.

Balance Sheet

The  balance sheet examines the assets and liabilities and owner’s equity of the business at some particular point in time. It is divided into two sections—the credit component (the assets of the business) and the debit component (liabilities and equity). These two components must equal each other. The business plan should have annual balance sheet for the three- or five-year planning horizon. The elements of the credit component are as follows:

  • Current assets. These are the assets that will be held for less than one year, including cash, marketable securities, accounts receivable, notes receivable, inventory, and prepaid expenses.
  • Fixed assets. These assets are not going to be turned into cash within the next year; these include plants, equipment, and land. It may also include intangible assets, such as patents, franchises, copyrights, and goodwill.
  • Total assets. This is the sum of current assets and fixed assets.

Liabilities consist of the following:

  • Current liabilities. These are debts that are to be paid within the year, such as lines of credit, accounts payable, other items payable (including taxes, wages, and rents), short-term loans, dividends payable, and current portion of long-term debt.
  • Long-term liabilities. These are debts payable over a period greater than one year, such as notes payable, long-term debt, pension fund liability, and long-term lease obligations.
  • Total liabilities. This is the sum of current liabilities and long-term liabilities.
  • Owner’s equity. This represents the value of the shareholders’ ownership in the business. It is sometimes referred to as net worth. It may be composed of items such as preferred stock, common stock, and retained earnings.

Cash-Flow Statement

From a practical and survival standpoint, the  cash-flow statement may be the most important component of the financial statements. The cash-flow statement maps out where cash is flowing into the firm and where it flows out. It recognizes that there may be a significant difference between profits and cash flow. It will indicate if a business can generate enough cash to continue operations, whether it has sufficient cash for new investments, and whether it can pay its obligations. Businesspeople soon realize that profits are nice, but cash is king.

Cash flows can be divided into three areas of analysis: cash flow from operations, cash flow from investing, and cash flow from financing. Cash flow from operations examines the cash inflows from revenues and interest and dividends from investments held by the business. It then identifies the cash outflows for paying suppliers, employees, taxes, and other expenses. Cash flow from investing examines the impact of selling or acquiring current and fixed assets. Cash flow from financing examines the impact on the cash position from the changes in the number of shares and changes in the short- and long-term debt position of the firm. Given the critical importance of cash flow to the survival of the small business, it will be covered in much more detail in Chapter 10 .

Additional Information

Depending on the nature of the business and the amount of funding that is being sought, the plan might include more materials. For an existing business, you may wish to include past tax statements and/or personal financial statements. If the business is a franchise, you should include all legal contracts and documents. The same should be done for any leasing, licensing, or rent agreements. This section should be seen as a catchall incorporating any materials that would support the plan. One does not want to be in the position of being asked by readers of the plan—“Where are these documents?”

The financial section of the business plan should include summaries of the three key financial elements. The details behind the financial statements should be included as an appendix along with clear statements concerning the assumptions that were used to build them. The appendixes may also include different scenarios that were considered in building the plan, such as alternative market growth assumptions or alternative competitive environments. Demonstrating that the author(s) considered “what-if” situations tells potential investors that the business is prepared to handle changing conditions. It should include items such as logos, diagrams, ads, and organizational charts.

Developing Scenarios

Change is constant. – Benjamin Disraeli

Business plans are analyses of the future; they can err on the side of either optimistic projections or conservative projections. From the standpoint of the potential investor, it is always better to err on the side of conservatism. Regardless of either bias, business plans are generally built on the basis of expected futures and past experience. Unfortunately, the future does not always emerge in a clearly predicated manner. One can have a dramatic change that can have significant impact on the business. Often such changes occur in the external environment and are beyond the control of the business management team. These external changes can occur within the technical environment; it can be based on changes in customer needs, changes with respect to the suppliers, changes in the economic environment—at the local, national, or global level. Dramatic change can also occur within the organization itself—the death of the owner or members of the management team. [30]

One way for an organization to deal with significant changes is a process known as scenario planning . The real origins of scenario planning can be traced back to the early nineteenth century activity known as Kreigsspiel—war gaming—a system for training officers developed by the Prussian command. This process of looking at future wars was adopted by many militaries in the later nineteenth century. In the 1950s, a more formal format was used at the RAND Institute for examining possible future changes in the military and geopolitical environments. The early 1980s saw it applied to industrial settings. Royal Dutch Shell examined the question of what would happen if there were a significant drop in the price of oil. This was after two oil crises that pushed the price of oil up significantly. The notion that oil prices would drop was considered to be an extremely unlikely event, but it did occur. Royal Dutch Shell was one of the few oil companies that did not suffer because its scenario analyses enabled them to be ready to deal with that situation. [31]

What could be the possible use of scenario planning for small businesses? There are several areas in which small businesses should apply scenario planning to be better prepared for future disruptions.

Identify Significant Changes That Might Impact the Business

Consider major shifts in the customer’s notion of value. As mentioned in Chapter 2 , the firm should always be examining what constitutes value in the eyes of the consumer and how that might shift. Henry Ford’s model T car was a global success because customers initially valued a reliable vehicle at a low price. Ford Motor Company continued to meet the customer’s notion of value by constantly driving down the unit cost. However, by the mid-1920s, customers’ notion of value included not only price but also issues such as styling and improved technologies. General Motors was able to recognize that there were changes in the customer’s value notion and provided them with a range of vehicles. Ford failed to recognize that change and suffered a significant drop in sales.

Shifts in the economic environment. The recent recession clearly indicates that economies can suffer significant shifts in a short period of time. These shifts can have dramatic impact on all business operations. Small-business owners have seen significant tightening of bank credit and changes with respect to the requirements for using credit cards. One could easily imagine the critical importance for small businesses to consider the impacts that would follow significant changes in interest rates. Southwest Airlines, in anticipation of possible fluctuations in oil prices, used futures contracts to deal with dramatic shifts in the price of oil. When oil prices rose significantly, they were in a much better position than their competitors.

The entrance of new competitors. Small businesses should always be ready to consider the impact of facing new competitors and new types of competition. Consider the case of small local retail outlets when a Walmart superstore opens in the area.

Consideration of Disasters

The best way to deal with any potential disaster is not while it is occurring or after it has happened but before it occurs. Small businesses should anticipate what they will do in the case of physical disasters, such as fire, earthquakes, or floods. Other disasters might involve the bankruptcy or loss of a major supplier or a major customer. A restaurant or a food market should have a contingency plan in the case of a power failure that might lead to food spoilage. Such a business might also want to conduct a scenario planning exercise to see what its responses would be in the case of a customer complaining of food poisoning. Other disaster scenarios that should be considered by small businesses include the impact and ramifications of having the computer system crash; having the service for the website crash; or having the website hacked, with the possible loss of customer information.

New Opportunities

Almost all businesses, large and small, must be prepared to seize new opportunities. This may mean that they have to consider the impact of technological change on the business or how technology can offer them new business opportunities. The technology of stereo lithography, a process by which three-dimensional objects are built layer by layer, has been available for more than a decade. Bespoke Innovations saw the potential for using this technology. Bespoke Innovations can develop, in a short period of time, custom artificial legs for a price of $5,000–$6,000 and with features that are not found in $60,000 prostheses. [32]

Scenario planning should be a periodic exercise, but it should be conducted no more than once a year. The actual frequency might be dependent on the perceived rate of change for the industry or the presence of storm clouds on the horizon. Scenario planning has several distinct activities, which may be as follows:

  • Pick one area that might occur in the future that would have significant impact on the business. What if the national joblessness rate remains at over 9 percent for the next three to five years? What if a major customer decides to buy from a competitor or that customer is in financial trouble? What if there are changes in the national defense budget? A luncheonette in New London, Connecticut, where Electric Boat builds nuclear submarines, wants to consider the impact of changes in the defense budget. A decrease in the budget for building nuclear submarines would reduce the number of subs made in New London, which might lead to layoffs at Electric Boat and fewer customers for the luncheonette.
  • Identify factors that might impact that issue. This sometimes is referred to as a PEST analysis, where the P stands for political issues, E stands for economic issues, S stands for sociocultural issues, and T stands for technology issues. Each factor would be analyzed to see how it might impact the scenario. In our previous luncheonette example, the restaurant might want to consider an upcoming election to see how each party would support defense appropriations, and it might look at the overall economy to determine whether a downturn in the economy might lead to a cut in defense appropriations. It is unlikely that sociocultural issues would impact defense appropriations. Technology issues, whether a breakthrough in some design by the United States or by some other country, might determine the number and location of submarines built in the United States.
  • Rank the relative importance of the previous factors. Not all factors under consideration can be considered equally important. It is critical in a scenario planning exercise to see which factors are most important so that decision-makers can focus on the ramifications of those factors in the analysis.
  • Develop scenarios. Having identified the relative importance of the factors, the next stage would be to develop a limited number of possible scenarios (no more than two or three). Each scenario would map out possible outcomes for each key factor. Based on these values, the group conducting the scenario planning exercise would develop insights into this possible future world.
  • How do the scenarios impact your business? For each future scenario, the team should examine how that possible future state would impact the operation of the business. Continuing with the luncheonette example, the owner might see that a particular political party would be elected in the next election and the economy will still be in the doldrums. Together, this might indicate a cut in the naval building budget. This will translate into a reduced number of submarines built in New London and a reduction in employment at Electric Boat. The luncheonette’s sales will obviously drop off. Now the owner must consider what it might do in that situation.

Scenario planning offers the opportunity for small business owners to examine the future on a long-term basis. It should force them to look at external environments and conditions that can have a dramatic impact on the survival of their firm. It broadens their thinking and creates an environment of increased flexibility. It enables a business to respond to those sudden shocks that might destroy other firms.

Computer Aids

Business plans can be built using a combination of word-processing and spreadsheet programs by those who are adept at using them. However, the entire process of constructing a comprehensive business plan can be greatly simplified by using a dedicated business plan software package. These packages are designed to produce reports that have all the required sections for a business plan, they greatly facilitate the creation of the financial statements with charts, and they often allow for the inclusion of materials from other programs. Most of them are fairly reasonably priced from $50 to $150.

There are many such packages on the market, and they range from those designed for novices to those that can generate annual plans by easily incorporating data from external sources, such as the accounting programs of a business. When evaluating competing programs, there are some primary and secondary factors that should be considered. [33] The primary factors are as follows:

  • Ease of building the report. The various sections of the report should be clearly identified, and the authors should be able to work on each section independent of their sequence within the report. Text and data entry should be simple and allow for easy corrections or revisions.
  • Financial statements. The software should facilitate building the income statement, the balance sheet, and the cash-flow statement. For multiyear projections, the software should support the forecasting process.
  • Import from other programs. The software should be able to incorporate data from a variety of programs, such as Word and Excel. Ideally, it should be able to import data from a variety of accounting programs.
  • Support services. The software company should bundle a variety of support services, including clear instructions, tutorials, and access to Internet or call-number support. Many packages provide sample business plans for different industries.

The secondary factors are as follows:

  • Access to research support. Some software packages include access to business publications and databases to aid with market research.
  • Export options. These packages allow for the report or parts of the report to be exported to different formats—Word, Excel, PowerPoint, HTML, or PDF.
  • Ancillary analysis tools. Some packages either directly include or offer additional programs for market planning, budgeting, or valuation.

The following is a partial listing of companies that have business planning software:

  • Business Plan Pro . This company provides business planning software with sample plans for a wide number of industries plus options for acquiring industry data at national, state, or local levels. The company also has programs for marketing planning and legal issues advice.
  • Business Plan Software . This company offers a number of products, including business planning software, a strategic planning program, financial projection and cash-flow forecasting programs, and marketing planning software.
  • Plan Magic . This company offers a suite of planning products ranging from particular industries to financial and marketing planning software.
  • The business planning for a start-up business should consider if the owner(s) is/are ready to accept the challenges of operating a business.
  • Comprehensive business plans will require information about the industry, competitors, and customers. Owners or the writers of the business plan should be aware of where they can obtain this information.
  • Forecasting is critical to the success of any business. There are many different approaches to forecasting: some are simple extrapolations of trends, while others can be computationally complex. The business should use a forecasting system that is not only accurate but also makes the users feel comfortable.
  • Although business plans come in different “sizes and shapes,” they should have some key sections: executive summary, mission statement, industry analysis, marketing plan, description of the management team, and financial projections.
  • Some businesses should make it a practice of conducting scenario analyses. This is a process of examining possible future events and what should be the response of the business.
  • The complexity and difficulty of building a comprehensive business plan can be significantly reduced by using one of the available business-planning software packages.
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  • T. C. Carbone, “Four Common Management Failures and How to Avoid Them,” Management World 10, no. 8 (1981): 38. Patricia Schaeffer, “The Seven Pitfalls of Business Failure and How to Avoid Them,” Business Know-How, 2011, accessed October 10, 2011, www.businessknowhow.com/startup/business-failure.htm. Isabel M. Isodoro, “10 Rules for Small Business Success,” PowerHomeBiz.com , 2011, www.powerhomebiz.com/vol19/rules.htm . Rubik Atamian and Neal R. VanZante, “Continuing Education: A Vital Ingredient of the ‘Success Plan’ for Small Business,” Journal of Business and Economic Research 8, no. 3 (2010): 37. ↵
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  • Melinda Emerson, “Life Plan before Business Plan,” Small Business Trends, March 22, 2010, accessed October 10, 2011, smallbiztrends.com/2010/03/life-plan -before-business-plan.html. ↵
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The path by which a firm seeks to provide its customers with value, given the competitive environment and within the constraints of the resources available to the firm.

A firm is in the position of being the lowest cost producer in its competitive environment.

A firm provides products or services that meet customer value in some unique way.

A firm seeks to provide value through low cost for a subset of the market given the competitive environment and within the constraints of the resources available to the firm.

A firm concentrates on providing a unique product or service to a segment of the market.

Individuals who provide money for start-up businesses or additional capital for a business to grow. They invest to make not only a profit but also returns that are substantially above those found in the market.

Individuals who initially invested in Broadway shows and films. As with venture capitalists, they are looking for returns higher than they can normally find in the market; however, they often are expecting returns lower than those anticipated by the venture capitalist.

Methods that assume that one does not have historical data or cannot rely on past historical data.

Methods that consist of techniques that assume you can use past data to make projections of the future.

The introduction to the business plan that describes the company’s business, the intended customers, the legal structure, the type and amount of funding that will requested, and the capabilities of the key executives.

A document that articulates the long-term purpose and idealized notion of what the business wishes to become.

A document that articulates the fundamental nature of the business. It should address what business the company is in, the company’s potential customers, and how customer value will be provided.

A report that provides an examination of the overall profitability of a firm over a particular period of time.

A report that examines the assets, liabilities, and owner’s equity of the business at some particular point in time.

A document that maps out where cash is flowing into a firm and where it flows out. It recognizes that there may be a significant difference between profits and cash flow.

A process that examines the impact and possible responses to events that may be unlikely but that would have significant impact on a business.

Small Business Management Copyright © by Jason Anderson is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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How To Write A Basic Business Plan

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Creating a successful business starts with a strong plan. Regardless of your experience level, learning how to write a basic business plan is essential to mapping out your company's path to success. With a clearly defined plan, you can identify potential challenges, set goals, and create a roadmap for growth.

Business plans can be incredibly beneficial for entrepreneurs in any stage of their business venture. Whether you're just starting out or seeking funding to expand, a well-crafted business plan can serve as a roadmap for success. Not only does it provide direction for your business, but it can also help you identify potential roadblocks, set realistic goals, and track your progress over time.

A well-written business plan can help potential investors or lenders understand your business model , mission, and strategies, making it easier for them to provide the resources you need to grow your business. So, if you're looking for a tool to help ensure your business's success, consider crafting a comprehensive and engaging business plan.

Your business plan doesn't become obsolete once your business is up and running. In fact, your business plan can continue to guide your decision-making even after your doors are open. Your plan serves as a blueprint for success and can remind you of your original goals and objectives.

By referring back to your business plan, you can ensure that your decisions align with your overall mission and vision for your company. With a solid business plan in place, you can keep your business on track and ensure that you continue to achieve your goals as your business grows and evolves.

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A’s president dave kaval is having delusions of grandeur about relocating to las vegas, manipulated kate middleton photo sparks royal frenzy of jokes and memes, business plan basics.

At its core, a business plan is a written description of your company's future. It outlines what you plan to do and how you plan to do it.

Here is what you typically find in a basic business plan:

1. Executive Summary

A snapshot of your business plan as a whole, touching on your company’s profile, mission, and the main points of your plan. Think of it as an elevator pitch that presents your company's profile and core mission in a concise yet engaging manner.

2. Company Description

A more detailed look at your business goals, and what sets it apart in the marketplace. It is imperative to stand out from the competition to succeed, so list your differentiators and how you add value.

3. Market Analysis

It involves delving into your industry, identifying potential customers, and analyzing your competition to develop a strong understanding of the market. By garnering this knowledge, you can tailor your marketing and sales strategies to better meet the needs of your target audience.

4. Organization and Management

Your business's legal structure, organizational structure, and product or service life cycle. By keeping a close eye on your organization and management, you can ensure that your business is positioned for success in the long term.

5. Marketing and Sales Strategy

How you plan to attract and retain customers. It's not enough to simply offer a great product or service, you need to be able to effectively communicate your value proposition to your target audience.

6. Funding Request

If you are seeking funding, how much you need and what it will be used for. Securing funding can be a crucial component to kickstarting your business ventures.

7. Financial Projections

Projecting your profits, losses, and cash flow helps you plan in advance and make informed decisions. By crunching the numbers and analyzing past data, you can estimate future earnings and get a better understanding of your company's financial health.

8. Appendix

This is where you can include any additional information, such as resumes, permits, leases, and other legal documentation.

The bottom line is that a well-crafted business plan not only provides direction and structure but also helps you articulate your vision and goals. With a clear understanding of your target audience, competition, and financial projections, you're better equipped to make informed decisions and navigate the complexities of running a business. Ultimately, a business plan is an investment in your success, and it's essential for building a viable business.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business . She is the founder of She Means Profit, which is a podcast and blog . As a Finance Strategist for small business owners, Melissa helps successful business owners increase their profit margins so that they keep more money in their pocket and increase their net worth.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

Melissa Houston

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  • Section 2. Creating a Business Plan

Chapter 42 Sections

  • Section 1. Developing a Plan for Financial Sustainability
  • Section 3. Developing a Committee to Help with Financial Sustainability
  • Section 4. Applying for a Grant: The General Approach
  • Section 5. Writing a Grant
  • Main Section

What's the connection between business and community development?

What's a business plan, why should you make a business plan, when should you make a business plan, how do you make a business plan.

Although your primary goal is improving the community rather than making a profit, "business" can still be important to your work. Even non-profit organizations need resources to sustain their work, and business operations can be a good way to acquire those necessary resources.

Your business operations usually involve things you sell. Those "things" can be products - actual goods - or they can be services. Below are some examples of each.

But is it ethical for us to sell products and services?

Yes, if it is done honestly, openly, and fairly. What is sold should be of high quality and good value,fairly advertised and delivered as stated.

And selling products and services can be more than ethically permissible . It can be the ethically responsible thing to do if you are selling something that people need, and that will actually help them.

And is it legal ?

Yes, in a great number of cases. Here's a key fact:

A nonprofit group can make a profit. Of course, the selling of products and services must comply with local laws and regulations. It's up to you to know what those laws and regulations are where you live.

Does this mean all nonprofit groups should go into business?

No, not necessarily. There are other ways to pay expenses and to ensure your financial sustainability. Among them are grants , fund-raisers , membership dues , and in-kind support . Your decision about going into business should depend upon what funding you need, what you have on hand, what funding options are available to you, and what your prospects for success are in each case.

To plan for your overall financial sustainability requires an overall financial plan, and if business operations are part of what sustains you, then you will also need a business plan.

What is a business plan?

A business plan is a written document that describes in detail what kind of business you intend to operate, how you intend to operate it, and why you believe it will succeed. It is backed with logical, factual and financial documentation.

Why should you have a business plan?

  • Setting your thoughts down on paper, and forming a plan, will clarify your own thinking
  • Your business plan will raise confidence in your business ventures among members of your own group and among potential outside backers
  • A business plan will increase your likelihood of business success
  • When you are seriously thinking about embarking on a particular business venture
  • When you need clarity on the details
  • When you want expert feedback or advice on the specifics of your ideas
  • When you need to attract outside grants, gifts, loans, supplies, other materials or moral support

How should I make a business plan?

We'll cover three main elements:

  • What should the plan contain?

How should the plan be written?

How should the plan be packaged, what should the plan contain.

Successful business plans vary in format, but all contain some basic components. Don't hesitate to adapt them to your own situation, but try to stay fairly close to the mark.

This should include a title, your organization name, and accessible contact information (phone/fax/e-mail). The title should reflect the nature of your plan, and it should be phrased for maximum appeal to your intended audience. You want to capture audience attention and interest right from the beginning.

Table of contents

List each section of your plan, with appropriate page numbers.Tabs attached to the first page of each section can make it easier for the reader to find a specific section. This table should be a maximum of one page.

Executive summary

This summary is usually the most important section of your plan. It should not be more than two pages long, and normally should be written last. Your executive summary will be a condensed version of your entire business plan. A reader of the executive summary should be able to understand what your business purpose is, what your plan contains, what your organization wants, and why it wants it.

If your executive summary is effectively written, it will:

  • Communicate your organization's vision of the future
  • Establish your organization's credibility
  • Describe your product or service, and how it will be sold
  • Explain and document the need for your product or service
  • Inform the reader of key steps you plan to take
  • Make the reader want to read the entire plan
  • If money is being asked for: Request an appropriate amount of money, and present a defensible case for such a request

Description of your organization Or, in other words, "Who are you?" This should include:

  • What your organization does
  • Where it is located
  • How long it has been in operation
  • Its goals and objectives
  • What it has accomplished
  • What financial support (if any) it receives at the moment
  • What specific background it has in selling products or services
  • What is distinctive about your organization that sets it apart from everybody else

Description of your management

If you are looking for outside support, this will be a vital element of your plan, because potential supporters will be investing in your organization's management and its ability to perform. Briefly describe your key officers and staff, including their qualifications relevant to this plan. If you have a board of directors, advisory board, or other professional or technical advisors, they can be listed here too.

This section of your plan, together with the previous one describing your organization, is the equivalent of your organizational resume. It should convince potential supporters that the current leadership can carry out the plan.

Description of your product or service

Here's where you describe the product or service you want to sell. What exactly is it? What are the "product specifications?" Give the details, but don't overload the reader with technical jargon.

Try to present some clear examples. If it's a physical product, try to include photographs, drawings, or brochures. If there are any special permits or licenses that you need, or regulations you must comply with, cite these too.

Point out any particular beneficial features your product might have. And if you can document previous customer support, provide endorsements, or cite experts who recommend its use, such testimonials should certainly be included.

Information about your market

Your reader will want to know what your market is, what research you have done to determine that market, and how you plan to reach that market.

This will frequently be your most detailed section, because it spells out precisely how you intend to carry out your business plan. So let's take the above points in order:

  • Your market means who your customers are . How many potential customers are there? Are they likely to grow in number; if so, why? What distinguishing characteristics do they have, demographic or otherwise? Where are they located? Your plan should answer these questions concretely. What you want to show here is that there are enough customers for your product or service to justify the sales levels you are projecting. (Those sales levels will be detailed later, but can be previewed here.) If there is a particular part of the market you want to capture, say so.
  • Your market research means documenting why you believe your potential customers will become actual buyers . Here you need evidence. For example, what do you really know about the habits of your market? Have you gathered data on sales off similar products? Have you observed consumers, or done a survey, or conducted interviews? And have you tested out some prototype designs, and measured consumer reaction? This is the type of evidence we mean.
  • Your market plan means how you plan to reach your intended market. How can customers find your product or service? Where will it be sold - in stores (which ones?); by advertisements (where? when? how often?); at special events; by mail; by local or toll-free phone line; over the Internet; or through some combination of the above? Will there be discounts, contests, free samples, or tie-ins with other local happenings? Are there contingency plans, in case one marketing strategy fails?

Information about your competition

It's rare that a totally new product or service comes onto the scene; often, your product or service has been sold before, and there may even be others nearby who are selling it now.

Your plan should profile these competitors, briefly describing what they provide. Then, if you can, you should give reasons why your product or service is superior to your competition's. If you can't justifiably claim superiority, then at minimum you should document that there is enough customer demand for a new competitor on the scene - that is, you.

Details of your operating plan

Somewhere along the line, your product will have to be manufactured or acquired; if it's a service, someone will need to provide it. Your operating plan describes just how this will be done.

An operating plan should answer the following questions:

  • What is the production process?
  • Who produces it, and where?
  • How many employees are needed?
  • Is production occurring right now, or are matters simply in the "research and development" stage?
  • Is production machinery involved?
  • Is there a specific production location?
  • How will production be scheduled? (If you acquire the product from somewhere else - coffee mugs, for example - who are your suppliers, and what are the precise supply arrangements?)
  • What about outside production regulations?
  • What about labor and maintenance considerations?
  • How will items get to the customers?
  • What about quality control?
  • What contingencies exist in case things go wrong?
  • How will customer satisfaction be assessed and assured?
  • Is there a flow chart that summarizes and diagrams your operational steps?

If you can't answer all of these questions right away, it will stimulate you to think about the questions, and come up with your best responses.

Financial information

This is where you present the actual financial information to show how you will make a profit selling your product or service.

The specifics here include:

  • Historical data from selling the product or service (if such data exist)
  • Projections of how much income you will take in from selling your product or service; this is done for several different points of time in the future
  • Projected sales costs, broken down by category, and covering the same multiple points in time as your income projections. (Your total projected income minus total projected costs will yield your projected profits for each time point.)
  • Financial assumptions which underlie and justify your projections
  • Cash on hand, and other assets available
  • Additional cash needed, if any, to put the business into operation at your desired level

If you are seeking a loan, this last item of course requires special attention. You need to demonstrate precisely what the loaned funds will be used for, justify your ability to repay them, and suggest and how and when they will be repaid.

There are two common forms used in presenting financial information, which respond to the points above. These are a Balance Sheet and an Income Forecast, and blank samples of each are provided under Tools.

You should have a timeline or chart that specifies each action step in your plan and when it will be completed.Creating a timeline is an excellent planning discipline and can be persuasive to potential supporters.

Lastly, you may have other supporting information to present which strengthens your business plan, but which does not fit easily into the main text. Such information can be placed in an appendix to your plan. Examples here could include more specifics of management qualifications, letters of endorsement, or details of your market research. What other information might apply to your own situation?

These are your basic business plan ingredients. Now let's move on to how the plan should be written, and then presented.

Your plan should be written simply, clearly, persuasively, honestly, and to the point.

Adapted from "Guide to Writing a Business Plan" here are some of the most common writing mistakes:

  • The writing is unclear. It's difficult to understand.
  • The plan is too long. The writer does not get to the point, support it with facts, and move on.
  • The layout is poor, and/or illogical. Illustrations, product descriptions, and graphs are missing.
  • An executive summary is omitted.
  • There is too much technical jargon. The writer does not clearly demonstrate what the benefits are and why someone would want to use the product or service
  • There is insufficient detail on the qualifications of the proposers to implement the plan.
  • The market is not defined. And/or: Market research is not cited. And/or: A marketing plan is missing.
  • No mention, or sketchy mention, is made of the market competition.
  • The financial information given is not straightforward.
  • The reader is given no compelling reason to invest in the plan, or to otherwise support it.

Remember these pitfalls before putting your plan onto paper!

Your reader will see your plan before reading it, and will form an impression without having scanned a single page.

Make sure your plan looks professional. To be specific:

  • It should be printed on high-quality paper, by a high-quality printer.
  • As a guideline, its overall length should be about 20 pages, plus-or-minus ten. (Sometimes a shortened version of the plan can be created for other promotional purposes.)
  • Color printing, when thoughtfully employed, can give you an edge; so can tasteful presentation graphics.
  • The completed plan should be bound according to the standards of your readers. Seek the advice of your local print shop - or get hold of some comparable finished plans.
  • Have several people read over the plan before it is printed to make sure it's totally error-free.

To enhance your persuasive content and your clear writing, your plan should have an attractive and professional appearance, without being unnecessarily flashy.

Online Resources

Service Corps of Retired Executives (SCORE) has more than 500 chapters nationwide, provides free counseling, workshops, and seminars for small businesses. SCORE is sponsored by the Small Business Administration.

StrongNonprofits.org provides best-practice guidance and hands-on tools to help you understand and manage your non-profit’s financial health. The site offers helpful resources in the areas of financial planning, operations, monitoring, and governance.

Print Resources

Bangs, D., Jr. (1995).  The business planning guide: Creating a plan for success in your own business . (7th ed.). Chicago, IL: Upstart Publishing Company, Inc. This book also includes many sample business plans, sample documents, and a very comprehensive listing of more specialized references. Upstart Publishing is itself one of the leading small business publishers in the U.S.; to request its catalog, call 1-800-235-8866.

Mancuso, J. (1983).  How to prepare and present a business plan . Englewood Cliffs, NJ: Prentice-Hall.

Massachusetts Office of Business Development (no date).  Guide to writing a business plan . Boston, MA: Massachusetts Office of Business Development. One Ashburton Place, Boston, MA 02108 1-800-5-CAPITAL

What to Know About the SAVE Plan, the Income-Driven Plan to Repay Student Loans

More than 75 million student loan borrowers have enrolled in the U.S. government’s newest repayment plan since it launched in August

MARK STOCKWELL

MARK STOCKWELL

FILE - Wheaton College students stop to chat on the Norton, Mass. campus, Feb. 13, 2024 as snow falls. More than 75 million student loan borrowers have enrolled in the U.S. government's newest repayment plan since it launched in August. (Mark Stockwell/The Sun Chronicle via AP, File)

NEW YORK (AP) — More than 75 million student loan borrowers have enrolled in the U.S. government's newest repayment plan since it launched in August.

President Joe Biden recently announced that he was canceling federal student loans for nearly 153,000 borrowers enrolled in the plan, known as the SAVE plan . Forgiveness was granted to borrowers who had made payments for at least 10 years and originally borrowed $12,000 or less.

The SAVE plan was created last year to replace other existing income-based repayment plans offered by the federal government. More borrowers are now eligible to have their monthly payments reduced to $0, and many will qualify for lower payments compared to other repayment plans.

For Lauran Michael and her husband, the SAVE plan has reduced student loan payments by half.

Since getting married, they've both been paying off her husband's student loans, which would have amounted to about $1,000 a month when payments resumed after a pause during the pandemic. Under the SAVE plan, their payments are now $530 a month.

“We don't want our loans dictating our life choices, and us not being able to do other things because we're paying so much money. The SAVE plan is definitely a game changer for us,” said Michael, a 34-year-old interior designer in Raleigh, North Carolina.

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A Maka Indigenous woman puts on make-up before protesting for the recovery of ancestral lands in Asuncion, Paraguay, Wednesday, Feb. 28, 2024. Leader Mateo Martinez has denounced that the Paraguayan state has built a bridge on their land in El Chaco's Bartolome de las Casas, Presidente Hayes department. (AP Photo/Jorge Saenz)

Michael's family is paying for daycare for their two children using the money they saved from not making payments during the pandemic and the reduced payments under the SAVE plan.

If you are interested in applying for the SAVE plan, here's what you need to know:

WHAT IS AN INCOME-DRIVEN REPAYMENT PLAN?

The U.S. Education Department offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. But if borrowers have difficulty paying that amount, they can enroll in one of several plans that offer lower monthly payments based on income and family size. Those are known as income-driven repayment plans.

Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased.

HOW IS THE SAVE PLAN DIFFERENT?

More borrowers in the SAVE plan are eligible for $0 payments. This plan won’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person. The cutoff for other plans, by contrast, is 150% of the poverty line, or $22,000 a year for a single person.

Also, the SAVE plan prevents interest from piling up. As long as borrowers make their monthly payments, their overall balance won’t increase. Once they cover their adjusted monthly payment — even if it’s $0 — any remaining interest is waived.

Other major changes will take effect in July 2024. Payments on undergraduate loans will be capped at 5% of discretionary income, down from 10% now. Those with graduate and undergraduate loans will pay between 5% and 10%, depending on their original loan balance.

The maximum repayment period is capped at 20 years for those with only undergraduate loans and 25 years for those with any graduate school loans.

WHO QUALIFIES FOR THE SAVE PLAN?

The SAVE plan is available to all student loan borrowers in the Direct Loan Program who are in good standing on their loans.

Read more about the SAVE plan here .

HOW DO I APPLY FOR THE SAVE PLAN?

Borrowers can apply to the SAVE plan using the Income-Driven Repayment Plan request through the Education Department’s website.

HOW WILL I KNOW THAT MY DEBT HAS BEEN CANCELED?

If you are one of the borrowers who is benefitting from forgiveness under the SAVE plan, you will receive an email from the Education Department.

WHAT ARE OTHER PROGRAMS THAT CAN HELP WITH STUDENT LOAN DEBT?

If you’ve worked for a government agency or a nonprofit , the Public Service Loan Forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower’s debt after 20 to 25 years.

Borrowers should make sure they’re signed up for the best possible income-driven repayment plan to qualify for these programs.

Borrowers who have been defrauded by for-profit colleges may also apply for relief through a program known as Borrower Defense.

If you’d like to repay your federal student loans under an income-driven plan, the first step is to fill out an application through the Federal Student Aid website .

WILL THERE BE FUTURE FORGIVENESS?

Several categories of borrowers would be eligible for relief under Biden’s second try at widespread cancellation after the Supreme Court rejected his first plan last year.

The proposed plan includes relief for borrowers who have been paying their loans for at least 20 or 25 years, automatic forgiveness for borrowers who are eligible for income-driven repayment plans but are not enrolled, and loan cancellation for borrowers who attended a for-profit college that left them unable to pay their student loans, among others.

Whether any of the relief will materialize is a looming question as conservatives vow to challenge any attempt at mass student loan cancellation. The new proposal is narrower, focusing on several categories of borrowers who could get some or all of their loans canceled, but legal challenge is almost certain.

Currently, borrowers who are eligible for forgiveness under the SAVE program will get their loans discharged on a rolling basis, according to the Education Department.

The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

Copyright 2024 The  Associated Press . All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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‘The final chapter’: Orlando brewery announces upcoming closure

chapter two of the business plan

Deadwords Brewing Deadwords Brewing Company announced Wednesday that it will permanently close its doors next month. (Deadwords Brewing)

ORLANDO, Fla. — Deadwords Brewing Company announced Wednesday that it will permanently close its doors next month.

▶ WATCH CHANNEL 9 EYEWITNESS NEWS

The brewpub on Orange Blossom Trail near West Central Boulevard said it will close April 27.

David Satterfield, a former top attorney at Darden Restaurants, and Luke Pridgeon opened the brewery near Parramore in December 2021.

It is best known for its impressive theming and unique styles of craft beer.

Read: 2 local breweries file for Ch. 11 bankruptcy protection

“The decision to close follows several months of negotiations with the brewery’s landlord and the inability to reach a feasible arrangement to enable the brewery’s continued operation at its current location,” the brewery said in a news release. “From the outset, Deadwords Brewing embarked on its journey amid the unprecedented global COVID-19 pandemic, facing immense challenges including massive delays, cost overruns and the slow implementation of the Parramore Main Street development program.”

The brewery said it is proud of having served thousands of barrels of beer to thousands of patrons in the more than two years since it opened.

Read: These 19 Florida restaurants have been added to the Michelin Guide

chapter two of the business plan

“The heart of Deadwords Brewing has always been its people,” the brewery said. “Our incredible staff -- passionate about their craft and service -- have been the backbone of our operations. We have also been fortunate to be supported by a group of wonderful investors who believed in the vision of Deadwords Brewing, even in the face of adversity.”

The brewery expressed its “deepest gratitude to the Orlando community for its unwavering support and warm welcome.”

Read: New Japanese restaurant coming to Orlando’s Mills 50 District

“While short-lived, the success of Deadwords Brewing is as much a testament to the spirit and passion of our guests as it is to the quality of our beer and the dedication of our team,” the release said. “Your support has been the light during the most challenging times, and for that, we are eternally grateful.”

The brewery said it will liquidate its merchandise, so it will soon give an update on sale dates.

“We reiterate our heartfelt thanks to everyone who has been a part of our journey,” the brewery said. “Your support, enthusiasm and love for Deadwords Brewing have made all the difference.”

See a map of the brewery below:

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Jason Kelly

Jason Kelly, WFTV.com

Jason Kelly joined WFTV in 2014.

Madeline Soto case: Stephan Sterns faces 60 new charges

Madeline Soto case: Stephan Sterns faces 60 new charges

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Timber Creek High School: Lockdown lifted after report of suspicious person

Madeline Soto: A timeline of her disappearance & death

Madeline Soto: A timeline of her disappearance & death

Woman shot to death, alleged gunman identified by Orange County sheriff’s investigators

Woman shot to death, alleged gunman identified by Orange County sheriff’s investigators

2 killed in house explosion; damage found miles away from site

2 killed in house explosion; damage found miles away from site

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What are the new map and weapon loot pool changes in Fortnite Chapter 5 Season 2?

What weapons are new and which weapons got vaulted?

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Several Greek gods including Zeus and Aphrodite pose with guns in Fortnite

Fortnite ’s Chapter 5 Season 2 is dubbed “ Myths and Mortals ,” and is full of gods and prominent figures from Greek mythology. The island has also gained points of interest based off of these myths.

It’s no surprise that you’ll see the likes of Zeus, Cerberus, and Artemis roaming around the island (and you can unlock them as skins via the battle pass). There are quite a few other things going around the island, including an updated loot pool with mythics that drop specifically from these NPCs.

Below we explain the map and loot pool changes for Fortnite Chapter 5 Season 2. And for more Fortnite guides, check out our list of all Weapons Bunker locations .

Fortnite map changes for the Chapter 5 Season 2 update

The map has been updated with tons of locations from Greek mythology, including The Underworld, Mount Olympus, and the Brawler’s Battleground (home to Fortnite ’s rendition of Ares). You can see the full map below:

Fortnite C5S2 Myths &amp; Mortals map

Fortnite weapon loot pool for the Chapter 5 Season 2 update

Cerberus with a green glow and a specialized gun as seen in Fortnite Chapter 5 Season 2

These weapons have been unvaulted for the new season:

  • Midas’ Drum Gun
  • Hand Cannon
  • Impulse Grenade
  • Chug Splash

These are also new items added for Chapter 5 Season 2:

  • Ares’ Warforged Assault Rifle
  • Warforged Assault Rifle
  • Drum Gun (epic and legendary)
  • Zeus’ Huntress DMR
  • Huntress DMR
  • Cerberus’ Gatekeeper Shotgun
  • Gatekeeper Shotgun
  • Hades’ Harbinger SMG
  • Harbinger SMG
  • Thunderbolt of Zeus
  • Wings of Icarus
  • Shield Bubble Jr.

Some of the weapons in the above list will only drop from taking on the respective boss. For example, you’ll get the mythic Ares’ Warforged Assault Rifle for eliminating Ares. These bosses do appear to drop medallions , too, just like last season.

What has been vaulted in Fortnite Chapter 5 Season 2?

  • Enforcer AR
  • Thunder Burst SMG
  • Ballistic Shield
  • Lock On Pistol
  • Grapple Blade
  • Anvil Rocket Launcher
  • EMP Stealth Camo
  • Cardboard Box
  • Crash Pad Jr.

In addition to the above, the specialty weapons dropped by bosses (like Montague’s Nemesis AR) have been vaulted, since those are no longer featured bosses. These versions of boss medallions have also been vaulted, though as mentioned above, there are new versions of boss medallions that fit with the season’s theme now.

chapter two of the business plan

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chapter two of the business plan

May I direct your attention to these perfect Kirby mini toys at Amazon?

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Key art for Zweihander Grim and Perilous RPG features a woman in rich black brocade holding a glowing sword.

Zweihander, the RPG engine behind Flames of Freedom, has risen from the dead

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Jump into the Daggerheart TTRPG open beta today for free

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Business LibreTexts

1.7: Chapter 7 – Finishing the Business Plan

  • Last updated
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  • Page ID 21281

  • Lee A. Swanson
  • University of Saskatchewan

Learning Objectives

After completing this chapter, you will be able to

  • Develop the final draft of the business plan

The previous stages of business plan development focused on helping the business plan writer (1) start on the plan, (2) develop a reasonably complete and comprehensive first draft of the plan by focusing on developing the initial story without obsessing about its realism, (3) convert that into a second draft by adding realism, and (4) develop a third draft by preserving the realism and making needed changes designed to make the plan appealing to the entrepreneur and desirable to targeted investors. This stage is where the business plan writer puts the finishing touches on the plan to prepare it for use.

6.jpg

Figure 12 – Finishing the Business Plan (Illustration by Lee A. Swanson)

First Things Last

Finalize major goals.

As contradictory as it might sound, it is only after the business plan is almost finished that the Major Goals section near the start of the plan should be completed. Replace the preliminary goals you have in that section with a limited set of goals, perhaps five to ten, which perfectly describe the outcomes you projected in certain sections of your plan. Write goals that will further improve the appeal of your plan for targeted investors and other important potential readers.

Your major goals should be substantive and relevant. They should also be written using a format designed to maximize their impact for targeted readers. The RUMBA formula (realistic, understandable, measurable, believable, and achievable) provides a useful guideline for developing major goals. The following is an example of a relevant major goal that follows that formula:

We will secure a $56,050 short-term loan in September, 20 20, to finance inventory purchases needed to satisfy our projected increase in Christmas sales that year .

Write your Executive Summary

The last part of your business plan that you should write is the E xec u tive S ummary . Unlike most other types of documents, the executive summary at the start of a business plan can be up to about three pages in length.

As the executive summary might be the first section that targeted readers go through, it must be written to appeal to them. It should provide those readers with information that will encourage them to seriously consider taking the desired action, like investing in the venture. If they are not interested by the contents of the executive summary, they will not likely read any other part of the plan, and they won’t act—usually by investing in the business—as the business plan writer hopes they will.

Polish it Up!

Thoroughly proofread the completed business plan and fix all errors before submitting it to anyone. It is usually best to have other people proofread your work as they will catch errors that you will miss.

Never underestimate the negative consequences that can occur from distributing poor quality work.

Write A Letter of Transmittal

A letter of transmittal is to a business plan what a cover letter is to a resume. A letter of transmittal should briefly introduce the business plan accompanying it to the intended recipient and persuasively, but briefly, communicate the reasons why they should read it.

Chapter Summary

After all of the hard work involved with developing a high-power business plan, it must be finished properly to have the intended impact with its targeted readers. Before distributing it to targeted investors and other recipients, a limited number of major goals should be included in the Major Goals section near the start of the plan. Those goals should be carefully crafted to appeal to intended readers. The final writing task is to develop an executive summary that will entice targeted readers to examine the rest of the plan in detail for the purpose of deciding whether to potentially take the action—usually to invest in the venture—desired by the business plan writer. After that, the plan should be thoroughly proofread and revised to ensure that all errors are eliminated before the plan is used. After writing a customizedletter of transmittal to introduce the plan, it can be put to use.

  • Share full article

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Rivian Will Delay Construction of a $5 Billion Factory in Georgia

The money-losing electric vehicle company, which makes vans, trucks and S.U.V.s, is trying to preserve cash as it works to produce and sell more affordable vehicles.

R.J. Scaringe, wearing a brown buttoned shirt and glasses, stands next to a S.U.V. with his hands together.

By Neal E. Boudette

Rivian, a young electric vehicle company, said on Thursday that it was halting construction of a new factory in Georgia. The company also announced two new models, one of which will now be produced at its plant in Illinois.

The company had nearly completed preparing the roughly 2,000-acre site in Georgia that is about 50 miles east of Atlanta, and it was expecting to break ground on the $5 billion plant this year.

But the growth of electric vehicle sales has slowed in the past six months, forcing many automakers to reassess their plans for new factories and models.

Rivian said delaying the Georgia plant would save it about $2.25 billion, a large sum from a business that has been losing billions of dollars for several years. The company said it was committed to building the plant but did not say when it hoped to restart construction.

“Our Georgia site remains really important to us,” Rivian’s chief executive, R.J. Scaringe, said at an event on Thursday where he unveiled two new sport-utility vehicles. “It’s core to scaling across all these vehicles.”

One of the S.U.V.s, called the R2, is a five-passenger vehicle that is expected to be available in the first half of 2026. Originally, the R2 was supposed to be the first vehicle produced in Georgia. Shifting production to Normal, Ill., where the company has an operating factory, will allow Rivian to begin delivering the vehicle to customers sooner, Mr. Scaringe said.

The R2 will have a starting price of about $45,000, he said, which is $30,000 less than its larger S.U.V., the R1S. The R2, Mr. Scaringe said, “combines capability, performance, utility, storage, functionality in a way that we think really fits with a huge customer need.”

Rivian also introduced the R3, a compact S.U.V., and a high-performance version of that vehicle, the R3X. The company did not say when or where those models would be produced.

Delaying construction of the new factory is a setback for Georgia and its governor, Brian Kemp, a Republican, who had promoted the construction as the largest economic development project in the state’s history. Rivian had said it expected the plant to create 7,500 jobs and eventually produce 400,000 vehicles a year.

The plant had faced opposition over its potential environmental impact, the lucrative state subsidies Georgia gave to Rivian and how it would affect the area’s rural character. One of Mr. Kemp’s opponents in the 2022 Republican primary for the governor’s office, former Senator David Perdue, focused part of his campaign on blocking the plant.

Rivian was once seen as a potentially formidable rival of Tesla for supremacy in electric vehicles. The company was started by Mr. Scaringe and raised billions of dollars from Amazon, Ford Motor and other investors. It has a contract to produce thousands of electric delivery vans for Amazon.

But Rivian has struggled to ramp up operations at its plant in Illinois, slowing production of the vans, the R1S and the R1T pickup truck. In 2023, the company sold just over 50,000 vehicles, more than double its total in 2022. It lost $5.4 billion last year on revenue of $4.4 billion.

Investors have grown much more skeptical about the company’s prospects in recent months. Rivian’s stock has fallen by about 90 percent from just after it went public in November 2021. The company’s shares closed up 13 percent on Thursday after it announced it was delaying the Georgia plant.

Neal E. Boudette is based in Michigan and has been covering the auto industry for two decades. He joined The New York Times in 2016 after more than 15 years at The Wall Street Journal. More about Neal E. Boudette

IMAGES

  1. CHAPTER 2 THEORETICAL BASIS 2.1 Business, Business Plan

    chapter two of the business plan

  2. The Business Plan 6 -1 The Business

    chapter two of the business plan

  3. Business PLAN Chapter ONE 1 0 Executive

    chapter two of the business plan

  4. How to structure your business plan?

    chapter two of the business plan

  5. Business Plan

    chapter two of the business plan

  6. The Format Of A Business Plan / Free Business Plan Templates in Excel

    chapter two of the business plan

COMMENTS

  1. Chapter 2 The structure of the business plan

    Chapter 2 The structure of Chapter 2 the business Chapter 2 plan. In Chapter 1 we examined the reasons and justification for preparing and using business plans, both for new and established enterprises. This chapter examines the ways in which business plans are presented, and suggests a basic structure which would be acceptable to most potential banks or financiers, in order to give the ...

  2. 1.2: Chapter 2

    It is important to conduct the essential initial research. All information and items in the plan should be backed with facts from valid primary or secondary sources. Alternatively, some entrepreneurs can make valid claims based on experience and expertise. As such, their background and experiences should be delineated to support the claims made ...

  3. 11.4 The Business Plan

    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.

  4. Business Plan Development Guide

    Chapter 1 - Developing a Business Plan. Chapter 2 - Essential Initial Research. Chapter 3 - Business Models. Chapter 4 - Initial Business Plan Draft. Chapter 5 - Making the Business Plan Realistic. Chapter 6 - Making the Plan Appeal to Stakeholders and Desirable to the Entrepreneur. Chapter 7 - Finishing the Business Plan.

  5. PDF Chapter 2 Business Fundamentals and Marketing

    This chapter introduces you to some basic business fundamentals by examining two essential business planning documents: the feasibility study and the business plan. The chapter then focuses on a particularly important part of the business plan, the marketing strategy.

  6. How to Write a Business Plan: Guide + Examples

    Download a free one-page plan template to write a useful business plan in as little as 30-minutes. Explore over 500 real-world business plan examples from a wide variety of industries. Try the business planning and growth tool trusted by over 1-million business owners.

  7. 1.1: Chapter 1

    Make certain all of your pages are ordered and numbered correctly. 4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows: 1. First main heading. 1.1 First subheading under the first main heading. 1.1.1.

  8. PDF A Guide to Writing a Business Plan A GUIDE TO WRITING A ...

    A Guide to Writing a Business Plan 8 CHAPTER TWO THE BUSINESS PLAN Definition of a Business Plan The business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture (Histrich, Peters, Shepherd 2013). It addresses the

  9. Business Plan Development

    As the road map for a business's development, the business plan. Defines the vision for the company. Establishes the company's strategy. Describes how the strategy will be implemented. Provides a framework for analysis of key issues. Provides a plan for the development of the business. Helps the entrepreneur develop and measure critical ...

  10. Business chapter 2 business plan Flashcards

    Provides detailed financial information that shows how your business will succeed in earning a profit. What three purposes does the business plan serve. 1. Explains the idea behind your business and spells out how your product or service will be produced or sold. 2. Sets specific objectives and describes how your business expects to achieve them.

  11. Business Plan

    A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing. A business plan should follow a standard format and contain all ...

  12. PDF Three Steps to an Effective Business Plan

    Chapter 2: The Three-Step Planning Process presents an introduction to the three steps you will use to develop and manage your own business plan—identifying the issues, develop-ing the plan, and managing the plan. Perform-ing these three steps avoids the planning pitfalls described in Chapter 1, thereby helping you suc-cessfully achieve your ...

  13. 5.6 The Business Plan

    Sections of the Business Plan. Though formats can vary, a business plan generally includes the following sections: executive summary, description of proposed business, industry analysis, mission statement and core values, management plan, goods or services and (if applicable) production processes, marketing, global issues, and financial plan.

  14. 1.5: Chapter 5

    This page titled 1.5: Chapter 5 - Business Planning is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by Lee A. Swanson via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request. This chapter describes the purposes of business ...

  15. Chapter 2 The Foundations of Business

    In 1976 Steve Jobs and Steve Wozniak created their first computer, the Apple I. [1] They invested a mere $1,300 and set up business in Jobs' garage. Three decades later, their business—Apple Inc.—has become one of the world's most influential and successful companies. Jobs and Wozniak were successful entrepreneurs: those who take the ...

  16. Chapter 2: Business Plan Flashcards

    profit computation. net income/profit= revenues-expenses. break even point. where total cost equals total revenue. contribution margin. selling price per unit-variable cost per unit. Study with Quizlet and memorize flashcards containing terms like What makes up a business plan?, description of a company, operating plan and more.

  17. Chapter 5

    The business plan should follow a logical structure. No ideal business plan clearly specifies the exact sections that need to be included nor is there an ideal length. Literature concerning business plans indicates that the appropriate length of the body of a business plan line should be between twenty and forty pages.

  18. How To Write A Basic Business Plan

    Here is what you typically find in a basic business plan: 1. Executive Summary. A snapshot of your business plan as a whole, touching on your company's profile, mission, and the main points of ...

  19. Section 2. Creating a Business Plan

    Online Resources. Service Corps of Retired Executives (SCORE) has more than 500 chapters nationwide, provides free counseling, workshops, and seminars for small businesses. SCORE is sponsored by the Small Business Administration. StrongNonprofits.org provides best-practice guidance and hands-on tools to help you understand and manage your non-profit's financial health.

  20. CHAP 2

    CHAPTER2 BUSINESS PLAN MARKETING PLAN. Marketing plan provide the basic for organization ,operation And financial planning it involve planning , pricing promotional activities and fair and even distributed of goods and services to the customers , to exploit the market opportunity maximally mainly the entrepreneur should therefore develop market development strategies.

  21. entrep

    description of the business. information about the type of productor service. address & location of the business. - address: the exact business address. - location: the reason/s for the selection. Study with Quizlet and memorize flashcards containing terms like business plan, proposed name of business, logo of the business and more.

  22. What to Know About the SAVE Plan, the Income-Driven Plan to Repay

    More borrowers in the SAVE plan are eligible for $0 payments. This plan won't require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a ...

  23. EV Charge Station Maker Charge Enterprises Files Bankruptcy

    The Chapter 11 filing marks at least the fourth bankruptcy involving companies in the electric vehicle business over the past few years. Photographer: Jack Taylor/AFP/Getty Images Facebook

  24. The Artist's Guide to Success in the Music Business, Chapter 6 ...

    The Artist's Guide to Success in the Music Business, Chapter 6: The Music Business Plan podcast on demand - Chapter 6 of The Artist's Guide to Success in the Music Business. This chapter is regarding The Music Business Plan Author - Loren Weisman. Narrator - Loren Weisman. Published Date - Thursday, 19 January 2023.

  25. 'The final chapter': Orlando brewery announces upcoming closure

    Read: 2 local breweries file for Ch. 11 bankruptcy protection "The decision to close follows several months of negotiations with the brewery's landlord and the inability to reach a feasible ...

  26. Fortnite Chapter 5 Season 2 New map and weapon loot pool changes

    Fortnite's Chapter 5 Season 2 is dubbed "Myths and Mortals," and is full of gods and prominent figures from Greek mythology. The island has also gained points of interest based off of these ...

  27. 1.7: Chapter 7

    After writing a customizedletter of transmittal to introduce the plan, it can be put to use. This page titled 1.7: Chapter 7 - Finishing the Business Plan is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by Lee A. Swanson via source content that was edited to the style and standards of the LibreTexts platform ...

  28. Answered: On March 31, 2024, management of…

    2. By December 31, 2024, the equipment has not been sold, but management expects that it will be sold in 2025 for $290,000. For what amount is the equipment reported in the December 31, 2024, balance sheet? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the equipment's book value as of March ...

  29. Aldi plans to open 800 new locations in the US

    Aldi said Thursday that it plans to open 800 new stores nationwide in a $9 billion expansion plan, with the discount grocer announcing in a press release it wants to bring the "lowest possible ...

  30. Rivian Will Delay Construction of a $5 Billion Factory in Georgia

    Rivian said delaying the Georgia plant would save it about $2.25 billion, a large sum from a business that has been losing billions of dollars for several years. The company said it was committed ...