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importance of new venture business plan

The importance of a business plan

Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.

Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.

What is a business plan?

A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.

Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success. ‍

Why is a business plan important?

A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

  • A market analysis : gathering information about factors and conditions that affect your industry
  • Competitive analysis : evaluating the strengths and weaknesses of your competitors
  • Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
  • Marketing: using your research to advertise your business
  • Logistics and operations plans : planning and executing the most efficient production process
  • Cash flow projection : being prepared for how much money is going into and out of your business
  • An overall path to long-term growth

10 reasons why you need a business plan

I know what you’re thinking: “Do I really need a business plan? It sounds like a lot of work, plus I heard they’re outdated and I like figuring things out as I go...”.

The answer is: yes, you really do need a business plan! As entrepreneur Kevin J. Donaldson said, “Going into business without a business plan is like going on a mountain trek without a map or GPS support—you’ll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for success.

To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business.

1. To help you with critical decisions

The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that small businesses can’t always afford. That’s where a business plan comes in.

Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time.

Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.

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2. To iron out the kinks

Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.

3. To avoid the big mistakes

Only about half of small businesses are still around to celebrate their fifth birthday . While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.

According to data from CB Insights , some of the most common reasons businesses fail include:

  • No market need : No one wants what you’re selling.
  • Lack of capital : Cash flow issues or businesses simply run out of money.
  • Inadequate team : This underscores the importance of hiring the right people to help you run your business.
  • Stiff competition : It’s tough to generate a steady profit when you have a lot of competitors in your space.
  • Pricing : Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.

The exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis , every piece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don’t be afraid to scrap an idea you really loved if it turns out there’s no market need. Be honest with yourself!

Get a jumpstart on your business plan by creating your own cash flow projection .

4. To prove the viability of the business

Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point.

Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.

A graphic showing you a “Business Plan Outline.” There are four sections on the left side: Executive Summary at the top, Company Description below it, followed by Market Analysis, and lastly Organization and Management. There was four sections on the right side. At the top: “Service or Product Line.” Below that, “Marketing and Sales.” Below that, “Funding Request.” And lastly: “Financial Projections.” At the very bottom below the left and right columns is a section that says “Appendix.

A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.

Want to prove there’s a market gap? Here’s how you can get started with market research.

5. To set better objectives and benchmarks

Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.

6. To communicate objectives and benchmarks

Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions any time there’s an absence. Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly.

Sharing your business plan with team members also helps ensure that all members are aligned with what you’re doing, why, and share the same understanding of long-term objectives.

7. To provide a guide for service providers

Small businesses typically employ contractors , freelancers, and other professionals to help them with tasks like accounting , marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.

8. To secure financing

Did you know you’re 2.5x more likely to get funded if you have a business plan?If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run. Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.

Learn what you need to get a small business loan.

9. To better understand the broader landscape

No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well. Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.

10. To reduce risk

Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.

Understanding the importance of a business plan

Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.

Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.

Related Posts

Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.

importance of new venture business plan

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

importance of new venture business plan

A business journal from the Wharton School of the University of Pennsylvania

Knowledge at Wharton Podcast

How entrepreneurs can create effective business plans, march 2, 2010 • 16 min listen.

When an entrepreneur has identified a potential business opportunity, the next step is developing a business plan for the new venture. What exactly should the new plan contain? How can the entrepreneur ensure it has the substance to find interest among would-be investors? In this installment of a series of podcasts for the Wharton-CERT Business Plan Competition, Wharton management professor Ian MacMillan explains that business plans must contain several crucial elements: They must articulate a market need; identify products or services to fill that need; assess the resources required to produce those products or services; address the risks involved in the venture; and estimate the potential revenues and profits.

importance of new venture business plan

An edited transcript of the interview appears below:

Knowledge at Wharton: Professor MacMillan, thank you for speaking with us about the necessity of entrepreneurs writing business plans. To start with a basic question, what exactly is a business plan?

Ian MacMillan: A business plan to me is a 25-page, maximum 30-page, document, which is a description, analysis and evaluation of a venture that you want to get funded by somebody. It provides critical information to the reader — usually an investor — about you, the entrepreneur, about the market that you are going to enter, about the product that you want to enter with, your strategy for entry, what the prospects are financially, and what the risks are to anybody who invests in the project.

Knowledge at Wharton: Could you explain some of these elements in a little more detail and describe how entrepreneurs can develop an effective business plan?

MacMillan: Let me start by saying that you probably want to avoid developing a detailed business plan unless you have done some initial work. Basically what happens is that by doing a little bit of work, you earn the right to do more work. The first thing I would do before you start a business plan is think about a concept statement. A concept statement is about three to five pages that you put together and share with potential customers or investors just to see if they think it’s worth the energy and effort of doing more detailed work.

The concept statement has a few pieces to it. You are going to have a description of the market need that has to be fulfilled; a description of the products or services that you think are going to fulfill that need; a description of the key resources that you think are going to be needed to provide that product or service; a specification of what resources are currently available; an articulation of what you think the risks are; and then a sort of rough and ready estimate of what you think the profits and profitability will be.

The idea is to put together this concept document and begin to share it around with people who are going to have to support your venture if you take it forward. This allows you to rethink as a result of feedback that you get. You might get word back from the various stakeholders — like potential customers or distributors — that this really wasn’t such a good idea after all. That saves you the energy and effort of putting together a big business plan.

Knowledge at Wharton: Assuming the concept statement works out and you want to move towards the business plan, what else would you need? And where can you find the information? Some information can be hard to locate, especially about your competitors.

MacMillan: It’s really important to go out and speak to your potential customers. You need to find the people who you think will buy your product and talk to them about what dissatisfies them with their current offerings. You should get a sense from them about who is providing the alternative at the moment. Remember, the world has gone for maybe 100,000 years without your idea — and people are getting by; they’re not dying. Something out there is servicing their need. So what is the closest competitive alternative to what you want to offer?

That is what you need to find out — and that involves talking and listening. And for all the enthusiasm you have for your venture or your idea, you really need to listen to people who are eventually going to write a check for it.

Before you go on to write a business plan, you have to do some more work. If the concept statement looks good, then the next step is to do a 15- to 20-page feasibility analysis. This means we are now going to take this idea to the next level. We’ve learned from potential customers and distributors. We’ve learned who the major competitors are. We’ve shaped the idea more clearly, and now we’re digging deeper.

The next challenge you face is to say, well, if you start this business, what evidence do you have that the market actually wants it? Who do you think would write a check for your product? You need to articulate what makes your product or your service feasible. What has to be done in order to make this thing real? You need a description of how you intend to enter the market, a description of who the major competitors are, a preliminary plan — a very rough plan — which specifies what you think your revenues and profits are going to be, and an estimate of what you think the required investment will be. And only then, once you have articulated that, and once again shared it with your stakeholder community, will you perhaps be able to go and write a business plan.

Knowledge at Wharton: Once you have done your feasibility analysis and assuming you get the go ahead from your stakeholders, what is the next step?

MacMillan: The idea of the business plan is to convince the stakeholders. First, what we need to do in a business plan is show that we understand the needs — the unmet needs — of potential customers. Second, we need to understand the strengths and weaknesses of the current most competitive offering out there. Third, we need to understand the skills and capabilities that you and your team have as entrepreneurs. Next we need to understand what the investors need to get out of their investment, because they have to put their money in and they need to have some kind of sense of what they are going to get in terms of returns. In addition, the investment needs to be competitive with alternative investments that the investors might make.

The most important idea in the business plan is to articulate and satisfy the different perspectives of various stakeholders. This process sets in motion some basic requirements in the business plan — to tee up right from the start — evidence that the customer will accept it. Probably a third of the ventures out there that fail are because some person came up with the right product that they thought the world would love and then found out that the customers couldn’t care less. What you want to try to do in a business plan is convince the reader that there are customers out there who will in fact buy the product — not because it’s a great product, but because they want it and they are willing to pay for it.

Moreover, you need to convince the reader that you have some kind of proprietary position that you can defend. You also need to convince your readers that you have an experienced and motivated management team and that you have the experience and the management capabilities to pull it off. You need to convince potential investors that they are going to get a better return than they could get elsewhere, so you need to estimate the net present value of this venture. You need to show that the risk they are taking will be accompanied by appropriate returns for that risk. If we look at the contents of a typical business plan, you need to be able to articulate all these issues in some 25 to 30 pages. People get tired if they have to read too much.

Now let’s look at the various components of the business plan document:

First, you need an executive summary that grabs the attention of the potential investor. This should be done in no more than two pages. The executive summary is meant to convince the potential investor to read further and say, “Wow! This is why I should read more about this business plan.”

Next, you need a market analysis. What is the market? How fast is it growing? How big is it? Who are the major players? In addition, you need a strategy section. It should address questions such as, “How are you going to get into this market? And how are you going to win in that marketplace against current competition?”

After that, you need a marketing plan. How are we going to segment the market? Which parts of the market are we going to attack? How are we going to get the attention of that market and attract it to our product or service?

You also need an operations plan that answers the question, “How are we going to make it happen?” And you need an organization plan, which shows who the people are who will take part in the venture.

You need to list the key events that will take place as the plan unfolds. What are the major things that are going to happen? If your plan happens to be about a physical product, are you going to have a prototype or a model? If it happens to be a software product, are you going to have a piece of software developed — a prototypical piece of software? What are the key milestones by which investors can judge what progress you are making in the investment? Remember that you will not get all your money up front. You will get your funds allocated contingent on your ability to achieve key milestones. So you may as well indicate what those milestones are.

You should also include a hard-nosed assessment of the key risks. For example, what are the market risks? What are the product risks? What are the financial risks? What are the competitive risks? To the extent that you are upfront and honest about it, you will convince your potential investors that you have done your homework. You need to also be able to indicate how you will mitigate these risks — because if you can’t mitigate them, investors are not going to put money into your venture.

After that, what you get down to is a financial plan where you basically do a five-year forecast of what you think the finances are going to be — maybe with quarterly data or projections for the first two years and annual for the next three years.

You need a pro forma profit and loss statement. You need a pro forma balance sheet if you have assets in the balance sheet. You need to have a pro forma cash flow. Your cash flow is important, because it is the cash flow that kills. You may have great profits on your books but you may run out of money — so you need a pro forma cash flow statement. And you need a financing plan that explains, as the project unfolds, what tranches of financing you will need and how will you go about raising that money.

Finally you need a financial evaluation that tells investors, if you make this investment, what is its value going to be to you as an investor. That is basically the structure of the plan.

Knowledge at Wharton: Let’s say you have written a business plan and presented it to your investors. How closely do you have to be tied to the plan? Does it mean that once you are executing against the plan, you should reject new opportunities you find because they are not part of your plan? Or should you build in some flexibility that allows you to explore emerging opportunities?

MacMillan: Is this an opportunity for me to speak about discovery-driven planning?

Knowledge at Wharton: Of course.

MacMillan: Okay. The thing about most entrepreneurial ventures is that your outcome is uncertain — because what you are doing is very new. It is very, very hard to predict what the actual outcome is going to be. One of the most fundamental flaws is that in the face of unfolding uncertainty, you single-mindedly and bloody-mindedly pursue the original objective.

The reality is that the true opportunity will emerge over time. What venture capitalists do is they will put a small amount of money into the project, allow the entrepreneur to enter that market space and then — contingent on performance and contingent on what apparent traction you can get in that market space — completely re-plan to find out what the true opportunity really is. It is insanity to insist that people actually meet their plan as it was originally written.

This doesn’t mean you compromise your objectives. The idea is that I want to keep on trying to meet my objectives, but how I meet them must change as the plan unfolds. That’s basically what led to all the work that Wharton has done in the last few years on discovery driven planning. It’s a way of thinking about planning that says, “I’m going to make small investments. If I’m wrong early, I can fail fast, fail cheap and move on. But as I find out what the true opportunity is, I can aggressively invest in what this opportunity is.”

Knowledge at Wharton: Could you give an example of a company that has used this discovery-driven planning process to take its business to the next level?

MacMillan: One company that has done the most in this area is Air Products. What they have been able to do is use discovery-driven planning to unfold completely different businesses from the ones that they were in. Air Products makes things like carbon dioxide and oxygen and nitrogen. It is a very old-line company. Using discovery-driven planning, they have been able to move aggressively into, for instance, the service sector. Once they recognized that they were able to deliver reliably and predictably in the face of uncertain demand, they developed a set of skills that allowed them to enter the service business where the return on investment and return on assets are far higher than putting a huge plant in place.

Knowledge at Wharton: Professor MacMillan, thanks so much.

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How to launch a new business: Three approaches that work

COVID-19 and its ongoing repercussions have forced business leaders to reevaluate their priorities and strategies. One area where businesses across all regions have accelerated their commitments is around building new businesses. Leading growth businesses in particular have made this strategy a top priority, according to recent McKinsey research .

About the authors

This article was a collaborative effort by Ralf Dreischmeier , Philipp Hillenbrand , Jerome Königsfeld , Ari Libarikian , and Lukas Salomon, representing views from Leap by McKinsey, McKinsey’s business-building practice.

Yet despite the growing enthusiasm for business building, incumbents with good ideas, strong commitments, and big ambitions will frequently run headlong into a big question: How do we actually go about building a business? Getting the answer to this question right is crucial because it shapes the entire operating model of the business-building venture, with significant implications in terms of budget, organization, and strategic direction.

A leading industrial company learned this at a cost. When executives wanted to optimize operations in their factories, they believed setting up a fully independent start-up dedicated to developing new factory concepts was the only way to make it happen. Despite millions of dollars of investment, however, it didn’t work. The start-up struggled to access data and insights, failed to fully grasp the challenges of the core business, and did not attain sufficient support in the parent organization to test and implement changes. This example supports our research, which shows that fewer than a quarter of businesses launched ten years ago are viable large-scale enterprises today .

Figuring out the right approach to business building is especially important now as new opportunities for innovation surface. Prompted by the pandemic, new business-building archetypes have emerged, such as remote service provision, digital retail, and collaboration platforms.

As is true for many complex undertakings, there is no single right approach for launching a new business successfully. In addition, certain strategies will be important no matter which approach a company takes. Joint ventures and alliances, for example, can help to reach scale and enter new markets, and working with partners in ecosystems that, in some cases, include erstwhile competitors can expand offerings, access capabilities, and accelerate scale.

After analyzing more than 200 corporate business builds that we have supported, we have identified three major approaches that have proven successful. While other approaches can certainly work, the three we explore in this article have an established track record and clear conditions for success. The characteristics of each are unique, and so, too, are the criteria and conditions for success (Exhibit 1).

Would you like to learn more about Leap , our business-building practice?

1. internal vc-like incubator.

In this approach, incumbents develop a broad portfolio of ideas, with the goal of producing a few winners that can be successfully commercialized. Teams within the parent organization develop concepts for new businesses and pitch them to a dedicated venture-capital-style board comprising internal and external experts, who select the most promising ones. Successful teams receive milestone-based funding and resources to validate core assumptions and develop a minimum viable product (MVP)—a crucial governance necessity no matter what approach a business chooses (Exhibit 2).

The business has to be vigilant to ensure that the start-up culture “sticks” and that the legacy corporate culture doesn’t slowly start to take over. One way to do that is to assign an experienced business-building coach to each team to build up and nurture an agile test-and-learn culture.

Establishing an incubation approach is particularly suitable for incumbents that have a clear overall sense of the future direction of their business and sector, as well as a strong pipeline of promising early-stage ideas. They may, however, lack initial certainty on what the “winning concepts” will be and how they should be set up for the long term—as an internal division or an external spinout, for example. In our experience, the internal incubation approach works best when the new business is expected to focus on the parent’s core business.

A leading consumer food company achieved great success with this internal incubation approach. After a successful restructuring program, the company’s CEO and board first set a clear vision and ambition that new ventures should primarily benefit the core business and enable significant improvements in the top and bottom lines. Management then invited employees to form small teams that included a team lead and a management sponsor, such as the division head.

Over the course of six weeks, these teams then independently developed more than 100 ideas for new businesses aligned with the overall strategy. All teams scoped out MVPs and pitched their concepts to a newly created internal venture-capital (VC) board that included senior managers, external venture capitalists and technologists, sector experts, and strategic customers.

The VC board then provided initial funding to ten concepts that covered a wide range of applications, including IoT devices, process automation, data platforms, and resourcing marketplaces. Key decision criteria were resources required, path to scale, time to impact, expected overall P&L impact, and unique advantages of the parent company that could be leveraged to build the new businesses. Each initiative was assigned a delivery lead, an experienced business-building coach who helped employees to identify and de-risk the core assumptions first .

Over the course of the next six to ten weeks, these teams built out their MVPs to test core assumptions, such as market demand, required investment, and potential to scale. Those that were successful then approached the VC board and business-unit leadership for additional resources to scale the MVP. Within 16 months, the program to incubate the new businesses became self-funding.

Key success factors

  • Adopt a true VC mindset, and kill ideas without clear potential early on in order to cut losses and strengthen the organization’s focus and resources on concepts with high potential.
  • Include external experts on your VC board to increase objectivity and add important new perspectives.
  • Match venture teams with experienced delivery leads to provide crucial coaching and skill building to test and adapt quickly.

2. Scale-up factory

Frequently, an incumbent organization already has a strong pipeline of new-product and -business concepts that have been validated with first customers and partners. But because it lacks the specialized resources, talent, and expertise required to quickly and successfully scale an entirely new business, promising ideas wither.

A scale-up-factory approach can help address these issues. In this model, the parent sets up a fully owned “factory” that is exclusively dedicated to rapidly scaling promising concepts from the parent’s R&D pipeline into independent businesses. Typically, with this approach, the parent is the first and largest customer of the new businesses. In return, the factory’s new businesses can leverage the parent’s brand, reputation, and customer network. Importantly, providing employees with equity gives them “skin in the game” and helps attract and retain the best digital talent from start-ups and tech firms.

Despite a strong R&D pipeline, new ideas at a leading global energy player frequently did not reach sufficient scale to generate meaningful new revenue streams. To change this, the company used the scale-up-factory approach to address a key business goal: build and scale disruptive technologies and business models from the internal R&D into rapidly growing and revenue-generating businesses.

The new scale-up factory is located in a separate office and staffed with a dedicated team, most of whom were hired to meet the need for specialized skills and a “start-up mindset.” The new company is governed by its own leadership and a dedicated, internal board of directors, rather than by business-unit leaders. While senior group leaders dedicate significant time to strategic decision making and steering toward targets and milestones, they do not get involved in the scale-up factory’s day-to-day decision making.

After two years, the businesses developed by the scale-up factory have scaled to more than 100 employees and have already become a significant revenue-growth motor for the parent company.

  • A strong pipeline of “potential blockbuster” ideas within the parent company that have been validated and deemed commercially viable
  • Clear funding and governance to establish accountability for each project that has business-unit and factory representation, remove any ambiguity in approvals and funding (such as joint signatures between factory and business unit), and align up front on milestones for the release of further funding
  • Strong learning and pattern-recognition processes —the more scale-ups the factory executes, and the better team members become at collecting and codifying learnings, the more efficient the factory’s processes will become (a key insight from our latest research )

Why business building is the new priority for growth

Why business building is the new priority for growth

3. ‘clean slate’ business building.

In some cases, executives have identified a big, promising idea for a new business well beyond their organization’s core focus, such as leveraging a disruptive new technology or entering a new industry. In this case, a clean-slate approach works best, with the new business typically fully owned by the incumbent (or jointly owned with external investors) and all talent hired externally.

Similar to the scale-up factory, the new start-up enjoys organizational independence but has greater entrepreneurial latitude. Speed is more important than process perfection in areas such as HR, IT, and procurement. The new business develops its own tech stack, for example, and explores different business models, even working with traditional competitors. It has different compensation and hiring models than the parent company, as well as its own R&D and insights capability to aggressively test completely new markets. Incumbents that have been successful in driving growth via clean-slate business building often start to shift to adapting principles of the scale-up-factory approach described in the previous section.

“Acqui-hiring” talent (that is, hiring an entire team or acquiring a company to access its talent) can be used to turbocharge business builds in any of the three approaches outlined in this article, but it is particularly suitable for accelerating clean-slate builds when internal capabilities are limited. Acqui-hires provide incumbents with immediate access to a well-integrated team with relevant capabilities who can hit the ground running.

Acqui-hiring can work only if the new venture has a strong culture that can quickly and successfully integrate the acqui-hired team. Clear leadership communication and strong alignment of incentives—such as equity awards distributed to all members of the business-building team—are critical to bringing the new team on board and avoiding potential resentment from members from the incumbent organization.

Using a clean-slate approach enabled one of the world’s leading engineering companies to quickly build a highly innovative IoT platform to sell software through an app store. Initial testing had validated the concept, which also had strong support from top management. Given the need to move quickly and lacking the right talent internally, the company set up a new start-up with strong financial backing, a separate office several hundred miles away from parent-company headquarters, and a leadership team hired from leading technology players.

Senior executives from the parent organization narrowed down the catalog of more than 1,000 rules, regulations, and governance processes that new divisions were typically required to implement to only about 50 that were essential. To establish the new business’s neutrality, the company set up a new industry alliance and collaborated with external partners—some of them direct competitors of the parent company—from day one.

To further accelerate this process, the company decided against gradually hiring developers or retraining staff. Instead, it acqui-hired a full development team of more than 30 people from a major software producer. This approach enabled the building of a highly complex digital solution and a thriving ecosystem with dozens of partners at record speed: first sales were generated less than 15 months after the acqui-hire had been completed.

  • Strong focus on culture through strong investment in regular team-building activities that are crucial to integrate teams and unite them behind a common goal
  • Foundations for an ecosystem of partners built early on by engaging with external partners—even competitors—as soon as the new business is set up, so that the market perceives it as a neutral player; then build out a large-scale ecosystem over time
  • A start-up CEO fully committed to the new venture, through incentives (equity, bonus structure, and so on) that are fully tied to the start-up’s fortunes and do not include a “safety net” in the form of guaranteed continued employment with the parent

Business building is increasingly a core strategic pillar for companies operating in a digital world. Selecting the approach that is right for any given business, based on an understanding of the necessary trade-offs, conditions, and criteria for success, is one of the most important decisions incumbents need to make, as it can unlock the opportunity for rapid growth.

Ralf Dreischmeier is a senior partner in McKinsey’s London office; Philipp Hillenbrand is a partner in the Berlin office; Jerome Königsfeld is an associate partner in the Cologne office; and Ari Libarikian is a senior partner in the New York office, where  Lukas Salomon  is a consultant.

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6 Reasons You Really Need to Write A Business Plan

Published: October 14, 2020

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

marketer writing a business plan

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

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

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

→ Download Now: Free Business Plan Template

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

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

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

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

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

Six Reasons You Really Need To Write a Business Plan

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

1. Legitimize your business idea.

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

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

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

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

2. Give your business a foundation for success.

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

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

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

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

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

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

3. Obtain funding and investments.

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

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

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

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

4. Hire the right people.

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

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

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

5. Communicate your needs.

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

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

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

6. It makes it easier to sell your business.

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

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

A Business Plan Is Essential

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

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

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How to develop a strategic business plan for a new venture

by Jenny Bowes | Jul 01, 2021

importance of new venture business plan

A key aspect of launching any new business venture is planning – but truthfully, many would-be entrepreneurs aren’t sure where to start.

Business planning has had a revamp in recent years. The old business plan has undergone a massive makeover that reflects the contemporary pace of modern business. Now, your forecasts and proposals can be much more sophisticated and yield better results. When the OKR method is included in this process, you’ll have all the tools you need to get your new business venture off to a strong start.

So, how can you put a strategic business plan in place for a new venture, and where’s the best place to begin? We answer this question in this article.

What is a strategic business plan?

A strategic business plan goes a few steps further than a traditional business plan. Business planning previously focused mainly on numbers. However, a strategic business plan takes a holistic approach, encompassing business values, vision and a variety of goals concerning your business’ philosophy, ethos and methodology.

It also focuses on how best to use and optimise your existing resources in a controlled manner.  It’s essential to account for incremental growth so that you don’t exhaust your current resources too quickly. Of course, when setting up a new business venture you don’t have previous data to work from – so a strategic business plan will use industry insights and competitor analysis to shape your organisational objectives.

Why use a strategic business plan for a new venture?

New business ventures are exciting. They leave you buzzing with the prospect of fresh opportunities approached with abundant enthusiasm. It’s easy to get lost within all the excitement that comes along with starting a new business, but getting down to the nitty-gritty is even more important for fledgling companies. That’s where strategic business planning comes in.

This will help you to streamline your business planning process so that you boost your chances of long-term success. We’ve covered some of the other main benefits below…

How can strategic business planning benefit your new venture?

Focus is key when starting any new venture. Without a clear idea of where you’re headed and how you’re getting there, you’ll likely hit some bumps in the road. Many business owners also cite time management as one of their key challenges. Overwhelm can lead to a scattergun approach, which in turn, impairs productivity. If you can clearly see where you need to focus your time, money and efforts at each stage, you can be confident that nothing is being overlooked as you progress.

  • Proactivity over reactivity

When you anticipate the good and the bad, you’ll be prepared for whatever life throws at you. Business can be unpredictable and external influences are not always under your control. However, forward planning for unexpected events enables you to prepare for any unfavourable scenarios before they occur. This allows you to act accordingly and minimise any negative impact. The same can be said for positive, yet unanticipated occurrences such as a steep rise in sales. 

Creating a strategic business plan puts you one step ahead of the game and significantly increases your chances of success!

  • Increased efficiency

Streamlining is key for new ventures. Many new businesses waste a significant portion of their resources during their first few years, simply because they’re unable to adequately manage them. Operational efficiency is key for any new business especially as it grows and evolves.

  • Improved resilience

Markets change and events occur that are not within your control – take Covid, for instance. But, with strategic business planning, you can increase your long-term resilience by building a more adaptable and flexible organisation. 

Things to consider during the strategic business planning process

Strategic business plans are comprehensive and incorporate multiple elements. Therefore, you’ll need to gather some information and consider various different aspects of your business (both now and how you want it to look in the future) before you begin.

To start with, consider the following elements:

Your vision and values: Who are you, what do you do and most importantly, why? What makes you different? What do you stand for?

Your industry and competitors: Who else is doing what you do, and how do they do it? What’s their market share – and what should yours be? How are you contributing to, or evolving your industry?

Your clients and customers: What does your ideal client or customer look like? Who are they, what do they do? Creating an avatar for your ideal customer can be useful especially for marketing and branding going forward. Go into detail about their salary, lifestyle, likes and dislikes and what other companies (both competitor and non-competitor) they engage with. 

Your products and services: What exactly do you offer? List absolutely everything with a detailed description.

Outlining the above provides a firm foundation for starting the strategic business planning process.

How to make a strategic business plan

There’s no one size fits all approach to the strategic business planning process. Each industry and company is entirely different, so of course, their plans will be unique too! Using a sample strategic business plan could help to guide you through the process, especially if it’s your first time setting up a new business.

You might like to start by sitting everyone down and talking about your business. Verbally communicating what you do and how you do it without the pressure of documenting things formally can allow you to be really open and creative. Doing this with your team will also enable you to gain a variety of insights and perspectives. It can relieve that stagnant feeling that can come with strategic business planning, as you simply talk it out and discuss your company candidly in a safe setting.

In addition, competitor and target market research will be a key element for any new venture – as you’re not working with your own existing data. If you’re looking to disrupt the market you’re in, you’ll be using these insights in reverse.

Once you’ve gathered plenty of notes from your brainstorming session, begin bit by bit to fill in each section of your strategic business plan. Think of this as your first draft – it’ll go through several refinements during this process until you have something solid to work from.

If you’re still struggling to get it right, don’t worry. Getting expert support from strategic planning specialists may be the best way to go.

At There Be Giants we help organisations to execute their strategic plans by using OKRs . The OKR process and strategic planning process go hand in hand. Using both methods can help to boost your chances of achieving sustained business growth.

If you want to learn more about executing your strategic plans, speak to one of our Giants today to learn more about how we can help you.

Get in touch

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Developing a Business Plan

Developing a Business Plan

An important task in starting a new venture is to develop a business plan. As the phrase suggests, a business plan is a "road map" to guide the future of the business or venture. The elements of the business plan will impact the daily decisions of the business and provide direction for expansion, diversification, and future evaluation of the business.

This publication will assist in drafting your own business plan. It includes a discussion of the makeup of the plan and the information needed to develop a business plan. Business plans are traditionally developed and written by the owner with input from family members and the members of the business team. Business plans are "living" documents that should be reviewed and updated every year or if an opportunity for change presents itself. Reviews reinforce the thoughts and plans of the owner and the business and are a key item in the evaluation process. For an established venture, evaluation determines if the business is in need of change or if it is meeting the expectations of the owners.

Using the Proper Format

The format and appearance of the plan should be as professional as possible to portray your business in a positive manner. When dealing with a lender or possible investor, the plan will be reviewed for accuracy and suggestions for changes to the plan may be offered. The decision to recommend a loan for approval will be largely based on your business plan. Often loan officers will not know a great deal about the proposed venture, but they will know the correct structure of a business plan.

Investors will make their decision based on the plan and the integrity of the owner. For this reason, it is necessary to use a professional format. After loan officers complete their evaluations, the loan committee will further review the business plan and make a decision. The committee members often spend limited time reviewing the document, focusing on the message of the executive summary and financial statements to make their determination. They will refer to other sections of the plan for details and clarification. Because of this, these portions need to be the strongest parts of the plan and based on sound in-depth research and analysis.

Sections of the Business Plan

A business plan should be structured like a book with the title or cover page, followed by a table of contents. Following these two pages, the body of the plan normally appears in this order: executive summary, business mission statement, goals and objectives, background information, organizational matters, marketing plan, and financial plan.

Executive Summary

The executive summary is placed at the front of the business plan, but it should be the last part written. The summary should identify the type of business and describe the proposed business, or changes to the existing business. Research findings and recommendations should be summarized concisely to provide the reader with the information required to make any decisions. The summary outlines the direction and future plans or goals of the business, as well as the methods that will be used to achieve these goals. The summary should include adequate background information to support these recommendations.

The final financial analysis and the assumptions used are also a part of the executive summary. The analysis should show how proposed changes will ensure the sustainability of the current or proposed business. All challenges facing the existing business or proposed venture should be discussed in this section. Identifying such challenges shows the reader that all possibilities have been explored and taken into account during the research process.

Overview, Mission, and Goals and Objectives

This section has three separate portions. It begins with a brief overview that includes a general description of the existing or planned business. The overview is followed by the mission statement of the business. You should try to limit the mission statement to three sentences if possible and include only the key ideas about why the business exists. An example of a mission statement for a produce farm might be: The mission of XYZ Produce is to provide fresh, healthy produce to our customers, and to provide a safe, friendly working environment for our employees. If you have more than three sentences, you should be as concise as possible.

The final portion sets the business's goals and objectives. There are at least two schools of thought about goals and objectives. Goals and objectives should show the reader what the business wishes to accomplish, and the steps needed to obtain the desired results. Conducting a SWOT analysis will assist your team when developing goals and objectives. SWOT in an acronym for Strengths, Weaknesses, Opportunities, and Threats and is covered more in-depth later in the publication. You may want to include marketing topics in the SWOT or conduct two SWOT analyses, one for the entire business and one for the marketing plan.

Goals should follow the acronym DRIVE, which stands for D irectional, R easonable, I nspiring, V isible, and E ventual. The definitions of DRIVE are:

  • Directional: It should guide you to follow your vision.
  • Reasonable: You should be able to reach the goal, and it should be related to your business.
  • Inspiring: Make sure the goal is positive but should challenge the business to grow into the goal.
  • Visible: You and your employees should be able to easily recognize the goal. Goals should be posted where everyone sees them every day.
  • Eventual: The goals should focus on the future and be structured to provide motivation to all to strive towards the goals.

Objectives should follow the acronym SMART, which stands for S pecific, M easurable, A ttainable, R ewarding, and T imed. Objectives are the building blocks to achieve the goals and stand for:

  • Specific: Each objective should focus on one building block to reach the goal.
  • Measurable: You should be able to determine if your progress is going in the right direction.
  • Attainable: You should be able to complete the objective with an appropriate amount of work.
  • Rewarding: Reaching the objective should be something to celebrate and provide positive reinforcement to the business.
  • Timed: You must have a deadline for the objective to be achieved. You do not want to have the objectives linger for too long. Not reaching the objectives delays reaching the goals. Not achieving goals is detrimental to the morale of the business.

Goals and objectives should follow these formats to allow for evaluation of the entire process and provide valuable feedback along the way. The business owner should continually evaluate the outcomes of decisions and practices to determine if the goals or objectives are being met and make modifications when needed.

Background Information

Background information should come from the research conducted during the writing process. This portion should include information regarding the history of the industry, the current state of the industry, and information from reputable sources concerning the future of the industry.

This portion of the business plan requires the most investment of time by the writer, with information gathered from multiple sources to prevent bias or undue optimism. The writer should take all aspects of the industry (past, present, and future) and business into account. If there are concerns or questions about the viability of the industry or business, these must be addressed. In writing this portion of the plan, information may be obtained from your local public library, periodicals, industry personnel, trusted sources on the Internet, and publications such as the Penn State Extension Agricultural Alternatives series . Industry periodicals are another excellent source of up-to-date information. The more varied the sources, the better the evaluation of the industry and the business, and the greater the opportunity to have a viable plan.

The business owner must first choose an appropriate legal structure for the business. The business structure will have an impact on the future, including potential expansion and exit from the business. If the proper legal structure is not chosen, the business may be negatively impacted down the road. Only after the decision is made about the type of business can the detailed planning begin.

Organizational Matters

This section of the plan describes the current or planned business structure, the management team, and risk-management strategies. There are several forms of business structure to choose from, including sole proprietorship, partnership, corporations (subchapter S or subchapter C), cooperative, and limited liability corporation or partnership (LLC or LLP). These business structures are discussed in Agricultural Alternatives: Starting or Diversifying an Agricultural Business .

The type of business structure is an important decision and often requires the advice of an attorney (and an accountant). The business structure should fit the management skills and style(s) of the owner(s) and take into account the risk management needs (both liability and financial) of the business. For example, if there is more than one owner (or multiple investors), a sole proprietorship is not an option because more than one person has invested time and/or money into the business. In this case a partnership, cooperative, corporation, LLC, or LLP would be the proper choice.

Another consideration for the type of business structure is the transfer of the business to the next generation or the dissolution of the business. There are benefits and drawbacks for each type of structure covering the transition of ownership. If the business has a high exposure to risk or liability, then an LLC might be preferred over a partnership or sole proprietorship.

If the business is not a sole proprietorship, the management team should be described in the business plan. The management team should consist of all parties involved in the decisions and activities of the business. The strengths and backgrounds of the management team members should be discussed to highlight the positive aspects of the team. Even if the business is a sole proprietorship, usually more than one person (often a spouse, child, relative, or other trusted person) will have input into the decisions, and so should be included as team members.

Regardless of the business structure, all businesses should also have an external management support team. This external management support team should consist of the business's lawyer, accountant, insurance agent or broker, and possibly a mentor. These external members are an integral part of the management team. Many large businesses have these experts on staff or on retainer. For small businesses, the external management team replaces full-time experts; the business owner(s) should consult with this external team on a regular basis (at least once a year) to determine if the business is complying with all rules and regulations. Listing the management team in the business plan allows the reader to know that the business owner has developed a network of experts to provide advice.

The risk-management portion of the business plan provides a description of how the business will handle unexpected or unusual events. For example, if the business engages in agricultural production, will the business purchase crop insurance? Does the business have adequate liability insurance? Is the business diversified to protect against the unexpected, rather than "putting all its eggs in one basket"? If the business has employees, does the business carry adequate workers' compensation insurance? All of these questions should be answered in the risk-management portion of the business plan. More information on how liability can affect your business and on the use of insurance as a risk-management tool can be found in Agricultural Alternatives: Agricultural Business Insurance and Agricultural Alternatives: Understanding Agricultural Liability . The business structure will also determine a portion of the risk-management strategy because the way that a business is structured carries varying levels of risk to the owner and/or owners. All opportunities carry a degree of risk that must be evaluated, and mitigation strategies should be included in this portion of the plan.

Marketing Plan

Every purchase decision that a consumer makes is influenced by the marketing strategy or plan of the company selling the product or service. Products are usually purchased based on consumer preferences, including brand name, price, and perceived quality attributes. Consumer preferences develop (and change) over time and an effective marketing plan takes these preferences into account. This makes the marketing plan an important part of the overall business plan.

In order to be viable, the marketing plan must coincide with the production activities. The marketing plan must address consumer desires and needs. For example, if a perishable or seasonal crop (such as strawberries) will be produced, the marketing plan should not include sales of locally grown berries in January if the business is in northeastern United States. If the business plans to purchase berries in the off-season from other sources to market, this information needs to be included. In this way, the marketing plan must fit the production capabilities (or the capability to obtain products from other sources).

A complete marketing plan should identify target customers, including where they live, work, and purchase the product or service you are providing. This portion of the plan contains a description of the characteristics and advantages of your product or service. Identifying a "niche" market will be of great value to your business.

Products may be sold directly to the consumer (retail) or through another business (wholesale) or a combination of both. Whichever marketing avenue you choose, if you are starting a new enterprise or expanding an existing one, you will need to decide if the market can bear more of what you plan to produce. Your industry research will assist in this determination. The plan must also address the challenges of the proposed marketing strategy.

Other variables to consider are sales location, market location, promotion, advertising, pricing, staffing, and the costs associated with all of these. All of these aspects of the marketing plan will take time to develop and should not be taken lightly. Further discussion on marketing fruits and vegetables can be found in Agricultural Alternatives: Fruit and Vegetable Marketing for Small-Scale and Part-Time Growers .

SWOT Analysis

An adequate way of determining the answers to business and marketing issues is to conduct a SWOT analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths represent internal attributes and may include aspects like previous experience in the business. Experience in sales or marketing would be an area of strength for a retail farm market. Weaknesses are also internal and may include aspects such as the time, cost, and effort needed to introduce a new product or service to the marketplace.

Opportunities are external aspects that will help your business to take off and be sustained. If no one is offering identical products or services in your immediate area, you may have the opportunity to capture the market. Threats are external and may include aspects like other businesses offering the same product in close proximity to your business or government regulations impacting business practices and cost.

Financial Plan

The financial plan and assumptions are crucial to the success of the business and should be included in the business plan. One of the foremost reasons new businesses fail is because they do not have enough start-up capital to cover all expenses to make a profit. The scope of your business will be determined by the financial resources you can acquire. Because of this, you will need to develop a financial plan and create the supporting documents to substantiate it.

The financial plan has its basis in historical data (if you are an existing business) or from projections (for a proposed business). The first issue to address is recordkeeping. You should indicate who will keep the necessary records and how these records will be used. Internal controls, such as who will sign checks and handle any funds, should also be addressed. A good rule to follow for businesses that are not sole proprietorships is having at least two people sign all checks.

The next portion of the financial plan should detail where funding will come from. This includes if (and when) the business will need additional capital, how much capital will be needed, and how these funds will be obtained. If start-up capital is needed, this information should be included in this portion. Personal contributions should be included, along with other funding sources. The amount of money and repayment terms should be listed. One common mistake affecting many new businesses is under-funding at start-up. Many start-up businesses do not evaluate all areas of expense and underestimate the amount of capital needed to see a new business through the development stages (including personal living expenses, if off-farm income is not available).

Typically, a balance sheet, income statement, cash flow statement, and partial budget or enterprise budgets are included in a business plan. More information on agricultural budgets can be found in Agricultural Alternatives: Budgeting for Agricultural Decision Making . These documents will display the financial information in a form that lending institutions are used to seeing. If these are not prepared by an accountant, having one review them will ensure that the proper format has been used.

Financial projections should be completed for at least two years and, ideally, for five years. In agricultural businesses, five-year projections are sometimes difficult to make because of variability in prices, weather, and other aspects affecting production. One way to illustrate these risks is to develop several projection scenarios covering a range of production assumptions. This attention to detail will often result in a positive experience with lenders because they realize that the plan covers several possible circumstances and provides insight into how the business plans to manage risk. More information on financing agricultural businesses can be found in the publication Agricultural Alternatives: Financing Small-Scale and Part-Time Farms .

Financial Statements

To keep personal assets and liabilities separate from business assets and liabilities, it is beneficial to create both business and personal financial statements. A lender will need to see both, but the separation will show how the business will support the family or how the off-farm income will support the business.

Cash Flow Statement

A cash flow statement is the predicted flow of cash into and out of a business over a year. Cash flow statements are prepared by showing the total amounts predicted for each item of income or expense. This total is then broken down by month to show when surpluses and shortfalls in cash will occur. In this way, the cash flow statement can be used to predict when additional cash is needed and when the business will have a surplus to pay back any debt. This monthly prediction allows the owner(s) to better evaluate the cash needs of the business, taking out applicable loans and repaying outstanding debts. The cash flow statement often uses the same categories as the income statement plus additional categories to cover debt payments and borrowing.

After these financial statements are completed, the business plan writer will have an accurate picture of how the business has performed and can project how the business will perform in the coming year(s). With such information, the owner—and any readers of the business plan—will be able to evaluate the viability of the business and will have an accurate understanding of actions and activities that will contribute to its sustainability. This understanding will enable them to make better informed decisions regarding loans or investments in the business.

Income Statement

The income statement is a summary of the income (revenue) and expenses for a given accounting cycle. If the balance sheet is a "snapshot" of the financial health of the business, the income statement is a "motion picture" of the financial health of the business over a specific time period. An income statement is constructed by listing the income (or revenue) at the top of the page and the expenses (and the resulting profit or loss) at the bottom of the page.

Revenue is any income realized by the sale of crops or livestock, government payments, and any other income the business may have (including such items as fuel tax refunds, patronage dividends, and custom work). Other items impacting revenues are changes in inventory and accounts receivable between the start of the time period and the end—even if these changes are negative.

Expenses include any expense the business has incurred from the production of the products sold. Examples of expenses include feed, fertilizer, pesticides, fuel, labor, maintenance, repairs, insurance, taxes, utilities, and any changes in accounts payable. Depreciation, which is the calculated wear and tear on assets (excluding land), is included as an expense for accounting purposes. Interest is considered an expense, but any principal payments related to loans are not an expense. Repayment of principal is recorded on the balance sheet under "Loans Payable."

As the income statement is created, the desired outcome is to have more income than expenses, so the income statement shows a profit. If not, the final number is shown in parentheses (signifying a negative number). Another name for this financial record is a Profit and Loss Statement. Income statements are one way to clearly show how the farm is making progress from one year to the next and may show a much more optimistic view of sustainability than can be seen by looking at a single year's balance sheet.

Balance Sheet

A balance sheet is a snapshot of a business’s assets, liabilities, and owner’s equity at a specific point in time. A balance sheet can be prepared at any time, but is usually done at the end of the fiscal year (for many businesses, this is the end of the calendar year). Evaluating the business by using the balance sheet requires several years of balance sheets to tell the true story of the business’s progress over time. A balance sheet is typically constructed by listing assets on the left and liabilities and owner’s equity on the right. The difference between the assets and liabilities of the business is called the "owner's equity" and provides an estimate of how much of the business is owned outright.

Assets are anything owned by, or owed to, the business. These include cash (and checking account balances), accounts receivable (money owed to the business), inventory (any crops or supplies that the business has stored on farm), land, equipment, and buildings. This may also include machinery, breeding stock, small-fruit bushes or canes, and fruit trees. Sometimes assets are listed as current (those easily converted to cash) and fixed (those that are required for the business to continue). Assets are basically anything of value to the business. Some valuations of assets are not easily determined for items such as breeding stock, small-fruit bushes or canes, and fruit trees and may require the use of a certified appraiser familiar with the items.

Balance sheets may use a market-basis or a cost-basis to calculate the value of assets. A market-basis balance sheet better reflects the current economic conditions because it relies on current or market value for the assets, rather than what those assets originally cost. Market values are more difficult to obtain because of the difficulty in finding accurate current prices of assets and often results in the inflation of the value of assets. Cost-basis balance sheets are more conservative because the values are often from prior years. For example, a cost-basis balance sheet would use the original purchase price of land, rather than what selling that land would bring today. Because purchase records are easily obtained, constructing a cost-basis balance sheet is easier. Depreciable assets such as buildings, tractors, and equipment are listed on the cost-basis balance sheet at purchase price less accumulated depreciation. Most accountants use the cost-basis balance sheet method. Whether you choose to use market-basis or cost-basis, it is critical that you remain consistent over the years to allow for accurate comparison.

Liabilities are what the business owes on the date the balance sheet is prepared. Liabilities include both current liabilities (accounts payable, any account the business has with a supplier, short-term notes, operating loans, and the current portion of long-term debt), which are payable within the current year, and noncurrent liabilities (mortgages and loans with a term that extends over one year).

Owner's equity is what remains after all liabilities have been subtracted from all assets. It represents money that the owner(s) have invested in the business, profits that are retained in the business, and changes caused by fluctuating market values (on a market-basis balance sheet). Owner’s equity will be affected whenever there are changes in capital contributed to the business or retained earnings, so if your practice is to use all earnings as your "paycheck," rather than reinvesting them in the business, your owner's equity will be impacted. On the balance sheet, owner’s equity plus liabilities equals assets. Or stated another way, all of the assets less the amount owed (liabilities) equals the owner’s equity (sometimes referred to as "net worth"). Owner's equity provides the "balance" in a balance sheet.

Putting It All Together

After the mission, background information, organization, and marketing and financial plans are complete, an executive summary can then be prepared. Armed with the research results and information in the other sections, the business will come alive through this section. Research results can be included in an appendix if desired. The next step is to share this plan with others whose opinions you respect. Have them ask you the hard questions—make you defend an opinion you have expressed or challenge you to describe what you plan to do in more detail. Often, people are hesitant to share what they have written with their families or friends because they fear the plan will not be taken seriously. However, it is much better to receive constructive criticism from family and friends (and gain the opportunity to strengthen your plan) than it is to take it immediately to the lender, only to have any problems pointed out and receive a rejection.

Once all parts of the business plan have been written, you will have a document that will enable you to analyze your business and determine which, if any, changes need to be made. Changes on paper take time and effort but are not as expensive as changing a business practice only to find that the chosen method is not viable. For a proposed venture, if the written plan points to the business not being viable, large sums of money have not been invested and possibly lost. In short, challenges are better faced on paper than with investment capital.

Remember, a business plan is a "road map" that will guide the future of the business. The best business plan is a document in continual change, reacting to the influence of the outside world on the business. Having the basis of a written plan will give you the confidence to consider changes in the business to remain competitive. Once the plan is in place, the business will have a better chance of future success.

For More Information

Publications.

Abrams, R. The Successful Business Plan: Secrets and Strategies (Successful Business Plan Secrets and Strategies) . Palo Alto, Calif.: Planning Shop, 2014.

Becker, J. C., L. F. Kime, J. K. Harper, and R. Pifer. Agricultural Alternatives: Understanding Agricultural Liability . University Park: Penn State Extension, 2011.

Dethomas, A., and L. and S. Derammelaere. Writing a Convincing Business Plan (Barron's Business Library) . Hauppauge, N.Y.: Barron's Educational Series. 2015.

Dunn, J., J. K. Harper, and L. F. Kime. Agricultural Alternatives: Fruit and Vegetable Marketing for Small-scale and Part-time Growers . University Park: Penn State Extension, 2009.

Grant, W. How to Write a Winning Business Plan: A Step-by-Step Guide for Startup Entrepreneurs to Build a Solid Foundation, Attract Investors and Achieve Success with a Bulletproof Business Plan (Business 101). Independently published. 2020.

Harper, J. K., S. Cornelisse, L. F. Kime, and J. Hyde. Agricultural Alternatives: Budgeting for Agricultural Decision Making . University Park: Penn State Extension, 2019.

Kime, L. F., J. A. Adamik, E. E. Gantz, and J. K. Harper. Agricultural Alternatives: Agricultural Business Insurance . University Park: Penn State Extension, 2019.

Kime, L. F., S. Cornelisse, and J. K. Harper. Agricultural Alternatives: Starting or Diversifying an Agricultural Business . University Park: Penn State Extension, 2018.

Lesonsky, R. Start Your Own Business Fifth Edition: The Only Start-Up Book You'll Ever Need.  Irvine, Calif.: Entrepreneur Media Inc., 2010.

Shelton, H. The Secrets to Writing a Successful Business Plan: A Pro Shares a Step-by-Step Guide to Creating a Plan That Gets Results. Rockville, Md.: Summit Valley Press, 2017.

Stokes, J. S., G. D. Hanson, J. K. Harper, and L. F. Kime.  Agricultural Alternatives: Financing Small-scale and Part-time Farms . University Park: Penn State Extension, 2005.

Online Course

Starting a Farm: Business Planning  

Periodicals

  • American Agriculturist Magazine Farm Progress Companies Inc. 5482 Wilshire Blvd, Suite 260 Los Angeles, CA 90036
  • Businessweek Magazine
  • Fortune Magazine
  • Kiplinger's Personal Finance
  • Money Magazine
  • BizPlanit - Virtual Business Plan
  • PA Business One-Stop Shop
  • Small Business Administration
  • SCORE—volunteer business assistance
  • The Pennsylvania Department of Revenue Starting a Business in Pennsylvania—A Guide to Pennsylvania Taxes
  • The Pennsylvania State University Agricultural Alternative Tools
  • The Pennsylvania State University Conducting a SWOT Analysis
  • The Pennsylvania State University Happy Valley Launch Box

Prepared by Lynn F. Kime, senior extension associate; Linda Falcone, extension educator in Wyoming County, Jayson K. Harper, professor of agricultural economics; and Winifred W. McGee, retired extension educator in Dauphin County

Additional financial support for this publication was provided by the Risk Management Agency of the United States Department of Agriculture and the Pennsylvania Department of Agriculture.

This publication was developed by the Small-scale and Part-time Farming Project at Penn State with support from the U.S. Department of Agriculture-Extension Service.

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Obtaining a Loan - The C's of Credit

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Image source: http://www.farmvetco.org/homegrown-by-heroes/

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Developing a business plan for your new venture

Do you have an idea to evolve your business or maybe even starting something brand new? Turning your vision into a reality requires developing a business plan. Here’s how to get started.

developing a business plan

Many people are waiting for all the stars to align before taking the next leap in their business or starting an entirely  new company. Because of that hesitation, they never get around to fulfilling their dreams. But by getting rolling on developing your business plan, you can turn your dream into a reality faster. 

In 2022, industries will continue to shift in new ways, and now may be the perfect time to take your project to the next level. To get started, it’s important to know what is involved in venturing into new territory or starting a business, and that’s where a business plan comes in. 

Why is developing a business plan so important?

A business plan is a formal document that provides the roadmap for your company. It can help you navigate through tough decisions and can help you manage any challenges that may come your way. It will also help you stay focused on your end goal as you grow your business. And if you are starting a completely new venture, it’s essential to have one in place before applying for funding or securing partners. 

To create a great business plan — whether for your startup, scaling business or mature enterprise — you’ll want to start with these steps:

Step One: Define your business goals

The first step in creating your business plan is determining the direction of your business (if you’re evolving into new territory) or what kind of company you want to start — along with your overall goals. For example, will you run a physical store, or do you prefer an online business? Do you want to sell a specific product or focus on services? Maybe you already have a hobby that you want to turn into a business, or you have an idea of an innovation you can bring to the market?

Once you define your ultimate goals, you’ll be able to start thinking about how you want to achieve those goals.

Step Two: Evaluate your business skills and knowledge

Many new business owners find it helpful to take classes in business to better grasp the intricacies of running a business. Online universities offer convenient solutions for those seeking to learn more about leadership, strategy, operations and general management.

If there are some areas of running a business that you aren’t well-versed in, you’ll want to leverage outside help or software that fills in the gaps. For example, if you’ve never managed payroll, software or apps can help. Many of these services provide same-day direct deposit, automation for payroll and payroll taxes, and time tracking.

Tired of waiting 90 days for payment? Try this instead.

Step Three: Define the structure of your business

Next, you’ll want to clearly define the best business structure for your venture. Incorporating rather than operating as a sole proprietorship does have its benefits. For example, if you form an LLC, you could be eligible for certain tax incentives, tax credits and business incentives. 

You will need a clear idea of what products you will sell at the time of the company launch and how your offering will evolve with time to keep up with industry trends and client demands. You will also need to know if you will be selling directly to consumers, acting as a wholesaler, or offering a B2B service for other businesses.

Step Four: Get your financials in order

An important part of creating a business plan is planning out the financing aspect. What cost structure will allow you to create your product or service and have it reach your final consumer? This would include all the physical production costs, supply chain, marketing, and personnel costs for your company structure.

Once you have all of the above information, you can bring it all together. Make financial projections of what your sales and profits would look like over the first few years and what startup costs and cash flow you need to finance to start the business.

Access to funding will be crucial in getting your venture up and running. Invoice factoring can help build working capital. 

Step Five: Research the market

The final step in creating a business plan is to research the competition . This will help you to avoid starting an unnecessary or unprofitable venture. Think of ways that make your company unique from other similar companies who are also competing for clients in this space. Answering the following questions will help guide your research:

  • What is different about your products and services that only you can provide?
  • Based on your product, costs, customer target, and competition, what would be the optimal price points for each of your products or services? 
  • How are you going to reach your consumers and let them know about your products? 

There are many resources online today that can help you establish a solid business plan. And once you have it on paper, you will see that it makes your vision come to life and gives you a base document that you can work with to approach investors or potential stakeholders in your business.

Up next:  Create a smart digital marketing plan on a budget

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The Value of Business Plans for New Ventures: Company and Entrepreneur Outcomes

  • Richard C. Becherer University of Tennessee at Chatanooga
  • Marilyn M. Helms Dalton State College

Allred, Anthony T. and Addams, H. Lon (2006). After Receiving Financing, Do Inc. 500 Companies Continue To Utilize Their Business Plan? Journal of Small Business Strategy. 17(1), 17-26.

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Bowers, Brent (2009) "In the Hunt: Investors Pay Business Plans Little Heed, Study Finds," New York Times, May 14, Small Business, p. 1

Delmar, Frederic and Shane, Scott (2003) "Does Business Planning Facilitate the Development of New Ventures?" Strategic Management Journal, 24, 1165-1185.

Fiet, James O. and Patel, Pankaj C. (2006). Evaluating the Wealth-Creating Potential of Business Plans. The Journal of Private Equity. 10(1), 18-32.

Fletcher, Margaret and Harris, Simon. (2002). Sever Aspects of Strategy Formation," International Small Business Journal, 20(3), 297-314.

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Sahlman, W. A. (1997) "How to Write a Great Business Plan." Harvard Business Review 75(4), 99-110.

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

Table of Contents

1) Plan for viability and growth

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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  • 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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  • Authors: Michael Laverty, Chris Littel
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  • Book title: Entrepreneurship
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What is a Business Venture? With Examples + How to Start

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Are you looking to become a business owner ? Have you wondered what a business venture is and how to create one? Do you have a small amount of money and don’t know how to start?

Starting a business may seem intimidating , but it can be incredibly rewarding with the right knowledge and strategy. With a successful business venture , the sky is truly the limit with regard to earning potential.

Motivations for starting a business

If you’re ready to begin your entrepreneurial journey and start a business, I’m here to provide you with the necessary information and inspiration needed for success .

This blog post will define a business venture and examine some successful examples of what you can sell and how to grow fast. I’ll also provide some advice about how to find a profitable business venture. So read on for all the information you need!

What is a Business Venture?

A business venture is a project or undertaking where entrepreneurs create, organize, and manage their companies. Usually, this involves seeking an opportunity to develop and market a product or service in exchange for money. It can include opening a restaurant or launching a clothing line.

Most business ventures are frequently referred to as small businesses since they usually start with an idea and quite limited finances. They are typically supported by one or more angel investors who have faith in this business concept.

Amount of Capital needed to start a business

Any new business venture often starts from an existing gap in the market . It could be a demand for a product that consumers require or simply because of the lack of services available to them. No matter what business you are launching, you must have an idea to provide customers with a specific value.

How to Find a Profitable Business Venture

When looking for a business venture, it is important to look for an opportunity you can capitalize on . Your venture should have the potential to create a profit within a reasonable amount of time to stay in business.

Survival rates for small Businesses

There are many different business ideas to make money ! However, to make a better choice, answer the following three questions:

Question 1: Can I craft a convincing offer that people happily pay money for?

The first question to ask yourself when considering creating a successful small business venture is whether you can craft an offer that people will be willing to pay for . You need to provide something of value, a good business idea that customers feel they need, want, and are happy to pay for.

Think about what kind of product or service your potential customers would benefit from. The key is to make sure the offer solves a problem or fills people’s needs and provides them with something they would be willing to pay for.

So, priority number one is straightforward – identify what your potential customers desire and provide them with exactly that. Additionally, make sure you’re appropriately targeting the right individuals at a time when they will be most inclined to purchase.

Question 2: Can I systematically attract leads at low costs?

Once you’ve identified a great product or service, the next step is to focus on attracting potential customers . When it comes to marketing, it’s quite important to focus your efforts on tactics that will cost you as little money as possible.

It could mean taking advantage of organic social media posts, creating content (such as blog posts or videos) that can be shared and liked, or setting up partnerships with influencers who already have a significant and loyal following.

Traffic Sources

One of the most cost-effective strategies for attracting leads is email marketing . Email newsletters are an excellent way to reach out to potential customers and ensure that your offer is always in front of them.

You can also create targeted ads on different social media platforms such as Facebook, Twitter, and LinkedIn to reach out to people likely interested in your services or products. Ad campaigns like this can be especially useful if you want to sell products and services quicker and without much hassle.

It’s also worth considering offering a discount or giveaway to customers to entice them to make a purchase.

Question 3: Can I convert those leads into customers with relatively low CAC relative to CLV?

It’s not enough to attract leads – the key is to convert them into customers. It means that your offer must be compelling and attractive enough for potential customers to actually purchase it.

To ensure you’re getting a good return on investment, focus on calculating your customer acquisition cost (CAC) relative to your customer lifetime value (CLV) . The CAC is how much you spend to acquire a customer, while the CLV considers all revenue generated from that customer over time.

Customer acquisition cost

To discover your CAC , divide your marketing costs by the number of customers acquired in a given period.

Custome Lifetime Value

The CLV is calculated by taking the average purchase value multiplied by the number of purchases made over a given time frame.

All businesses should strive for a CLV to CAC ratio of 3:1 for each marketing segment. If you spend too generously (for example, 1:1), it can be unprofitable as customers won't cover the cost of acquisition. On the other hand, if you under-invest in customer acquisition and set your bid cap low, then it could mean missing out on profitable customers who have an above-average cost per acquisition.

By taking the time to answer these three key questions, you will be able to determine whether your venture has the potential to create a profitable and sustainable business. The key is to make sure that you are providing something of value that customers feel they need, want, and are happy to pay for!

23 Profitable Business Venture Examples to Inspire You

If you’re looking for some inspiration and ideas, here are 23 profitable business ventures you can consider:

  • Bird Tricks – Bird Tricks is an online business that specializes in providing online pet bird training classes. They use various marketing channels, such as YouTube and Instagram, to attract customers.
  • Learning Herbs – Learning Herbs is an online herbalism education business. They earn financial gain via classes, webinars, and digital products to help people learn about herbs and their uses.
  • Management Consulted – A great enterprise that provides management consulting to organizations, as well as individual and group training sessions. They attract customers using webinars, blog posts, and social media campaigns.
  • Bonsai Empire – A community-based business that specializes in bonsai trees and care for them. They achieve profits through digital products, such as e-books, videos, and tutorials.
  • The Online Dog Trainer – This business venture is based on providing online dog training services. They use YouTube advertising and targeted marketing campaigns to attract customers.
  • Make a Living Writing – A practical venture that focuses on helping you become a successful freelance writer. They generate profits through digital products such as e-books and online courses.
  • Goins, Writer – Need some inspiration? Goins, Writer, is a great business venture that focuses on helping people become successful writers. They use social media and blogging to reach out to the audience and profit from selling e-books, workshops, and courses.
  • How to Program with Java – A highly successful business enterprise that specializes in teaching Java programming. They attract potential customers with YouTube video tutorials and online courses.
  • Donald Robertson – Want to learn how to apply ancient philosophy to everyday life? This business venture is perfect for you. It provides online courses and sells books on Philosophy.
  • Study Hacks – This start-up enterprise helps students become more productive and efficient in their studies. They use blogging and Youtube to reach out to the audience while generating profits through digital products such as e-books and courses.
  • TaskRabbit – A great business venture that connects customers with skilled taskers who can take care of any task. They promote via Google Ads and generate profits through commission on each job completed via the website or app.
  • Wealthy Affiliate – Ready to create a flourishing digital business centered around your passions and hobbies? Look no further than this all-inclusive platform, designed to help you reach success with ease! They generate profits through subscriptions and membership.
  • AuditionHacker – A business venture designed to help aspiring musicians. They offer online courses and one-on-one coaching, helping musicians improve their performing skills.
  • GooseChase – Looking to add something unique to your business? GooseChase is a perfect choice! This venture provides customers with mobile-based scavenger hunts that can be used for different events and settings. They generate profits through commission fees.
  • Edx – A great business venture that specializes in online education. They provide online classes and certifications and generate profits through enrollments and subscriptions.
  • Skillshare – Another great business venture that specializes in online learning. They use targeted ads and offer an annual subscription to generate profits.
  • The Salon Business – This business venture focuses on helping salon owners manage their businesses. They use various marketing tactics, such as webinars and social media campaigns, to attract customers.
  • La Vie En Code – Need to learn a programming language? This business venture offers online coding courses, and they generate profits through enrollments.
  • Make Fabulous Cakes – Want to make a name in the cake decoration industry? This business venture provides support in online tutorials on cake decoration. They attract their customers through YouTube videos and generate profits through e-books, online courses, and digital products.
  • WODprep – A great network that focuses on helping CrossFit athletes become more efficient and effective. Through subscription fees, online courses, and digital products, they are able to generate substantial profits.
  • WoodSkills – Want to learn woodworking? This business venture offers online tutorials and e-books on the subject. They generate profits through their online courses and subscriptions.
  • The Ultimate Disneyworld Savings Guide – A business venture geared towards helping customers save money when visiting Disneyworld. They use targeted ads and e-books to reach their audience and increase profits.
  • Hardcore Music Studio – Looking to learn how to create a professional music studio? This business venture specializes in teaching aspiring producers and musicians the fundamentals of music production. They generate profits through online courses and digital products.

Here are just some of the many profitable business ventures out there. With the right strategy, any venture can become successful! The key is to identify your target audience, understand their needs, and develop a product or service that meets those needs!

Business Venture vs Startup

Stratup Company

Small businesses and startups have a lot of commonalities , but there are also some key differences between them. Small business ventures typically involve one or two people taking risks to generate income from an idea or product. This type of venture usually requires less capital investment , and the goal is often to create a steady stream of revenue that can sustain the business.

On the other hand, startups are typically larger undertakings involving a team of people and more substantial capital investment . The goal of a startup is to create something new or disruptive that will quickly scale up to generate large profits. Startups tend to focus on growth rather than stability and often exploit technology to reach their goals.

Another key difference between small business ventures and startups is the level of risk involved. Small businesses tend to involve less risk , as there is typically less capital investment and a steady revenue stream.

Startups , however, involve much more risk due to their focus on rapid growth and disruptive technology. As a result, the potential rewards from successful startups can be much higher than those of small business ventures. Still, the risk of failure is also greater.

Finally, small businesses and startups take different marketing approaches. Small business owners typically focus on established tactics such as direct mail, print advertising, and word-of-mouth referrals .

Startups often rely more heavily on digital marketing methods such as search engine optimization, social media marketing, and content marketing.

Overall, small business ventures and startups have different goals and approaches regarding risk, capital investment, and marketing. While both types of businesses can be successful, understanding their differences is key to setting realistic expectations for success.

Bottom Line

A business venture is a great way to start and grow a successful business. However, creating a new company requires writing a careful business plan , understanding the target audience , and developing services or products that meet their particular purpose.

Having an idea of which type of venture is right for you, be it a business venture or a startup, can help you make the proper decision and maximize your chances of success.

Consider the amount of risk you’re willing to take on and how quickly you want to make money. With the right strategy, any venture can be successful! Good luck!

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Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.

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The importance of business plan: 5 key reasons.

The Importance of Business Plan: 5 Key Reasons

A key part of any business is its business plan. They can help define the goals of your business and help it reach success. A good business plan can also help you develop an adequate marketing strategy. There are a number of reasons all business owners need business plans, keep reading to learn more!

Here’s What We’ll Cover:

What Is a Business Plan?

5 reasons you need a well-written business plan, how do i make a business plan, key takeaways.

A business plan contains detailed information that can help determine its success. Some of this information can include the following:

  • Market analysis
  • Cash flow projection
  • Competitive analysis
  • Financial statements and financial projections
  • An operating plan

A solid business plan is a good way to attract potential investors. It can also help you display to business partners that you have a successful business growing. In a competitive landscape, a formal business plan is your key to success.

importance of new venture business plan

Check out all of the biggest reasons you need a good business plan below.

1. To Secure Funding

Whether you’re seeking funding from a venture capitalist or a bank, you’ll need a business plan. Business plans are the foundation of a business. They tell the parties that you’re seeking funding from whether or not you’re worth investing in. If you need any sort of outside financing, you’ll need a good business plan to secure it.

2. Set and Communicate Goals

A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you’re more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike.

3. Prove Viability in the Market

While many businesses are born from passion, not many will last without an effective business plan. While a business concept may seem sound, things may change once the specifics are written down. Often, people who attempt to start a business without a plan will fail. This is because they don’t take into account all of the planning and funds needed to get a business off of the ground.

Market research is a large part of the business planning process. It lets you review your potential customers, as well as the competition, in your field. By understanding both you can set price points for products or services. Sometimes, it may not make sense to start a business based on the existing competition. Other times, market research can guide you to effective marketing strategies that others lack. To have a successful business, it has to be viable. A business plan will help you determine that.

4. They Help Owners Avoid Failure

Far too often, small businesses fail. Many times, this is due to the lack of a strong business plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. Some of them are listed below, which can be avoided by having a business plan:

  • The market doesn’t need the business’s product or service
  • The business didn’t take into account the amount of capital needed
  • The market is oversaturated
  • The prices set by the business are too high, pushing potential customers away

Any good business plan includes information to help business owners avoid these issues.

importance of new venture business plan

5. Business Plans Reduce Risk

Related to the last reason, business plans help reduce risk. A well-thought-out business plan helps reduce risky decisions. They help business owners make informed decisions based on the research they conduct. Any business owner can tell you that the most important part of their job is making critical decisions. A business plan that factors in all possible situations helps make those decisions.

Luckily, there are plenty of tools available to help you create a business plan. A simple search can lead you to helpful tools, like a business plan template . These are helpful, as they let you fill in the information as you go. Many of them provide basic instructions on how to create the business plan, as well.

If you plan on starting a business, you’ll need a business plan. They’re good for a vast number of things. Business plans help owners make informed decisions, as well as set goals and secure funding. Don’t put off putting together your business plan!

If you’re in the planning stages of your business, be sure to check out our resource hub . We have plenty of valuable resources and articles for you when you’re just getting started. Check it out today!

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Do you REALLY need a business plan?

The top three questions that I get asked most frequently as a professional business plan writer will probably not surprise you:

  • What is the purpose of a business plan – why is it really required?
  • How is it going to benefit my business if I write a business plan?
  • Is a business plan really that important – how can I actually use it?

Keep reading to get my take on what the most essential advantages of preparing a business plan are—and why you may (not) need to prepare one.

Business Plan Purpose and Importance

The importance, purpose and benefit of a business plan is in that it enables you to validate a business idea, secure funding, set strategic goals – and then take organized action on those goals by making decisions, managing resources, risk and change, while effectively communicating with stakeholders.

Let’s take a closer look at how each of the important business planning benefits can catapult your business forward:

1. Validate Your Business Idea

The process of writing your business plan will force you to ask the difficult questions about the major components of your business, including:

  • External: industry, target market of prospective customers, competitive landscape
  • Internal: business model, unique selling proposition, operations, marketing, finance

Business planning connects the dots to draw a big picture of the entire business.

And imagine how much time and money you would save if working through a business plan revealed that your business idea is untenable. You would be surprised how often that happens – an idea that once sounded so very promising may easily fall apart after you actually write down all the facts, details and numbers.

While you may be tempted to jump directly into start-up mode, writing a business plan is an essential first step to check the feasibility of a business before investing too much time and money into it. Business plans help to confirm that the idea you are so passionate and convinced about is solid from business point of view.

Take the time to do the necessary research and work through a proper business plan. The more you know, the higher the likelihood that your business will succeed.

2. Set and Track Goals

Successful businesses are dynamic and continuously evolve. And so are good business plans that allow you to:

  • Priorities: Regularly set goals, targets (e.g., sales revenues reached), milestones (e.g. number of employees hired), performance indicators and metrics for short, mid and long term
  • Accountability: Track your progress toward goals and benchmarks
  • Course-correction: make changes to your business as you learn more about your market and what works and what does not
  • Mission: Refer to a clear set of values to help steer your business through any times of trouble

Essentially, business plan is a blueprint and an important strategic tool that keeps you focused, motivated and accountable to keep your business on track. When used properly and consulted regularly, it can help you measure and manage what you are working so hard to create – your long-term vision.

As humans, we work better when we have clear goals we can work towards. The everyday business hustle makes it challenging to keep an eye on the strategic priorities. The business planning process serves as a useful reminder.

3. Take Action

A business plan is also a plan of action . At its core, your plan identifies where you are now, where you want your business to go, and how you will get there.

Planning out exactly how you are going to turn your vision into a successful business is perhaps the most important step between an idea and reality. Success comes not only from having a vision but working towards that vision in a systematic and organized way.

A good business plan clearly outlines specific steps necessary to turn the business objectives into reality. Think of it as a roadmap to success. The strategy and tactics need to be in alignment to make sure that your day-to-day activities lead to the achievement of your business goals.

4. Manage Resources

A business plan also provides insight on how resources required for achieving your business goals will be structured and allocated according to their strategic priority. For example:

Large Spending Decisions

  • Assets: When and in what amount will the business commit resources to buy/lease new assets, such as computers or vehicles.
  • Human Resources: Objectives for hiring new employees, including not only their pay but how they will help the business grow and flourish.
  • Business Space: Information on costs of renting/buying space for offices, retail, manufacturing or other operations, for example when expanding to a new location.

Cash Flow It is essential that a business carefully plans and manages cash flows to ensure that there are optimal levels of cash in the bank at all times and avoid situations where the business could run out of cash and could not afford to pay its bills.

Revenues v. Expenses In addition, your business plan will compare your revenue forecasts to the budgeted costs to make sure that your financials are healthy and the business is set up for success.

5. Make Decisions

Whether you are starting a small business or expanding an existing one, a business plan is an important tool to help guide your decisions:

Sound decisions Gathering information for the business plan boosts your knowledge across many important areas of the business:

  • Industry, market, customers and competitors
  • Financial projections (e.g., revenue, expenses, assets, cash flow)
  • Operations, technology and logistics
  • Human resources (management and staff)
  • Creating value for your customer through products and services

Decision-making skills The business planning process involves thorough research and critical thinking about many intertwined and complex business issues. As a result, it solidifies the decision-making skills of the business owner and builds a solid foundation for strategic planning , prioritization and sound decision making in your business. The more you understand, the better your decisions will be.

Planning Thorough planning allows you to determine the answer to some of the most critical business decisions ahead of time , prepare for anticipate problems before they arise, and ensure that any tactical solutions are in line with the overall strategy and goals.

If you do not take time to plan, you risk becoming overwhelmed by countless options and conflicting directions because you are not unclear about the mission , vision and strategy for your business.

6. Manage Risk

Some level of uncertainty is inherent in every business, but there is a lot you can do to reduce and manage the risk, starting with a business plan to uncover your weak spots.

You will need to take a realistic and pragmatic look at the hard facts and identify:

  • Major risks , challenges and obstacles that you can expect on the way – so you can prepare to deal with them.
  • Weaknesses in your business idea, business model and strategy – so you can fix them.
  • Critical mistakes before they arise – so you can avoid them.

Essentially, the business plan is your safety net . Naturally, business plan cannot entirely eliminate risk, but it can significantly reduce it and prepare you for any challenges you may encounter.

7. Communicate Internally

Attract talent For a business to succeed, attracting talented workers and partners is of vital importance.

A business plan can be used as a communication tool to attract the right talent at all levels, from skilled staff to executive management, to work for your business by explaining the direction and growth potential of the business in a presentable format.

Align performance Sharing your business plan with all team members helps to ensure that everyone is on the same page when it comes to the long-term vision and strategy.

You need their buy-in from the beginning, because aligning your team with your priorities will increase the efficiency of your business as everyone is working towards a common goal .

If everyone on your team understands that their piece of work matters and how it fits into the big picture, they are more invested in achieving the objectives of the business.

It also makes it easier to track and communicate on your progress.

Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

8. Communicate Externally

Alliances If you are interested in partnerships or joint ventures, you may share selected sections of your plan with the potential business partners in order to develop new alliances.

Suppliers A business plan can play a part in attracting reliable suppliers and getting approved for business credit from suppliers. Suppliers who feel confident that your business will succeed (e.g., sales projections) will be much more likely to extend credit.

In addition, suppliers may want to ensure their products are being represented in the right way .

Professional Services Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, including attorneys, accountants, and other professional consultants as needed, to make sure that everyone is on the same page.

Advisors Share the plan with experts and professionals who are in a position to give you valuable advice.

Landlord Some landlords and property managers require businesses to submit a business plan to be considered for a lease to prove that your business will have sufficient cash flows to pay the rent.

Customers The business plan may also function as a prospectus for potential customers, especially when it comes to large corporate accounts and exclusive customer relationships.

9. Secure Funding

If you intend to seek outside financing for your business, you are likely going to need a business plan.

Whether you are seeking debt financing (e.g. loan or credit line) from a lender (e.g., bank or financial institution) or equity capital financing from investors (e.g., venture or angel capital), a business plan can make the difference between whether or not – and how much – someone decides to invest.

Investors and financiers are always looking at the risk of default and the earning potential based on facts and figures. Understandably, anyone who is interested in supporting your business will want to check that you know what you are doing, that their money is in good hands, and that the venture is viable in the long run.

Business plans tend to be the most effective ways of proving that. A presentation may pique their interest , but they will most probably request a well-written document they can study in detail before they will be prepared to make any financial commitment.

That is why a business plan can often be the single most important document you can present to potential investors/financiers that will provide the structure and confidence that they need to make decisions about funding and supporting your company.

Be prepared to have your business plan scrutinized . Investors and financiers will conduct extensive checks and analyses to be certain that what is written in your business plan faithful representation of the truth.

10. Grow and Change

It is a very common misconception that a business plan is a static document that a new business prepares once in the start-up phase and then happily forgets about.

But businesses are not static. And neither are business plans. The business plan for any business will change over time as the company evolves and expands .

In the growth phase, an updated business plan is particularly useful for:

Raising additional capital for expansion

  • Seeking financing for new assets , such as equipment or property
  • Securing financing to support steady cash flows (e.g., seasonality, market downturns, timing of sale/purchase invoices)
  • Forecasting to allocate resources according to strategic priority and operational needs
  • Valuation (e.g., mergers & acquisitions, tax issues, transactions related to divorce, inheritance, estate planning)

Keeping the business plan updated gives established businesses better chance of getting the money they need to grow or even keep operating.

Business plan is also an excellent tool for planning an exit as it would include the strategy and timelines for a transfer to new ownership or dissolution of the company.

Also, if you ever make the decision to sell your business or position yourself for a merger or an acquisition , a strong business plan in hand is going to help you to maximize the business valuation.

Valuation is the process of establishing the worth of a business by a valuation expert who will draw on professional experience as well as a business plan that will outline what you have, what it’s worth now and how much will it likely produce in the future.

Your business is likely to be worth more to a buyer if they clearly understand your business model, your market, your assets and your overall potential to grow and scale .

Related Questions

Business plan purpose: what is the purpose of a business plan.

The purpose of a business plan is to articulate a strategy for starting a new business or growing an existing one by identifying where the business is going and how it will get there to test the viability of a business idea and maximize the chances of securing funding and achieving business goals and success.

Business Plan Benefits: What are the benefits of a business plan?

A business plan benefits businesses by serving as a strategic tool outlining the steps and resources required to achieve goals and make business ideas succeed, as well as a communication tool allowing businesses to articulate their strategy to stakeholders that support the business.

Business Plan Importance: Why is business plan important?

The importance of a business plan lies in it being a roadmap that guides the decisions of a business on the road to success, providing clarity on all aspects of its operations. This blueprint outlines the goals of the business and what exactly is needed to achieve them through effective management.

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Table of Contents

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Business Planning: It’s Importance, Types and Key Elements

Every year, thousands of new businesses see the light of the day. One look at the  World Bank's Entrepreneurship Survey and database  shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.   

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several  other statistics  expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all. 

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%)  don't have a formal business plan in place. 

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.  

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.  

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.  

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained. 

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes. 

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

  • Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals. 
  • Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
  • Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
  • Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
  • Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
  • Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest. 

Now let's look at the various types involved in business planning.

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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.  

Here’s an overview of a few fundamental types of business plans. 

  • Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
  • Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments. 
  • Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
  • Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
  • Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them. 

Here are the key elements of a good business plan:

  • Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.  
  • Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
  • Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
  • Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time. 
  • Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

  • Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

  • Create a business plan to determine your company's direction, obtain financing, and attract investors.
  • Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
  • Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
  • You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success. 

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.   

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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7 Startups Vie for Investment at the 2024 College New Venture Challenge

importance of new venture business plan

The Polsky Center for Entrepreneurship and Innovation and The University of Illinois’ Grainger College of Engineering is pleased to announce the seven finalists selected to compete in the College New Venture Challenge (CNVC) finals.

On Friday, March 1 , the finalists will present their business plans to a panel of judges and investors for a piece of an investment pool expected to top $200,000.

This year, The Grainger College of Engineering at the University of Illinois Urbana-Champaign will also award the Grainger Engineering CNVC Prize. This prestigious prize supports CNVC teams comprising students from both the University of Illinois and the University of Chicago. These collaborative teams are eligible to compete for an additional prize pool of $75,000 offered by Grainger Engineering. Participation in the final round of the CNVC competition is not a requirement for competing for the Grainger Engineering CNVC Prize.

“The selection of this year’s finalists was extremely difficult,” said Starr Marcello, AM ’04, MBA ’17, deputy dean for MBA programs at the University of Chicago’s Booth School of Business and professor of the CNVC. “These teams are incredibly impressive, and we look forward to supporting them as they grow their businesses throughout the course and beyond.”

The 2024 finalists are:

  • bellie // bellie is a gut-strengthening beverage that helps soothe acute intestinal pain and rebuilds the microbiome over time. Backed by science, it is on a mission to support people on their journey to better health.
  • BYLD Innovations // BYLD Innovations is BYLDing a cutting-edge portable and foldable 3D printer for increasing accessibility to 3D printing and innovation.
  • Domain Diligence // Domain Diligence is an online platform that helps investment banks speed up and simplify the due diligence processes for M&A transactions, letting them focus on delivering the most value for the client.
  • Lynkr Inc. // Lynkr is a college-specific social app designed for event planning and engagement within university ecosystems like UChicago. Uniquely streamlining event organization by allowing students to invite specific groups in one click, manage block and allow lists, and track attendance, students can engage with their school in new ways with live chats and friendtracking.
  • MethaFarm // MethaFarm aims to localize and improve the sustainability of small-scale farm waste management systems. Utilizing small anaerobic digesters, the waste is processed into fertilizer and biogas, of which can be converted into electricity. The carbon byproduct is then captured and sold.
  • Resolv // Resolv is building a blockchain security tool that allows crypto businesses to recover stolen assets. When all other mechanisms of prevention have failed, Resolv is the last line of defense to return what’s rightfully yours.
  • TrackPatch // TrackPatch is a bioadhesive tracker which can easily be attached to a child’s skin to locate their whereabouts and receive critical alerts during an emergency. Its product features a silicone-based bioadhesive which ensures maximum reliability and biocompatibility. With TrackPatch, your child’s safety is just a tap away.

Launched in 2012, the CNVC is one of five tracks of the University of Chicago Booth School of Business’ New Venture Challenge, a pioneering and top-ranked startup accelerator that has nurtured more than 370 still-active companies that have raised more than $1.2 billion in investment and achieved some $8.5 million in mergers and exits.

Alumni of the college accelerator include success stories such as  Cubii , Wasoko , MoneyThink , Quevos , and  Fronen .

The CNVC is open to returning undergraduate students from UChicago, as well as students in the entrepreneurship track of the City Scholars program at the University of Illinois Urbana Champaign.

“Each year, the excellence of our groups, especially with the increasing diversity of mixed teams, surpasses our expectations,” stated Jed Taylor, assistant dean of Innovation and Entrepreneurship at the Grainger College of Engineering. “This year, we’re especially excited to introduce the new Grainger Engineering CNVC Prize, celebrating outstanding innovation and teamwork. We eagerly anticipate the finals and wish all the teams best of luck.”

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OpenAI Completes Deal That Values the Company at $80 Billion

The A.I. start-up’s valuation tripled in less than 10 months.

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People walking along a sunny sidewalk between a building and a parking area filled with cars.

By Cade Metz and Tripp Mickle

Reporting from San Francisco

OpenAI has completed a deal that values the San Francisco artificial intelligence company at $80 billion or more, nearly tripling its valuation in less than 10 months, according to three people with knowledge of the deal.

The company would sell existing shares in a so-called tender offer led by the venture firm Thrive Capital, the people said. The deal lets employees cash out their shares in the company, rather than a traditional funding round that would raise money for business operations.

OpenAI, which declined to comment, is now one of the world’s most valuable tech start-ups, behind ByteDance and SpaceX, according to figures from the data tracker CB Insights .

The deal is another example of the Silicon Valley deal-making machine pumping money into a handful of companies that specialize in generative A.I. — technology that can generate text, sounds and images on its own. The funding boom kicked off early last year, after OpenAI captured the public’s imagination with the release of the online chatbot ChatGPT .

(The New York Times sued OpenAI and its partner, Microsoft, in December, claiming copyright infringement of news content related to A.I. systems.)

The deal comes at a critical time for OpenAI, providing it with an important vote of confidence after a year of controversy. In November, the company’s board fired Sam Altman, its chief executive, because it lost confidence in his leadership. The dismissal ignited a week of chaos and threw the company’s future into doubt, as employees threatened to resign in solidarity with Mr. Altman. Ultimately, he was reinstated and several board members resigned.

In an attempt to resolve last year’s turmoil, OpenAI hired the law firm WilmerHale to review the board’s actions and Mr. Altman’s leadership. WilmerHale is expected to finish its report on the episode early this year.

The company agreed to a similar deal early last year. The venture-capital firms Thrive Capital, Sequoia Capital, Andreessen Horowitz and K2 Global agreed to buy OpenAI shares in a tender offer, valuing the company at around $29 billion.

Thrive declined to comment.

Investors are eager to pour money into A.I. companies. Last January, Microsoft invested $10 billion in OpenAI, bringing its total investment in the San Francisco start-up to $13 billion.

Since then, Anthropic, an OpenAI rival, has raised $6 billion from Google and Amazon. Cohere, a start-up founded by former Google researchers, raised $270 million, bringing its total funding to more than $440 million, and Inflection AI, founded by a former Google executive, also raised a $1.3 billion round, bringing its total to $1.5 billion.

OpenAI appeared to be close to finalizing its latest deal in November, when Mr. Altman was unexpectedly fired. In the week that followed, the potential deal loomed over Mr. Altman’s efforts to negotiate his way back into the company. Before he was reinstated, over 700 of the company’s 770 employees signed a petition calling for his reinstatement .

Cade Metz writes about artificial intelligence, driverless cars, robotics, virtual reality and other emerging areas of technology. More about Cade Metz

  More about Tripp Mickle

Explore Our Coverage of Artificial Intelligence

News  and Analysis

Google has temporarily suspended the ability of its Gemini chatbot  to generate images of people, after the A.I. generated images of people of color in German military uniforms from World War II  — an obvious historical inaccuracy.

Nvidia, the Silicon Valley chip maker, released quarterly financial results that reinforced how the company has become one of the biggest winners of the A.I. boom .

OpenAI announced that it was releasing a new version of ChatGPT that would remember all prior conversations with users  so it could use that information in future chats. The start-up also unveiled technology that creates videos that look like they were lifted from a Hollywood movie .

The Age of A.I.

Few companies better illustrate how A.I. is changing Silicon Valley deal-making than Anthropic, one of the world’s hottest A.I. start-ups .

A year ago, a rogue A.I. tried to break up our columnist’s marriage. Did the backlash that ensued help make chatbots too boring? Here’s how we tame d the chatbots.

Amid an intractable real estate crisis, fake luxury houses offer a delusion of one’s own. Here’s how A.I. is remodeling the fantasy home .

New technology has made it easier to insert digital, realistic-looking versions of soda cans and shampoo on videos on social media. A growing group of creators and advertisers is jumping at the chance for an additional revenue stream .

A start-up called Perplexity shows what’s possible for a search engine built from scratch with A.I. Are the days of turning to Google for answers numbered ?

More From Forbes

Business tech roundup: google’s gemini is coming for your business.

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The Google AI logo is being displayed on a smartphone with Gemini in the background in this photo ... [+] illustration, taken in Brussels, Belgium, on February 8, 2024. (Photo by Jonathan Raa/NurPhoto via Getty Images)

Here are five things in tech that happened this week and how they affect your business. Did you miss them?

1 – Google plans “Gemini Business” AI for workspace users.

It appears Google is working toward an AI chatbot specifically for Google Workspace members. A productivity and collaboration tool that includes a suite of apps (Calendar, Google Drive, Google Meet, Docs and Sheets) – Google Workspace is now featuring “Gemini for Workspace” where users will have access to the AI for work-related projects. Gemini for business will be separate from the Workspace basic plan which is $12/month. Users will have the option of upgrading to “Gemini Business or Gemini Enterprise" – priced at $20/month or $30/month. Source: Ars Technica )

Why this is important for your business:

Whatever Microsoft does, Google does and the same way around. For Google Workspace users you can get ready for both Gemini and Duet to help you write documents, create emails, spruce up presentations and increase your overall productivity.

2 – AWS launches program to boost AI and tech competency for small and medium businesses.

Amazon Web Services has begun their competency program to help small and medium-sized business owners refine their skill set with technological capabilities. Working with 30 “Competency Partners” the program offers training for business owners based on their area of industry (e.g., automotive, government, manufacturing, and others). (Source: Fox Business )

Artificial intelligence, machine learning, and security solutions are a few examples of the kinds of specialties that SMBs can receive training for. "It really comes down to the [AWS] customer saying, ‘this is what I’m trying to do’ and then our teams matching that up with these competency partners and making sure we have a good fit," Ben Schreiner, U.S. Head of Business Innovation for SMB, said. (Ben and I did a few really fun podcasts together recently on cloud and other small business technologies).

No, Neither Gmail Or Google Pay Closing Down Starting June 4

New ios 17 3 update warning issued to all iphone users, apple just gave millions of samsung users a reason to buy an iphone.

3 – ChatGPT used by North Korean hackers to scam LinkedIn users.

Hacking groups out of North Korea are swindling sensitive information from LinkedIn members and other social platforms, Microsoft confirms. One of the tools that’s been used is ChatGPT reportedly aimed at white collar professionals – “employees from global cyber security, global defense, and crypto companies.” Posing as recruiters, the hackers are able to “create polished and credible-looking recruiter profiles,” Erin Plante, Vice-President of cyber security company Chainalysis, said. The United Nations ’ Office of Counter-Terrorism has found these types of malicious campaigns are supported monetarily in North Korea which in turn finances their nuclear weapons program. Plante warned, “These attacks are getting very sophisticated – we’re not talking about a badly worded email.” (Source: Tech.co )

It’s not just bad attachments to an email. Security issues can now come from LinkedIn and it’s important that you and your employees are getting the training to identify these potential bad actors.

4 – Salesforce rolls out native generative AI within Slack.

CRM company Salesforce is launching “native generative AI” in Slack so “customers can easily tap into the collective knowledge shared” in the communications platform. Key updates include channel summaries, thread recaps and AI search. (Source: VentureBeat )

This is a big step forward for Slack users. With the click of a button users can find a summary of specific threads without having to spend time searching through multiple conversations. Channels are summarized with items presented in list form. One of the major improvements with this AI tool is the ease of extracting important information from numerous, dated conversations. Slack has said this update alone can “save up to 30 minutes scrolling through messages and another hour of writing the summary.” Additionally, if the summary isn’t accurate, it can be rated as “bad.” The AI will also offer Q&A feature for team members who are seeking more information about items within a summary.

5 – Here’s some tips on avoiding those annoying “reply-all” people.

To curtail the amount of email in your inbox, Outlook and Gmail have some helpful options. Outlook’s “Ignore Conversation” feature allows users to move selected threads to their Deleted folder. Right-clicking on an email will bring up a menu where “Ignore Conversation” appears. Once chosen, notifications will be disabled for any subsequent messages in the thread. To undo this feature, users can click on “Stop Ignoring” and the thread is automatically moved back to the Inbox. Gmail also has a mute option by selecting the thread then choosing “Mute” on the desktop which is found under the three dots labeled “More”. Once selected, the thread no longer appears in the Inbox and notifications are disabled. To locate muted threads, type “is:muted” in the search bar then select “Unmute” under the three dots. (Source: CNET )

You’re welcome.

Gene Marks

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Sam Altman wants Washington's backing for his $7 trillion AI chip venture

  • Sam Altman wants US government approval for his trillion-dollar AI chip venture, Bloomberg reported.
  • Altman has been attempting to raise up to $7 trillion to boost his GPU-chip supply.
  • Nvidia CEO, Jensen Huang, has expressed skepticism about the hefty sum.

Insider Today

Sam Altman is trying to get Washington's backing for his trillion-dollar AI chip venture.

The OpenAI CEO is working to secure US government approval for the project as it risks raising national security and antitrust concerns, Bloomberg reported .

Altman has reportedly been attempting to raise up to $7 trillion to boost his GPU-chip supply. The Wall Street Journal reported that the tech CEO had held talks with investors including in the United Arab Emirates.

Altman told potential investors that he can't move forward without Washington's approval, Bloomberg reported.

Altman's proposals are aimed at helping to solve the  global chip shortage , according to the reports. He's said to be presenting his pitch as a partnership with OpenAI, chip makers, and investors who can finance GPU chip plants, the report says.

Representatives for OpenAI did not immediately respond to a request for comment from Business Insider.

Jensen Huang , the CEO of leading chipmaker Nvidia, hasn't been overly positive about Altman's plan.

He told the United Arab Emirates' AI minister, Omar Al Olama, that developing AI wouldn't cost as much as the amount Altman was seeking to raise. 

Huang said: "There's about a trillion dollars' worth of installed base of data centers. Over the course of the next four or five years, we'll have $2 trillion worth of data centers that will be powering software around the world."

He also took an indirect shot at Altman, joking that $7 trillion could buy "apparently all the GPUs." 

importance of new venture business plan

Watch: Sam Altman moves to Microsoft after OpenAI fires him as CEO

importance of new venture business plan

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    Step Five: Research the market. The final step in creating a business plan is to research the competition. This will help you to avoid starting an unnecessary or unprofitable venture. Think of ways that make your company unique from other similar companies who are also competing for clients in this space.

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    Here are 5 reasons why you need a business plan: 1. It will help you steer your business as you start and grow. Think of a business plan as a GPS to get your business going. A good business plan guides you through each stage of starting and managing your business. You'll use your business plan like a GPS for how to structure, run, and grow ...

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

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    13. To share your business plans with coworkers and family. When you open a business, you will likely get a lot of questions about what you do from previous coworkers and family members. Drafting a business plan can help you answer these questions, sharing your goals and plans with them.

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  18. What is a Business Venture? With Examples + How to Start

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    Let's take a closer look at how each of the important business planning benefits can catapult your business forward: 1. Validate Your Business Idea. The process of writing your business plan will force you to ask the difficult questions about the major components of your business, including: External: industry, target market of prospective ...

  23. Business Planning: It's Importance, Types and Key Elements

    Common Challenges of Writing a Business Plan. The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning: Create a business plan to determine your company's direction, obtain financing, and attract investors.

  24. 7 Startups Vie for Investment at the 2024 College New Venture Challenge

    The Polsky Center for Entrepreneurship and Innovation and The University of Illinois' Grainger College of Engineering is pleased to announce the seven finalists selected to compete in the College New Venture Challenge (CNVC) finals.. On Friday, March 1, the finalists will present their business plans to a panel of judges and investors for a piece of an investment pool expected to top $200,000.

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  27. OpenAI Completes Deal That Values the Company at $80 Billion

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    Why this is important for your business: This is a big step forward for Slack users. With the click of a button users can find a summary of specific threads without having to spend time searching ...

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