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What Is a Business Plan?

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

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

definition of term business plan

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

Key Takeaways

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

Investopedia / Ryan Oakley

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

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

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

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

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

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

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

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

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

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

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

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

2 Types of Business Plans

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

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

Why Do Business Plans Fail?

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

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

What Does a Lean Startup Business Plan Include?

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

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

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

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

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

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

definition of term business plan

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

That just scratches the surface for why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those that are ready to start a business. It’s just as valuable for those that have an idea and want to determine if it’s actually possible or not. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

Document your strategy and goals

For those starting or managing a business understanding where you’re going and how you’re going to get there are vital. Writing your plan helps you do that. It ensures that you are considering all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll have an idea of where you want your business to go as well as how you’ve performed in the past. This alone better prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

This will be the first part of your plan but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps .  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add it. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing the viability of your business. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex on the surface, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

  • Sales and revenue projections
  • Profit and loss statement
  • Cash flow statement
  • Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first and only add documentation that you think will be beneficial for anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. So, to get the most out of your plan, it’s best to find a format that suits your needs. Here are a few common business plan types worth considering. 

Traditional business plan

The tried-and-true traditional business plan is a formal document meant to be used for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

Business model canvas

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

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan. This format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Now, the option that we here at LivePlan recommend is the Lean Plan . This is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

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Kody Wirth

Posted in Business Plan Writing

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What is a Business Plan? Definition, Tips, and Templates

AJ Beltis

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plan graphic with business owner, lightbulb, and pens to symbolize coming up with ideas and writing a business plan.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

businessplan_0

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]

businessplan_2

Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

definition of term business plan

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Free Business Plan [Template]

Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

  • Business Plan Subtitle
  • Executive Summary
  • Company Description
  • The Business Opportunity
  • Competitive Analysis
  • Target Market
  • Marketing Plan
  • Financial Summary
  • Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

businessplan_9

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

  • Startup Business Plan
  • Feasibility Business Plan
  • Internal Business Plan
  • Strategic Business Plan
  • Business Acquisition Plan
  • Business Repositioning Plan
  • Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

businessplan_7

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

businessplan_4

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

  • A detailed product description
  • Market analysis
  • Technology needs
  • Production needs
  • Financial sources
  • Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

businessplan_5

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

  • Department-specific budgets
  • Target demographic analysis
  • Market size and share of voice analysis
  • Action plans
  • Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

businessplan_8

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

  • Relevant data and analysis
  • Assessments of company resources
  • Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

businessplan_3

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

  • How an acquisition will change its operating model
  • What will stay the same under new ownership
  • Why things will change or stay the same
  • Acquisition planning documentation
  • Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

  • What the new owner will do to turn the business around
  • Historic business metrics
  • Sales projections after the acquisition
  • Justification for those projections

6. Business Repositioning Plan

businessplan_6 (1)

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

  • Acknowledge the current state of the company.
  • State a vision for the future of the company.
  • Explain why the business needs to reposition itself.
  • Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

  • SWOT analysis
  • Growth opportunity studies
  • Financial goals and plans
  • Marketing plans
  • Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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A Business Plan is a Roadmap for a Business to Achieve its Goals

What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.

  • What are some of the reasons why business plans don't succeed?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

Looking for someone to write a business plan?

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These are the following purpose of business plan:

  • Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
  • Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
  • Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

The Essential Components of a Business Plan

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

  • Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

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Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

  • You have launched a new product or service line.
  • You have entered a new market.
  • You have experienced significant changes in your customer base or competitive landscape.
  • You have made changes to your management team or organizational structure.
  • You have raised new funding.

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

Reasons why Business Plans Dont Success

  • Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
  • Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
  • Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
  • Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

  • It helps you to clarify your business goals and strategies.
  • It can help you to attract investors and lenders.
  • It can serve as a roadmap for your business as it grows and changes.
  • It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

  • Executive summary.
  • Company description.
  • Management and organization description.
  • Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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What Is A Business Plan (& Do I Really Need One?)

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The term "business plan" is a familiar one, often bandied about in entrepreneurial circles. Yet, despite its ubiquity, it's remarkable how much mystery and confusion can surround this essential business tool.

What exactly is a business plan? What purpose does it serve? How is it structured? This article aims to lift the veil, demystifying the business plan and revealing its multifaceted nature.

Business Plan Definition

A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them. It's more than a mere document; it's a structured communication tool designed to articulate the vision of the business, allowing stakeholders to easily find the information they seek.

The business plan is a tangible reflection of the strategic planning that has gone into the business's future. While the plan is a static document, the planning is a dynamic process, capturing the strategic thinking and decision-making that shape the business's direction.

Purposes of a Business Plan

1. attracting funding opportunities.

A well-crafted business plan illustrates the company's potential for growth and profitability. It outlines the company's vision, mission, and strategies, providing a clear roadmap for success. A potential investor, whether venture capitalists or angel investors, can see how capital will be utilized, fostering trust and confidence in the business venture. A bank or financial institution can assess your company's ability to meet debt service obligations and compliance with strict financial accounting to meet underwriting requirements.

2. Aligning Organizational Objectives

A business plan acts as a unifying document that aligns the team with the company's goals and strategies. It ensures that everyone is on the same page, working towards common objectives. This alignment fosters collaboration and efficiency, driving the business towards its targets.

3. Validating the Business Concept

Before launching, a business plan helps in validating the feasibility of the business idea. It's a rigorous process that tests the concept against real-world scenarios, ensuring that the idea is not only innovative but also practical and sustainable. This validation builds credibility and prepares the business for the challenges ahead. For an existing business, a business plan can help address a possible merger and acquisition (M&A), rolling out a new business product or location, or expanding the target market.

4. Facilitating Legal and Regulatory Compliance

Whether it's securing a visa for international operations or meeting other regulatory requirements, a business plan can be an essential tool. It provides the necessary information in a structured format, demonstrating compliance with legal and regulatory standards. This can streamline processes and prevent potential legal hurdles.

5. Articulating and Formalizing the Business Vision

The business plan is more than a set of numbers and projections; it's the embodiment of the business vision. It communicates the essence of the business to stakeholders, turning abstract ideas into a concrete operational plan. It's a vital tool for leadership to articulate and formalize the vision, setting the stage for strategic execution.

Identifying the Right Type of Business Plan

Once you understand who your business plan is for and what specific needs it must address, you can identify the type of plan that best suits your situation. Business plans can be categorized into two main types: traditional and lean, each serveing its own unique purpose.

Traditional Business Plan

The Traditional Business Plan is a detailed and comprehensive document, often used by a new business, especially those seeking significant funding. It provides a complete picture of the company's vision, strategies, and operations. A traditional business plan leaves no stone unturned, offering a robust tool that communicates the business's entire vision and plan to stakeholders.

Lean Business Plan

In contrast, the Lean Business Plan is an abbreviated structure that still emphasizes the key elements of a Traditional Business Plan, but in less detail. It's suitable for early-stage startups, small businesses, or situations where agility and speed are essential. The Lean Business Plan focuses on the essentials, providing a quick overview without overwhelming details. It's a flexible and adaptable tool that can evolve with the business. One of the primary distinctions between it and a Traditional Business Plan is that a Lean Business Plan does not typically include financial planning, or if it does, it's a simple financial forecast or cash burn.

Components of a Business Plan

There are many places online where you can buy a business plan template. Often, those documents are just an outline of the sections of the business plan and what is included in each. If that's what you're looking for, here's a good business plan outline:

Executive Summary

The Executive Summary is the first section read but often the last written, as it encapsulates the entire plan. If the company has a mission statement, it's typically included here. When used for funding, it includes the ask or uses of funds, and for investment, it may contain an investor proposition. It's a concise overview that sets the tone, summarizing each section that follows.

Company Overview

The Company Overview is the foundation of the business, articulating how it operates, generates revenue, and delivers unique value to its customers. This section defines products and/or service the business sells, as well as the company’s business model and unique value proposition. It covers key partners, pricing strategy, revenue model, and other essential business activities. 

Market Analysis Summary

The Market Analysis is the business intelligence portion of the plan. It comprises an industry analysis, market segments, target customers, competitive analysis, competitive advantage. This section provides insights into the market landscape, identifying opportunities, challenges, and how the business positions itself uniquely within the industry.

Strategy & Implementation Summary

Here, the business plan should outline the short-term and long-term objectives, marketing strategy and sales approach. It's a roadmap that details how the business will achieve its goals, including tactical steps, timelines, and resources. In a business plan for investors, the inclusion of an exit strategy can provide a vision for the future, considering various potential outcomes.

Management Summary

The Management Summary offers profiles of key personnel, their qualifications, roles, and plans to fill talent gaps. It's a snapshot of the leadership team, providing assurance that the right people are in place to execute the business plan successfully.

Financial Projections

This section includes standard financial statements like the profit & loss statement (P&L), the balance sheet, and the cash flow statement. It offers a detailed financial blueprint, illustrating the company’s revenue drivers and unit assumptions, income statement, a break-even analysis, and a sensitivity analysis to examine how changes in variables affect outcomes. For businesses with complex structures, framing the revenue in terms of market share can offer additional insight into the viability and feasibility of the financial projections.

The Appendices often include year 1 and year 2 monthly financial statements, intellectual property like patents and trademarks, construction blueprints, and other essential documentation. It's a repository for supporting information that adds depth and context to the main sections of the plan.

Do I Need a Business Plan?

The question "Do I need a business plan?" is one that many entrepreneurs and business leaders grapple with. The answer, however, is not as straightforward as it might seem. While not every business requires a traditional business plan, the strategic planning process is essential for all. 

In some cases, a traditional business plan is required. Applying for a Small Business Administration (SBA) loan , obtaining a entrepreneurship visa , or meeting specific investor requirements may mandate a comprehensive business plan.

However a traditional business plan isn’t always necessary. For example, in early-stage investor funding, particularly in industries like SaaS, a lean business plan accompanied by a pitch deck presentation will often suffice. The focus here is on agility and essential information rather than exhaustive detail.

Every Business Needs Business Planning

Unlike the traditional business plan, which may or may not be required depending on the situation, business planning as a process is indispensable for every business, regardless of size or stage.

Business planning is a dynamic, continuous process. It's not confined to a single document but evolves with the business, adapting to changes, challenges, and opportunities. Effective strategic planning ensures internal alignment with both long-term vision and short-term objectives. It's a holistic approach that guides business goal-setting decision-making, resource allocation, and strategic direction. It often serves as the basis for a fully developed marketing plan.

Every business, from a small startup to a large corporation, benefits from strategic planning. It's a practice that fosters growth, innovation, and resilience, providing a roadmap for success.

Not every business needs a traditional business plan as a document, but all businesses need to engage in business planning as a process. While the traditional business plan serves specific purposes and audiences, business planning is a universal practice that guides and grows the business.

Entrepreneurs and business leaders must assess their specific needs, recognizing that the traditional business plan is just one tool among many. The true value of the business plan lies in continuous planning, adapting, and aligning with the unique vision and goals of the business.

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What Is A Business Plan And Why It Matters In Business

A business plan is a document that details key operational and financial goals for a business and how they will be achieved in the future. Essentially, a business plan is an exercise in due diligence. While no business plan can accurately predict the future, they do demonstrate and give insight into the likelihood of eventual profitability. This in turn removes some of the entrepreneurial risk associated with investing large amounts of time and capital into a new venture.

Table of Contents

A typical business plan structure

Business plan structure varies considerably across industries, but most incorporate these parts as a part of a 10 to 20-page document.

Business concept

What is the nature of the industry the business intends to operate in?

What is the structure of the business and what are the products or services it will offer? How will it achieve success?

Marketplace analysis

Who is the potential target audience and why are they motivated to buy? Is there an existing demand for the product or service? In this part, it’s crucial to be as detailed as possible.

Develop a target demographic and associated buyer persona through in-depth research.

market-development

Competitive analysis

Who are the main competitors and what are their strengths and weaknesses? Is the market saturated or impenetrable?

If the market does have established players, then strategies must be devised to acquire market share.

direct-and-indirect-competitors

Financial plan

If financing is required, then a sound financial plan will be key in attracting capital from banks, investors, or venture capitalists.

As best as possible, develop income and cash flow statements, balance sheets, and break-even analyses.

The goal here is to convince interested parties that the business has a realistic chance of success.

Management and legal structure

How will the company be structured and who will lead it? What skills do management bring to the table and how will they contribute to success?

A sound business plan should also define the intended legal structure, whether that be incorporated, partnership, sole proprietor, or LLC.

The four main categories of business plans

Business plans usually fall under one of four main categories:

The mini-plan

Used to quickly test a concept or gauge the interest of a prospective investment partner. Mini-plans are typically short at 1-10 pages in length.

The working plan

Used to describe how a business could operate once established.

The working plan is primarily an internal document; it does not need to look attractive with supporting photography, formatting, and appendices.

The presentation plan

Or a working plan submitted to interested external parties. Industry jargon and slang should be removed in favor of standard business language.

The presentation plan should incorporate all aspects of a typical business plan structure.

Attention to detail is also a must. Figures must be correct and words free of typing errors. The plan should also be professionally bound and printed.

The electronic plan

In the digital age, many organizations find it useful to keep electronic copies of their business plans.

These are useful for savvy investors who want to delve into complex spreadsheets for analysis . They are also ideal for presentations and virtual meetings.

How to build an effective business plan according to Peter Thiel

A-great-business-plan

According to Pether Thiel, former CEO of  PayPal and founder of the software company Palantir, there are seven questions to answer if you want to create a company that will go from Zero to One.

Those questions are critical to building a business that will be able to capture value in the long run. In fact, according to Peter Thiel the value of a business isn’t to go from 1 to  n  but to real value is to go from Zero to One.

In short, build a company that creates new things, rather than building a business based on the existing “best practices,” which according to Peter Thiel, leads to dead ends.

This framework of going from Zero to One can be summarised in seven questions to answer if you want to have a great business plan.

In fact, you don’t need complicated Excel models or reasonings. You only need to address now these seven questions.

Indeed, that is how Peter Thiel puts it in Zero to One:

Whatever your industry, any great business plan must address every one of them.If you don’t have good answers to these questions, you’ll run into lots of “bad luck” and your business will fail. If you nail all seven you’ll master fortune and succeed.

The Engineering Question

Can you create breakthrough technology instead of incremental improvements? 

The Timing Question

Is now the right time to start your particular business? 

The Monopoly Question

Are you starting with a big share of a small market? 

The People Question

Do you have the right team? 

The Distribution Question

Do you have a way to not just create but deliver your product?

The Durability Question

Will your market position be defensible 10 and 20 years into the future? 

The Secret Question

Have you identified a unique opportunity that others don’t see? 

Key takeaways

  • A business plan is a comprehensive document that highlights the goals of a business and how it plans to achieve them.
  • A business plan is essential for new businesses where due diligence is crucial in attracting external investment or predicting long-term viability. All businesses – regardless of maturity – should use and adhere to such a plan.
  • There are four main categories of business plans, with each category suited to a particular stage of the business life cycle.

Key Highlights:

  • Business Plan Definition: A business plan is a detailed document outlining a business ’s operational and financial goals, along with strategies for achieving them. It serves as a tool for due diligence, demonstrating the potential profitability of a venture and reducing entrepreneurial risk.
  • Business Concept: Describes the industry, business structure, products/services, and success strategies.
  • Marketplace Analysis: Identifies the target audience, demand, and buyer persona through detailed research.
  • Competitive Analysis: Assesses main competitors, their strengths and weaknesses, and market saturation.
  • Financial Plan: Presents income statements, cash flow projections, balance sheets, and break-even analyses.
  • Management and Legal Structure: Defines the company’s structure, leadership, and legal status.
  • Mini-Plan: Brief, used to test concepts or attract investment partners.
  • Working Plan: Describes how a business will operate, primarily for internal use.
  • Presentation Plan: Tailored for external parties, incorporates all aspects of a typical plan.
  • Electronic Plan: Digital copies useful for analysis , presentations, and virtual meetings.
  • Peter Thiel, co-founder of PayPal, outlines seven critical questions to address in a business plan.
  • These questions guide businesses to create new value and avoid dead-end practices.
  • The seven questions include: Engineering Question, Timing Question, Monopoly Question, People Question, Distribution Question, Durability Question, and Secret Question.
  • Addressing these questions enhances a company’s chances of success by creating breakthrough technology, timing the market entry, targeting a niche market, forming the right team, ensuring product delivery, building defensible market positions, and identifying unique opportunities.
  • A business plan outlines a business ’s goals and strategies for achieving them.
  • It is essential for attracting investment, reducing risk, and guiding business operations.
  • The plan’s components include business concept, marketplace analysis , competitive analysis , financial plan, and management structure.
  • Business plans can fall into four categories: mini-plan, working plan, presentation plan, and electronic plan.
  • Addressing Peter Thiel’s seven questions can enhance a business plan’s effectiveness and increase the chances of long-term success.

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Business Plan

By Entrepreneur Staff

Business Plan Definition:

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask. Generally, a business plan has the following components:

Title Page and Contents A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.

Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.

Executive Summary The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front. Are you looking for a $10,000 loan to remodel and refurbish your factory? A loan of $25,000 to expand your product line or buy new equipment? How will you repay your loan, and over what term? Would you like to find a partner to whom you'd sell 25 percent of the business? What's in it for him or her? The questions that pertain to your situation should be addressed here clearly and succinctly.

The summary or statement should be no more than half a page in length and should touch on the following key elements:

  • Business concept describes the business, its product, the market it serves and the business' competitive advantage.
  • Financial features include financial highlights, such as sales and profits.
  • Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
  • Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
  • Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.

Description of the Business The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Remember that bankers and investors want to know hard facts--they won't risk money on assumptions or conjecture.

When describing your business, say which sector it falls into (wholesale, retail, food service, manufacturing, hospitality and so on), and whether the business is new or established. Then say whether the business is a sole proprietorship, partnership, C or Sub chapter S corporation. Next, list the business' principals and state what they bring to the business. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.

Description of the Product or Service The business description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs.

When you describe your product or service, make sure your reader has a clear idea of what you're talking about. Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors.

Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful. If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Give hard facts, such as "new equipment will create an income stream of $10,000 per year" and briefly describe how.

Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

Market Analysis A thorough market analysis will help you define your prospects as well as help you establish pricing, distribution, and promotional strategies that will allow your company to be successful vis-à-vis your competition, both in the short and long term.

Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain. Keep in mind that no one gets 100 percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections.

You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning." Positioning helps establish your product or service's identity within the eyes of the purchaser. A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP (unique selling proposition) is.

How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas. Many methods of establishing prices are available to you, but these are among the most common.

  • Cost-plus pricing is used mainly by manufacturers to assure that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
  • Demand pricing is used by companies that sell their products through a variety of sources at differing prices based on demand.
  • Competitive pricing is used by companies that are entering a market where there's already an established price and it's difficult to differentiate one product from another.
  • Markup pricing is used mainly by retailers and is calculated by adding your desired profit to the cost of the product.

You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user. Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services. To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales.

Competitive Analysis The purpose of the competitive analysis is to determine:

  • the strengths and weaknesses of the competitors within your market.
  • strategies that will provide you with a distinct advantage.
  • barriers that can be developed to prevent competition from entering your market.
  • any weaknesses that can be exploited in the product development cycle.

The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.

Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.

Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.

The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you'll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.

In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don't need a business plan unless you're trying to borrow money. Of course, it's true that you do need a good plan if you intend to approach a lender--whether a banker, a venture capitalist or any number of other sources--for startup capital. But a business plan is more than a pitch for financing; it's a guide to help you define and meet your business goals.

Just as you wouldn't start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before--and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

More from Business Plans

Financial projections.

Estimates of the future financial performance of a business

Financial Statement

A written report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Executive Summary

A nontechnical summary statement at the beginning of a business plan that's designed to encapsulate your reason for writing the plan

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Business Plan

Who should write a business plan, pros and cons of a business plan, the anatomy of a business plan, .css-uphcpb{position:absolute;left:0;top:-87px;} what is a business plan, definition of a business plan.

A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them.

In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and which tactics you plan to use to reach commercial success.

Whilst every enterprise should have a plan of some sort, a business plan is of particular importance during the investment process. Banks, venture capitalists, and angel investors alike will need to see a detailed plan in order to make sound investment decisions — think of your plan as a way of convincing them your idea is worth their resources.

Roadmapping From A to Z

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Business plans can also be useful as a guide to keeping a new business on track, especially in the first few months or years when the road ahead isn’t too clear.

Starting a business isn’t an exact science. Some companies organically develop out of trial and error, while others are plotted out from start to finish.

So if you’re asking whether your company needs a lengthy business plan, the answer would be ‘no’. That said, there are definitely a few situations in which writing a plan makes sense and can help increase the chances of a business becoming successful:

In situations when the market is new and untested — or simply volatile — it can be very helpful to have a business plan to refer back to when the road ahead isn’t clear.

For those who have an exciting business idea but haven’t necessarily distilled it down into black-and-white. Writing a business plan is a great way to look at a concept from all angles and spot any potential pitfalls.

How to write a business plan?

The most important step in writing a business plan is to identify its purpose.

Who are you trying to attract with it, and why?

Here are a few key pointers for writing a business plan:

Are you looking to secure a bank loan, get funding from private investors, or to lure skilled professionals to join you?

Include a brief history of your business, the concept, and the products or services. Keep it professional and transparent.

Don’t exaggerate your experience or skills, and definitely don’t leave out information investors need to know. They’ll find out at some point, and if they discover you lied, they could break off their involvement. Trust is crucial.

Explain what the product or service your business offers in simplistic terms.

Watch out for complex language and do whatever you can to prevent readers from becoming confused.

Focus on the benefits the business offers, how it solves the core audience’s problem(s), and what evidence you have to prove that there is a space in the market for your idea. It’s important to touch on the market your business will operate in, and who your main competitors are.

Another essential aspect of writing an effective business plan is to keep it short and sweet. Just focus on delivering the crucial information the reader has to know in order to make a decision. They can always ask you to elaborate on certain points later.

Still, deciding whether or not a business plan will benefit you at this stage of your venture?

Let’s look at a few reasons why you might (or might not) want to write a business plan.

A business plan will help you to secure funding even when you have no trading history. At the seed stage, funding is all-important — especially for tech and SaaS companies. It’s here that a business plan can become an absolute lifesaver.

Your business plan will maintain a strategic focus as time goes on. If you’ve ever heard of “mission creep”, you’ll know how important an agreed can be — and your business plan serves exactly that purpose.

Having a plan down in black and white will help you get other people on board . Again, with no trading history, it can be hard to convince new partners that you know what you’re doing. A business plan elegantly solves this problem.

Your business plan can cause you to stop looking outward. Sometimes, especially in business, you need to be reactive to market conditions. If you focus too much on your original business plan, you might make mistakes that can be costly or miss golden opportunities because they weren’t in the plan.

 A lot of time can be wasted analyzing performance. It’s easy to become too focused on the goals and objectives in your business plan — especially when you’re not achieving them. By spending too much time analyzing past performance and looking back, you may miss out on other ways to push the business forward.

A business plan is out of date as soon as it’s written. We all know how quickly market conditions change. And, unfortunately, certain elements in your business plan may have lost relevance by the time you’re ready to launch. But there is another way — by transferring your strategic plan into an actionable roadmap , you can get the best of both worlds. The business plan contains important detail that is less likely to change, such as your mission statement and target audience, and the roadmap clarifies a flexible, adaptable, route forward.

So, you’ve decided to write a business plan — a great choice! 

But now comes the tricky task of actually writing it. 

This part can be a little frustrating because there is no one-size-fits-all template appropriate for all business plans. The best approach, in fact, is to look at common ingredients of a business plan and pick out the ones that make sense for your venture.

The key elements of a great business plan include:

An overview of the business concept . This is sometimes referred to as an executive summary and it’s essentially the elevator pitch for your business.

A detailed description of the product or service. It’s here that you’ll describe exactly what your core offering will be — what’s your USP , and what value do you deliver?

An explanation of the target audience. You need a good understanding of who you’ll be selling your product or service to, backed up by recent market research.

Your sales and marketing strategy. Now that you know who you’re targeting, how do you plan to reach them? Here you can list primary tactics for finding and maintaining an engaged client base.

Your core team . This section is all about people: do you have a team behind you already? If not, how will you build this team and what will the timeline be? Why are you the right group of people to bring this idea to the market? This section is incredibly important when seeking external investment — in most cases, passion can get you much further than professional experience.

Financial forecasts . Some investors will skim the executive summary and skip straight to the finances — so expect your forecasts to be scrutinized in a lot of detail. Writing a business plan for your eyes only? That’s fine, but you should still take time to map out your financial requirements: how much money do you need to start? How do you plan to keep money coming in? How long will it take to break even ? Remember, cash is king. So you need a cash flow forecast that is realistic, achievable and keeps your business afloat, especially in the tricky first few years.

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What is a Business Plan?

Home › Business Management › What is a Business Plan?

Definition:  A business plan is a detailed written steps and goals defined to guide a business’ course of action from its initial stages. A business plan provides a complete description and projection of the company as well as its core strategies and expected results.

  • What Does Business Plan Mean?

The creation of a new organization or a new business requires coherent actions in order to achieve the desired outcomes. Following a business plan allows to link actions and resources to objectives and measurable goals. This plan can be used internally like a roadmap for the owner but also can be a requirement when looking for funding or partners.

A business plan is generally a precise, short document that commonly contains the following sections: executive summary, business description with its products or services, marketing plan, operational plan and financial plan with its forecasted financial statements for the first years of operation, often five to ten years. The initial business plan is later substituted by annual or bi-annual strategic plans.

Mark Tilson is a young professional that wants to start a new business. He has the idea of providing an innovative maintenance service to medium-size manufacturing companies but he needs funds to implement it. Mr. Tilson therefore decided to write a business plan to present the idea to some potential capital partners. He though that the ideas were already clear but soon realized that more analysis and pre-launching work was required.

How many employees the company will have? How the company will market its services? How much money the initial investment requires? How much profit the company is expected to generate at the end of the fifth year of operation? These and other questions must be answered and coherently written in the business plan. Finally, Mr. Tilson improved his ideas, presented the plan and found the required partner.

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12 Key Elements of a Business Plan (Top Components Explained)

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Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

Executive Summary of the Business Plan

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

  • The name and location of your company
  • Products and services offered by your company
  • Mission and vision statements
  • Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

  • Business location
  • The legal structure of your business
  • Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Components of Market Analysis

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

  • The geographical location of your target market
  • Needs of your target market and how your products and services can meet those needs
  • Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

  • Industry description and statistics
  • Demographics and profile of target customers
  • Marketing data for your products and services
  • Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

Marketing Strategy vs Marketing Plan

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

Sales Strategy

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

Competitive Analysis Framework

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

  • Your competitors' identified advantages in the market
  • How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
  • The standout qualities that distinguish you from other companies
  • Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

  • Information about how your company plans to carry out its operations.
  • The base location from which your company intends to operate.
  • The number of employees to be utilized and other information about your company's operations.
  • Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

  • Projected income statements
  • Cash flow statements
  • Balance sheets
  • Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

  • Legal documents
  • Licenses and permits
  • Credit histories
  • Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

  • The management team and other stakeholders resume
  • Marketing research
  • Permits and relevant legal documents
  • Financial documents

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Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

Business Terms Glossary

Tim Berry

68 min. read

Updated February 23, 2024

To start and run a business , you often need to understand business terms that may not be well-defined in a standard dictionary.

Our glossary of business terms provides definitions for common terminology and acronyms in business plans , accounting, finance, funding , and other aspects of small business.

Accounts Payable (AP)

Accounts payable (AP) are bills to be paid as part of the normal course of business.

This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive goods or services from a vendor, receive an invoice, and until that invoice is paid the amount is recorded as part of “accounts payable.”

Accounts Receivable (AR)

Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.

The standard procedure in business-to-business sales is that when goods or services are delivered the come with an invoice, which is to be paid later. Business customers expect to be invoiced and to pay later. The money involved goes onto the seller’s books as accounts receivable, and onto the buyer’s books as accounts payable.

Accrual-Based Accounting

Accrual-based accounting is standard business accounting, which assumes there will be accounts payable (Bills to be paid as part of the normal course of business) and/or sales on credit (sales made on account; shipments against invoices to be paid later), as opposed to cash basis only.

For example, most businesses have regular bills such as rent, utilities, and often inventory purchase which are not paid for at the exact moment of purchase, but are invoiced. Most businesses will also not be able to collect on all of their sales immediately in cash, but must bill the purchaser or wait for payment on at least some percentage of their sales (the exact percentage varies by industry).

Accumulated Depreciation

Total accumulated depreciation reduces the formal accounting value (called book value) of assets. Each month’s accumulated balance is the same as last month’s balance plus this month’s depreciation.

An acid test is a business’s short-term assets minus accounts receivable and inventory, divided by short-term liabilities.

This tests a company’s ability to meet its immediate cash requirements. It is one of the more common business ratios used by financial analysts.

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Acquisition Costs

Acquisition costs are the incremental costs involved in obtaining a new customer.

Adaptive Firm

An adaptive firm is an organization that can respond to and address changes in their market, their environment, and/or their industry to better position themselves for survival and profitability.

To be adaptive, it’s smart to look at your business critically—and a tool like a SWOT analysis can be helpful here.

Adventure Capital

Adventure capital is capital needed in the earliest stages of the venture’s creation before the product or service is available to be provided.

Advertising Opportunity

A product or service may generate additional revenue through advertising if there is benefit from creating additional awareness, communicating differentiating attributes, hidden qualities, or benefits. Optimizing the opportunity may involve leveraging strong emotional buying motives and potential benefits.

An agent is a business entity that negotiates, purchases, and/or sells, but does not take title to the goods.

Asset Turnover

Asset turnover is sales divided by total assets . Important for comparison over time and to other companies of the same industry. This is a standard business ratio.

Assets are property that a business owns, including cash and receivables, inventory, and so on.

Assets are any possessions that have value in an exchange. The more formal definition is the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts. What most people understand as business assets are cash and investments, accounts receivable, inventory, office equipment, plant and equipment, and so on.

Assets can be long-term or short-term, and the distinction between these two categories might be whether they last three years, five years, 10 years, or whatever; normally the accountants decide for each company and what’s important is consistency. The government also has a say in defining assets, because it has to do with tax treatment; when you buy a piece of equipment, if you call that purchase an expense then you can deduct it from taxable income.

If you call it an asset you can’t deduct it, but you can list it on your financial statement among the assets. The tax code controls how businesses decide to categorize spendings into assets or expenses.

Back End (Websites)

Back end and front end describe website program interfaces relative to the user.

The front end of your website is how it looks and how a user interacts with it: the graphic design and HTML portion—some people call this the user interface or UI.

In contrast, the back end handles the dynamic parts of the site, that your website visitors generally don’t see or interact with such as a newsletter, an administration page, a registration database, a contact page or more complicated web applications.

Your back end interfaces with your UI and makes your website work.

Balance Sheet

The balance sheet is one of three essential parts that form the bedrock of a company’s financial statements: cash flow, balance sheet, and income statement.

The balance sheet is a snapshot of your company’s assets, liabilities, and owner’s equity at a specific point in time. It shows what a company owns (assets), what it owes (liabilities), and how much owners and shareholders have invested (equity).

A balance sheet always has to balance: Assets = Liabilities + Equity

For more, read our article here on Bplans that gives an overview of what a balance sheet is .

A benchmark is a standard or guideline used to compare some aspect of a business to some objective or external standard measure.

For example, when a banker compares a business’ profitability to standard financial ratios for that type of business, the process is sometimes referred to as “benchmarking.”

Industry benchmarks can tell you whether you are matching the profit margins of your peers, keeping too much inventory on hand, or getting paid faster or slower than others.

For more on small business financials, see The Key Elements of the Financial Plan .

Your company’s brand includes your business name, logo, sign, symbol, design, or a combination of all used to differentiate your goods or services from competitors.

Brand Equity

Brand equity is the added value a brand name identity brings to a product or service beyond the functional benefits provided. For example, Apple benefits from the fact that its brand name is a household name in smartphones and computers. Apple built a brand that seems fundamentally different from all other computers and smartphones.

Brand Extension Strategy

Brand extension strategy is the practice of using a current brand name to enter a new or different product class. An example of this is the ride-sharing company Uber’s foray into scooters and bike share.

Brand Recognition

Brand recognition refers to a customer’s ability to identify a brand based on its name, logo, colors, or other aspects of a marketing campaign.

Break-Even Analysis

A break-even analysis is used to assess the expected profitability of a company or a single product. It helps you determine at what point revenues and expenditures are equal.

Break-even is usually expressed in terms of the number of units you’ll need to sell or how much revenue you’ll need to generate.

The break-even analysis uses three assumptions to determine a break-even point: fixed costs, variable costs, and unit price. Fixed costs and variable costs are both included in this glossary, and unit price is the average revenue per unit of sales.

The formula for the break-even point in sales amount is: = fixed costs/(1-(Unit Variable Cost/Unit Price)).

The break-even analysis is often confused with the payback period (also in this glossary), because many people interpret breaking even as paying back the initial investment.

However, this is not what the break-even analysis actually does. Despite the common and more general use of the term “break even,” the financial analysis has an exact definition as explained above.

One important disadvantage of the break-even analysis is that it requires estimating a single per-unit variable cost, and a single per-unit price or revenue, for the entire business. That is a hard concept to estimate in a normal business that has a variety of products or services to sell.

Another problem that comes up with break-even is its preference for talking about sales and variable cost of sales in units. Many businesses, especially service businesses, don’t think of sales in units, but rather as sales in money. In those cases, the break-even analysis should think of the dollar as the unit, and state variable costs per unit as variable costs per dollar of sales.

Break-Even Point

The break-even point is the output of a standard break-even analysis. The unit sales volumes or actual sales amounts a company needs to equal its running expense rate and not lose or make money in a given month.

The formula for the break-even point in sales amount is: = Regular running costs/(1-(Unit Variable Cost/Unit Price)).

This should not be confused with the recovering initial investment through the regular operation of a business. That concept, often confused with break-even, is called the payback period.

For more detail on the subject, read: What Is Break Even Analysis?

A broker is an intermediary that serves as a go-between for the buyer or seller.

Check out our latest articles on law and taxes for more information on the legal side of setting up and managing your business.

Bundling is the practice of marketing two or more product or service items in a single package with one price.

Burden Rate

Burden rate refers to personnel burden, the sum of employer costs over and above salaries (including employer taxes, benefits, and so on).

Business Mission

A business mission is, also called a mission statement, is a brief description of an organization’s purpose with reference to its customers, products or services, markets, philosophy, and technology.

For more on your business mission, see How to Write a Mission Statement With 10 Examples

Business Plan

A business plan is a strategic roadmap for any new or growing business or startup venture. Formal business plans are generally required by bank lenders, angel investors, and venture capitalists if you’re seeking funding to grow your company. 

A business plan captures the opportunity see for your company: it describes your product or service and your business model, the target market you’ll serve. 

It also includes details on how you’ll execute your plan: how you’ll price and market your solution, and your financial projections.

Check out our full guide covering the basics of business plans .

Buy-Sell Agreement

A buy-sell agreement is an agreement designed to address situations in which one or more of the entrepreneurs want to sell their interest in the venture.

For more on exiting your business, check out our article on selling your business .

C Corporation (C Corp)

The C corporation is the classic legal entity of the vast majority of successful companies in the United States.

Most lawyers would agree that the C corporation is the structure that provides the best shielding from personal liability for owners, and provides the best non-tax benefits. This is a separate legal entity, different from its owners, which pays its own taxes.

Most lawyers would also probably agree that for a company that has ambitions of raising major investment capital and eventually going public, the C corporation is the standard legal entity.

Compound Average Growth Rate (CAGR)

Compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance if you reinvest profits every year.

The standard formula for compound average growth rate is: (last number/first number)^(1/periods)-1

Cannibalization

Cannibalization is the undesirable tradeoff where sales of a new product or service decrease sales from existing products or services and minimize or detract from the total revenue.

Capital Assets

Capital assets are long-term assets, also known as fixed assets.

These terms are interchangeable. Assets are generally divided into short-term and long-term assets, the distinction depending on how long they last.

Usually, the difference between short-term and long term is a matter of accounting and financial policy. Five years is probably the most frequent division point, meaning that assets that depreciate over more than five years are long-term assets. Ten years and three years are also common.

Capital Expenditure

Spending on capital assets (also called plant and equipment, fixed assets, or long-term assets).

Capital Input

Capital input can also be called investment, or new investment. It is new money being invested in the business, not as loans or repayment of loans, but as money invested in ownership.

This is also money at risk. It will grow in value if the business prospers, and decline in value if the business declines. This is closely related to the concept of paid-in capital, on the balance sheet table. 

Paid-in capital is the amount of money actually invested in the business as money, checks written by investors. Paid-in capital increases only when there is new investment. It is different from retained earnings.

Cash normally means bills and coins, as in paying in cash.

However, the term is used in a business plan to represent the bank balance, or checking account balance.

For more on cash, check out our article on forecasting cash flow .

Cash basis means an accounting system that doesn’t use the standard accrual accounting. 

It records only cash receipts and cash spending, without assuming sales on credit (sales made on account; shipments against invoices to be paid later) or accounts payable (bills to be paid as part of the normal course of business).

ash flow measures how much money is moving into and out of your business during a specific period of time.

Businesses bring in money through sales, returns on investments, and from loans and investments—that’s cash flowing into the business.

And businesses spend money on supplies and services, as well as utilities, taxes, loan payments, and other bills—that’s cash flowing out.

Cash flow is measured by comparing how much money flows into a business during a certain period of time compared to how much money flows out of that business during that same period. Usually, cash flow is measured over the course of a month or a quarter.

Cash Flow Budget

A cash flow budget is a budget that provides an overview of cash inflows and outflows during a specified period of time.

This is often called the cash flow, or the cash budget. Just as cash flow is one of the most critical elements of business, the cash flow projection or table is one of the most critical elements of a business plan.

Cash Flow Statement

The cash flow statement is one of the three main financial statements (along with the income statement and balance sheet) that shows the financial position and health of a business.

The cash flow statement shows actual cash inflows and outflows of a business over a specified period of time, usually a month or a quarter. The statement then compares cash received to cash spending to determine if a business is cash flow negative or positive.

Cash sales are sales made in cash, with credit cards, or by check. The opposite of sales on credit (sales made on account; shipments against invoices to be paid later).

Cash Spending

Cash spending is money a business spends when it pays obligations immediately instead of letting them wait for a few days first.

Central Driving Forces Model

The central driving forces model is an entrepreneurial-based model that considers the positives and negatives of three areas of the venture; founder(s), opportunities, and resources. 

The model then evaluates these areas regarding the “fits and gaps” that indicate correlating strengths or weaknesses for the venture. The CDF model also considers industry and market information in the overall analysis.

Channel Conflicts

Channel conflicts refer to a situation where one or more channel members believe another channel member is engaged in behavior that is preventing it from achieving its goals. Channel conflict most often relates to pricing issues.

Channels of Distribution

Channels of distribution are the system where customers are provided access to an organization’s products or services.

Click-Through Rate

Click-through rate is a way of measuring the success of an online advertising campaign.

A click-through rate (CTR) is obtained by dividing the number of users who clicked on an ad on a webpage by the number of times the ad was delivered (impressions).

For example, if your banner ad was delivered 100 times (impressions delivered) and 1 person clicked on it (clicks recorded), then the resulting CTR would be 1%.

Co-Branding

Co-branding is the pairing of two manufacturer’s brand names on a single product or service.

Cost of Goods Sold

The cost of goods sold is traditionally the costs of materials and production of the goods a business sells.

For a manufacturing company this is materials, labor, and factory overhead. For a retail shop it would be what it pays to buy the goods that it sells to its customers.

For service businesses, that don’t sell goods, the same concept is normally called “cost of sales,” which shouldn’t be confused with “sales and marketing expenses.” The cost of sales in this case is directly analogous to cost of goods sold. 

For a consulting company, for example, the cost of sales would be the compensation paid to the consultants plus costs of research, photocopying, and production of reports and presentations.

In standard accounting, costs of sales or costs of goods sold are subtracted from sales to calculate gross margin. 

These costs are distinguished from operating expenses, because gross profit is gross margin less operating expenses. Costs are not expenses.

Collection Period (Days)

A collection period is the average number of days between delivering an invoice and receiving the money.

The formula is: =(Accounts_receivable_balance*360)/(Sales_on_credit*12)

In business, a commission is the compensation paid to the person or entity based on the sale of a product; commonly calculated on a percentage basis.

The most frequent commission formula is gross margin multiplied by the commission percentage.

Commission Percent

A commission percent is an assumed percentage used to calculate commission expense as the product of commission percent multiplied by sales, gross margin, or related sales items.

Community Interest Company (CIC)

A CIC is a new type of limited company in the United Kingdom, designed for social enterprises that want to use their profits and assets for the public good.

CICs will be easy to set up, with all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community. This is achieved by a “community interest test” and “asset lock”, which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes.

Registration of a company as a CIC has to be approved by the regulator who also has a continuing monitoring and enforcement role.

Competitive Advantage

A competitive advantage is strategic development where customers will choose a firm’s product or service over its competitors based on significantly more favorable perceptions or offerings.

Competitive Analysis

Competitive analysis means assessing and analyzing the comparative strengths and weaknesses of competitors; may include their current and potential product and service development and marketing strategies.

Competitive Entry Wedges

Competitive entry wedges are strategic competitive advantages and justification for entering an established market or activity that provides recognizable and known value.

The four competitive entry wedges include:

  • New product or service
  • Parallel competition
  • Franchise entry

Completed Store Transactions

Completed store transactions refer to a conversion value measuring the number of purchases made on the website.

Concentrated Target Marketing

Concentrated target marketing is a process that occurs when a single target market segment is pursued.

Contribution

Contribution can have different meanings in different context.

When the contribution is applied to a product or product line, it means the difference between total sales revenue and total variable costs, or, on a per-unit basis, the difference between unit selling and the unit variable cost. It may be expressed in percentage terms (contribution margin) or dollar terms (contribution per unit).

Contribution Margin

Contribution is frequently expressed as contribution margin for a whole company or across a group or product line, in which case it can be taken as gross margin less sales and marketing expenses.

Conversion Rate

A conversion rate is the percentage of unique website visitors who take a desired action upon visiting the website.

The desired action may be submitting a sales lead, making a purchase, viewing a key page of the site, downloading a file, or some other measurable action.

Core Marketing Strategy

Core marketing strategy is a statement that communicates the predominant reason to buy to a specific target market.

Corporation

Corporations are either the standard C corporation, or the small business S corporation.

The C corporation is the classic legal entity of most successful companies in the United States. The S corporation is used for family companies and smaller ownership groups.

The clearest distinction from C is that the S corporation’s profits or losses go straight through to the S corporation’s owners, without being taxed separately first. 

In practical terms, this means that the corporation’s owners can take their profits home without first paying the corporation’s separate tax on profits. Profits are taxed once for the S owner, and twice for the C owner. The C corporation doesn’t send its profits home to its owners as much as the S corporation because it usually has different goals and objectives. It often wants to grow and go public, or it already is public.

In most states, an S corporation is owned by a limited number (25 is a common maximum) of private owners, and corporations can’t hold stock in S corporations, just individuals. Corporations can switch from C to S and back again, but not often. The IRS has strict rules for when and how those switches are made. 

You’ll almost always want to have your CPA and, in some cases, your attorney guide you through the legal requirements for switching.

Corridor Principal

The corridor principle is the principle where an entrepreneurial venture may find that it has significantly changed its focus from the initial concept of the venture as it has continually responded and adapted to its market and the desire to optimize profitability potential.

Cost of Sales

Cost of sales refers to the costs associated with producing the sales.

In a standard manufacturing or distribution company, this is the same as the cost of the goods sold. In a services company, this is more likely to be personnel costs for people delivering the service or subcontracting costs.

This term is commonly used interchangeably with “cost of goods sold,” particularly for a manufacturing, retail, distribution, or other product-based company. In these cases, it is traditionally the costs of materials and production of the goods a business sells.

For a manufacturing company, this is materials, labor, and factory overhead. 

For a retail shop, it would be what it pays to buy the goods that it sells to its customers. 

For service businesses that don’t sell goods, the concept is normally called “cost of sales,” which shouldn’t be confused with “sales and marketing expenses.” The cost of sales, in this case, is directly analogous to cost of goods sold.

In standard accounting, costs of sales or costs of goods sold are subtracted from sales to calculate gross margin. These costs are distinguished from operating expenses, because gross profit is gross margin less operating expenses. Costs are not expenses.

For more on costs of goods sold, see our article on the LivePlan blog: What Are Direct Costs?

Cross Elasticity of Demand

Cross elasticity of demand is the change in the quantity demanded of one product or service, impacting the change in demand for another product or service.

Current Assets

Current assets are the same as short-term assets.

Current Debt

Current debt refers to short-term debt and short-term liabilities.

Current Liabilities

Current liabilities refer to short-term debt and short-term liabilities.

Doing Business As (DBA)

DBA stands for “doing business as ,” which is a company name, also commonly called a “fictitious business name.”

When a sole proprietor operates a company using any name except his or her own given name, then the DBA or fictitious business name registration establishes the legal ownership to satisfy banks, local authorities, and customers.

So when you start the Acme Restaurant, unless you are named Acme, you need your DBA to open a bank account in that name, pay employees, and do business.

You can usually obtain this registration through the county government, and the cost is no more than a small registration fee plus a required newspaper ad, for a total of less than $100 in most states.

Debt and Equity

Debt and equity is the sum of liabilities and capital. This should always be equal to total assets.

Depreciation

Depreciation is an accounting and tax concept used to estimate the loss of value of assets over time. For example, cars depreciate with use.

Differentiated Target Marketing

Differentiated target marketing is a process that occurs when an organization simultaneously pursues several different market segments, usually with a different strategy for each.

Differentiation

Differentiation is an approach to create a competitive advantage based on obtaining a significant value difference that customers will appreciate and be willing to pay for, and which ideally will increase their loyalty as a result.

Direct Cost of Sales

Direct cost of sales is a shortcut for cost of goods sold: traditionally, the costs of materials and production of the goods a business sells, or the costs of fulfilling a service for a service business.

Direct Mail Marketing

Direct mail marketing is a form of direct marketing that involves sending information through a mail process, physical or electronic, to potential customers.

Direct Marketing

Direct marketing refers to any method of distribution that gives the customer access to an organization’s products and services without intermediaries; also, any communication from the producer that communicates with a target market to generate a revenue producing response.

A directory is a computer term related to the operating system on IBM and compatible computers. Disk storage space is divided into directories.

Distinctive Competency

A distinctive competency is an organization’s strengths or qualities including skills, technologies, or resources that distinguish it from competitors to provide superior and unique customer value and, hopefully, is difficult to imitate.

Diversification

Diversification is a product-market strategy that involves the development or acquisition of offerings new to the organization and/or the introduction of those offerings to the target markets not previously served by the organization.

Dividends refers to money distributed to the owners of a business as profits.

Dual Distribution

Dual distribution is the practice of simultaneously distributing products or services through two or more marketing channels that may or may not compete for similar buyers.

Early Adopters

Early adopters are one type of adopter in Everett Rogers’ diffusion of innovations framework that describes buyers that follow “innovators” rather than be the first to purchase.

Early Majority

An early majority is one type of adopter in Everett Rogers’ diffusion of innovations framework that describes those interested in new technology that wait to purchase until these innovations are proven to perform to the expected standard.

Also called income or profits, earnings are the famous “bottom line”: sales less costs of sales and expenses.

Earnings Before Interest and Taxes (EBIT)

EBIT refers to earnings before interest and taxes.

Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)

Earnings before interest, taxes, depreciation and amortization (or EBITDA) is equal to the gross margin (the difference between total sales revenue and total direct cost of sales) minus total operating expenses (tax-deductible expenses incurred in conducting normal business operations, such as wages and salaries, rent, and so on), plus any depreciation (The loss of value of assets over time) and amortization.

This is similar to earnings before interest and taxes (EBIT). The difference between the two is that EBIT subtracts all expenses, including depreciation, as an expense, and EBITDA subtracts all expenses except depreciation and amortization.

Economies of Scale

Economies of scale refers to the benefit that larger production volumes allow fixed costs to be spread over more units lowering the average unit costs and offering a competitive price and margin advantage.

Producing in large volume often generates economies of scale. The per-unit cost of something goes down with volume because vendors charge less per unit for larger orders, and often production techniques and facilities cost less per unit as volume increases. Fixed costs are spread over larger volume.

Effective Demand

Effective demand is when prospective buyers have the willingness and ability to purchase an organization’s offerings.

Effective Tax Rate

The effective tax rate is a comparison of final tax payments compared to actual profits. Usually the effective tax rate is somewhat less than the nominal tax rate because of deductions, credits, etc.

Entrepreneur in Heat (EIH)

The term “entrepreneur in heat” describes an entrepreneur that continues to develop new products and services beyond what the venture can support and inadvertently may diminish the focus and effectiveness of the activities supporting the venture’s primary revenue streams.

Entrepreneur

An entrepreneur is someone who starts a new business venture; someone who recognizes and pursues opportunities others may not see as clearly, and finds the resources necessary to accomplish his or her goals.

Equity is business ownership—capital. Equity can be calculated as the difference between assets and liabilities.

Equity Financing

Equity financing refers to the sales of some portion of ownership in a venture to gain additional capital for startup.

Evaluating Ideas and Opportunities

Evaluating ideas and opportunities is the process of considering ideas versus opportunities, and then screening those opportunities using objective criteria as well as personal criteria.

Everett Rogers

Everett Rogers is an author who studied and published work on the diffusion of innovation.

Exclusive Distribution

Exclusive distribution is a distribution strategy whereby a producer sells its products or services in only one retail outlet in a specific geographical area.

For the purposes of business accounting, expenses are deductible against taxable income. Common expenses are rent, salaries, advertising, travel, and so on.

Questions arise because some businesses have trouble distinguishing between expenses and purchase of assets, especially with development expenses. When your business purchases office equipment, if you call that an expense then you can deduct that amount from taxable income, so it reduces taxes.

Experience Curve

The experience curve is a visual representation, often based on a function of time, from exposure to a process that offers greater information and results in enhanced efficiency and operations advantage.

Features, Advantages, and Benefits (FAB)

A FAB analysis explores the features, advantages, and benefits of a product or service offering.

Marketing plans need to understand these concepts in order to develop effective marketing programs. People often confuse features and benefits; for example, in an automobile, air bags are a feature that produces the benefit of greater safety. 

Advantages fall in between, and features become advantages that offer benefits to the end user.

Failure Rule, Common Causes

Entrepreneurial ventures most often fail due to one or more of these four issues:

  • Inadequate sales (39%)
  • Competitive weaknesses (21%)
  • Excessive operating expenses (11%)
  • Uncollected receivables (9%)

Failure Rule, Exceptions to the Rule

Entrepreneurial ventures most often fail due to one (or more) of the following common issues: inadequate sales, competitive weaknesses, excessive operating expenses, and uncollected receivables.

Exceptions to the failure rule include:

  • High potential ventures
  • Threshold concept
  • Promise of growth
  • Venture capital backing

Fatal 2% Rule

The concept of the fatal 2% rule is that if a venture can just get “2%” of total market share it will be successful.

This percentage can be unattainable based on the approach, limited resources, and/or structure of the industry.

Fighting Brand Strategy

A fighting brand strategy is adding a new brand to confront competitive brands in an established product category.

First Mover

The first mover is a company that attempts to gain an unchallengeable, privileged market position by being the first to establish itself in a given market.

First Mover Advantage

Key first mover advantages include:

  • Reputation effect
  • Experience curve
  • Customer commitment and loyalty

First Mover Disadvantage

These factors can turn first-mover advantages into weaknesses. They include:

  • Resolution of technological uncertainty
  • Resolution of strategic uncertainty
  • Free-rider effect—others duplicate based on the leader’s success
  • Complementary assets to exploit core technological expertise

Fiscal Year

The fiscal year is a standard accounting practice allows the accounting year to begin in any month. Fiscal years are numbered according to the year in which they end. 

For example, a fiscal year ending in February of 2025 is Fiscal 2025, even though most of the year takes place in 2024.

Five Forces Model

Porter’s model considers these forces as they impact an industry and the overall competitive climate:

  • Risk of entry by potential competitors
  • Bargaining power of suppliers
  • Bargaining power of buyers
  • Threat of substitute products
  • Rivalry among established firms

Running costs that take time to wind down: usually rent, overhead, some salaries. Technically, fixed costs are those that the business would continue to pay even if it went bankrupt.

In practice, fixed costs are usually considered the running costs. These are static expenses that do not fluctuate with output volume and become progressively smaller per unit of output as volume increases.

Fixed costs are an important assumption for developing a break-even analysis. The standard break-even formula estimates a break-even point of sales based on per-unit price or revenue, per-unit variable costs, and fixed costs.

Fixed Liabilities

Fixed liabilities are debts—money that must be paid. Usually, debt on terms of longer than five years are fixed liabilities. Also called long-term liabilities.

Fixed liabilities, in contrast to floating liabilities, are secured by assets with a stable value, such as a building or a piece of equipment.

Floating Liabilities

Floating liabilities are debts—money that must be paid. Floating liabilities, in contrast to fixed liabilities, are secured by assets with a constantly changing value, such as a company’s accounts receivable (debtors). These are usually short-term loans.

Focus Group

A focus group refers to small groups of people, usually between nine and 12 in number, representing target audiences, that are brought together to discuss a topic that will offer insight for product development and/or marketing efforts.

Frequency Marketing

Frequency marketing refers to activities that encourage repeat purchasing through a formal program enrollment process to develop loyalty and commitment from the customer base. Frequency marketing is also referred to as loyalty programs.

Front End (Websites)

Front end and back end describe program interfaces relative to the user.

The front end, here, is the appearance of your website. It is the graphic design and HTML portion—some people call this the user interface or UI.

In contrast, the portion of the application you or your developers work with is the back end. The back end handles the dynamic parts of the site, such as a newsletter, an administration page, a registration database, a contact page, or more complicated web applications. Your back end interfaces with your UI and makes your website work.

Full-Cost Price Strategies

Full-cost price strategies are costs that consider variable cost and fixed cost (total cost) in the pricing of a product or service.

Future Value Projections

Future value projections refer to the process of projecting the future value of a venture and/or an investment in the venture. It typically considers an expected rate of return, inflation, and the period of time to assess future value.

Goodwill is when a company purchases another company for more than the value of its assets—which is quite common—the difference is recorded as an asset named “goodwill.”

This is not a general term for the value of a brand, for example, but a very specific accounting term.

For example, if one business buys another business for $1 million then it needs to show the $1 million spent as an asset. If there are only $500 thousand in real assets, the accounting result should be $500,000 in real assets purchased and another $500,000 in “goodwill.”

Gross Margin

Gross margin is the difference between total sales revenue and total cost of goods sold (also called total cost of sales). This can also be expressed on a per unit basis, as the difference between unit selling price and unit cost of goods sold. Gross margin can be expressed in dollar or percentage terms.

Gross Margin Percent

The gross margin percent is the gross margin divided by sales, displayed as a percentage. Acceptable levels depend on the nature of the business. There are providers who can deliver standard gross margins for different types of industries based on SIC (Standard Industry Classification) codes that categorize industries.

Guerrilla Marketing

The term guerrilla marketing comes from Conrad Levinson’s book Guerrilla Marketing, which refers to marketing via events and stimulated media coverage rather than paid advertisements.

Harvesting is most often referring to selling a business or product line, as when a company sells a product line or division or a family sells a business.

  • Impressions

An impression occurs each time an advertisement is seen by a potential customer. For example, in online marketing, an impression happens when an advertisement such as a banner ad loads on a user’s screen, whether for the first time, when returning to a page, or when the ad cycles through dynamically.

Income Statement

Also called profit and loss statement, an income statement is a financial statement that shows sales, cost of sales, gross margin, operating expenses, and profits or losses.

Gross margin is sales less cost of sales, and profit (or loss) is gross margin less operating expenses and taxes. The result is profit if it’s positive, loss if it’s negative.

Initial Public Offering (IPO)

An IPO is a corporation’s initial effort to raise capital through the sale of securities on the public stock market.

Innovation (Evolutionary or Revolutionary)

Innovation refers to the determination if an innovation is a “new and improved” concept taken to the next level (evolutionary), or the rare innovation that revolutionizes a technology or concept to the product or services.

Innovators refers to one type of adopter in Everett Rogers’ diffusion of innovations framework describing the first group to purchase a new product or service.

Integrated Marketing Communications

Integrated marketing communications is the practice of blending different elements of the communication mix in mutually reinforcing ways.

Intensive Distribution

Intensive distribution is a distribution strategy whereby a producer attempts to sell its products or services in as many retail outlets as possible within a geographical area without exclusivity.

Interest Expense

Interest expense is interest paid on debts, and interest expense is deducted from profits as expenses. Interest expense is either long-term or short-term interest.

Intraprenuership

Intrapreneurship refers to entrepreneurial-based activities within a corporation that receive organizational support and resource commitments for an innovative new business experience within the organization itself.

Inventory refers to goods in stock, either finished goods or materials used to manufacture goods.

Inventory Turnover

Inventory turnover is the total cost of sales divided by inventory. Usually calculated using the average inventory over an accounting period, not an ending-inventory value.

Inventory Turns

Also known as inventory turnover, inventory turns are the total cost of sales divided by inventory. Usually calculated using the average inventory over an accounting period, not an ending-inventory value.

A jobber is an intermediary that buys from producers to sell to retailers and offers various services with that function.

Labor, in this context, refers to the labor costs associated with making goods to be sold. This labor is part of the cost of sales, part of the manufacturing and assembly. The row heading refers to fulfillment costs as well, for service companies.

Laggards are one type of adopter in Everett Rogers’ diffusion of innovations framework describing the risk-averse group that follows the late majority that is generally not interested in new technology and are the last customers to buy.

Leveraged Buy Out (LBO)

A leveraged buy-out is a type of purchase of a business that relies heavily on the venture’s cash receipts with expectations of positive cash flow continuing based on historical or other performance indicators.

Liabilities

Liabilities are debts or money that must be paid. Usually, debt on terms of less than five years is called short-term liabilities, and debt for longer than five years is called long-term liabilities.

A life cycle is a model depicting the sales volume cycle of a single product, brand, service, or a class of products or services over time described in terms of the four phases of introduction, growth, maturity and decline.

Limited (Public) Company (AUS)

A public limited company is one where the right to transfer shares and the number of members is not limited. In addition, the company may invite the public to subscribe for its shares and, to deposit money with the company.

Limited Liability Company (LLC)

The LLC form is different for different states, with some real advantages in some states that aren’t relevant in others.

An LLC is usually a lot like an S corporation, a combination of some limitation on legal liability and some favorable tax treatment for profits and transfer of assets. This is a newer form of legal entity, and often harder to establish than a corporation.

Why would you establish an LLC instead of a corporation? That’s a tough legal question, not one we can answer here. In general, the LLC has to be missing two of the four characteristics of a corporation (limited liability, centralized management, continuity of life, and free transferability of ownership interest). 

Still, with the advisability and advantages varying from state to state, here again, this is a question to take to a good local attorney with small business experience.

Limited Liability Partnership

A limited liability partnership is a form of business organization combining elements of partnerships and corporations, in which both managing and non-managing partners are protected from liability to some degree, and have a different tax liability than in a corporation. 

Although this form of business is available in the U.S., the U.K., and Japan, legal details of forming and operating such a company vary from one country to another, and by state within the U.S.

Long-Term Assets

Long-term assets are assets like plant and equipment that are depreciated over terms of more than five years, and are likely to last that long, too.

Long-Term Interest Rate

A long-term interest rate is the interest rate charged on long-term debt.

Long-Term Liabilities

Long-term liabilities are the same as long-term loans. Most companies call a debt long-term when it is on terms of five years or more.

Loss is an accounting concept, the exact opposite of profit, normally the bottom line of the income statement, which is also called profit or loss statement. 

Start with sales, subtract all costs of sales and all expenses, and that produces profit before tax. Subtract tax to get net profit. If the end result is negative, then instead of profit it is called loss.

Loyalty Programs

Loyalty programs are activities designed to encourage repeat purchasing through a formal program enrollment process and the distribution of benefits. Loyalty programs may also be referred to as frequency marketing.

Manufacturer’s Agent

A manufacturer’s agent is an agent who typically operates on an extended contractual basis, often sells in an exclusive territory, offers non-competing but related lines of goods, and has defined authority regarding prices and terms of sale.

A market refers to prospective buyers, individuals, or organizations, willing and able to purchase the organization’s potential offering.

Market Development Funds

Market development funds refer to the monetary resources a company invests to assist channel members increase volume sales of their products or services.

Market Development Strategy

A market development strategy is a product-market strategy whereby an organization introduces its offerings to markets other than those it is currently serving. In global marketing, this strategy can be implemented through exportation licensing, joint ventures, or direct investment.

Market Evolution

Market evolution refers to changes in primary demand for a product class and changes in technology.

Market Penetration Strategy

Market penetration is the amount that your business is able to sell a product or service to customers compared to the estimated total available market (TAM). 

This is a measurement that can help you define the serviceable available market (SAM), which is the portion you estimate that you can acquire. 

Additionally, it can serve as a baseline for developing a strategy to increase your service obtainable market (SOM), or the subset of customers that you can realistically acquire.

Market Plan

Often found within the business plan, the market plan provides details regarding the overall marketing strategy, pricing, sales tactics, service and warranty policies, advertising, promotion, and distribution plans for the venture.

Market Redefinition

Market redefinition refers to changes in the offering demanded by buyers or promoted by competitors to enhance its perception and associated sales.

Market Sales Potential

Market sales potential is the maximum level of sales that might be available to all organizations serving a defined market in a specific period.

Market Segmentation

Market segmentation is the categorization of potential buyers into groups based on common characteristics such as age, gender, income, and geography or other attributes relating to purchase or consumption behavior.

Market Share

Market share is the total sales of an organization divided by the sales of the market they serve.

Marketing refers to the set of planned activities designed to positively influence the perceptions and purchase choices of individuals and organizations.

Check out our guide on the different ways to market your business .

Marketing Audit

A marketing audit is a comprehensive and systematic examination of a company’s marketing environment, objectives, strategies, and activities with a view of identifying and understanding problem areas and opportunities and recommending a plan of action.

Marketing Mix

Marketing mix refers to the activities controllable by the organization. It includes the product, service, or idea offered, the manner in which the offering will be communicated to customers, the method for distributing or delivering the offering, and the price to be charged.

Marketing Plan

A marketing plan is a written document containing descriptions and guidelines for an organization’s or a product’s marketing strategies, tactics, and programs for offering their products and services over the defined planning period, often one year.

Marketing Cost Analysis

Marketing cost analysis refers to assigning or allocating costs to a specified marketing activity or entity in a manner that accurately captures the financial contribution of activities or entities to the organization.

Materials are included in the cost of sales. These are materials involved in the assembly or manufacture of goods for sale.

Materials Included in Cost of Sales

These are materials involved in the assembly or manufacture of goods for sale.

Mission Statement

A mission statement is a statement that captures an organization’s purpose, customer orientation, and business philosophy.

Moving Weighted Average

Moving weighted average is a statistical method to forecast the future based on past results. It is a subset of time series analysis.

Multiple Channel System

A multiple-channel system is a channel of distribution that uses a combination of direct and indirect channels where the channel members serve different segments.

Net Cash Flow

Net cash flow is the projected change in cash position, an increase or decrease in cash balance.

Net Present Value (NPV)

Net present value is a method of discounting future income streams using an expected rate of return to evaluate the current value of expected earnings. It calculates future value in today’s dollars. NPV may be used to determine the current value of a business being offered for sale or capitalized.

Net profit is the operating income less taxes and interest. The same as earnings, or net income.

Net Profit Margin Before Taxes

Net profit margin before taxes is the remainder after cost of goods sold, other variable costs revenue, or simply, total revenue minus total cost. Net profit margin can be expressed in actual monetary values or percentage terms.

Net worth is the same as assets minus liabilities, and the same as total equity; other short-term assets. These might be securities, business equipment, and so on.

New Visitors

In online marketing, a new visitor is a website visitor who has not made any previous visits to the site or page in question.

New Brand Strategy

New brand strategy is the development of a new brand and often a new offering for a product class that has not been previously served by the organization.

Newsletter Subscriptions

In online marketing, newsletter subscription is a conversion value measuring the number of users who voluntarily include themselves in your database and are willing to accept unsolicited emails from you.

Not Invented Here (NIH)

Not invented here is a negative response to innovations and inventions from sources outside the venture’s own research and development activities.

Obligations Incurred

Obligations incurred are business costs or expenses that need to be paid, but wait for a time as accounts payable (in other words, bills to be paid as part of the normal course of business) instead of being paid immediately.

An offering is the total benefits or satisfaction provided to target markets by an organization. An offering consists of a tangible product or service plus related services such as installation, repair, warranties or guarantees, packaging, technical support, field support, and other services.

Offering Mix or Portfolio

An offering mix is an organization’s offerings, including all products and services.

On-costs are labor costs in addition to salaries and wages; that is, payroll tax, workers’ compensation, and other liability insurance, subsidized services to employees, training costs, and so on.

Operating Expenses

Operating expenses are expenses incurred in conducting normal business operations. Operating expenses may include wages, salaries, administrative and research and development costs, but excludes interest, depreciation, and taxes.

Operating Leverage

Operating leverage is the extent to which fixed costs and variable costs are used in the production and marketing of products and services.

Operations Control

Operations control is assessing how well an organization performs marketing activities as it seeks to achieve planned outcomes.

Opportunity Analysis

Opportunity analysis identifies and explores revenue enhancement or expense reduction situations to better position the organization to realize increased profitability, efficiencies, market potential, or other desirable objectives.

Opportunity Cost

Opportunity cost refers to the resource use options given up due to pursuing one activity among several possibilities. Potential benefits foregone as a result of choosing an alternative course of action.

Original Equipment Manufacturer (OEM)

An original equipment manufacturer is the process that is facilitated through licensing or other financial arrangements where the initial producer of a product or service agrees to allow another entity to include, remanufacture, or label products or services under their name and sell through their distribution channels.

It typically results in a “higher volume, lower margin” relationship for the original producer. It offers access to a broader range of products and services the buyer can offer their consumers at more attractive costs.

Other Short-Term Liabilities

Other short-term liabilities are short-term debts that don’t cause interest expenses. For example, they might be loans from founders or accrued taxes (taxes owed, already incurred, but not yet paid).

Outsourcing

Outsourcing is purchasing an item or a service from an outside vendor to replace the performance of the task with an organization’s internal operations.

In online marketing, a request for a file whose type is defined as a page in log analysis. This is generally what people mean when they talk about webpage hits, but is a more accurate way of tracking this metric because of the way log analysis works.

A single pageview (one visitor looking at one page) may generate multiple hits in log analysis, as all the resources required to view the page (images, .js, and .css files) are also requested from the web server.

Paid-In Capital

Paid-in capital is real money paid into the company as investments. This is not to be confused with the par value of stock, or market value of stock. This is actual money to the company as equity investments by owners.

Partnership

Partnerships are hard to describe because they change so much. State laws govern them, but the Uniform Partnership Act has become the law in most states. That act, however, mostly sets the specific partnership agreement as the real legal core of the partnership, so the legal details can vary widely.

Usually, the income or loss from partnerships passes through to the partners without any partnership tax. The agreements can define different levels of risk, which is why you’ll read about some partnerships with general and limited partners, with different levels of risk for each. The agreement should also define what happens if a partner withdraws, buy and sell arrangements for partners, and liquidation arrangements if that becomes necessary.

If you think a partnership might work for your business, do this right. Find an attorney with experience in partnerships, and check for references of present and past clients. This is a complicated area, and a mistake in the agreement will cause a lot of problems.

Payables is short for account payables—bills to be paid as part of the normal course of business. This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities.

Businesses receive goods or services from a supplier, receive an invoice, and until that invoice is paid the amount is recorded as part of “accounts payable.”

Payback Period

A payback period is the number of years an organization requires to recapture an initial investment. This may apply to an entire business operation or an individual project.

Payment Days

Payment days are the average number of days that pass between receiving an invoice and paying it.

It is not a simple estimate; it is calculated with a financial formula: =(Accounts_payable_balance*360)/(Total entries to accounts payable*12)

Payment Delay

Payment delay is the number of days on average a business waits between receiving a bill and paying a bill. Also called payment days.

Payroll refers to wages, salaries, or employee compensation.

Payroll Burden

Payroll burden includes payroll taxes and benefits. It is calculated using a percentage assumption that is applied to payroll.

For example, if payroll is $1,000 and the burden rate is 10 percent, the burden is an extra $100. Acceptable payroll burden rates vary by market, industry, and company.

Penetration Pricing Strategy

Penetration pricing strategy refers to setting a relatively low initial price for a new product or service.

Perceived Risk

Perceived risk is the extent to which a customer or client is uncertain about the consequences of an action, often relating to purchase decisions.

Perceptual Map

A perceptual map is a two or three-dimensional illustration of a customer’s perceptions of competing products comparing select attributes based on market research.

Personal Selling

Personal selling is the use of face-to-face communication between the seller and buyer.

PEST analysis

PEST is a popular framework for situation analysis, looking at political, economic, and social trends. Analyzing these factors can help generate marketing ideas, product ideas, and so on.

Plant and Equipment

Plant and equipment is the same as long-term, fixed, or capital assets. These are generally assets that are depreciated over terms of more than five years, and are likely to last that long, too.

Point of Purchase Advertising (POP)

Point of purchase advertising is a retail in-store presentation that displays product and communicates information to retail consumers at the place of purchase.

A portfolio is the complete array of an organization’s offerings including all products and services. Also called an offering mix.

Positioning

Positioning refers to orchestrating an organization’s offering and image to occupy a unique and valued place in the customer’s mind relative to competitive offerings. A product or service can be positioned on the basis of an attribute or benefit, use or application, user, class, price, or quality.

Premiums refers to a product-oriented promotion that offers some free or reduced-price item contingent on the purchase of advertised or featured merchandise or service.

Price Elasticity of Demand

Price elasticity of demand is the change in demand relative to a change in price for a product or service.

Privately Owned

A company whose shares are not publicly traded on a stock market. Such companies usually have less restrictive reporting requirements than publicly traded companies. A company that is not owned by the government (state-owned).

Pro Forma Income Statement

A pro forma income statement is a projected income statement. Pro forma in this context means projected. An income statement is the same as a profit and loss statement, a financial statement that shows sales, cost of sales, gross margin, operating expenses, and profits.

Pro Forma Statements

The term “pro forma” in front of any financial statement primarily serves to label that version of the statement as not adhering to the strict “generally accepted accounting principles” (GAAP) standards that all publicly-traded companies must use to produce their financial statements.

Major corporations use pro forma statements to illustrate projected numbers, like in the case of a merger or acquisition, or to emphasize certain current figures.

GAAP standards don’t apply to small businesses, so you don’t really need to worry about distinguishing your financial statements as “pro forma” or not—everyone you show them to expects that they’re not GAAP-compliant. But if you want to be technically correct in your terminology, go ahead and call your financial statements “pro forma.”

Product Definition

A product definition is a stage in a new product development process in which concepts are translated into actual products for additional testing based on interactions with customers. 

Product Development

Product development refers to expenses incurred in the development of new products (salaries, laboratory equipment, test equipment, prototypes, research and development, and so on).

Product Development Strategy

A product development strategy is a product-market strategy whereby an organization creates new offerings for existing markets innovation, product augmentation, or product line extensions.

Product Life Cycle (PLC)

Product life cycle refers to the phases of the sales projections or history of a product or service category over time used to assist with marketing mix decisions and strategic options available.

The four stages of the product life cycle include introduction, growth, maturity, and decline, and typically follow a predictable pattern based on sales volume over a period of time.

Product Line

A product line is a group of closely related products with similar attributes or target markets.

Product Line Pricing

Product line pricing refers to the setting of prices for all items in a product line involving the lowest-priced product price, the highest-priced product, and price differentials for all other products in the line.

Profit is an accounting concept, normally the bottom line of the income statement, which is also called profit or loss statement. Start with sales, subtract all costs of sales and all expenses, and that produces profit before tax. Subtract tax to get net profit.

Profit Before Interest and Taxes

Profit before interest and taxes is also called EBIT, for Earnings Before Interest and Taxes. It is gross margin minus operating expenses.

Profit or Loss

Also called profit and loss statement, a profit or loss statement is an income statement is a financial statement that shows sales, cost of sales, gross margin, operating expenses, and profits or losses. 

Proprietary (Private) Limited Company

A Proprietary Limited Company (often abbreviated as “Pty Ltd”) is a private company, in which the right to transfer shares is restricted and the number of members is limited to no more than fifty.

In addition, the company is prohibited from inviting the public to subscribe for its shares and, from inviting the public to deposit money with the company.

Public Relations

Public relations refers to communications often in the form of news distributed in a non-personal form which may include newspaper, magazine, radio, television, internet, or other form of media for which the sponsoring organization does not pay a fee.

Publicly Traded

Publicly traded means a company owned by shareholders who are members of the general public and trade shares publicly, as on the stock market.

Pull Communication Strategy

A pull communication strategy creates interest among potential buyers, who demand the offering from intermediaries, ultimately “pulling” the offering through the channel.

Push Communication Strategy

A push communication strategy is the practice of “pushing” an offering through a marketing channel in a sequential fashion, with each channel focusing on a distinct target market.

The principal emphasis is on personal selling and trade promotions directed toward wholesalers and retailers. 

Questionable Costs

Questionable costs are costs that may be considered as variable or as fixed costs, depending on the specifics of the situation.

Receivables

Short for account receivables, this refers to debts owed to your company, usually from sales on credit. Accounts receivable is a business asset, the sum of the money owed to you by customers who haven’t paid.

The standard procedure in business-to-business sales is that when goods or services are delivered, they come with an invoice, which is to be paid later. Business customers expect to be invoiced and to pay later. The money involved goes onto the seller’s books as accounts receivable and the buyer’s books as accounts payable.

Receivables Turnover

Receivables turnover refers to sales on credit for an accounting period divided by the average accounts receivables balance.

Regional Marketing

Regional marketing is the practice of using different marketing mixes to accommodate unique preferences and competitive conditions in different geographical areas.

Relevant Cost

Relevant cost refers to expenditures that are expected to occur in the future as a result of some marketing action and differ among other potential marketing alternatives.

Repositioning

Repositioning is the process of strategically changing the perceptions surrounding a product or service.

Resource Requirements (Websites)

Your resource requirements are the personnel, time, space, and equipment necessary to create and maintain your website. Remember that a website is never done—it will always require resources, some of which will be used to create new content periodically.

Retained Earnings

Retained earnings are earnings (or losses) that have been reinvested into the company, not paid out as dividends to the owners. When retained earnings are negative, the company has accumulated losses.

Return on Assets

Return on assets is your net profits divided by total assets. It is a measure of profitability.

Return on Investment (ROI)

Return on investment, or ROI is your net profits divided by net worth or total equity. It’s another measure of profitability.

Return on Sales

Return on sales is net profits divided by sales. It’s another measure of profitability.

Return Visitors

In online marketing, a website visitor who has made at least one previous visit to the site or page in question is considered a return visitor.

Rich-Gumpert Evaluation System

The Rich-Gumpert evaluation system is a method of analysis that associates a numeric value between 1 and 4 regarding the spectrums of product development and the entrepreneur and management team.

S Corporation (S Corp)

The C corporation is the classic legal entity of the vast majority of successful companies in the United States. Most lawyers would agree that the C corporation is the structure that provides the best shielding from personal liability for owners, and provides the best non-tax benefits to owers. This is a separate legal entity, different from its owners, which pays its own taxes.

Most lawyers would also probably agree that for a company that has ambitions of raising major investment capital and eventually going public, the C corporation is the standard form of legal entity. The S corporation is used for family companies and smaller ownership groups. The clearest distinction from C is that the S corporation’s profits or losses go straight through to the S corporation’s owners, without being taxed separately first.

In practical terms, this means that the owners of the corporation can take their profits home without first paying the corporation’s separate tax on profits, so those profits are taxed once for the S owner, and twice for the C owner. In practical terms the C corporation doesn’t send its profits home to its owners as much as the S corporation does, because it usually has different goals and objectives. It often wants to grow and go public, or it already is public. In most states an S corporation is owned by a limited number (25 is a common maximum) of private owners, and corporations can’t hold stock in S corporations, just individuals.

Corporations can switch from C to S and back again, but not often. The IRS has strict rules for when and how those switches are made. You’ll almost always want to have your CPA and in some cases your attorney guide you through the legal requirements for switching.

Sales Break Even

Sales break-even is the sales volume at which costs are exactly equal to sales.

The exact formula is =Fixed_costs/(1-(Unit_Variable_Cost/Unit_Price))

Sales Forecast

A sales forecast is the level of sales a single organization expects to achieve based on a chosen marketing strategy and assumed competitive environment.

Sales on Credit

Sales on credit are sales made on account; shipments against invoices to be paid later.

Scrambled Merchandising

Scrambled merchandising is the practice by wholesalers and retailers that carry an increasingly wider assortment of merchandise.

Seed Capital

Seed capital is investment contributed at a very early stage of a new venture, usually in relatively small amounts. It comes even before what they call “first round” venture capital.

How much is that “relatively small amount?” Some high-end high-tech ventures in the heart of Silicon Valley call an investment of $500K seed capital, and other ventures that called $35K investment seed capital, and the following $300K investment the first round. It depends on the point of view.

Selective Distribution

Selective distribution is a strategy where a producer sells its products or services in a few exclusively chosen retail outlets in a specific geographical area.

Selling Approaches

Selling approaches are potential selling resources based on the sales value and the distribution of the product.

Senior Corps of Retired Executives (SCORE)

SCORE is a no-cost consulting and resources service offered through the Small Business Administration.

Shareholders

Shareholders are individuals or companies that legally own one or more shares of stock in a company.

Short-term is normally used to distinguish between short-term and long-term, when referring to assets or liabilities. Definitions vary because different companies and accountants handle this in different ways.

Accounts payable is always a short-term liability, and cash, accounts receivable and inventory are always short-term assets. Most companies call any debt of less than five-year terms short-term debt. Assets that depreciate over more than five years (e.g., plant and equipment) are usually long-term assets.

Short-Term Assets

Short-term assets are cash, securities, bank accounts, accounts receivable, inventory, business equipment, assets that last less than five years or are depreciated over terms of less than five years. Also called current assets.

Short-Term Notes

Short-term notes are the same as short-term loans. These are debts with terms of five years or less.

Short-Term Liabilities

Short-term liabilities are debts with terms of five years or less. These are also called current liabilities, short-term loans, or short-term (current) debts. These may also include short-term debts that don’t cause interest expenses.

For example, they might be loans from founders or accrued taxes (taxes owed, already incurred, but not yet paid).

Simple Linear Regression

Simple linear regression is a linear correlation that offers a straight-line projection based on the variables considered.

Situation Analysis

A situation analysis is the assessment of operations to determine the reasons for the gap between what was or is expected, and what has happened or will happen.

Skimming Pricing Strategy

Skimming pricing strategy refers to setting a relatively high initial price for a new product or service when there is a strong price-perceived quality relationship that targets early adopters who are price insensitive. The price may be lowered over time.

Slotting Allowances

Slotting allowances are payments to store chains for acquiring and maintaining shelf space.

Small Business Investment Council (SBIC)

The SBIC is a division of the Small Business Administration that offers “venture capital-like” resources to higher-risk businesses seeking capital.

Sole Proprietorship

The simplest business structure is the sole proprietorship. Simply put, your business is a sole proprietorship if you don’t create a separate legal entity for it.

This is true whether you operate it in your own name, or under a trade name. If it isn’t your own name, then you register a company name as a “Fictitious business name,” also called a DBA (“Doing Business As”).

Depending on your state, you can usually obtain this through the county government, and the cost is no more than a small registration fee plus a required newspaper ad, for a total of less than $100 in most states.

Sole Trader

A sole trader is the easiest and quickest form of corporation for a small, privately-owned business. Your Memorandum and Articles of Association are usually fairly straightforward to obtain, and your taxes will be lower than those of a public company.

However, the owner of a sole trader is personally liable for all of its actions and debts, and may not be entitled to benefits, like unemployment payments, that would accrue to those running public companies.

Starting Date

Starting date refers to the starting date for the entire business plan.

Goods on hand, either finished goods or materials to be used to manufacture goods. Also called inventory.

Stock can also refer to privately held or publicly traded shares or securities representing an investment in, or partial ownership of, a business. Public trading of such stock occurs on the stock market.

Stock Market

The stock market is the organized trading of stocks, bonds, or other securities, or the place where such trading occurs.

Stock Turnover

Stock turnover is the total cost of sales divided by inventory (materials or goods on hand). Usually calculated using the average inventory over an accounting period, not an ending-inventory value. Also called inventory turnover.

Strategic Control

Strategic control is the practice of assessing the direction of the organization as evidenced by its implicit or explicit goals, objectives, strategies, and capacity to perform in the context of changing environmental and competitive actions.

Strategic Marketing Management

Strategic marketing management is the planned process of defining the organization’s business, mission, and goals; identifying and framing organizational opportunities; formulating product-market strategies, budgeting marketing, financial, and production resources; developing reformulation.

Success Factors

Primary success factors include considerations regarding:

  • The choice of business based on the status of the market
  • Education and experience
  • People and collaboration
  • Creativity and innovation versus business skills and networks
  • Incubation potential
  • Leveraging available resources
  • Management practices

Success Requirements

Success requirements are the basic tasks that must be performed by an organization in a market or industry to compete successfully.

Sunk cost refers to past expenditures for a given activity that are typically irrelevant in whole or in part to future decisions. The “sunk cost fallacy” is an attempt to recoup spent dollars by spending still more dollars in the future.

Surplus or Deficit

Surplus or deficit is a term used by nonprofits. It’s also called profit and loss statement or an income statement in for-profit plans.

An income statement is a financial statement that shows funding, cost of funding, gross surplus, operating expenses, and surplus or deficit. Gross surplus is funding less cost of funding, and surplus (or deficit) is gross surplus less operating expenses and taxes. The result is surplus if it is positive, a deficit if it is negative.

Switching Costs

Switching costs are the costs incurred in changing from one provider of a product or service to another. Switching costs may be tangible or intangible costs incurred due to the change of this source.

SWOT Analysis

A SWOT analysis is a formal framework of identifying and framing organizational growth opportunities. SWOT is an acronym for an organization’s internal strengths and weaknesses and external opportunities and threats.

Systematic Innovation

Systematic innovation is innovation resulting from an intentional and organized process to evaluate opportunities to introduce change, based on a definition provided by Peter Drucker. The sources of innovation may be internal or external to the enterprise.

Tactics are a collection of tools, activities and business decisions required to implement a strategy.

Target Market

A target market is a defined segment of the market that is the strategic focus of a business or a marketing plan. Normally the members of this segment possess common characteristics and a relative high propensity to purchase a particular product or service. 

Because of this, the member of this segment represent the greatest potential for sales volume and frequency. The target market is often defined in terms of geographic, demographic, and psychographic characteristics.

Target Marketing

Target marketing is the process of marketing to a specific market segment or multiple segments. Differentiated target marketing occurs when an organization simultaneously pursues several different market segments, usually with a different strategy for each. 

Concentrated target marketing occurs when a single market segment is pursued.

Tax Rate Percent

Tax rate percent is an assumed percentage applied against pre-tax income to determine taxes.

Taxes Incurred

Taxes incurred are taxes that are owed but not yet paid.

Telemarketing

Telemarketing is a form of direct marketing that uses the telephone to reach potential customers.

Trade Margin

Trade margin is the difference between unit sales price and unit cost and each level of a marketing channel usually expressed in percentage terms.

Trading Down

Trading down is the process of reducing the number of features or quality of an offering to realize a lower purchase price.

Trading up is the practice of improving an offering by adding new features and higher quality materials or adding products or services to increase the purchase price.

In broad, general terms, traffic is the number of visitors and visits a website receives.

Types of Entrepreneurs

Entrepreneurs may be categorized into eleven areas, including:

  • Solo self-employed individuals
  • Team builders
  • Independent innovators
  • Pattern multipliers
  • Economy of scale exploiters
  • Capital aggregators
  • Buy-sell artists
  • Conglomerates
  • Speculators
  • Apparent value manipulators

User Interface (UI)

User interface is the graphic design and appearance of a website, its function as seen and used by the person on the user end, at the website in a browser.

The UI of a website is ultimately how it lets users know what it has to offer them. If it lacks an easy navigation scheme users get lost, and never find the information on a site.

Unique User Sessions

In online marketing, unique user sessions is a website metric tracking the number of uniquely identified clients generating requests on the web server (log analysis) or viewing pages (page tagging). A visitor can make multiple visits.

Unit Variable Cost

Unit variable cost is the specific labor and materials associated with a single unit of goods sold. Does not include general overhead.

Units Break-Even

Units break-even refers to the unit sales volume at which the fixed and variable costs are exactly equal to sales. 

The formula is UBE=Fixed_costs/(Unit_Price-Unit_Variable_Cost)

Unpaid Expenses

Unpaid expenses are money owed to vendors for expenses incurred, but not yet paid. In bookkeeping and accounting, this is called accounts payable. A simple example would be the advertising expense from advertising that has already run but not yet been paid for by the advertiser.

User Benefits

User benefits refer to understanding and appreciating the base reason an individual purchases a product or service that may not directly correlate with the feature or function of the good or service. These benefits may be intangible.

User Registrations

In online marketing, user registrations is a conversion value measuring the number of website visitors who voluntarily include themselves in your database in order to access the content you provide on your website.

Used as a noun, valuation is what a business is worth, as in, “this company’s valuation is $10 million.”

This would mean that a company is valued at $10 million, or worth $10 million. The term is used most often for discussions of sale or purchase of a company; it’s valuation is the price of a share times the number of shares outstanding, and the price of a share is the total valuation divided by the number of shares outstanding.

Value is the ratio of perceived benefits compared to price for a product or service.

Variable Cost

Variable costs are costs that fluctuate in direct proportion to the volume of units produced. The best and most obvious example are physical costs of goods sold, direct costs, such as materials, products purchased for resale, production costs and overhead, etc.

The concept of variable cost is an important component of risk in a company. Generally, variable costs are less risky than fixed costs, because variable costs are not incurred unless there are sales and production. See also break-even analysis, fixed costs, and contribution.

For more on this, check out What Is Break-Even Analysis?

Variance is a calculation of the difference between plan and actual results, used by analysts to manage and track the impact of planning and budgeting.

Venture Capitalists (VC)

Venture capitalists are thought of in two ways, first, some people think of any wealthy individual who invests in young companies as a venture capitalist. Second, among the more informed investors, analysts, and entrepreneurs, a venture capitalist is a manager of a mainstream venture capital fund.

Venture Capital

Venture capital nowadays is used two ways. First, people often take venture capital as any investment capital obtained through private investment or public investment funds directed to high-risk and high-potential enterprises. 

Second, within the more informed and sophisticated business circles, venture capital is defined more narrowly as investment money coming from the mainstream venture capital firms, a few hundred major firms, different from investment money from other private investors, angels, etc.

A website (or site) is a virtual location, identified and located by a URL (uniform resource locator), an address that can lead you to a file on any connected machine anywhere in the world.

Website Metrics

In online marketing, website metrics metrics are measurement tools used to evaluate how effectively a website is marketing a business.

These can include:

  • Unique user sessions
  • New visitors
  • Return visitors
  • Click-through rate
  • Conversion rate

Website Traffic

In broad, general terms, website traffic is the number of visitors and visits a website receives. This traffic can be measured by a variety of website metrics.

A wholesaler is a channel member that purchases from the producer and supplies to the retailer and primarily performs the function of physical distribution and amassing inventory for rapid delivery.

Working Capital

The accessible resources needed to support the day-to-day operations of an organization.

Working capital is commonly in the form of cash and current (short-term) assets, including accounts receivable, prepaid expenses, accounts payable for goods and services, and current unpaid income taxes.

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

Content Author: Tim Berry

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

Grow 30% faster with the right business plan. Create your plan with LivePlan.

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5 Benefits Of Using A Business Plan Templates to Launch Your Dream in 2024

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Unlock the Five Benefits of Using a Business Plan Template to Write Your Small Business Plan in 2024

Kristal Sepulveda, CPA

April 23, 2024

definition of term business plan

Did you know that the key to entrepreneurial success is using your business plan as a roadmap? According to a study by SCORE , a nonprofit resource partner for small businesses, 39% of entrepreneurs cite writing a business plan as their biggest hurdle.

But what if there is a template to streamline the process for a written business plan? Look no further! This article reveals a brand-new business plan template to simplify the process and empower your entrepreneurial vision.

definition of term business plan

What is a Business Plan, and Why is it Important?

Definition and purpose of a business plan.

A business plan serves as a blueprint for your business startup. This will detail how you'll launch and grow your business. It outlines your objectives, target market, financial projections, and marketing strategies. Without a well-thought-out plan, your business won’t have a clear direction, making it challenging to succeed.

Key Components of a Business Plan

  • Executive Summary: A concise overview of your business concept and goals.
  • Business Description: Details about your company, its mission, vision, and values.
  • Market Analysis: Research on your target market, competitors, and industry trends.
  • Marketing and Sales Strategy: How you'll promote and sell your product or service.
  • Operational Plan: Your business's day-to-day operations, including logistics and management structure.
  • Financial Plan : Projections for revenue, expenses, and funding requirements.
  • Appendix: Additional documents supporting the rest of your plan, like resumes, permits, or legal documents.

Further Reading: Maximizing Your Small Business Tax Benefits: 2023 Tax Year Strategies & New Reporting Changes

Five benefits of utilizing business plan templates for your new business, 1. time-saving structure.

Utilizing a free business plan template offers new business owners a time-saving structure. With a simple business plan template, everything you need to create a thorough business plan quickly and efficiently is at your fingertips.

Instead of starting from scratch, you can download a free template and learn how to write a professional business plan easily. This streamlined process allows you to focus on other aspects of starting your business, such as developing a marketing plan or securing a business loan.

2. Accessibility and Affordability

Access to a free, simple business plan template ensures that everyone can start their business journey on the right foot, regardless of financial resources. You can easily download a free business plan template to get started.

Eliminate the need for expensive consultants or software. This accessibility empowers aspiring business owners to take the first step toward their entrepreneurial dreams without breaking the bank.

3. Clear Communication

A well-designed business plan template includes sections like an executive summary and sales plan, facilitating clear communication with stakeholders such as business partners or potential investors. Using a template, you can effectively convey your vision, product or service offerings, and marketing strategies concisely and structured.

This clear communication not only helps garner support from investors but also ensures alignment among team members, laying a solid foundation for a successful business venture.

4. Tailored Flexibility

While templates provide a structured framework, they also offer tailored flexibility to accommodate different types of businesses and industries. Are you launching a tech startup or opening a small cafe ? A free business plan template can be customized to suit your specific needs and goals.

You can adapt sections such as the marketing plan or financial statements to reflect your business model's unique requirements. This flexibility allows you to create a professional business plan that resonates with your target audience and sets you apart from competitors.

5. Enhanced Planning Accuracy

Following a predefined structure allows you to consider all aspects of your business, from market research to financial projections. This thorough approach helps identify potential pitfalls and opportunities, enabling you to make informed decisions and mitigate risks effectively.

How to Choose the Right Business Plan Template for Your Venture?

Considerations when selecting a good business plan format.

Consider your venture's unique requirements and objectives when choosing a business plan template. Evaluate whether you're starting a new business or looking to grow your existing one. Assess the products and services you offer and the market you operate in.

Consider whether the template aligns with the guidelines provided by the Small Business Administration (SBA) and offers flexibility to customize according to your needs. Your business plan is not just a document. It's a strategic tool that can help propel your business forward.

Features to Look for in a Business Plan Template

Ensure it covers all the necessary sections of a comprehensive business plan, including information about your business, market analysis, marketing and sales strategies, operational plan, and financial projections. Consider whether the template provides guidance and examples for each section.

Look for templates offering flexibility and customization options, allowing you to tailor the plan to your business model and goals. Also, choose a template that is easy to use and understand, facilitating the writing process and ensuring clarity and coherence in your plan.

Writing a Solid Business Plan Template for Your Specific Needs

Gather all the relevant information about your business to write a solid business plan template for your specific needs. Clearly define your products or services, target market, and unique selling propositions. Use the template as a guide to creating a comprehensive and well-structured plan.

Utilize the resources and guidance the template provides to effectively articulate each part of your business plan. Ensure it reflects your vision, goals, and strategies. As you operate your business, regularly review and update your plan to adapt to changing market conditions and opportunities.

Steps to Write an Effective Business Plan Using a Template

Setting clear objectives and goals.

Begin by defining clear objectives and goals for your business. Identify the purpose of your business plan and the outcomes you aim to achieve. Outline your aspirations and milestones, whether you're starting a new business or growing an existing one.

Utilize the goal-setting section of your business plan template to help articulate your vision. For small business owners, setting achievable objectives drives growth and ensures long-term viability.

Developing a Comprehensive Business Description

Craft a comprehensive business description outlining the business type you're operating or planning to start. Provide detailed information about your products or services, target market, and how your business solves a specific need or problem.

Here's a step-by-step guide to building a strong and informative business description:

1. Company Overview:

  • Business Name and Location: Start with your company's official name and physical location (if applicable).
  • Year Established: Briefly mention the year your business was founded.
  • Mission Statement: A concise statement outlining your company's purpose and core values.

2. Products and Services:

  • Provide a clear description of the products and services you offer.
  • Categorize your offerings for better readability.
  • Briefly mention your brand partnerships (if applicable).

3. Target Market:

  • Define your ideal customer base.
  • Consider the demographics, interests, and needs of different customer segments.

4. Competitive Advantage:

  • What sets your business apart from competitors?
  • Highlight unique selling propositions (USPs) such as exceptional customer service, specialized products, or innovative services.

5. Management Team:

  • Briefly introduce key members of your management team.
  • Include their titles, expertise, and relevant experience.

6. Financial Performance:

  • You can highlight financial strengths like consistent growth or profitability for established businesses.
  • Emphasize responsible financial management if relevant.

7. Future Goals:

  • Briefly outline your company's aspirations and long-term vision.
  • Mention potential expansion plans or future product development.

8. Call to Action:

  • Depending on your audience, you can include a call to action (CTA) at the end.
  • This could be a website visit, contacting you for inquiries, or following your social media pages.

Constructing a Solid Financial Plan

Develop a solid financial plan that includes detailed projections and forecasts for revenue, expenses, and profitability. Utilize the financial plan section of your business plan template to outline your financial goals and strategies. It doesn't matter if you're creating a traditional or lean startup business plan.

Here are steps involved:

1. Define Your Financial Goals:

  • Short-Term (1-3 years): Examples include saving for a vacation, emergency fund, or down payment on a car.
  • Mid-Term (3-10 years): Examples include saving for a house, education, or starting a business.
  • Long-Term (10+ years): The primary focus here is retirement planning.

2. Track Your Income and Expenses:

  • Gather all your income sources (salary, investments, etc.).
  • Collect bank statements and receipts to track your spending for a set period (3-6 months).
  • Categorize your expenses (housing, food, transportation, etc.).

3. Create a Budget:

  • Use your income and expense data to create a realistic budget.
  • Several budgeting methods exist (50/30/20 rule, zero-based budgeting). Choose one that suits your needs.
  • Allocate funds for expenses, savings, and debt repayment within your budget.

4. Analyze Your Debt Situation:

  • List all your debts (credit cards, student loans, mortgages) with their interest rates and minimum payments.
  • Prioritize high-interest debts for faster repayment. Consider debt consolidation strategies if applicable.

5. Build an Emergency Fund:

  • Aim to save 3-6 months of living expenses to cover unexpected costs.

6. Plan for Retirement:

  • Research retirement savings options (401(k), IRAs) and contribution limits.
  • Estimate your future retirement needs and adjust your savings plan accordingly.

7. Invest for Your Goals:

  • Research investment options (stocks, bonds, mutual funds) based on your risk tolerance and time horizon.
  • Consider seeking professional investment advice for complex financial situations.

8. Protect Your Assets:

  • Look into insurance coverage (health, life, disability) to safeguard yourself and your loved ones from financial hardship.

9. Review and Revise Regularly:

  • Your financial plan is not static. Revisit and adjust your goals, budget, and investment strategies as your life circumstances evolve.

Making Your Business Plan Stand Out

Highlight key differentiators and unique selling propositions to make your business plan stand out. Showcase the viability of your business idea and its potential for success in your chosen market. Use your business plan's marketing and sales section to outline strategies for promoting your products or services and reaching your target audience.

Are you operating as a limited liability company or building your business from the ground up? A standout business plan can attract investors, partners, and customers, setting the stage for a successful venture.

Review and Refinement

Review your business plan carefully to ensure accuracy, clarity, and coherence. Seek feedback from mentors, advisors, or industry experts to identify areas for improvement. Refine your business plan based on feedback and market research to enhance its effectiveness and relevance.

Are you writing a one-page business plan or a detailed business plan outline? Ongoing review and refinement are essential for staying aligned with your goals and adapting to changing market conditions.

Further Reading: How To Leverage Tax Season For Better Client Engagements

You'll need to create a business plan to launch your venture successfully. Business plans can help guide your efforts, ensuring you're well-prepared to bring your product or service to market. Utilizing a free business plan template includes essential sections like market research and financial projections, making the process more accessible.

With a business plan template download, you can write a business plan quickly and efficiently, leveraging its structured format to streamline your efforts. Business plans help crystallize your vision and strategy.

How can Taxfyle help?

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At Taxfyle , we connect small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.

Legal Disclaimer

Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

definition of term business plan

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  1. Business Plan: What It Is, What's Included, and How to Write One

    Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...

  2. What Is a Business Plan? Definition and Essentials Explained

    It's the roadmap for your business. The outline of your goals, objectives, and the steps you'll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. A business plan can help you explore ideas, successfully start a business, manage operations, and ...

  3. What is a Business Plan? Definition, Tips, and Templates

    Although this is the last part of the business plan that you'll write, it's the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company's mission or vision statement, value proposition, and long-term goals. 3.

  4. What is a business plan? Definition, Purpose, & Types

    This plan, known as a business plan, is a comprehensive document that outlines a company's goals, strategies, and financial projections. Whether you're starting a new business or looking to expand an existing one, a business plan is an essential tool. As a business plan writer and consultant, I've crafted over 15,000 plans for a diverse ...

  5. Business plan

    Clawback. v. t. e. A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on the organization, the organization's financial projections, and the strategies it ...

  6. Write your business plan

    Common items to include are credit histories, resumes, product pictures, letters of reference, licenses, permits, patents, legal documents, and other contracts. Example traditional business plans. Before you write your business plan, read the following example business plans written by fictional business owners.

  7. What is a Business Plan? Definition + Resources

    A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. But the reality can be more nuanced - it depends on the stage a business is in, or the type of business plan being written. Ideal times to write a business plan include: When you have an idea for a ...

  8. How To Write A Business Plan (2024 Guide)

    Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...

  9. Business Plan: What It Is + How to Write One

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

  10. What Is A Business Plan (& Do I Really Need One?)

    Business Plan Definition. A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them. ... For businesses with complex structures, framing the revenue in terms of market share can offer additional insight into the viability and feasibility of the financial ...

  11. Business Plan: What It Is + How to Write One

    1. Executive summary. This short section introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, development goals, and why it will succeed. If you are seeking funding, summarise the basics of the financial plan. 2.

  12. What is business plan?

    business plan: A business plan is a document demonstrating the feasibility of a prospective new business and providing a roadmap for its first several years of operation.

  13. What Is A Business Plan And Why It Matters In Business

    Definition. A Business Plan is a formal written document that outlines a company's goals and how it plans to achieve them. It serves as a roadmap for the business, providing a detailed description of its products or services, target market, competition, financial projections, and strategies for growth.

  14. Business Plan

    Business Plan Definition: ... is an investment that pays big dividends in the long term. Your business plan should conform to generally accepted guidelines regarding form and content. Each section ...

  15. What is a Business Plan? Definition, Pros & Cons & Anatomy

    A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them. In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and ...

  16. What is a Business Plan?

    Definition: A business plan is a detailed written steps and goals defined to guide a business' course of action from its initial stages. A business plan provides a complete description and projection of the company as well as its core strategies and expected results.

  17. Business Plan

    A business plan is an executive document that acts as a blueprint or roadmap for a business. It is quite necessary for new ventures seeking capital, expansion activities, or projects requiring additional capital. It is also important to remind the management, employees, and partners of what they represent. You are free to use this image on your ...

  18. 12 Key Elements of a Business Plan (Top Components Explained)

    Here are some of the components of an effective business plan. 1. Executive Summary. One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

  19. Glossary of Business Terms for Small Businesses

    68 min. read. Updated February 23, 2024. To start and run a business, you often need to understand business terms that may not be well-defined in a standard dictionary. Our glossary of business terms provides definitions for common terminology and acronyms in business plans, accounting, finance, funding, and other aspects of small business.

  20. 5 Benefits Of Using A Business Plan Templates to Launch Your Dream in

    5. Enhanced Planning Accuracy. Following a predefined structure allows you to consider all aspects of your business, from market research to financial projections. This thorough approach helps identify potential pitfalls and opportunities, enabling you to make informed decisions and mitigate risks effectively.

  21. A Guide to Terms used in Business Plans

    Like resumes, sometimes, you have to read between the lines to get at the truth. Here are my favorite examples: If the plan says: "Our numbers are conservative." I read: "I know investors want us ...

  22. How To Use "Business Plan" In A Sentence: Proper Usage Tips

    A business plan is a comprehensive document that outlines the goals, strategies, and financial projections of a business. It serves as a roadmap for entrepreneurs and business owners, providing a detailed overview of how the business will be structured, operated, and financed. Historically, the concept of a business plan can be traced back to ...

  23. Definition Of Term Business Plan

    Writing. 4.8/5. 5 Customer reviews. Definition Of Term Business Plan, Pay For My Professional Personal Essay On Pokemon Go, Not Using The Word I In Essays, Human Resource Business Plan Presentation, Job Application Letter For Psychiatrist, Sample Topic Sentences For Compare And Contrast Essays, Contoh Essay Tentang Ilmu Komunikasi.