What Is A Business Plan? The Best Guide For 2024

Elena Hudgens
By Elena Hudgens 14 Min Read

Before starting a business, you need to know if it’s the right idea. This means understanding what is a business plan and how much work it will be. Before starting a business, you need to ask yourself why you want one.

Do you want to run your own business to have more control over your day-to-day life? Or do you want to be your boss to earn more money? Once you know the answers to these questions about what is a business plan, you can start writing a business plan. 

A business plan is a document that tells people about your business and includes details of how you intend to start it, grow it, and make money. It doesn’t matter if you already have a business idea or if this is the first business you’re thinking about starting.

Understanding everything you need about writing one is crucial for the different components of a business plan and how to put them together. This guide will show you exactly what is a business plan and how effective it is for new companies.

We’ll go over the different components of a business plan and how to put them together; you’ll understand the differences between a business plan and a business strategy. You’ll learn what is a business plan from start to finish and how to write it.

What is a business plan? 

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A business plan is a document that details the steps required to start and operate your business. It’s a roadmap that leads from your business idea to its completion and beyond. Ideally, what is a business plan will be answered by these specific questions about your business, such as:

• What is the target market? 

• What type of products or services will your business provide? 

• Who are your competitors? 

• What resources do you have available to you? 

• How much capital (e.g., cash, savings, a personal loan) will you need to get and run your business? 

• How long will it take to get your business off the ground? 

• How will you finance your business?

A business plan is a document that should be updated and revised as your company changes. It should also consider any macroeconomic factors that could impact your business’s success, such as a recession or a stock market downturn.

Who needs a business plan?

After understanding what is a business plan, you should consider who needs it. The need for a business plan varies from one project to the next. If you’re considering picking up some freelance work as extra income, you can skip that part. 

However, if your current endeavor is more significant and will take up a lot of time or resources to get started properly, then a business plan is necessary.

It’s unfortunate, but many people only think about starting businesses or applying for loans without considering how they’ll be able to experience success with their new venture – by relying on the correct type of strategic planning now. 

At the same time, there are no obstacles present yet. If you’re taking planning seriously when it comes to running your own company (or looking into new loans), thinking about writing out all aspects of this process is critical for success overall.  

This means existing companies should have plans that they regularly update as needed, such as when market conditions change around them and opportunities arise unexpectedly.

1. Startup Business

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A business plan isn’t something you should do for just any idea. It’s most important when starting a new company to know what is a business plan. Still, it also has its place in established companies faced with uncertainty about what to do next or how to get out of a difficult situation. 

The need becomes apparent as soon as you recognize the uncertainty and break down possible future scenarios into meaningful pieces, like sales projections, expense budgets, and timing of payments- all this without even mentioning investment opportunities.

In these cases (startups or not), the business plan explains what the company will be doing in detail. 

Hence, people understand why they have chosen those specific goals over others – investors will undoubtedly want an explanation-and at least one good reason they’re qualified enough for such projects.

And finally, they need to be informed about where funds come from personal investments by someone within your team or outside investor money, which can provide startup capital.

2. Existing Business

One of the best ways to grow an existing business is using a business plan. It can use a way for companies to create and measure their objectives, goals, and responsibilities. Enterprises use it, too, to track results or manage resources efficiently like cash flow which is so essential on top of everything else. 

And lastly, they also use it at regular intervals for review- but not just any type – rather one that helps them keep up with the changes in their marketplaces while taking advantage of new opportunities often seen therein.

It’s valuable for a startup trying to raise funds for an established company looking to grow. 

Every business has goals, sales targets, and expense budgets for the short-term (a few months) and the long-term (years). A business plan encompasses all of these things.

How to write a business plan 

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Creating a business plan doesn’t have to be overwhelming. If you are building a business plan to raise money and grow your business or need to figure out if an idea works, every business plan needs six sections. Here is an overview of each term to understand what is a business plan broadly:

1. Executive Summary

It is an overview of your business and plans. It’s widespread for investors to ask for only the executive summary when evaluating your business. Therefore, it should be a one to two-page document that ideally covers the highlights of your detailed plan.

Your Executive Summary should include: 

  • A summary of the problem you solved or service/product offered;
  • A description of who this product or service aims at (your target market); 
  • Brief reports on team members;
  • An overview etc.; 
  • Summary of Financials (if funding required).

If the Executive Summary is enough to catch their interest, there’s a good chance that they’ll ask for more information about you and what we do. If they want more details, they’re going to need financials.

2. Products & Service

Products and services are the core of understanding what is a business plan. The products services chapter is where you outline what your company does and how it will accomplish its goals. 

Start by describing the problem you solve for clients, then tell your service or product.

Next, identify competition- who else is providing a solution to this same pain point? What are competitive advantages over other businesses in this space? Is there any intellectual property that protects what you do?

Finally, review milestones and metrics- set targets for timeframes on when specific tasks need to be completed before selling our product or service.

3. Market Analysis

The target market is the group of people we plan to sell to. It will be easier for us to create a sales and marketing plan that reaches our customers with a solid target market. We want to be as specific about this as possible, meaning no generalizations or blanket statements like “everyone.”

If you have more than one type of customer-children aged 4-6 vs. those aged 7+, list each separately with their respective statistics and needs (based on your research). This will make what they may need when purchasing certain products from you more transparent. 

This section also provides information about how our market is growing over time and how we position for changes in the industry due to shifts in consumer behavior/preferences, eCommerce becoming popular, etc. All business owners should do this.

4. Marketing and Sales

Marketing and sales are a vital part of what is a business plan. They include how you plan on reaching your target market, the strategies for selling to those markets, what pricing plans will be used, and outlining various activities and partnerships that need to happen for the business to be successful

Some businesses rely on Amazon or Walmart- other retail outlets like grocery stores or Target-to distribute their products and reach customers, so they should review this section of their marketing & sales chapter. 

Several costs and potential hurdles come with getting products on store shelves, but if there is a SWOT analysis here – which is purely optional but could explain how your product offerings position themselves against competitive threats while taking advantage of opportunities at the same time.

5. Company Organization and Management Team

Investors look for a variety of things when they invest in your business. This chapter will describe the current team and whom you need to hire and provide an overview of your legal structure and history. You should also include brief bios highlighting each member’s relevant experiences. 

It is essential to highlight why these members are suitable for the job here- do they have experience with similar ventures or past entrepreneurial successes? The overview of your company should also include how the entity is divided among partners. Does everyone own an equal share, and what percentage can be seen from every partner?  

Potential lenders may find it helpful during their review before investing if there’s any doubt about financial stability because all owners are equally providing funds at some point during the startup phase (seed money).

6. Financial Projections

This is the last chapter in our guide to building a solid business plan. It might be what entrepreneurs find most daunting, but it doesn’t have to be as intimidating as it seems. 

Business financials for startups are less complicated than you would think, and a degree is certainly not required to build an attractive forecast.

There are many tools and resources to use if you need any additional help with this aspect of your plan.

A typical financial plan will include sales projections, an income statement, cash flow statements, and balance sheets. It may also include sections on raising capital or attracting investors.

Running a business or ensuring the growth of your company’s performance and strategic value, knowing how to plan is essential. Whether you’re launching an exciting new product or expanding operations, prepare for it with what is a business plan in all cases. 

The need for planning expert professionals will never end since firms worldwide rely on them to cope with cut-throat competition and market uncertainties like this currently going on.

 Summing up

Creating a business plan is the best way for you to validate your new idea, set goals, and manage it. One of the helpful things you can do to build a successful company is to write up an initial draft of what is a business plan. 

If you need help with formatting or structuring it, check out our business planning for real estate guide

If looking for something more comprehensive than just templates- explore software that will make sure everything fits smoothly into place without wasting time designing or creating models about finances.

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Elena Hudgens is an entrepreneur with 10+ years of experience. She started her journey by building her own e-commerce website on Shopify and turned her $1000 savings to millions in just 2 years. Soon she started different ventures in which she failed and succeeded. And now, she's on a mission to help other entrepreneurs with her life and business lessons.
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