10 Qualities of a Good Business Plan Explained
According to the United States Small Business Administration, there are approximately 32.5 million small businesses at the moment. The number fluctuates from year to year with businesses coming and going. If you want to remain profitable and thrive, you must have a plan to move forward.
A business plan does far more than help secure venture capital when you’re starting out. You’ll use a strong business plan throughout the life of a company. Use it to refocus your goals, refresh your memory on growth plans, and fulfill marketing goals. Share your plan with employees, shareholders, and investors, and refer back to it to see if you need to make adjustments along the way.
Having a solid business plan can help you successfully start, manage, and grow your business. But what are the qualities that make a business plan more than a document? What does it take to write a strong business plan?
What are the characteristics of a great business plan?
An excellent plan works for your company and keeps everyone on the same page. There isn’t a lot of ambiguity in it, and all things are listed in an orderly fashion that’s easy to absorb.
The format of the business plan may be almost as important as the words within it, so use bullet points, headers, bold print, and other tricks to keep the reader engaged.
Whether you already have a business plan written and want to edit it to perfection or you need to start from scratch , there are six characteristics every strong plan has.
1. Clear language
It might be tempting to throw in a bunch of industry jargon to show your knowledge of your niche. Unfortunately, most lenders won’t know what you mean. It’s much better to stick to language anyone can understand. You never know who you’ll need to share your business plan with.
Read over the plan several times for typos and clarity. Read out loud so you can “hear” the words. You’ll catch awkward phrasing by speaking the words. You can never have too many eyes on the plan. One person might catch a particular spelling error while another sees the grammatical errors.
Get feedback from your employees, family, mentor, and friends. You don’t have to follow every suggestion, but you should consider what everyone says and choose the things that make the most sense for your business model.
Look at the business plan through the eyes of someone outside the industry. Does everything make sense? Are there any phrases someone might have to stop and look up? You don’t want the reader to be thrown out of the flow of the text.
2. Employee recognition
Your business plan should include a layout for employee recognition. Developing a strong workplace culture benefits your brand in numerous ways, such as creating staff loyalty and retaining your best people. It’s difficult for a company to thrive and grow without focusing on its workers.
When employees receive recognition for their accomplishments, they are 82% happier in their jobs . They’ll outperform workers in a company without the plan for an excellent culture. If you aren’t quite sure what your company culture should be yet, just make some notes on the things you’ve loved about your favorite places to work.
3. Realistic goals
While you might love to run a multi-billion-dollar conglomerate, most small businesses stay relatively small. That isn’t to say you can’t find great success as a small business owner, but make sure your goals are achievable .
As you work through the potential revenue numbers, pay attention to what others in your industry make in a year. You might be able to exceed that by 10%, but thinking you’ll make four times what your nearest competitor does may not be very realistic.
Making your goals too lofty may hurt your chances of securing financing, too. Those considering investing in your business may feel you don’t fully understand the typical earnings of your industry.
4. Great mission statement
The best business plans outline the purpose of your company. Why did you start the business in the first place, and how will you leave your mark with the brand?
For example, a small landscaping company called Massey Services shares its mission statement on its website. Their overall goal is total customer satisfaction . Everything else in their statement on their webpage ties into that philosophy. They also want to build long-term relationships, they want people to trust them, and they value truth and integrity.
When you have a strong mission statement , it drives everything else you do. If your focus is on building relationships, you’ll develop a company culture based on interactions with employees. Your mission statement might arguably be the thing about your company that never changes.
5. Methodology for results
Make sure your business plan has a way to track results over time. Lay out the methodology of any facts and figures used to estimate revenue or what your costs will be. Then, check against those assumptions from time to time to make sure you’re hitting the right beats.
For example, if you plan to hit a certain level of revenue by the end of the first year, how can you break that down into quarters, months, and weeks? What is the best way to make sure you achieve your goals?
You can’t fix mistakes or make adjustments if you don’t know where you are in the journey. Pay attention to how quickly the brand moves toward objectives and make adjustments as needed.
6. Foundation for marketing strategies
How do you plan to get the word out about your brand? You must have a marketing strategy that makes sense for your budget and your philosophies as a brand. Perhaps you plan to work exclusively with online influencers. How much will you allocate to the budget for influencer marketing?
Take time to study who your target audience is and create buyer personas representing the average person who’ll buy from you. While you might need to tweak your personas from time to time, a solid plan, in the beginning, gets things off on the right foot and helps you bring in new customers.
Figure out how much you’ll spend online and offline on marketing efforts. Where can you reach your average customer? Do they mainly hang out on Facebook? If so, much of your budget can go to Facebook ads. On the other hand, if they use TikTok and rarely visit Facebook, you might want to put more time, energy, and finances into building an audience on the newer platform.
7. It fits the need of your business
The best business plan for your company takes into account why you need a business plan in the first place. Are you going for funding, using the information to improve internal operations, pitching your concept to investors, or perhaps communicating your goals to employees?
There are many different reasons you’ll utilize a business plan. They aren’t one-size-fits-all . You may even find you need addendums or additional plans to match the needs of your business at any given time.
If you intend to use your plan in-house to motivate employees or stick to your goals, a one-page plan may be all you need. You can also use a shorter version to test ideas you have and see how they might match the goals of your company.
On the other hand, a traditional full-length plan works best if you need funding from a bank or want to pitch a concept to an outside investor. You can also use a longer plan to get feedback from a mentor or business coach.
8. Your strategy is realistic
In a recent Gartner Execution Gap Survey, approximately 40% of leaders said their enterprise accountability and leadership were not aligned on an execution strategy. If your business plan doesn’t lay out how the business operates, there may be too much room for interpretation that causes dissent within the company and makes people work against one another instead of as a cohesive unit.
Start by ensuring different operational milestones within your plan are attainable. For example, if you share a financial forecast, is it realistic? Based on current revenue, can you realistically achieve your goals? If you’ve brought in $200,000 per year in revenue for the last few years, don’t expect to jump to $400,000 in the next quarter. Make a plan for increasing revenue – but in increments that make sense and are achievable.
You don’t need an unrealistic plan. Company leaders and employees will only grow frustrated and discouraged if they’re unable to hit any target goals laid out in the plan.
9. Clearly identifies assumptions
When you’re writing out a business plan, you may not have all the answers. At best, some of the information is an assumption based on outside data, past performance, and any testing you’ve completed. There will be times when you make a mistake in your estimates.
Be upfront about what your assumptions are when writing out your plan. Did you assume the company will increase 10% in productivity this year because it did in the last few years? Share your thoughts on why you think this is achievable based on past factors, but also make it clear it’s a guess. In reality, the company may over-or-underperform on those expectations.
Show what is an assumption also point to what might need to be updated or refined after a few months. Consider these areas to revisit frequently for updates or to set new goals.
10. Easy to communicate with the right people
Who is your audience? Knowing who will look at your business plans allows you to create it in a format you can share with the right people. Consider factors such as how easily scannable the text is and what it looks like in different formats, such as a document or PDF file.
Who are you sharing it with, and how will they use it? For example, if you include any links, will the person be able to click on them and go directly to the page you want them to go to? Is the viewer likely to read the plan on a mobile device? How well does the format adapt?
Consider who you’re sharing it with and how they’ll need to use it to make sure you offer it in the best format for viewing by that individual. You may even want to save your business plan in a variety of different formats.
Keep your plan updated
Your business plan isn’t something you write once and then forget. To truly make yours work for your business model, you must refer back to it and see where you are with your predictions and goals. As you hit high notes, add new objectives and plan them out with measurable goals.
Over time, your business plan won’t look much like the one you used the day you opened your company’s doors. However, the mission statement will likely stay the same, and elements such as company culture won’t change much.
What will change is your knowledge of the industry and how well you can adapt to the challenges faced by all small business owners. With a plan for handling different situations, you’re certain to be one of the small businesses finding success past the 10-year mark.
Eleanor Hecks is editor-in-chief at Designerly Magazine . She was the creative director at a prominent digital marketing agency prior to becoming a full-time freelance designer. Eleanor lives in Philadelphia with her husband and pup, Bear.
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Six essential components of a sound business plan.
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If you are thinking about opening a business, planning is key to getting started on the right foot. A thorough and well-written business plan makes all the difference in organizing and marketing your business, seeking funding, and measuring your success.
That being said, developing a business plan can seem daunting at first, even if you have an MBA or background in business. The fact that there are so many templates for business plans can also exacerbate that overwhelming feeling. Fortunately, you can choose the format that is tailored best for you and your business. It just needs to have the following components.
1. Executive Summary
Every business should be able to be summarized in an elevator pitch so think of this as a high-level introduction to your business and your reasons for starting it. Your executive summary should include your mission statement of your business’s aims and values, the product or service you are selling, and your business’s name and location.
As we should individually do so in life, you should set short- and long-term goals for your business. A way to distinguish between the two is to set short-term goals for the next four to six months and long-term ones for the next one to three years.
Defining the target audience for your products or services is crucial to your success. Taking the time to determine if you are targeting the general market or a particular demographic based on age range, gender, or race, and whether it is local, regional or national will help guide the next two components of your business plan.
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Now that you have determined your business and its audience, you need a full understanding of the sphere where it is operating. Look at ways your particular business can improve upon existing models in your market and fill market gaps. In addition, you should fully understand your competitors and how your product or service is different from what they offer.
With these previous areas defined, it is now time to determine how you will market and promote your product or service to your target audience. In developing your marketing and promotion strategy, determine the tactics best for reaching your audience. Social media can advertise your business with little to no cost, but newsletters, pay-per-click ads, email marketing, or search engine optimization are also cost-effective options.
6. Budget and Expenses
The final step of your plan should include a budget with operational expenses, monthly and daily expenses, marketing, and any debt related to the business. It should also include future financial projections, along with current financial performance.
These components will lead to a plan to help launch your business and bring it to life. Once you complete your business plan, I recommend having it carefully reviewed by a business partner, advisor, or accountant before moving forward with it.
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A summary document that outlines how and why a new business is being created
What is a Business Plan?
A business plan is a summary document that outlines how and why a new business is being created. New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives. The business plan underlines the strategies that need to be adopted in order to reach organizational goals, identify potential problems, and devise custom solutions for them.
In addition, potential investors look at business plans to evaluate the risk exposure of a particular entrepreneurial venture. Startups that try to attract employees and investors use business plans to solidify their claims regarding the potential profitability of a particular business idea. Existing companies may use business plans to deal with suppliers or manage themselves more effectively.
- A business plan is a summary document that outlines how and why a new business is being created.
- New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives.
- Existing companies may use business plans to deal with suppliers or manage themselves more effectively.
Why Use a Business Plan?
Owing to the following benefits of a well-researched and comprehensive business plan, preparing one is highly recommended, but not a mandate.
Entrepreneurs use a business plan to understand the feasibility of a particular idea. It is important to contextualize the worth of the proposed product or service in the current market before committing resources such as time and money. It helps to expand the otherwise limited view of a passionate innovator-turned-entrepreneur.
2. Focusing device
Formulating a concrete plan of action enables an organized manner of conducting business and reduces the possibility of losses due to uncalculated risks. Business plans act as reference tools for management and employees as they solidify the flow of communication, authority, and task allocation.
The process of preparing a business plan often creates many unintended yet desired results. It functions on the principle of foresight as it helps one realize future hurdles and challenges that aren’t explicit. It also brings a variety of perspectives on the forefront, eventually leading to a more comprehensive future plan of action.
4. Raising capital
A business plan is an effective way of communicating with potential investors, and the level of expertise and time used in preparing a business plan also gives professional credibility to entrepreneurs . It analyzes and predicts the chances of success for the investor and helps to raise capital.
Features of a Good Business Plan
1. executive summary.
The executive summary functions as a reading guide, as it highlights the key aspects of the plan and gives structure to the document. It must describe ownership and history of formation. It is an abstract of the entire plan, describes the mission statement of the organization, and presents an optimistic view about the product/service/concept.
2. Business Description
This section presents the mission and vision of an organization. Business descriptions provide the concept of one’s place in the market and its benefits to future customers. It must include key milestones, tasks, and assumptions, popularly known as MAT. Big ideas are redundant without specifics that can be tracked. Fundamental questions to be answered include:
- Who are you?
- What is the product or service, and what are its differentiating characteristics?
- Where is the opportunity located?
- When will you start implementing your plan and expects cash flows or profits?
- Why should customers choose your company?
- How do you plan to run the business in terms of structure and regulatory compliance?
3. Market Strategies
The market strategies section presents the target consumer group and the strategies needed to tap into it. It requires meticulous analysis of all aspects of the market, such as demography, cultural norms, environmental standards, resource availability, prices, distribution channels , etc.
4. Competitive Analysis
The competitive analysis section aims to understand the entry barriers one could face due to other companies in the same or complementary sectors. The strengths of existing companies could be co-opted into one’s strategy, and the weaknesses of existing product development cycles could be exploited to gain a distinct advantage.
5. Design and Development Plan
It outlines the technical details of the product and its development cycle within the realm of production. In the sphere of circulation, it focuses on marketing and the overall budget required to reach organizational objectives.
6. Operations and Management Plan
The operations and management plan describes the cycle of business functions needed for survival and growth. It includes management functions such as task division, hierarchy, employee recruitment, and operational functions such as the logistics of the value chain , distribution, and other capital and expense requirements. The managers’ backgrounds must also be briefly included.
7. Financial Factors
The financials section should include the company’s balance sheet and cash flow projections. Financial data is imperative to provide credibility to any assertions or claims made about the future profitability of the business. The aim is to provide an accurate idea of the company’s value and ability to bear operational costs and earn profits.
Common Mistakes to Avoid While Writing a Business Plan
- The plan must not begin by stressing the superiority of one’s product or service, but instead by identifying a genuine problem faced by the consumer. The plan should then be presented as a way of bridging that gap between consumer expectations and industry offerings.
- A team’s expertise is displayed not by listing their academic achievements and employment history, but by stressing how the team’s experience is best suited for a particular industry sector or product. Often, teams with members who have failed in a past venture are successful in attracting capital.
- The most common mistake is to offer an excessively optimistic view of the opportunity. There is no market without competition and no venture without some degree of risk, and a business plan must portray the objective truth with sincerity.
CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional CFI resources will be very helpful:
- 5 P’s of Marketing
- Business Model Canvas Template
- Profit Model
- Value Proposition
- See all commercial lending resources
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10 Characteristics, Functions, Features And Benefits Of A Business Plan
What is a business plan?
Characteristics of a business plan :, flexibility, executive summary, insertion in the market, market characteristics, marketing plan, business system and schedule.
We explain what a business plan is, its functions, and the benefits it provides. Also, what are its features and methods it uses?
A business plan is a written document that expresses a formal declaration of the objectives of the initiatives that a company has in the projection and evaluation phase.
These initiatives can be new projects within the company’s activities or the start of the company itself. Therefore, a business plan describes a series of interrelated activities aimed at achieving certain goals.
This allows a planning of the tasks and the evaluation of the resources that will be necessary to achieve those goals (for example, resorting to banks or investors for financing).
In addition, its function is to transmit to current or potential investors (investors, shareholders, financiers, etc.) how the investment will be recovered and the guarantees they have. It differs from an investment project in that a business plan is more focused on the strategies that will be carried out.
Business plans do not usually remain the same as their original version .
The intervention of new factors (investors, partners, suppliers, etc.) and a better understanding of the possibilities by the company can modify the structure of the plan.
Therefore, it is common for them to undergo constant renewal and updating.
The main function of a business plan is to define the model and the strategic actions to achieve the goals. Once defined, you must establish the economic viability of the project.
This requires analyzing the different areas involved , which allows supporting the project conceptually and observing it from all dimensions. But, at the same time , it shows a defined image of the company before third parties.
- It allows errors to be detected and difficulties to be anticipated before the start of the investment . In this way solutions can be planned .
- By including the economic and financial forecast of the business, it facilitates access to bank financing , as well as attracting new partners and collaborators.
- It allows the measurement of results of each stage, through short and medium-term goals that allow establishing measurement criteria.
- It allows detecting the most promising business opportunities in terms of markets of interest, products and services.
- It allows an evaluation of the company’s situation in the context of its competitors, and the identification of tasks and areas that need improvement.
- It facilitates the rational use of resources, including personnel, since planning facilitates the assignment of responsibilities and coordinated work .
- Once the goals of the company have been established, it allows evaluating various strategies according to their effectiveness .
- Establishes the financial framework.
After the cover and table of contents, the executive summary gives an overall impression of the project . For that, you must highlight the key data of the same and include all the relevant information .
Among this information should not be missing the needs and objectives of the business , the advantages offered by the product or service and the opportunity offered by the market, as well as the history of the company and its management team.
Most of this information will be expanded upon in the rest of the document.
The projected product or service must be described in detail and its possible insertion in the market explained. For that, it is necessary to make a comparison with similar products or services that already exist in the market.
The project arises to cover an existing need in the market, which is why potential consumers must be identified and what advantages or weak points they will find in the proposed product or service.
The relationship between the product and the market must include a SWOT analysis (strengths, opportunities, weaknesses, threats).
Once the market that will be the context of the business has been identified, said market is described in depth. This includes:
- Size, rate of growth and potential benefits offered.
- What segments does it include?
- Locate it geographically.
- Identify possible competitors, substitutes and complements.
- Define means of audience research .
It details who makes up the management team , but also the characteristics of the work team: how the company will be managed, the history of the personnel involved, the general experience of the company, the various areas of management, sales, stock control and quality.
Promotional strategies are described, taking into account “the four P’s” : product , price, advertising , points of sale.
All the necessary steps are described from the manufacture of the product to the moment of purchase or completion of the service. It includes the areas of human resources , sales, commercial, management and organizational culture .
The schedule must specify when each of the necessary steps will be activated (hiring or relocation of personnel, start of production, purchase of raw material , etc.).
The accounting-financial area allows detailing the structure and composition of social capital , as well as calculating capital flows and valuing the investment.
Sources of income are analyzed and a plan is created that determines how profits and losses will be managed . If it is a search for risk capital, what are exit alternatives for investors should be included?
The above content published at Collaborative Research Group is for informational and educational purposes only and has been developed by referring to reliable sources and recommendations from technology experts. We do not have any contact with official entities nor do we intend to replace the information that they emit.
Luke is passionate about fostering student involvement and connection. He studied psychology for his major and likes learning about the past. While he is not working, you may catch him watching movies or walking along the beach.
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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 ...
Your business plan should include a layout for employee recognition. Developing a strong workplace culture benefits your brand in numerous ways, such as creating staff loyalty and retaining your best people. It’s difficult for a company to thrive and grow without focusing on its workers.
6. Budget and Expenses. The final step of your plan should include a budget with operational expenses, monthly and daily expenses, marketing, and any debt related to the business. It should also ...
Effective business plans contain several key components that cover various aspects of a company's goals. The most important parts of a business plan include: 1. Executive summary The executive summary is the first and one of the most critical parts of a business plan.
Features of a Good Business Plan 1. Executive Summary The executive summary functions as a reading guide, as it highlights the key aspects of the plan and gives structure to the document. It must describe ownership and history of formation.
A business plan is a written document that expresses a formal declaration of the objectives of the initiatives that a company has in the projection and evaluation phase. These initiatives can be new projects within the company’s activities or the start of the company itself.