what are the benefits of business planning

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

Free business plan template

Join over 1-million businesses and make planning easy with our simple, modern, investor-approved business plan template.

Download Template

• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

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.

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

Related Articles

7 Min. Read

5 Consequences of Skipping a Business Plan

10 Min. Read

Use This Simple Business Plan Outline to Organize Your Plan

5 Min. Read

How to Run a Productive Monthly Business Plan Review Meeting

8 Business Plan Templates You Can Get for Free

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

Do you REALLY need a business plan?

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

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

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

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

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

1. Validate Your Business Idea

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

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

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

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

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

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

2. Set and Track Goals

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

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

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

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

3. Take Action

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

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

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

4. Manage Resources

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

Large Spending Decisions

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

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

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

5. Make Decisions

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

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

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

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

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

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

6. Manage Risk

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

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

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

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

7. Communicate Internally

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

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

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

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

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

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

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

8. Communicate Externally

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

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

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

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

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

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

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

9. Secure Funding

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

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

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

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

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

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

10. Grow and Change

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

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

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

Raising additional capital for expansion

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

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

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

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

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

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

Related Questions

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

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

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

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

Business Plan Importance: Why is business plan important?

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

Sign up for our Newsletter

Get more articles just like this straight into your mailbox.

Related Posts

Recent Posts

FREE Webinar:

Ask our Experts Anything: Monthly Review - June 12th. Register Now

0 results have been found for “”

 Return to blog home

15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

As a small business owner or aspiring entrepreneur, a business plan can seem more like a hurdle you have to overcome than a useful tool. It’s a barrier that’s keeping you from moving forward with your business. Maybe the bank won’t review your loan application without a business plan or a potential investor has asked to see your business plan before they will meet with you. 

But, writing a business plan doesn’t have to feel like a homework assignment. Instead, think of writing a business plan as an investment in your business. It’s a tool to figure out a strong and financially viable strategy for growth. And, it’s even been scientifically proven that planning will increase your chances of success and help you grow faster. 

Still not convinced? Read on for our definitive list of reasons why you should write a plan for your business.

What is the key purpose of a business plan? 

Imagine you’re setting out on a journey. You know what your final destination is, but you haven’t figured out how to get there. While it might be fun to just start driving and figure things out as you go, your trip will most likely take longer than you anticipated and cost you more. If you instead take a look at a map and chart the best way to get to your destination, you’ll arrive on time and on budget. Planning for your business isn’t that much different. 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you’re going to get there. It helps you set your direction and determine a winning strategy. A solid business plan will set your business up for success and help you build an unbeatable company.

If you start off without a plan, you may go down some interesting detours, but you’re unlikely to grow quickly or stick to your budget.

Why do you need to write a business plan?

Establishing a strategic roadmap for your business is the primary benefit of writing a business plan. But what does that really look like for you and your business? Here are our top 15 reasons why you should write a business plan.

1. Reduce your risk

Writing a business plan takes some of the risk out of starting a business. It ensures that you’re thinking through every facet of your business to determine if it can truly be viable. 

Does your solution fit the market? Are your startup or operational costs manageable? Will your proposed business model actually generate sales? What sort of milestones would you need to hit to achieve profitability? These are all questions associated with business risk that you can answer with your plan.

For those already running a business, writing a plan can help you better manage ongoing risk. Should you bring on a new employee? What does cash flow look like for your next month, quarter, or even year? Are you on track to meet your milestones or do you need to change your focus? Keep your plan up to date, review it regularly and you can easily answer these questions and mitigate risk.

2. Uncover your business’s potential

Writing a business plan helps you think about the customers you are serving and what their needs are. Exploring those customer needs will help you uncover new opportunities for your business to serve them and potentially expose new products and services that you could offer. When you use your business plan to manage your business, you’ll be able to see the parts of your strategy that are working and those that aren’t. For example, you may have invested in new marketing efforts to sell one of your products, but that strategy just isn’t working out. With a business plan in hand, you’ll be able to see what’s going to plan and where you need to make adjustments to your strategy, pivoting to new opportunities that will drive profitability.

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

3. Test a new business idea

When you have a new business idea, it really helps to spend a little time thinking through all the details. A business plan will help you think about your target market, your budget, how much money you’ll need to launch, and how your idea will actually work before you spend any real money. A business plan will also help you easily share your idea with other people to get input and feedback before you get started. 

We recommend using a one-page business plan to test ideas quickly and easily. 

4. Attract investors and get funding to start and grow your business

Sharing your business idea with investors requires a business plan. Now, you probably won’t share a long, detailed business plan to get investors interested, but you probably will share your executive summary — which is an overview of your business plan. Investors may never actually ask for your full business plan, but they will certainly ask you questions that you’ll only be able to answer if you’ve taken the time to write a plan. 

At the very least, they’ll want to see your financial forecasts , so you should be prepared for this. If you end up pitching your business to investors, whether in-person or remotely , having a business plan written makes it much easier to translate the right information into a pitch deck. In short, you’ll have all of the right information ready and available to show why your business is worth investing in.

5. Plan for different scenarios

Even if you have a plan in place, things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive on the scene. Having a plan allows you to experiment with different scenarios to see how changes to your business will impact your forecasts, budgets, profitability, and cash flow. 

6. Research shows that business plans definitely work

A Journal of Management Studies study found that businesses that take the time to plan grow 30% faster than those that don’t. Our own 2021 small business research study found that 58% of small business owners that have or are working on a plan feel confident in their business, even amidst a crisis. And a study in Small Business Economics found that entrepreneurs that write business plans for their ideas are 152% more likely to actually start their businesses. There’s plenty of additional research that links planning with success, so it’s a proven fact that you won’t be wasting your time when you write your plan.

7. Build a better budget and a financial forecast

A core component of any business plan is a financial forecast. When you take the time to plan, you’ll have to think through your expense budget, your sales goals, and the cash that it’s going to take to keep your doors open, purchase inventory, and more. 

The beauty of incorporating forecasts into your business plan is that you don’t need to have the exact numbers to start. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business. As you operate and collect financial data you can then begin to update your forecasts to generate a more accurate view of how your business will operate.

8. Determine your financial needs

Without a business plan, it’s impossible to really know how much money it’s going to take to start and run your business. You don’t just need money for your initial purchases. You need to have enough cash in the bank to keep your business afloat while you get fully up and running. A plan will help you determine exactly how much money you’ll need and help you keep track of your cash flow and runway .

9. Attract employees

Especially if you’re a young startup company, attracting employees can be hard. Without a proven track record, why should someone take a risk to work for you? Having a business plan can help solve that problem. Your plan can help a prospective employee understand your business strategy and plans for growth so that they can feel confident joining your team. It’s also incredibly useful in determining when and if it’s feasible for you to bring on more employees . 

10. Get your team all on the same page

A great strategy for your business can only be successful if your team understands it. By documenting your strategy with a business plan, you can easily get everyone on the same page, working towards the same goals. It’s even better if you regularly review your plan with members of your team. This ensures that everyone is consistently going back to the core strategy documentation, analyzing it, and exploring how it impacts individual and team goals .

11. Manage your business better 

A business plan is all about setting goals for your company — both financial goals and milestones you hope to accomplish. When you use your plan to regularly check in on your business to see how you’re doing and what your progress is, you’re managing your business. Regular review , ideally monthly, will help you build a strong, resilient business.

12. Understand your market and build a marketing plan

No matter how good your idea is, you have to figure out who your ideal customers are and how you’re going to get the word out to them. That’s where a marketing plan comes in. It can be an indispensable tool for figuring out how you get your first customers as well as your thousandth customer. 

13. It’s easier than you think

You may be procrastinating in writing a business plan because it sounds like a lot of work. The truth is that planning is much less complicated than you think. Start small with a one-page business plan that you complete in half an hour . From there, refine your plan until your idea is solid. At that point, you can invest a little more time in a more detailed business plan. Just start with the basics and expand from there.

14. You’ll sleep better at night

When you have a plan for your business, you have peace of mind. You know that you’ve invested the time to figure out a business model that actually works and you’ve considered different financial scenarios so you can handle the unexpected. And, you’ve got a management tool to run your business better than your competitors. 

15. Effectively navigate a crisis

Having a business plan not only helps you create a roadmap for your business but also helps you navigate unforeseen events. Large-scale economic downturns, supply shortages, payment delays, cash flow problems, and any number of other issues are bound to pop up. But, you can be prepared to face each crisis head-on by leveraging your business plan.

A plan helps you assess your current situation, determine how the crisis will alter your plan, and begin to explore what it will take to recover. With a little planning, you can even prepare your business for future downturns with this same process. It’ll make crisis planning easier and ideally recession-proof your business by having the right plan and processes in place.

Don’t wait, start writing your business plan today

There are plenty of reasons to write a business plan, but the real reason is about finding success for you and your business. Taking the time to plan is an investment in yourself and your business that will pay dividends, whether you’re starting a new business or taking your existing business to the next level. 

You can jump-start your business plan writing process with our article covering how to write a business plan in as little as 30-minutes .

If you’re looking for a tool to help you get more from your business plan, we recommend trying out LivePlan . Our business planning and management tool will guide you through the entire process, including all of your financial forecasts, without ever requiring that you open a spreadsheet.

Like this post? Share with a friend!

Noah Parsons

Posted in business plan writing, join over 1 million entrepreneurs who found success with liveplan, like this content sign up to receive more.

Subscribe for tips and guidance to help you grow a better, smarter business.

You're all set!

Exciting business insights and growth strategies will be coming your way each month.

We care about your privacy. See our privacy policy .

Table of Contents

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

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

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

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

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

This isn’t surprising at all. 

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

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

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

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

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

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

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

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

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

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

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

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

Become a Business and Leadership Professional

• Top 10 skills in demand Business Analysis As A Skill In 2020
• 14% Growth in Jobs Of Business Analysis Profile By 2028

Business Analyst

• Industry-recognized certifications from IBM and Simplilearn
• Masterclasses from IBM experts

Post Graduate Program in Business Analysis

• Certificate from Simplilearn in collaboration with Purdue University
• Become eligible to be part of the Purdue University Alumni Association

Here's what learners are saying regarding our programs:

Assistant Consultant at Tata Consultancy Services , Tata Consultancy Services

My experience with Simplilearn has been great till now. They have good materials to start with, and a wide range of courses. I have signed up for two courses with Simplilearn over the past 6 months, Data Scientist and Agile and Scrum. My experience with both is good. One unique feature I liked about Simplilearn is that they give pre-requisites that you should complete, before a live class, so that you go there fully prepared. Secondly, there support staff is superb. I believe there are two teams, to cater to the Indian and US time zones. Simplilearn gives you the most methodical and easy way to up-skill yourself. Also, when you compare the data analytics courses across the market that offer web-based tutorials, Simplilearn, scores over the rest in my opinion. Great job, Simplilearn!

I was keenly looking for a change in my domain from business consultancy to IT(Business Analytics). This Post Graduate Program in Business Analysis course helped me achieve the same. I am proficient in business analysis now and am looking for job profiles that suit my skill set.

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

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

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

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

Here are the key elements of a good business plan:

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

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

• Business Sorter

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

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

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

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

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

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

What Is Meant by Business Planning?

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

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

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

Strategic Planning

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

Tactical Planning

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

Contingency Planning

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

What Are the 7 Steps of a Business Plan?

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

Conduct Research

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

Have a Goal

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

Create a Company Profile

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

Describe the Company in Detail

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

Create a marketing plan ahead of time.

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

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

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

Incorporate Your Motivation

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

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

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

Services and Products

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

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

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

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

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

Our Business And Leadership Courses Duration And Fees

Business And Leadership Courses typically range from a few weeks to several months, with fees varying based on program and institution.

Get Free Certifications with free video courses

Business and Leadership

Business Analysis Basics

Data Science & Business Analytics

Business Intelligence Fundamentals

Learn from Industry Experts with free Masterclasses

Discover How AI Will Help Good Managers Become Great

The Modern Day Business Analyst Role: AI Tools and Techniques for Success

Career Information Session: Find Out How to Become a Business Analyst with IIT Roorkee

Recommended Reads

Business Intelligence Career Guide: Your Complete Guide to Becoming a Business Analyst

Corporate Succession Planning: How to Create Leaders According to the Business Need

Top Business Analyst Skills

Business Analytics Basics: A Beginner’s Guide

Financial Planning for Businesses Across the Globe

How to Become a Business Analyst

Get Affiliated Certifications with Live Class programs

• PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

Sign up for our newsletter for product updates, new blog posts, and the chance to be featured in our Small Business Spotlight!

The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

What is the purpose of a business plan?

A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

Send invoices, estimates, and other docs:

• via links or PDFs
• automatically, via Wave

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for the first 10 transactions of each month of your subscription, then 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions for the US and Canada . See Wave’s Terms of Service for more information.

Send invoices, get paid, track expenses, pay your team, and balance your books with our financial management software.

2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Business plan FAQs

How does having a business plan help small business owners make better decisions.

Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.

What industry-specific issues can business plans help tackle?

Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.

How can small business owners use their business plans to pitch investors or apply for loans?

In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.

Understanding the importance of a business plan

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

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

Related Posts

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

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

Business Planning

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on June 08, 2023

Get Any Financial Question Answered

Table of contents, what is business planning.

Business planning is a crucial process that involves creating a roadmap for an organization to achieve its long-term objectives. It is the foundation of every successful business and provides a framework for decision-making, resource allocation, and measuring progress towards goals.

Business planning involves identifying the current state of the organization, determining where it wants to go, and developing a strategy to get there.

It includes analyzing the market, identifying target customers, determining a competitive advantage, setting financial goals, and establishing operational plans.

The business plan serves as a reference point for all stakeholders , including investors, employees, and partners, and helps to ensure that everyone is aligned and working towards the same objectives.

Importance of Business Planning

Business planning plays a critical role in the success of any organization, as it helps to establish a clear direction and purpose for the business. It allows the organization to identify its goals and objectives, develop strategies and tactics to achieve them, and establish a framework of necessary resources and operational procedures to ensure success.

Additionally, a well-crafted business plan can serve as a reference point for decision-making, ensuring that all actions taken by the organization are aligned with its long-term objectives.

It can also facilitate communication and collaboration among team members, ensuring that everyone is working towards a common goal.

Furthermore, a business plan is often required when seeking funding or investment from external sources, as it demonstrates the organization's potential for growth and profitability. Overall, business planning is essential for any organization looking to succeed and thrive in a competitive market.

Business Planning Process

Step 1: defining your business purpose and goals.

Begin by clarifying your business's purpose, mission, and long-term goals. These elements should align with the organization's core values and guide every aspect of the planning process.

Step 2: Conducting Market Research and Analysis

Thorough market research and analysis are crucial to understanding the industry landscape, identifying target customers, and gauging the competition. This information will inform your business strategy and help you find your niche in the market.

Step 3: Creating a Business Model and Strategy

Based on the insights from your market research, develop a business model that outlines how your organization will create, deliver, and capture value. This will inform the overall business strategy, including identifying target markets, value propositions, and competitive advantages.

Step 4: Developing a Marketing Plan

A marketing plan details how your organization will promote its products or services to target customers. This includes defining marketing objectives, tactics, channels, budgets, and performance metrics to measure success.

Step 5: Establishing Operational and Financial Plans

The operational plan outlines the day-to-day activities, resources, and processes required to run your business. The financial plan projects revenue, expenses, and cash flow, providing a basis for assessing the organization's financial health and long-term viability.

Step 6: Reviewing and Revising the Business Plan

Regularly review and update your business plan to ensure it remains relevant and reflects the organization's current situation and goals. This iterative process enables proactive adjustments to strategies and tactics in response to changing market conditions and business realities.

Components of a Business Plan

Executive summary.

The executive summary provides a high-level overview of your business plan, touching on the company's mission, objectives, strategies, and key financial projections.

It is critical to make this section concise and engaging, as it is often the first section that potential investors or partners will read.

Company Description

The company description offers a detailed overview of your organization, including its history, mission, values, and legal structure. It also outlines the company's goals and objectives and explains how the business addresses a market need or problem.

Products or Services

Describe the products or services your company offers, emphasizing their unique features, benefits, and competitive advantages. Detail the development process, lifecycle, and intellectual property rights, if applicable.

Market Analysis

The market analysis section delves into the industry, target market, and competition. It should demonstrate a thorough understanding of market trends, growth potential, customer demographics, and competitive landscape.

Marketing and Sales Strategy

Outline your organization's approach to promoting and selling its products or services. This includes marketing channels, sales tactics, pricing strategies, and customer relationship management .

Management and Organization

This section provides an overview of your company's management team, including their backgrounds, roles, and responsibilities. It also outlines the organizational structure and any advisory or support services employed by the company.

Operational Plan

The operational plan describes the day-to-day operations of your business, including facilities, equipment, technology, and personnel requirements. It also covers supply chain management, production processes, and quality control measures.

Financial Plan

The financial plan is a crucial component of your business plan, providing a comprehensive view of your organization's financial health and projections.

This section should include income statements , balance sheets , cash flow statements , and break-even analysis for at least three to five years. Be sure to provide clear assumptions and justifications for your projections.

Appendices and Supporting Documents

The appendices and supporting documents section contains any additional materials that support or complement the information provided in the main body of the business plan. This may include resumes of key team members, patents , licenses, contracts, or market research data.

Benefits of Business Planning

Helps secure funding and investment.

A well-crafted business plan demonstrates to potential investors and lenders that your organization is well-organized, has a clear vision, and is financially viable. It increases your chances of securing the funding needed for growth and expansion.

Provides a Roadmap for Growth and Success

A business plan serves as a roadmap that guides your organization's growth and development. It helps you set realistic goals, identify opportunities, and anticipate challenges, enabling you to make informed decisions and allocate resources effectively.

Enables Effective Decision-Making

Having a comprehensive business plan enables you and your management team to make well-informed decisions, based on a clear understanding of the organization's goals, strategies, and financial situation.

Facilitates Communication and Collaboration

A business plan serves as a communication tool that fosters collaboration and alignment among team members, ensuring that everyone is working towards the same objectives and understands the organization's strategic direction.

Business planning should not be a one-time activity; instead, it should be an ongoing process that is continually reviewed and updated to reflect changing market conditions, business realities, and organizational goals.

This dynamic approach to planning ensures that your organization remains agile, responsive, and primed for success.

As the business landscape continues to evolve, organizations must embrace new technologies, methodologies, and tools to stay competitive.

The future of business planning will involve leveraging data-driven insights, artificial intelligence, and predictive analytics to create more accurate and adaptive plans that can quickly respond to a rapidly changing environment.

By staying ahead of the curve, businesses can not only survive but thrive in the coming years.

Business Planning FAQs

What is business planning, and why is it important.

Business planning is the process of setting goals, outlining strategies, and creating a roadmap for your company's future. It's important because it helps you identify opportunities and risks, allocate resources effectively, and stay on track to achieve your goals.

What are the key components of a business plan?

A business plan typically includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategies, and financial projections.

How often should I update my business plan?

It is a good idea to review and update your business plan annually, or whenever there's a significant change in your industry or market conditions.

What are the benefits of business planning?

Effective business planning can help you anticipate challenges, identify opportunities for growth, improve decision-making, secure financing, and stay ahead of competitors.

Do I need a business plan if I am not seeking funding?

Yes, even if you're not seeking funding, a business plan can be a valuable tool for setting goals, developing strategies, and keeping your team aligned and focused on achieving your objectives.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

Related Topics

• Business Continuity Planning (BCP)
• Business Exit Strategies
• Buy-Sell Agreements
• Capital Planning
• Change-In-Control Agreements
• Cross-Purchase Agreements
• Decision Analysis (DA)
• Employee Retention and Compensation Planning
• Endorsement & Sponsorship Management
• Enterprise Resource Planning (ERP)
• Entity-Purchase Agreements
• Family Business Continuity
• Family Business Governance
• Family Limited Partnerships (FLPs) and Buy-Sell Agreements
• Human Resource Planning (HRP)
• Manufacturing Resource Planning (MRP II)
• Plan Restatement

Ask a Financial Professional Any Question

Our recommended advisors.

Taylor Kovar, CFP®

WHY WE RECOMMEND:

Fee-Only Financial Advisor Show explanation

Certified financial planner™, 3x investopedia top 100 advisor, author of the 5 money personalities & keynote speaker.

IDEAL CLIENTS:

Business Owners, Executives & Medical Professionals

Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation

Claudia Valladares

Bilingual in english / spanish, founder of wisedollarmom.com, quoted in gobanking rates, yahoo finance & forbes.

Retirees, Immigrants & Sudden Wealth / Inheritance

Retirement Planning, Personal finance, Goals-based Planning & Community Impact

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.

Fact Checked

At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.

Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications.

They regularly contribute to top tier financial publications, such as The Wall Street Journal, U.S. News & World Report, Reuters, Morning Star, Yahoo Finance, Bloomberg, Marketwatch, Investopedia, TheStreet.com, Motley Fool, CNBC, and many others.

This team of experts helps Finance Strategists maintain the highest level of accuracy and professionalism possible.

Why You Can Trust Finance Strategists

Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year.

We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources.

Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.

Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.

Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.

How It Works

Step 1 of 3, ask any financial question.

Ask a question about your financial situation providing as much detail as possible. Your information is kept secure and not shared unless you specify.

Step 2 of 3

Our team will connect you with a vetted, trusted professional.

Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.

Step 3 of 3

Get your questions answered and book a free call if necessary.

A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.

Where Should We Send Your Answer?

Just a Few More Details

We need just a bit more info from you to direct your question to the right person.

Tell Us More About Yourself

Is there any other context you can provide.

Pro tip: Professionals are more likely to answer questions when background and context is given. The more details you provide, the faster and more thorough reply you'll receive.

What is your age?

Are you married, do you own your home.

• Owned outright
• Owned with a mortgage

Do you have any children under 18?

• Yes, 3 or more

What is the approximate value of your cash savings and other investments?

• $50k - $250k
• $250k - $1m

Pro tip: A portfolio often becomes more complicated when it has more investable assets. Please answer this question to help us connect you with the right professional.

Would you prefer to work with a financial professional remotely or in-person?

• I would prefer remote (video call, etc.)
• I would prefer in-person
• I don't mind, either are fine

What's your zip code?

• I'm not in the U.S.

Submit to get your question answered.

A financial professional will be in touch to help you shortly.

Part 1: Tell Us More About Yourself

Do you own a business, which activity is most important to you during retirement.

• Giving back / charity
• Spending time with family and friends
• Pursuing hobbies

Part 2: Your Current Nest Egg

Part 3: confidence going into retirement, how comfortable are you with investing.

• Very comfortable
• Somewhat comfortable
• Not comfortable at all

How confident are you in your long term financial plan?

• Very confident
• Somewhat confident
• Not confident / I don't have a plan

What is your risk tolerance?

How much are you saving for retirement each month.

• None currently
• Minimal: $50 - $200
• Steady Saver: $200 - $500
• Serious Planner: $500 - $1,000
• Aggressive Saver: $1,000+

How much will you need each month during retirement?

• Bare Necessities: $1,500 - $2,500
• Moderate Comfort: $2,500 - $3,500
• Comfortable Lifestyle: $3,500 - $5,500
• Affluent Living: $5,500 - $8,000
• Luxury Lifestyle: $8,000+

Part 4: Getting Your Retirement Ready

What is your current financial priority.

• Getting out of debt
• Growing my wealth
• Protecting my wealth

Do you already work with a financial advisor?

Which of these is most important for your financial advisor to have.

• Tax planning expertise
• Investment management expertise
• Estate planning expertise
• None of the above

Where should we send your answer?

Submit to get your retirement-readiness report., get in touch with, great the financial professional will get back to you soon., where should we send the downloadable file, great hit “submit” and an advisor will send you the guide shortly., create a free account and ask any financial question, learn at your own pace with our free courses.

Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals.

Get Started

Hey, did we answer your financial question.

We want to make sure that all of our readers get their questions answered.

Great, Want to Test Your Knowledge of This Lesson?

Create an Account to Test Your Knowledge of This Topic and Thousands of Others.

Get Your Question Answered by a Financial Professional

Create a free account and submit your question. We'll make sure a financial professional gets back to you shortly.

To Ensure One Vote Per Person, Please Include the Following Info

Great thank you for voting..

Enter your email below to receive occasional updates in your inbox.

• < Back to email setting

What is a Business Plan and Why is it Important?

What is a business plan.

Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.

While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

In fact, businesses that plan grow 30% faster than those that don’t. 1

For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.

Studies show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans. 2

Your plan should include explicit objectives for hiring new employees , market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.

Building an asset management business plan

Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on additional office, retail or work space.

Creating a marketing strategy

Marketing and market potential are important aspects of a plan for aspiring small businesses.

Getting your business in front of customers on a consistent basis is one of the keys to ensuring your business not only stays afloat but also thrives.

Marketing strategies can be simple, but before you decide on how you will get the word out, getting clear on your target audience and why your business solves their problem can make sticking to your marketing plan easier.

Knowing your unique market positioning can help you determine your messaging. Your marketing strategy should include who your target audience is, the platforms or methods you will connect with them on, and a measurement framework to determine if your efforts are working.

Take entrepreneur Scott Sultzer, who opened Sandwich Joint restaurant in downtown Los Angeles in 2009. “I included the potential marketing demographic of all those who lived in a certain area of the city,” he said of his marketing strategy. “My goal was to capture a certain percentage of all those people who lived and worked nearby.” 4

Created primarily as a marketing tool, Sulzer’s 10-page plan included such topics as target market breakdown, marketing strategy and market penetration. “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?” 4

Depending on your business, it’s important to have both brick-and-mortar marketing strategies as well as a plan for marketing your business online .

Seeking investment for your business

In addition to providing a roadmap for progress and a marketing plan , your business plan could also be important in securing funding .

Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether someone decides to invest – or how much they might choose to invest.

In fact, a study showed that businesses with a plan were more likely to receive formal financial support, such as funding, than businesses without one. 3

Hiring the right talent

A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. Sulzer used his business plan to secure a lease.

“I had to have a viable document that they could trust,” said Sulzer, who leased from one of the largest landowners in downtown Los Angeles. 4

“With a corporate landlord, they wouldn’t deal with me unless I had a business plan. I had to submit all my information and a plan that presented what I wanted to do, with financial breakdowns and percentages, demographics, and how I was going to get customers.” 4

For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan for hiring employees is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.

Setting business plan objectives for management

Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.

Ready to take the next step? Learn how to write a business plan .

Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going.

Find out how small business insurance from Nationwide can help you build and protect your business whether you are just starting up or already established.

1 https://www.effectuation.org/wp-content/uploads/2017/06/The-Multiple-Effects-of-Business-Planning-onNew-Venture-Performance-1.pdf , Accessed October 2021. 2 https://onlinelibrary.wiley.com/doi/abs/10.1111/0447-2778.00006 , Accessed October 2021. 3 https://www.tandfonline.com/doi/abs/10.1080/13504851.2014.967377 , Accessed October 2021. 4 Nationwide Interview with Scott Sultzer, 2016.

Disclaimer: The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide, Nationwide is on your side, and the Nationwide N and Eagle are services marks of Nationwide Mutual Insurance Company. © 2021 Nationwide.

• importance of a business plan
• purpose of a business plan
• what is the purpose of a business plan

Related articles

How to sell at a farmers market.

Strolling around the local farmers market on a Saturday morning is a popular pastime, and if you grow, bake, craft, or create things as a hobby, you may have wondered...

10 Tips for Buying a Business Car

Depending on the type of business you own, buying a company car could provide some noteworthy benefits. It might come in handy for deliveries or driving between work locations, and...

How to Start An Online Store

Starting a business is easier than ever thanks to greater online opportunities and the burgeoning “gig economy.” For many people, opening an online store has been a major success. Some...

FOLLOW US ON SOCIAL MEDIA!

SUBSCRIBE TO OUR YOUTUBE CHANNEL!

The Top 10 Benefits of Effective Planning

By Arootah     read

    By Arootah

• https://www.facebook.com/arootahcoach
• https://twitter.com/arootahcoach
• https://www.linkedin.com/company/arootahcoaching/?ref=website
• [email protected]

Did you enjoy this post? Share it with your network to spread these insider tips! Click a social icon and tag us @ArootahCoach

Effective planning is more than just a pathway to achieving your goals — it offers a host of other benefits.  

While goal setting can be an exciting and energizing process, achieving your goals requires considerable effort. This is why organizations that craft meticulous business plans experience a 30% greater chance of growth. 

However, the benefits of effective planning extend far beyond helping the organization meet its goals. Planning turns a company’s vision into a series of actionable steps and enriches the professional lives of all team members involved in the goal-realization process.  

Here are 10 key ways effective planning benefits your organization.  

The Importance of Planning to Accomplish an Objective

Goal setting alone isn’t enough to guarantee success; it must be accompanied by effective planning. In our eBook, The 10 Step Arootah Success Formula, we introduce a detailed, step-by-step process designed to help you accomplish any objective.  

Take the Target Corporation, for instance. Target devised a series of action steps to ensure that 100% of its private-label products would be environmentally stable by 2040. Target’s leadership began by identifying clear and specific goals and then publicly announcing its plan. Achieving a goal as ambitious as sustainability, however, necessitates an extensive and well-thought-out plan of action built on a strong purpose.  

Once establishing its action plan and the purpose behind it, Target realized the immense advantages of creating such a comprehensive strategy. First, it minimized the risk of errors by providing employees with a clear plan of action, on both a micro and macro level. This clarity enabled them to take appropriate steps while following the laid-out strategy.  

Target’s plan also offered their employees and customers a clear focus, akin to a mission or goal, for performance. As a result, everyone understood the purpose behind their actions.  

The key to efficiently and effectively achieving any goal is to develop a solid plan. The roadmap helps you determine which actions you need to take and in what order. Through careful planning, you can apply logical reasoning to significantly increase the likelihood of your success.  

10 Benefits of Effective Planning

If you’re contemplating the value of investing in a thorough and strategic planning process for your organization, we’re about to make your decision a lot easier.  

Here are 10 compelling advantages of planning that underscore its significance in any successful endeavor.  

1. Increases Proactivity

Planning, like goal setting , fosters proactive behavior by empowering team members to take initiative. With shared ownership of the plan, team members are inspired to act preemptively, rather than wait for instructions.  

2. Enhances Focus

Staying focused is essential for the successful and timely completion of all goals. Proper planning ensures that individuals, teams, and organizations remain focused on their objectives, leaving no room for distractions. The satisfaction derived from achieving the goal serves as a powerful motivator, fueling further focus and commitment within the team.  

3. Fosters Teamwork

The act of planning serves as a rallying point for teams to unite around a common objective. The more they collaborate towards a shared goal, the stronger they become as a unit.  

4. Improves Risk Management

An effective plan enables organizations to foresee potential challenges and proactively devise strategies to tackle them.  

5. Enforces Decision Making

The discipline instilled by planning necessitates swift decision making. This leaves teams with more time and energy for action. A well-structured plan provides the benchmark for all decisions.  

Get practical strategies you can apply for personal and professional growth. Sign up for The Weekly Return newsletter today.

6. Inspires Greater Achievement

Strategic planning cultivates an environment that inspires and motivates employees to aim for and achieve even higher goals in the future.   

7. Optimizes Resource Allocation

Effective planning instills the discipline organizations need to optimize their allocation of resources. A clear roadmap allows teams to strategize how to achieve the highest return with minimal resource expenditure.   

8. Stimulates Creativity

The discipline involved in crafting a plan can significantly enhance the creative process. Interestingly, studies have shown that creativity flourishes under constraint. Those a ctively engaged in planning may find their creative thinking and innovative problem-solving skills heightened.  

9. Reduces Stress

By outlining every action step clearly, planning can help minimize uncertainty and keep teams on track, reduce stress , and prevent feelings of overwhelm.  

10. Amplifies Success Rate

Without competent planning, there is little organization or means to measure progress. Thus, well-devised plans exponentially increase the probability of a team or organization achieving a goal .  

The Secret to Effective Planning? Put It in Writing.

A successful planning process isn’t complete, however, until you’ve committed your plan to writing. By documenting your goals and plans, you can increase your likelihood of success by a staggering 42% . Not only does this allow you to identify potential gaps in your planning, but it also transforms your aspirations from a mere wish list into a robust, strategic blueprint for future success.  

Take the example of Target’s sustainability plan. By making its comprehensive strategy publicly available on its website, the company fostered a heightened sense of accountability among its employees. At the same time, it signaled to its customers the high standard it was setting for itself.  

The effectiveness of writing down goals is further backed by neuroscientists . On both an individual and organizational level, documenting your plan significantly increases your odds of its successful execution.  

The Bottom Line

The benefits of effective planning go far beyond merely achieving your goals. Planning breathes life into a company’s vision and enriches everyone who works toward the shared objective.  

If a goal is worth setting, then it’s worth pursuing with the right tools and strategies. By creating and following an effective plan, you not only increase your chances of goal achievement, but you also reap a multitude of additional benefits. A well-structured plan of action is a potent catalyst for growth and development at the individual, organizational, or company level.  

Looking to maximize your goal-setting and planning efforts in the new year? Save the date for our annual Goal-Setting Workshop on January 4th, 2024!

Disclaimer: This article is for general informational purposes only and is not intended to be and should not be taken as professional medical, psychological, legal, investment, financial, accounting, or tax advice. Arootah does not warrant or guarantee the accuracy, reliability, completeness, or suitability of its content for a particular purpose. Please do not act or refrain from acting based on anything you read in our newsletter, blog or anywhere else on our website.

What are your thoughts?

Leave a comment with your thoughts, questions, compliments, and frustrations. We love to socialize in a constructive, positive way.

Are You Human?

Writing it down not only helps me remember but it helps me work through the problem. My head keeps spinning and going on a thought loop until I write it down and get out of my head with it.

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

10 Business Plan Benefits You Might Be Forgetting If you think creating a business plan is not for you, think again. Here are ten ways your business plan can help you be a better entrepreneur.

By Tim Berry Edited by Dan Bova Sep 6, 2013

Opinions expressed by Entrepreneur contributors are their own.

Too many people don't bother to write a business plan because they think it's too hard or unnecessary unless you're looking for funding . That's a shame. These myths keep a lot of people from the benefits of planning.

If you're still skeptical, here are 10 benefits to business planning you shouldn't be overlooking:

• You'll stay on strategy. It's hard to stick to strategy through the daily routine and interruptions. Use a business plan to summarize the main points of your strategy and as a reminder of what it both includes and rules out.
• Business objectives will be clear. Use your plan to define and manage specific measurable objectives like web visitors, sales, margins or new product launches. Define success in objective terms.
• Your educated guesses will be better. Use your plan to refine your educated guesses about things like potential market, sales, costs of sales, sales drivers, lead processing and business processes.
• Priorities will make more sense. Aside from the strategy, there are also priorities for other factors of your business like growth, management and financial health. Use your plan to set a foundation for these, then to revise as the business evolves.
• You'll understand interdependencies. Use a plan to keep track of what needs to happen and in what order. For example, if you have to time a product release to match a testing schedule or marketing to match a release, your business plan can be invaluable in keeping you organized and on track.
• Milestones will keep you on track. Use a business plan to keep track of dates and deadlines in one place. This is valuable even for the one-person business and vital for teams.
• You'll be better at delegating. The business plan is an ideal place to clarify who is responsible for what. Every important task should have one person in charge. Your plan keeps track.
• Managing team members and tracking results will be easy. So many people acknowledge the need for regular team member reviews and just as many admit they hate the reviews. The plan is a great format for getting things in writing and following up on the difference between expectations and results with course corrections.
• You can better plan and manage cash flow. No business can afford to mismanage cash. And simple profits are rarely the same as cash. A cash flow plan is a great way to tie together educated guesses on sales, costs, expenses, assets you need to buy and debts you have to pay.
• Course corrections will keep your business from flopping. Having a business plan gives you a way to be proactive -- not reactive -- about business. Don't wait for things to happen. Plan them. Follow up by tracking the results and making course corrections. It's a myth that a business plan is supposed to predict the future. Instead, it sets expectations and establishes assumptions so you can manage the future with course corrections.

You don't need a big formal business plan to reap these benefits. Instead, think of your business plan as a collection of lists, bullet points and tables. Think of it as something that lives on the computer, not on paper. It's just big enough to do its job.

Entrepreneur, Business Planner and Angel Investor

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick Red Arrow

• The First Openly LGBTQ+ Person to Conquer the 7 Summits Reveals How 5 Lessons Learned on His Climbs Helped Him Grow a Business to $5 Million in Sales
• Lock How to Start a Passive Income Side Hustle That Uses Assets You Already Own, From 3 People Who Make Thousands of Dollars Doing It
• 'People Have the Right to Protect Their Likeness': Hollywood Lawyer Says Scarlett Johansson's OpenAI Controversy Is Only the Beginning
• Lock 5 Tech Products That Make Traveling Easier This Summer
• 'It Was Pretty High Risk': Leader of the World's Largest Architecture Firm Says Going 'Off Track' Led to Being a CEO
• Lock 5 Habits That Will Help You Leave Your 9-5 and Increase Your Income, According to a Former Nurse Who Did It

Most Popular Red Arrow

The side hustle he started in his college apartment turned into a $70,000-a-month income stream — then earned nearly $2 million last year.

Kyle Morrand and his college roommates loved playing retro video games — and the pastime would help launch his career.

Learn All of Rosetta Stone's Languages for $152

A lifetime subscription is nearly $250 off for a limited time.

How His Personal Battle With Cancer Inspired This Founder's Solution for Patient Care

On this episode of "The Founder CEO," Michael O'Neil, founder and CEO of GetWellNetwork, discusses his inspiring journey as a leader and the transformative role of AI in healthcare.

5 SEO Hacks to Help You Rank Fast

Discover the best SEO hacks you can use to rank fast and avoid waiting for months to see results.

Homeowners in These 10 States Pay the Most in 'Hidden' Upkeep Costs

Hidden home costs pile on top of mortgage payments.

Inside the Exclusive Private Club Devoted to Food, Wine and the Arts

Barrett Wissman breaks down the passions and partnerships behind his latest venture Domus Artium Reserve.

Successfully copied link

The Importance of A Business Plan for Startups - Explained

A business plan is a crucial blueprint for a business idea, outlining its goals, strategies, and potential challenges. It serves as a roadmap, guiding startups towards success while attracting investors. The purpose of a business plan is to ensures clarity, focus, and a solid foundation for both short-term actions and long-term vision.

What is A Business Plan?

A business plan actively charts a company's future, setting clear objectives and mapping out strategies to achieve them.

Think of it as the strategic playbook for a business, covering vital areas like marketing, operations, finance, and leadership.

At its essence, a business plan isn't just a document; it's a hands-on tool that helps small businesses and their business owner navigate the journey, by securing funding and reassuring stakeholders.

Whether you're kickstarting a new venture or steering an existing one, a robust business planning process remains a cornerstone of sustainable success.

Why is A Business Plan Important for Your Startup?

1. Roadmap for Success

Think of launching a startup as embarking on a journey. You wouldn't set out without a map, right? That's what a business plan is for startups - a clear, detailed map. It lays out every step, sets checkpoints, and even warns about potential roadblocks. By dividing the journey into manageable tasks, startups find it easier to focus and act.

You need a business plan because it's not just about dodging pitfalls; this roadmap ensures every move you make drives the business closer to its goals.

2. Attracting Investors

In the cut-throat world of business, winning an investor's trust is a big deal. They're not just looking for a spark of an idea but solid evidence that it'll catch fire. Enter the business plan.

It showcases your grasp of the market, the challenges ahead, and your strategies to overcome them. By laying out the potential ROI with data to back it, you're essentially telling investors, "Your money's safe with us, and here's the proof."

3. Resource Allocation

Every startup feels the pinch - be it funds, time, or talent. So, how do you ensure you're putting your resources in the right place?

The business plan comes to the rescue again. It's like a compass, pointing out where to invest resources for the best outcomes.

It highlights what needs your immediate attention and what can simmer on the back burner. By channeling resources smartly, startups can strike a balance between today's needs and tomorrow's goals, ensuring both efficiency and growth.

4. Setting Clear Objectives

Imagine you're leading a team into a vast forest. Without a map or direction, chances are, you'll get lost. That's where writing a business plan really steps in.

It lets you carve out tangible goals, making sure everyone on your team knows where they're going and what they're aiming for. It's not just about setting targets; it's about keeping everyone on the same page, driven, and laser-focused.

5. Risk Management

Let's face it; the business world is unpredictable. But instead of being caught off-guard, having a business plan means you see those curveballs coming.

It's your playbook, helping you map out potential challenges, whip up a Plan B on the fly, and tackle surprises head-on. This isn't just a good strategy; it's showing stakeholders you're prepared for anything.

6. Growth Strategy

Think of your startup as a plant. You want it to grow, right? A good business plan is your growth formula with extremely specific business milestones. It spells out whether you're branching out to new territories, unveiling fresh products, or amplifying your operations.

With this strategy in hand, you're not just shooting in the dark; you're charting a course to scale smartly and sustainably.

7. Securing Loans

Let's get real. Walk into a bank without a solid business plan, and chances are, you'll walk out empty-handed. Banks need to know they're making a smart bet.

Presenting a detailed business plan tells them you've got skin in the game. It screams stability and showcases your vision, making them more likely to back you up.

8. Performance Measurement

Steering a startup without benchmarks is like sailing without stars to guide you. A business plan helps set those stars for you. It gives you clear markers to gauge how well you're doing.

If things seem off, you check your plan, adjust your course, and keep pushing forward.

9. Clarity and Focus

Ever had a whirlwind of ideas that seemed too scattered? Jotting them down in a business plan is like tidying up a messy room.

It forces you to sift through the clutter, zoom in on what matters, and sharpen your marketing strategy. The result? A crystal-clear path forward.

10. Stakeholder Communication

Think of your business plan as your startup's spokesperson. It tells your story to partners, employees, and potential investors. But it's more than just words on paper.

It aligns everyone, ensuring you're all singing from the same hymn sheet, driving home your business idea's vision and direction.

The Critical Components of an Ideal Business Plan

1. Executive Summary

Think of this as your handshake. In a few sentences, introduce your new business name, share your mission, and give a sneak peek of your game plan.

2. Business Description

Get down to brass tacks. Spell out what your small business really does, the problems you tackle, and the needs you meet in the market.

3. Market Analysis

With a marketing plan, show that you've rolled up your sleeves. Break down your industry insights, pinpoint your target audience, and size up the competition. Highlight where the market's heading and how you fit in. Creating the business plan forces you to analyze the competition.

4. Organization and Management

Who's in your corner? Sketch out your business structure, spotlight your team, and detail their roles. Share who calls the shots, who manages the show, and who advises from the boardroom.

5. Service or Product Line

What's on the shelf? A well-written business plan dives into what you're offering. Talk about its benefits, how it stands out, and the brains and brawn behind its development.

6. Marketing and Sales Strategy

How do you make the cash register ring? Share your marketing plan for getting the word out and closing the deal.

7. Funding Request

Need some financial muscle? If you're reaching out for funds, lay out how much you need now, what you'll need down the road, and the terms that would work for you.

8. Financial Projections

Got a crystal ball? Maybe not, but you can predict your financial future. Share your numbers game for the next five years, from profits to cash flow.

9. Implementation Plan

How do you roll? Detail the steps you'll take, the time you'll need, and the resources you'll tap into to kick things off and keep them running.

10. Appendix

Got some extras? Tuck them here. Whether it's research, permits, or any other paperwork, if it backs up your plan, it goes in.

A Template for Your Startup's Business Plan

Here's a template for a startup business plan:

Startup Business Plan Template

1. cover page.

• Business Name: [Your Startup's Name]
• Logo: [Your Startup's Logo]
• Contact Information: Address, Phone Number, Email, Website

2. Executive Summary

• Mission Statement : What's your core purpose?
• Objective : What do you aim to achieve in the short and long term?
• Brief Overview: A snapshot of your business concept and plan.

3. Business Description

• Nature of Business: What exactly does your startup do?
• Vision: Where do you see your business in the future?
• Value Proposition: Why should customers choose you?

4. Market Analysis

• Industry Overview: Current trends and future growth.
• Target Market: Who are your customers? Demographics, behaviors, needs.
• Competitor Analysis: Who are your main competitors? Strengths, weaknesses, opportunities.

5. Product/Service Line

• Description: What are you offering?
• Benefits to Customers: Why it's valuable.
• Development Stage: Is it an idea, prototype, or in production?

6. Marketing & Sales Strategy

• Positioning : How will you place your product in the market?
• Promotion: Advertising, PR, content marketing plans.
• Sales Tactics : Online sales, direct sales, retailers.

7. Organization & Management

• Business Structure: Sole proprietorship, partnership, LLC, corporation?
• Key Personnel: Brief profiles of your team members and their roles.
• Advisory Board: If you have one, who's on it?
• Startup Costs: Initial expenses before you start selling.
• Break-Even Analysis: When will you start making a profit?
• Projected Profit and Loss: Forecast for the next 3-5 years.
• Cash Flow Statement: Monthly cash flow projections for at least one year.

9. Funding Request

• Amount Requested: How much money do you need?
• Use of Funds : How will you use the invested money?

10. Implementation Plan

• Milestones : Key actions and dates from launch to operations.
• Risks: Potential challenges and your strategies to mitigate them.

11. Appendix

• Supporting Documents : Resumes, patents, licenses, contracts, and other relevant documents.

Final Thoughts

A successful business plan is the backbone of any startup, providing direction, attracting support, and mitigating risks. Beyond mere documentation, it embodies the vision and strategy of an entrepreneur .

In the ever-evolving business landscape, having a structured plan ensures resilience, adaptability, and a clear path to success.

FAQs: Importance of Business Plan

What is a business plan in your own words.

A business plan is a strategic blueprint that outlines a company's goals, the strategies to achieve them, and the resources required. It serves as both a roadmap and a communication tool for stakeholders.

What are the 3 main purposes of a business plan?

The three main purposes are:

a) To provide a strategic guide for the business's direction and growth.

b) To attract potential investors and secure funding.

c) To identify challenges ahead and devise solutions in advance.

What are 5 reasons for a business plan?

The five reasons are:

a) To set clear objectives and milestones.

b) To secure funding from existing businesses, investors or loans.

c) To understand the market and competition better.

d) To allocate resources effectively.

e) To onboard stakeholders and align the team's efforts with business plans.

What is the most important thing in a business plan?

The most important thing is the clarity of vision and feasibility of the plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. It should be realistic, backed by the market research, and adaptable to changing circumstances.

Is it really necessary to have a business plan?

Yes, it's necessary. A formal business plan provides direction, helps in securing funding, and ensures that all stakeholders are aligned towards the same goals.

What are the benefits of having a business plan?

The benefits of having a viable business plan includes, a clear direction and marketing strategies for growth, increased chances of securing funding, better understanding of the market and competition, effective resource allocation, and risk mitigation.

What are the 3 major components of a business plan?

The three major components are:

a) Executive Summary: An overview of the business, its mission, and objectives.

b) Market Analysis: A deep dive into the industry, target audience, and competitors.

c) Financial Projections: Predictions about revenue, costs, and profitability over a specified period.

Website Builder & CMS

Community Forum

Unified Inbox

Live Chat & Helpdesk

Marketing Campaigns

Project & Task Management

Form Builder

AI Assistant

Affiliate Management

Capital & Fundraising

Newsletters

Coaching / Consulting

Digital products

Memberships sites

Content business

Local businesses

Comparisons

Squarespace

Help Center

Startup Academy

Startup Blog

Startup Community

Startup Events

Startup Stories

Business Agility Pty Ltd

Your partners in business and leadership success.

Call: +61 448 101 507

• Oct 24, 2020

The Top 5 Benefits of Having a Business Plan

Whether you’re starting a small business or exploring ways to expand an existing business, a Business Plan is an important tool to help guide your decisions. An effective Business Plan is a roadmap to success, providing clarity on all aspects of your business, from marketing and finance, through to operations, products, services, people and how you will be better than your competitors.

The purpose of a business plan is to help articulate a strategy for starting or changing your business. It defines how you will achieve your most important business objectives. A good Business Plan should help you to sleep at night if you are a business owner.

For existing businesses, a business plan should be updated annually as a way to guide growth and navigate expansion into new markets. Your plan should include explicit objectives for hiring new employees, what structure you will have, what products and services your business will provide, how you will promote them and how you will finance business operations.

If you are considering starting a business, a Business Plan can help you to check the viability of a business before investing too much time or money in it. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

The Benefits of Having a Business Plan:​

1. Increased Clarity

A business plan can bring clarity to the decision-making process regarding key aspects of the business such as capital investments, leases, resourcing, etc. You can't do everything. A good Business Plan will help you identify business critical priorities and milestones to focus on.

2. Creation of a Marketing Roadmap

Marketing is an important aspect of a business plan. It helps to define your target market(s), target customers and how you will promote and place your product / service to these markets / customers.

3. Support for Funding

Whether you’re seeking credit from a bank or capital from investors, a business plan that answers questions about profitability and revenue generation is often required.

4. Helps to Secure Talent

For a business to succeed, attracting talented workers and partners is vital. Part of a business plan’s purpose is to help bring in the right talent, at the right time. Staff want to understand the vision, how the business will achieve its goals, and how they can contribute to this in their own roles.

5. Provides Structure

A business plan provides structure and defines business management objectives. It becomes a reference tool to keep the business on track with sales targets and operational milestones. When used properly and consulted regularly, it can help measure and manage your priority areas of focus.

Download your Business Plan template for $49.99 + GST here.

Many people engage us as business coaches to take a weekly / fortnightly step-by-step approach to the development of their own Business Plans, with the added benefit of our expertise and guidance throughout the process. In this way, you learn the essential aspects of running a successful business, while crafting your very own business plan over 8-12 weeks.

If you would like more information about how to create an effective Business Plan for your business, with our guidance, then please don't hesitate to contact Business Agility. We are business coaches who are former CEOs and MDs. We know what it takes to be successful in business.

Recent Posts

Round 2 of the Boosting Female Founders Initiative is Now Open

The Top 5 Benefits of Having a Marketing Plan

Lottery West COVID-19 Relief Fund: 'Strengthening & Adapting Organisations' Grant Now Open!

What Are the Benefits of Preparing a Business Plan?

• Small Business
• Business Planning & Strategy
• Preparing Business Plans
• ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
• ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
• ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">

Difference Between Business Plan & Strategic Plan

What is a dehydrated business plan, what does a business plan consist of.

• How to Create a New Business Plan
• Examples of Liquor Store Business Plans

Running a business with detailed plans and clearly defined strategies will help you forecast your growth and deal with unforeseen business developments. A business plan is not just a document about your business; it is an effective business tool that comes with many benefits. Using any number of business plan templates or how-articles, like the ones provided by the U.S. Small Business Administration, will help you create a winning business plan.

Provides You With Direction

One of the main benefits of developing a business plan is that it provides your company with direction. The research and preparation that goes into developing the plan helps to broaden your understanding of your business, its operations and its industry. A business plan allows you to clearly compare the business’s expenses against its customer demand, available finances and competition. Understanding this information makes it easier for you to develop appropriate strategies to generate successful outcomes, making clarity an important benefit of your business plan.

Helps You Set Goals

Another advantage of business plan writing is that it helps you clearly identify the success and failure of your business strategies. The business plan provides a broad snapshot of the business’s details and often includes one- and five-year projections. By comparing your business's current figures, receipts and totals against those presented in the business plan, you can determine if your business has achieved or exceeded its goals.

Comparison of the business plan's current and previous marketing efforts can also help you to improve or refine your business’s best practices. This process of benchmarking is also quite beneficial because it allows you keep your business in line with the industry’s standards.

Helps You Secure Financing

Finding sources of funding is one of the most critical business plan topics in any plan. Along with savings and personal investments, business funding options can include loans, grants and lines of credit. When applying for outside funding, institutions and investors often require a business plan to accompany the loan application.

Even government grant and procurement opportunities require a business plan to be submitted with the application. In addition, a complete business plan includes an appendix which holds copies of supporting documents, such as tax returns, payroll information and bank statements. These addendum items are often the documents required by lending institutions during the lending process. The business plan provides a convenient and well-organized location for these supporting items

Help With Contracts

During your process of developing business relationships and completing contract negotiations, you may be required to show and prove your business ideas and forecasts to other businesses. Your business plan provides a clear display of your business’s missions, objectives and goals, both short- and long-term. The business plan can also assist you in placing executive positions within your business because it assists these individuals in ascertaining the viability and potential success of your business. Furthermore, the business plan helps you to clearly communicate your business’s missions and goals to your staff, as well as explain how those goals will be attained.

Basics of a Business Plan

In order for your business plan to be beneficial to your business, it must be thoroughly researched, thoughtfully written and well-organized. Additionally, the plan must be regularly updated. Entrepreneur magazine recommends that you analyze, review and update your business plan at least once each year. However, periodic monthly and quarterly reviews are just as effective.

• Entrepreneur: Updating Your Business Plan

Writing professionally since 2004, Charmayne Smith focuses on corporate materials such as training manuals, business plans, grant applications and technical manuals. Smith's articles have appeared in the "Houston Chronicle" and on various websites, drawing on her extensive experience in corporate management and property/casualty insurance.

Related Articles

The importance of business plans, what is the difference between a marketing & business plan, define a business plan, key tools for planning finances, business plan vs. business strategy, why is it important to have a business plan, what does "abridged" mean on a business plan, why does a business need a business plan, the importance of a business plan, most popular.

• 1 The Importance of Business Plans
• 2 What Is the Difference Between a Marketing & Business Plan?
• 3 Define a Business Plan
• 4 Key Tools for Planning Finances

25 Benefits of Having a Business Plan in 2024

What is a business plan, what are the benefits of a business plan, 1) executive summary, 2) company description, 3) market analysis, 4) financial analysis, how to write your own business plan for free, hire a professional for writing a business plan.

The first step to creating a successful business is to have a well-written business plan. The benefits of a business plan are numerous.

A well-written plan can help you start your new business on the right foot with investors, partners, and potential employees. It will also serve as an essential tool for managing the day-to-day operations of the company.

A good business plan will outline clear expectations for all stakeholders involved in helping you become more successful.

In this article, we will discuss what you should include in your business plan so that it is not only informative but also convincing and persuasive to investors, partners, and potential employees. We will also state the benefits of writing a business plan to help your startup succeed.

To start, let’s get a good idea of what a business plan entails.

A business plan is an overview of your company and its goals. It includes information about the industry, finances, and marketing plans.

A business plan is a formal document containing the both short-term and long-term goals of a business, it also gives vital information on how to achieve the goals.

The purpose of a business plan is to provide an overview for investors and lenders, so they can decide whether they want to risk their money on your company.

Moreover, before creating a business plan an entrepreneur must research what will make the business triumph.

There are many benefits to writing a business plan for your new startup. In summary, it will serve as an accurate roadmap for your company, and it will help you think through all aspects of your business: from marketing and finances to staffing and operations. Let’s check the list of business plan benefits below

• A business Plan shows investors how serious you’re about your business
• A business plan can assist you in making decisions.
• A business plan might help you come up with new ideas and innovations.
• A Business Plan Creates an Action Plan
• To have a better understanding of your competitors.
• To gain a deeper understanding of your customer.
• To reveal the truth about assumptions previously nurtured in your industry.
• To determine the sustainability of your business.
• To keep a record of your earnings.
• To determine your financial requirements.
• To attract potential investors.
• To reduce the risk of following the wrong opportunity.
• To make you do more study and have a better understanding of your market.
• To attract workers and a management team to join the company.
• To design a route and concentrate your efforts.
• To find new partnerships.
• To establish your brand.
• To assess your company’s progress and success
• To reposition your company in response to shifting market conditions.
• To make a written record of your marketing strategy.
• To be aware of and anticipate your company’s workforce requirements.
• To seek out new possibilities.
• To capitalize on your competitor’s weakness
• It helps you set long-term goals
• A business plan lets an entrepreneur see future challenges and suggest possible ways to mitigate them.

What are the 4 Components of a Business Plan?

You should invest time in writing out your ideas by starting with these four main sections as they remain the major components of a business plan, and they are: 1) executive summary 2) company description 3) market analysis 4) financial analysis.

Every business plan should have a clear and concise executive summary. It is a short overview of the company’s mission, its qualifications for operating, and the risks it can expect to encounter.

The executive summary should be less than 1-page long and should be concise enough that a reader can understand what your company does in just 10 minutes.

It is important that you provide as many details as possible in the Executive Summary to allow potential investors to have a clear idea of your company’s concept and direction.

The company description section of your business plan defines the firm’s goal and direction so that financiers and investors can get a good idea of who you are.

A market analysis is a comprehensive examination of a market within a specific industry. You will investigate the nature of your market, such as volume and value, potential customer groups, purchasing behaviour, competitiveness, and other crucial elements, using this analysis.

The financial analysis part of your business plan may be the most complex for you to accomplish on your own, but it also has the potential to make or break your funding application.

You will include all financial projections for the business . You might actually need the help of an accountant to get this done.

Financial projections help with market research by predicting demand, pricing strategy, and pricing policy options.

Financial projections also help with strategic planning by organizing all of your financial information into different areas depending on market research and forecasts.

I have written an article, where I’ll walk you through the process of writing your own business plan for free.

Here is it: How to Write a Winning Bankable Business Plan

Creating a business plan might be done with a business plan template, by self-writing, or by hiring a professional. Get the best Business Plan Writing and Business Proposal . Contact us via [email protected]

Starting a business is always risky, but having an actionable and detailed business plan can help reduce the risk. It can also help you steer your business in the right direction. Moreover, the importance of a business plan can never be over-emphasized.

A good, actionable, and detailed business plan is essential for any entrepreneur or business owner to succeed. A well-thought-out plan is crucial to maintain the growth of your company in the long run.

This is for you

Vietsn Vietnamese Best Forum (2023 Review)

How to Start an LLC in South Dakota

4 Tips For Recovering From a Bad Business Decision in 2024

How to Write a Winning Bankable Business Plan in 2024

How to Make Money Online as a Teen in 2024 – Unique Ideas

5 Tips to Sustain a Small Business with Limited Capital

How to Start an LLC in Tennessee

3 Tips for Young Entrepreneurs Before Launching Overseas

10 Best Leadership Qualities To Improve Your Business

How to Fix “Discovered – Currently not indexed” Status in 2024

More From Forbes

The top 5 advantages of planning ahead in your business.

• Share to Facebook
• Share to Twitter
• Share to Linkedin

One of the most important activities you can do for your business to ensure you reap financial success is to plan. Planning gives your company a clear direction when mapping out your goals. You plan on the direction you would like the business to go, and the plan maps out how you will achieve those goals. This plan is known as a budget, and often business owners do not like to budget because it can feel like a constriction.

But have you considered how much a budget can offer you?

Budgeting and financial planning offers an opportunity to construct scenarios with various factors playing in, such as planned sales increases, payroll increases, cost per unit increases, and the list goes on. Depending on the business size and how many moving parts there are in the planning process, the organization and scenario building for this information, can get complicated.

Young woman with straight, long, brown hair wearing glasses smiling. Wearing business jacket.

After searching for an affordable financial planning software for many years but to no avail, Tiffany Wong, a co-founder of the startup company Pry.co , founded this new platform to move small business owners and startup companies away from error-prone and inefficient softwares towards an affordable software solution that easily streamlines the planning process. This tool is designed to make it easier for the user to manage their financial data while having access to actual accounting data from previous periods and planning future years – all in one platform.

Pry.co makes it simple for businesses to manage their financial budget, map out a hiring plan to include salary increases, financial models, and cash runway forecasts, all without having to manage other software programs or hire a CFO.

The top benefits of budgeting:

1. offers a plan and clear direction for your business goals.

In a budget, you can break down the cost drivers to smaller detail, so much so that if it is essential to understand the cost of screws when building your revenue model, you can do that.

See A Total Eclipse Of A Star As Manhattanhenge Returns The Night Sky This Week

A surprise game changing crypto bill could be about to quietly blow up the price of bitcoin ethereum and xrp, last-chance northern lights forecast: here’s where you could see aurora borealis tonight, 2. offers the ability to incorporate cost increases in your plan to ensure you can keep your profit margins healthy.

As costs increase over time due to inflation and variable cost increases, these can efficiently be planned for during the budget and planning phase. Having a reliable budgeting system in place makes the process more efficient and saves time for you.

3. Gives you a basis for monitoring your progress towards these goals

Budgets are typically broken down into monthly increments, which allows the user to monitor their actual progress against their budgeted performance monthly. This process allows the opportunity for the business owner to react quickly to deviations and correct them before the problems turn into more significant issues.

4. Allows you to understand your business on a much deeper level

When you break down your costs, it allows you to take a deep dive into your business and understand what drives your costs up and how the business decisions you make daily affect your bottom line. Knowing your numbers is the best way you can increase the profitability of your business.

5. Offers a clear understanding of where you either met, fell short, or exceeded the planned goals

As you monitor your results against your planned numbers, you will see clearly where goals fell short and where you stand financially in your business. If you have a money leak, you will quickly plug it, and that could be a potentially considerable cost-saving as if it went undetected, it could force the business to lose large amounts of money.

The bottom line is that is in your best interest as a business owner to ensure you plan for your business’s future. Knowing your numbers is the best way to keep your business dollars, thereby making it more profitable. Having tools that simplify the process goes a long way in saving time and money.

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

• Editorial Standards
• Reprints & Permissions

Business planning expert

10 benefits of business planning for all businesses.

(Note: I posted this Wednesday on the Small Business Administration’s Industry Word blog, where I am a guest expert. I’m reposting it here because it seems appropriate. Click here for the original.)

And I’d like to point out that none of these benefits require a big formal business plan document. A lean business plan (as in What Business Plan Type is Best for Me) is usually enough. It takes an hour or two to do the first plan, then just an hour or two to review and revise monthly.

Here are those top ten benefits.

• See the whole business . Business planning done right connects the dots in your business so you get a better picture of the whole. Strategy is supposed to relate to tactics with strategic alignment. Does that show up in your plan? Do your sales connect to your sales and marketing expenses? Are your products right for your target market? Are you covering costs including long-term fixed costs, product development, and working capital needs as well? Take a step back and look at the larger picture.
• Strategic Focus . Startups and small business need to focus on their special identities, their target markets, and their products or services tailored to match.
• Set priorities . You can’t do everything. Business planning helps you keep track of the right things, and the most important things. Allocate your time, effort, and resources strategically.
• Manage change . With good planning process you regularly review assumptions, track progress, and catch new developments so you can adjust. Plan vs. actual analysis is a dashboard, and adjusting the plan is steering.
• Develop accountability . Good planning process sets expectations and tracks results. It’s a tool for regular review of what’s expected and what happened. Good work shows up. Disappointments show up too. A well-run monthly plan review with plan vs. actual included becomes an impromptu review of tasks and accomplishments.
• Manage cash . Good business planning connects the dots in cash flow. Sometimes just watching profits is enough. But when sales on account, physical products, purchasing assets, or repaying debts are involved, cash flow takes planning and management. Profitable businesses suffer when slow-paying clients or too much inventory constipate cash flow. A plan helps you see the problem and adjust to it.
• Strategic alignment . Does your day-to-day work fit with your main business tactics? Do those tactics match your strategy? If so, you have strategic alignment. If not, the business planning will bring up the hidden mismatches. For example, if you run a gourmet restaurant that has a drive-through window, you’re out of alignment.
• Milestones . Good business planning sets milestones you can work towards. These are key goals you want to achieve, like reaching a defined sales level, hiring that sales manager, or opening the new location. We’re human. We work better when we have visible goals we can work towards.
• Metrics . Put your performance indicators and numbers to track into a business plan where you can see them monthly in the plan review meeting. Figure out the numbers that matter. Sales and expenses usually do, but there are also calls, trips, seminars, web traffic, conversion rates, returns, and so forth. Use your business planning to define and track the key metrics.
• Realistic regular reminders to keep on track . We all want to do everything for our customers, but sometimes we need to push back to maintain quality and strategic focus. It’s hard, during the heat of the everyday routine, to remember the priorities and focus. The business planning process becomes a regular reminder.

Share this:

3 thoughts on “ 10 benefits of business planning for all businesses ”.

Hi Tim I couldn’t agree more. I could weep at the networking meetings I go to when I ask how many businesses have business plans and only my hand goes up (and those of my clients :-)) It’s how to persuade them that this really is an important thing to do when they think they are poddling along quite happily now. I’ve tried waving my plan at them and telling them it just got me a £1k grant and if they want a grant too, come to me and I’ll help them! The lot of a decent business coach/consultant can be a frustrating one 🙂

Thanks Karen, and I hope you emphasize the “coach” element in your practice, so that your clients always understand that it’s something they do, with you helping. Check out this one: http://timberry.bplans.com/2007/07/my-worst-ever-b.html (still very valid today).

And thanks for your addition. Glad to have you here.

I like how you said that business planning helps you keep track of the important stuff. That seems like a really important thing to do because it would allow you to progress more. Focusing on the necessary and essential would really mean that you could do more and accomplish more it seems to me.

Leave a Reply Cancel reply

You must be logged in to post a comment.

• Start free trial

Start selling with Shopify today

Start your free trial with Shopify today—then use these resources to guide you through every step of the process.

Free Business Plan Template for Small Businesses (2024)

Use this free business plan template to write your business plan quickly and efficiently.

A good business plan is essential to successfully starting your business —  and the easiest way to simplify the work of writing a business plan is to start with a business plan template.

You’re already investing time and energy in refining your business model and planning your launch—there’s no need to reinvent the wheel when it comes to writing a business plan. Instead, to help build a complete and effective plan, lean on time-tested structures created by other  entrepreneurs and startups. 

Ahead, learn what it takes to create a solid business plan and download Shopify's free business plan template to get started on your dream today. 

What this free business plan template includes

• Executive summary
• Company overview
• Products or services offered
• Market analysis
• Marketing plan
• Logistics and operations plan
• Financial plan

This business plan outline is designed to ensure you’re thinking through all of the important facets of starting a new business. It’s intended to help new business owners and entrepreneurs consider the full scope of running a business and identify functional areas they may not have considered or where they may need to level up their skills as they grow.

That said, it may not include the specific details or structure preferred by a potential investor or lender. If your goal with a business plan is to secure funding , check with your target organizations—typically banks or investors—to see if they have business plan templates you can follow to maximize your chances of success.

Our free business plan template includes seven key elements typically found in the traditional business plan format:

1. Executive summary

This is a one-page summary of your whole plan, typically written after the rest of the plan is completed. The description section of your executive summary will also cover your management team, business objectives and strategy, and other background information about the brand. 

2. Company overview

This section of your business plan will answer two fundamental questions: “Who are you?” and “What do you plan to do?” Answering these questions clarifies why your company exists, what sets it apart from others, and why it’s a good investment opportunity. This section will detail the reasons for your business’s existence, its goals, and its guiding principles.

3. Products or services offered

What you sell and the most important features of your products or services. It also includes any plans for intellectual property, like patent filings or copyright. If you do market research for new product lines, it will show up in this section of your business plan.

4. Market analysis

This section includes everything from estimated market size to your target markets and competitive advantage. It’ll include a competitive analysis of your industry to address competitors’ strengths and weaknesses. Market research is an important part of ensuring you have a viable idea.

5. Marketing plan

How you intend to get the word out about your business, and what strategic decisions you’ve made about things like your pricing strategy. It also covers potential customers’ demographics, your sales plan, and your metrics and milestones for success.

6. Logistics and operations plan

Everything that needs to happen to turn your raw materials into products and get them into the hands of your customers.

7. Financial plan

It’s important to include a look at your financial projections, including both revenue and expense projections. This section includes templates for three key financial statements: an income statement, a balance sheet, and a cash-flow statement . You can also include whether or not you need a business loan and how much you’ll need.

Business plan examples

What do financial projections look like on paper? How do you write an executive summary? What should your company description include?  Business plan examples  can help answer some of these questions and transform your business idea into an actionable plan.

Professional business plan example

Inside our template, we’ve filled out a sample business plan featuring a fictional ecommerce business . 

The sample is set up to help you get a sense of each section and understand how they apply to the planning and evaluation stages of a business plan. If you’re looking for funding, this example won’t be a complete or formal look at business plans, but it will give you a great place to start and notes about where to expand.

Lean business plan example

A lean business plan format is a shortened version of your more detailed business plan. It’s helpful when modifying your plan for a specific audience, like investors or new hires. 

Also known as a one-page business plan, it includes only the most important, need-to-know information, such as:

• Company description
• Key members of your team
• Customer segments

💡 Tip: For a step-by-step guide to creating a lean business plan (including a sample business plan), read our guide on how to create a lean business plan .

Benefits of writing a solid business plan

It’s tempting to dive right into execution when you’re excited about a new business or side project, but taking the time to write a thorough business plan and get your thoughts on paper allows you to do a number of beneficial things:

• Test the viability of your business idea. Whether you’ve got one business idea or many, business plans can make an idea more tangible, helping you see if it’s truly viable and ensure you’ve found a target market. 
• Plan for your next phase. Whether your goal is to start a new business or scale an existing business to the next level, a business plan can help you understand what needs to happen and identify gaps to address.
• Clarify marketing strategy, goals, and tactics. Writing a business plan can show you the actionable next steps to take on a big, abstract idea. It can also help you narrow your strategy and identify clear-cut tactics that will support it.
• Scope the necessary work. Without a concrete plan, cost overruns and delays are all but certain. A business plan can help you see the full scope of work to be done and adjust your investment of time and money accordingly.
• Hire and build partnerships. When you need buy-in from potential employees and business partners, especially in the early stages of your business, a clearly written business plan is one of the best tools at your disposal. A business plan provides a refined look at your goals for the business, letting partners judge for themselves whether or not they agree with your vision.
• Secure funds. Seeking financing for your business—whether from venture capital, financial institutions, or Shopify Capital —is one of the most common reasons to create a business plan.

Why you should you use a template for a business plan

A business plan can be as informal or formal as your situation calls for, but even if you’re a fan of the back-of-the-napkin approach to planning, there are some key benefits to starting your plan from an existing outline or simple business plan template.

No blank-page paralysis

A blank page can be intimidating to even the most seasoned writers. Using an established business planning process and template can help you get past the inertia of starting your business plan, and it allows you to skip the work of building an outline from scratch. You can always adjust a template to suit your needs.

Guidance on what to include in each section

If you’ve never sat through a business class, you might never have created a SWOT analysis or financial projections. Templates that offer guidance—in plain language—about how to fill in each section can help you navigate sometimes-daunting business jargon and create a complete and effective plan.

Knowing you’ve considered every section

In some cases, you may not need to complete every section of a startup business plan template, but its initial structure shows you you’re choosing to omit a section as opposed to forgetting to include it in the first place.

Tips for creating a successful business plan

There are some high-level strategic guidelines beyond the advice included in this free business plan template that can help you write an effective, complete plan while minimizing busywork.

Understand the audience for your plan

If you’re writing a business plan for yourself in order to get clarity on your ideas and your industry as a whole, you may not need to include the same level of detail or polish you would with a business plan you want to send to potential investors. Knowing who will read your plan will help you decide how much time to spend on it.

Know your goals

Understanding the goals of your plan can help you set the right scope. If your goal is to use the plan as a roadmap for growth, you may invest more time in it than if your goal is to understand the competitive landscape of a new industry.

Take it step by step

Writing a 10- to 15-page document can feel daunting, so try to tackle one section at a time. Select a couple of sections you feel most confident writing and start there—you can start on the next few sections once those are complete. Jot down bullet-point notes in each section before you start writing to organize your thoughts and streamline the writing process.

Maximize your business planning efforts

Planning is key to the financial success of any type of business , whether you’re a startup, non-profit, or corporation.

To make sure your efforts are focused on the highest-value parts of your own business planning, like clarifying your goals, setting a strategy, and understanding the target market and competitive landscape, lean on a business plan outline to handle the structure and format for you. Even if you eventually omit sections, you’ll save yourself time and energy by starting with a framework already in place.

• How to Start an Online Boutique- A Complete Playbook
• How To Source Products To Sell Online
• The Ultimate Guide To Dropshipping (2024)
• How to Start a Dropshipping Business- A Complete Playbook for 2024
• 6 Creative Ways to Start a Business With No Money in 2024
• What is Shopify and How Does it Work?
• What Is Affiliate Marketing and How to Get Started
• How to Price Your Products in 3 Simple Steps
• 10 Common Small Business Mistakes to Avoid
• How to Turn a Hobby into a Business in 8 Steps

Business plan template FAQ

What is the purpose of a business plan.

The purpose of your business plan is to describe a new business opportunity or an existing one. It clarifies the business strategy, marketing plan, financial forecasts, potential providers, and more information about the company.

How do I write a simple business plan?

• Choose a business plan format, such as a traditional or a one-page business plan. 
• Find a business plan template.
• Read through a business plan sample.
• Fill in the sections of your business plan.

What is the best business plan template?

If you need help writing a business plan, Shopify’s template is one of the most beginner-friendly options you’ll find. It’s comprehensive, well-written, and helps you fill out every section.

What are the 5 essential parts of a business plan?

The five essential parts of a traditional business plan include:

• Executive summary: This is a brief overview of the business plan, summarizing the key points and highlighting the main points of the plan.
• Business description: This section outlines the business concept and how it will be executed.
• Market analysis: This section provides an in-depth look at the target market and how the business will compete in the marketplace.
• Financial plan: This section details the financial projections for the business, including sales forecasts, capital requirements, and a break-even analysis.
• Management and organization: This section describes the management team and the organizational structure of the business.

Are there any free business plan templates?

There are several free templates for business plans for small business owners available online, including Shopify’s own version. Download a copy for your business.

Keep up with the latest from Shopify

Get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

By entering your email, you agree to receive marketing emails from Shopify.

popular posts

The point of sale for every sale.

Subscribe to our blog and get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

Unsubscribe anytime. By entering your email, you agree to receive marketing emails from Shopify.

Latest from Shopify

Jun 11, 2024

Learn on the go. Try Shopify for free, and explore all the tools you need to start, run, and grow your business.

Try Shopify for free, no credit card required.

Suggested Keywords

Workplace Benefits

Workplace benefits – a new name for a long-standing commitment, better financial wellness tomorrow starts with, inspiring better decisions today.

One of the most important aspects of your job is offering benefits that reflect the needs of your employees and organization. Here’s how we can help.

2024 Workplace Benefits Report

Our 14th annual report, “The resurging workforce”, provides insights to help companies evolve the needs of today’s workforce

You get more from a leader

With Workplace Benefits, employees have access to the benefits and solutions they need – no matter where they are in work or in life, and no matter the challenge or opportunity they may face. We’ll help you understand what your people need now and where they want to be in the future, through a more holistic view of their financial lives so they’re not just getting any benefit – they’re getting the benefit that’s most relevant to their needs. Watch our video to hear our story.

Solutions and services

We bring a breadth of experience and resources from across Bank of America to help you create programs that engage employees and make your job easier.

Financial wellness for employees

Plan sponsor support

Benefits designed around the people and companies we serve.

At Bank of America, we see more of the people you see every day. With insights that give your employees the power to see further. We can empower your organization with benefit options that fit all your people wherever they are in their journey.

The power and breadth of our resources allow us to provide a benefits program that meets the near-term and long-term needs of your employees.

Our insights

You benefit from our deep insights gained from millions of interactions and research across the organization. Explore now.

Contact a team member today

Let us help you differentiate your business and empower your employees to take control of their full financial lives.

Business analytics refers to the statistical methods and computing technologies for processing, mining and visualizing data to uncover patterns, relationships and insights that enable better business decision-making.

Business analytics involves companies that use data created by their operations or publicly available data to solve business problems, monitor their business fundamentals, identify new growth opportunities, and better serve their customers.

Business analytics uses data exploration, data visualization, integrated dashboards, and more to provide users with access to actionable data and business insights.

This IBM ebook uncovers the value of integrating a business analytics solution that turns insights into action.

Read the guide for data leaders

Business intelligence (BI) enables better business decisions that are based on a foundation of business data. Business analytics (BA) is a subset of business intelligence, with business analytics providing the analysis, while the umbrella business intelligence infrastructure includes the tools for the identification and storage of the data that will be used for decision-making. Business intelligence collects, manages and uses both the raw input data and also the resulting knowledge and actionable insights generated by business analytics. The ongoing purpose of business analytics is to develop new knowledge and insights to increase a company’s total business intelligence.

Business analytics can be used to answer questions about what happened in the past, make predictions and forecast business results. 1 An organization can gain a more complete picture of its business, enabling it to understand user behavior more effectively.

Data scientists and advanced data analysts use business analytics to provide advanced statistical analysis. Some examples of statistical analysis include regression analysis which uses previous sales data to estimate customer lifetime value, and cluster analysis for analyzing and segmenting high-usage and low-usage users in a particular area.

Business analytics solutions provide benefits for all departments, including finance , human resources , supply chain , marketing , sales  or information technology , plus all industries, including healthcare , financial services and consumer goods .

Business analytics uses analytics—the action of deriving insights from data—to drive increases in business performance. 4 types of valuable analytics are often used:

As the name implies, this type of analytics describes the data it contains. An example would be a pie chart that breaks down the demographics of a company’s customers.

Diagnostic analytics helps pinpoint the root cause of an event. It can help answer questions such as: What are the series of events that influenced the business outcomes?  Where do the true correlation and causality lie within a given historical time frame? What are the drivers behind the findings? For example, manufacturers can analyze a failed component on an assembly line and determine the reason behind its failure.

Predictive analytics mines existing data, identifies patterns and helps companies predict what might happen in the future based on that data. It uses predictive models that make hypotheses about future behaviors or outcomes. For example, an organization could make predictions about the change in coat sales if the upcoming winter season is projected to have warmer temperatures. Predictive modeling 2 also helps organizations avoid issues before they occur, such as knowing when a vehicle or tool will break and intervening before it occurs, or knowing when changing demographics or psychographics will positively or negatively impact their product lines. 

These analytics help organizations make decisions about the future based on existing information and resources. Every business can use prescriptive analytics by reviewing their existing data to make a guess about what will happen next. For example, marketing and sales organizations can analyze the lead success rates of recent content to determine what types of content they should prioritize in the future. Financial services firms use it for fraud detection by analyzing existing data to make real-time decisions on whether any purchase is potentially fraudulent.

Business analytics practices involve several tools that help companies make sense of the data they are collecting and use it to turn that data into insights. Here are some of the most common tools, disciplines and approaches:

• Data management: Data management is the practice of ingesting, processing, securing and storing an organization’s data. It is then used for strategic decision-making to improve business outcomes. The data management discipline has become an increasing priority as expanding data stores has created significant challenges, such as data silos, security risks and general bottlenecks to decision-making.
• Data mining or KDD : Data mining, also known as knowledge discovery in data (KDD), is the process of uncovering patterns and other valuable information from large data sets and is a significant component of big data analytics. The growing importance of big data makes data mining a critical component of any modern business by assisting companies in transforming their raw data into useful knowledge.
• Data warehousing : A data warehouse, or enterprise data warehouse (EDW), is a system that aggregates data from different sources, including apps, Internet of Things (IoT) devices, social media and spreadsheets into a single, central, consistent data store to support data analysis, data mining, artificial intelligence (AI) and machine learning (ML). A data warehouse system enables an organization to run powerful analytics on large amounts of data (petabytes and petabytes) in ways that a standard database cannot.
• Data visualization : The representation of data by using graphics such as charts, plots, infographics and even animations. These visual displays of information communicate complex data relationships and data-driven insights in a way that is easier to understand, being especially helpful for nontechnical staff to understand analytics concepts, and helping show patterns in multiple data points. Data visualization can also help with idea generation, idea illustration or visual discovery.
• Forecasting : This tool takes historical data and current market conditions and then makes predictions as to how much revenue an organization can expect to bring in over the next few months or years. Forecasts are adjusted as new information becomes available. When companies embrace data and analytics with well-established planning and forecasting best practices, they enhance strategic decision-making and can be rewarded with more accurate plans and more timely forecasts.
• Machine learning algorithms : A machine learning algorithm is a set of rules or processes used by an AI system to conduct tasks, most often to discover new data insights and patterns, or to predict output values from a given set of input variables. Machine learning algorithms enable machine learning to learn, delivering the power to analyze data, identify trends and predict issues before they occur.
• Reporting : Business analytics runs on the fuel of data to help organizations make informed decisions. Enterprise-grade reporting software can extract information from various applications used by an enterprise, analyze the data and generate reports.
• Statistical analysis : Statistical analysis enables an organization to extract actionable insights from its data. Advanced statistical analysis procedures help ensure high accuracy and quality decision-making. The analytics lifecycle includes data preparation and management to analysis and reporting.
• Text analysis : Identifies textual patterns and trends within unstructured data by using machine learning, statistics and linguistics. By transforming the data into a more structured format through text mining and text analysis , more quantitative insights can be found.

Modern organizations need to be able to make quick decisions to compete in a rapidly changing world, where new competitors spring up frequently and customers’ habits are always changing. Organizations that prioritize business analytics have several advantages over competitors who do not.

Faster and better-informed decisions: Having a flexible and expansive view of all the data an organization possesses can eliminate uncertainty, prompt an organization to take action faster, and improve business processes. If an organization’s data suggests that sales of a particular product line are declining precipitously, it might decide to discontinue that line. If climate risk impacts the harvesting of a raw material another organization depends on, it might need to source a new material from somewhere else. It’s especially helpful when considering pricing strategies.

How a company prices its goods or services is based on thousands of data points, many of which do not remain static over time. Whether a company has a fixed or dynamic pricing strategy, being able to access real-time data to make smarter short- and long-term pricing data is critical. For organizations that want to incorporate dynamic pricing, business analytics enables them to use thousands of data points to react to external events and trends to identify the most profitable price point as frequently as necessary.

Single-window view of information: Increased collaboration between departments and line-of-business users means that everyone has the same data and is talking from the same playbook. Having that single pane of glass shows more unseen patterns, enabling different departments to understand the company’s holistic approach and increase an organization’s ability to respond to changes in the marketplace.

Enhanced customer service: By knowing what customers want, when and how they want it, organizations encourage happier customers and build greater loyalty. In addition to an improved customer experience , by being able to make smarter decisions on resource allocation or manufacturing, organizations are likely able to offer those goods or services at a more affordable price.

Companies looking to harness business data will likely need to upskill existing employees or hire new employees, potentially creating new job descriptions. Data-driven organizations need employees with excellent hands-on analytical and communication skills.

Here are some of the employees that they need to take advantage of the full potential of robust business analytics strategies:

Data scientists: These people are responsible for managing the algorithms and models that power the business analytics programs. Organizational data scientists  either use open source libraries, such as the natural language toolkit (NTLK) for algorithms or build their own to analyze data. They excel at problem-solving and usually need to know several programming languages, such as Python, which helps access out-of-the-box machine learning algorithms and structured query language (SQL) , which helps extract data from databases to feed into a model.

In recent years, an increasing number of schools offer Master of Science or Bachelor’s degrees in data science where students engage in degree program coursework that teaches them computer science, statistical modeling and other mathematical applications.

Data engineers: They create and maintain information systems that collect data from different places that are cleaned and sorted, and placed into a master database. They are often responsible for helping to ensure that data can be easily collected and accessed by stakeholders to provide organizations with a unified view of their data operations.

Data analysts: They play a pivotal role in communicating insights to external and internal stakeholders. Depending on the size of the organization, they might collect and analyze the data sets and build the data visualizations, or they might take the work created by other data scientists and focus on building strong storytelling for the key takeaways.

To maximize the benefits of an organization’s business analytics, it needs to clean and connect its data, create data visualizations and provide insights on where the business is today while helping predict what will happen tomorrow. This usually involves these steps:

First, organizations must identify all the data they have on hand and what external data they want to incorporate to understand what opportunities for business analytics they have.

Unfortunately, much of a company's data remains uncleaned, rendering it useless for accurate analysis until addressed.

Here are some reasons why an organization’s data might need cleaning:

• Incorrect data fields: Due to manual entry or incorrect data transfers, an organization might have bad data mixed in with accurate data. If it has any bad data in the system, this has the potential to render the entire set meaningless.
• Outdated data values: Certain data sets, including customer information, might need editing due to customers leaving, product lines being discontinued or other historical data that is no longer relevant.
• Missing data: Companies might have changed how they collect data or the data they collect, which means historic entries might be missing data that is crucial to future business analysis. Companies in this situation might need to invest in either manual data entry or identify ways to use algorithms  or machine learning  to predict what the correct data should be.
• Data silos: If an organization’s existing data is in multiple spreadsheets or other types of databases, it might need to merge the data so it’s all in one place. While the foundation of any business analytics approach is first-party data (data the company has collected from stakeholders and owns), they might want to append third-party data (data they’ve purchased or gleaned from other organizations) to match their data with external insights.

Companies can now query and quickly parse gigabytes or terabytes of data rapidly with more cloud computing . Data scientists can analyze data more effectively by using machine learning, algorithms, artificial intelligence (AI ) and other technologies. Doing so can produce actionable insights based on an organization’s key performance indicators (KPIs) .

Business analytics programs can now quickly take huge amounts of that analyzed data to create dashboards, visualizations and panels where the data can be stored, viewed, sorted, manipulated and sent to stakeholders.

Data visualization best practices include understanding which visual best fits the data an organization is using and the key points it hopes to make, keeping the visual as clean and simple as possible, and providing the right explanations and content to help ensure that the audience understands what they’re viewing.

Ongoing data management is conducted in tandem with what was mentioned earlier. An organization that embraces business analytics must create a comprehensive strategy for maintaining its cleaned data, especially as it incorporates new data sources.

Business analytics are useful for every type of business unit as a way to make sense of the data it has and help it generate specific insights that drive smarter decision-making.

• Financial and operational planning: Business analytics provides valuable insights to help organizations align their financial planning and operations more seamlessly. It does this by setting rules for supply chain management , integrating data across functions, and improving supply chain analytics and demand forecasting.
• Planning analytics: An integrated business planning approach that combines spreadsheets and database technologies to make effective business decisions about topics such as demand and lead generation, optimization of operating costs, and technology requirements based on solid metrics. Many organizations have historically used tools including Microsoft Excel for business planning, but some are transitioning to tools such as IBM Planning Analytics .
• Integrated sales and marketing planning: Most organizations have historical data about their lead generation, sales conversions and customer retention success rates. Organizations looking to create more accurate revenue plans and forecasts and gain deeper visibility into their marketing and sales data are using business analytics to allocate resources based on performance or changing demand to meet business objectives.
• Integrated workforce performance planning: As organizations undergo digital transformation and otherwise react to changing landscapes, they might need to ensure they have the right workforce with the right analytical skills. This is especially true in a world where employees are more likely to leave a company for a new job. Workforce performance planning helps organizations understand their workforce requirements, identify and address skill gaps, and better recruit and retain talent to meet the organization's needs today and in the future.

The flexibility of spreadsheets. Control of a database. The power of integrated business planning. Now available as a Service on AWS.

AI-powered automation and insights in Cognos Analytics enable everyone in your organization to unlock the full potential of your data. 

Detects application and business risks affecting the customer experience, enabling users to correlate application service level objectives with underlying infrastructure resourcing.

Learn more about business analytics by reading these blogs and articles. 

IBM Planning Analytics has helped support organizations across not only the office of finance but all departments in their organization.

A growing number of forward-looking companies are successfully navigating complexities using IBM Planning Analytics, a technology capable of supporting secure collaboration, fast automated data acquisition, and more.

Predictive analytics is a branch of advanced analytics that makes predictions about future outcomes using historical data combined with statistical modeling, data mining techniques and machine learning.

Scale AI workloads for all your data, anywhere, with IBM watsonx.data, a fit-for-purpose data store built on an open data lakehouse architecture.

1 Business intelligence versus business analytics  (link resides outside ibm.com), Harvard Business School. 2  How predictive analytics can boost product development  (link resides outside ibm.com), McKinsey, August 16, 2018.

• All Products
• Enterprise Resource Planning (ERP)

What is ERP?

Enterprise resource planning (ERP) is a software system that helps you run your entire business, supporting automation and processes in finance, human resources, manufacturing, supply chain, services, procurement, and more.

• ERP definition in detail

ERP stands for enterprise resource planning, but what does ERP mean? The simplest way to define ERP is to think about all the core business processes needed to run a company: finance, HR, manufacturing, supply chain, services, procurement, and others. At its most basic level, ERP helps to efficiently manage all these processes in an integrated system. It is often referred to as the system of record of the organization.

Yet today’s ERP systems are anything but basic and have little resemblance to the ERP of decades ago. They are now delivered via the cloud and use the latest technologies – such as artificial intelligence (AI) and machine learning – to provide intelligent automation, greater efficiency, and instant insight across the business. Modern cloud ERP software also connects internal operations with business partners and networks around the world, giving companies the collaboration , agility, and speed they need to be competitive today.

Table of Contents

Why is erp important.

• Benefits of ERP

ERP examples in different industries

How do erp systems work, common erp modules.

Types of ERP deployment

ERP integration

The total cost of erp.

• History and the future of ERP

10 things to look for in an ERP system

Erp at any size: what are my options.

Sometimes described as “the central nervous system of an enterprise,” an ERP software system provides the automation, integration, and intelligence that is essential to efficiently run all day-to-day business operations. Most or all of an organization’s data should reside in the ERP system to provide a single source of truth across the business.

Finance requires an ERP to quickly close the books. Sales needs ERP to manage all customer orders. Logistics relies on well-running ERP software to deliver the right products and services to customers on time. Accounts payable needs ERP to pay suppliers correctly and on time. Management needs instant visibility into the company’s performance to make timely decisions. And banks and shareholders require accurate financial records, so they count on reliable data and analysis made possible by the ERP system.

The importance of ERP software to businesses is illustrated by the growing adoption rate. According to G2 , “The global ERP software market is projected to reach US$78.40 billion by 2026, growing at a CAGR of 10.2% from 2019 to 2026.”

Discover why an ERP system is so important.

Six key benefits of ERP

A good ERP system offers many advantages — which can vary depending on how the system is deployed. The benefits of cloud ERP , for example, are different than on premise. That said, there are six major benefits that apply to all modern ERP solutions:

• Higher productivity: Streamline and automate your core business processes to help everyone in your organization do more with fewer resources.
• Deeper insights: Eliminate information silos, gain a single source of truth, and get fast answers to mission-critical business questions.
• Accelerated reporting: Fast-track business and financial reporting and easily share results. Act on insights and improve performance in real time.
• Lower risk: Maximize business visibility and control, ensure compliance with regulatory requirements, and predict and prevent risk.
• Simpler IT: By using integrated ERP applications that share a database, you can simplify IT and give everyone an easier way to work.
• Improved agility: With efficient operations and ready access to real-time data, you can quickly identify and react to new opportunities.

Businesses in every industry – from automotive to wholesale distribution – need accurate, real-time information and effective business processes to compete and thrive. Different industries rely on their ERP software for quite different reasons, however. Here are just a few examples:

• Utilities need to constantly review their capital assets, not only to meet demand for future services but also for the replacement of aging assets. Without ERP, the effort to prioritize these major asset investments would be difficult and error prone. ERP also helps solve another critical utility company issue: forecasting of spare parts. Not having the right parts during an outage can create a significant customer service issue. On the other hand, having too many spare parts means excessive costs and out-of-date stock.
• For wholesalers , importers, direct store delivery, and 3PL/4PL firms, on-time delivery is key. All of these organizations want to reduce distribution costs, increase inventory turns, and shorten order-to-cash time. To achieve these goals, they need integration of inventory management, purchasing, and logistics functionality, as well as automated processes that are customized to their needs.
• Discrete, batch, and continuous process manufacturers all rely on ERP and supply chain systems to meet product quality goals, manage asset utilization, control overtime costs, handle customer returns and more. Manufacturers can also gain end-to-end inventory control by monitoring stock movements, pinpointing top and underperforming products, and managing procurement more efficiently.
• Service companies – including accounting, tax, engineering, IT, legal, and other professional services firms – require powerful, real-time mobile ERP technology to balance service delivery commitments with financial health. Key to professional service success is the ability to stay on schedule while managing project profitability, resource utilization, revenue recognition, recurring revenue objectives, and growth opportunities.
• Retail has undergone a significant transformation now that e-commerce has merged with other sales channels as well as brick-and-mortar operations. The ability to provide self-service options for identifying, configuring, purchasing, and shipping products is dependent on integrated data. A modern ERP also helps retailers reduce cart abandonments, improve Web site conversions, boost average order value, and increase customer lifetime value.

An ERP system – also called an ERP suite – is made up of integrated modules or business applications that talk to each other and share common a database.

Each ERP module typically focuses on one business area, but they work together using the same data to meet the company’s needs. Finance , accounting, human resources , sales, procurement , logistics , and supply chain are popular starting points. Companies can pick and choose the module they want and can add on and scale as needed.

ERP systems also support industry-specific requirements, either as part of the system’s core functionality or through application extensions that seamlessly integrate with the suite.

ERP software can be bought using a cloud subscription model (software-as-a-service) or a licensing model (on premise).

The ERP software system shown here illustrates enterprise resource planning use cases for sourcing and procurement, as well as sales. Typical ERP modules also address finance, manufacturing, and supply chain, among other applications.

Enterprise resource planning systems include a variety of different modules. Each ERP module supports specific business processes – like finance, procurement, or manufacturing – and provides employees in that department with the transactions and insight they need do their jobs. Every module connects to the ERP system, which delivers a single source of truth and accurate, shared data across departments.

Components of an enterprise resource planning system

The most widely used ERP modules include:

• Finance:  The finance and accounting module is the backbone of most ERP systems. In addition to managing the general ledger and automating key financial tasks, it helps businesses track accounts payable (AP) and receivable (AR), close the books efficiently, generate financial reports, comply with revenue recognition standards, mitigate financial risk, and more.
• Human resources management:  Most ERP systems include an HR module that provides core capabilities such as time and attendance and payroll. Add-ons, or even entire human capital management (HCM) suites, can connect to the ERP and deliver more robust HR functionality – everything from workforce analytics to employee experience management.
• Sourcing and procurement:  The sourcing and procurement module helps businesses procure the materials and services they need to manufacture their goods – or the items they want to resell. The module centralizes and automates purchasing, including requests for quotes, contract creation, and approvals. It can minimize underbuying and overbuying, improve supplier negotiations with AI-powered analytics, and even seamlessly connect with buyer networks.
• Sales:  The sales module keeps track of communications with prospects and customers – and helps reps use data-driven insights to increase sales and target leads with the right promotions and upsell opportunities. It includes functionality for the order-to-cash process, including order management, contracts, billing, sales performance management, and sales force support.
• Manufacturing:  The manufacturing module is a key planning and execution component of ERP software. It helps companies simplify complex manufacturing processes and ensure production is in line with demand. This module typically includes functionality for material requirements planning (MRP), production scheduling, manufacturing execution, quality management, and more.
• Logistics and supply chain management:  Another key component of ERP systems, the supply chain module tracks the movement of goods and supplies throughout an organization’s supply chain. The module provides tools for real-time inventory management, warehousing operations, transportation, and logistics – and can help increase supply chain visibility and resilience.
• Service:  In an ERP, the service module helps companies deliver the reliable, personalized service customers have come to expect. The module can include tools for in-house repairs, spare parts, field service management, and service-based revenue streams. It also provides analytics to help service reps and technicians rapidly solve customer issues and improve loyalty.
• R&D and engineering:  Feature-rich ERP systems include an R&D and engineering module . This module provides tools for product design and development, product lifecycle management (PLM), product compliance, and more – so companies can quickly and cost-effectively create new innovations.
• Enterprise asset management: Robust ERP systems can include an EAM module – which helps asset-intensive businesses minimize downtime and keep their machines and equipment running at peak efficiency. This module includes functionality for predictive maintenance, scheduling, asset operations and planning, environment, health and safety (EHS), and more.

Modern ERP systems can be deployed in a number of ways: in a public or private cloud, on premise, or in various hybrid scenarios that combine environments. Here are some of the high-level benefits of each to help you identify the ERP deployment option that makes the most sense for your business.

With cloud ERP , the software is hosted in the cloud and delivered over the Internet as a service that you subscribe to. The software provider generally takes care of regular maintenance, updates, and security on your behalf. Today, cloud ERP is the most popular deployment method for many reasons – including lower upfront costs, greater scalability and agility, easier integration, and much more.

On-Premise ERP

This is the traditional model for deploying software where you control everything. The ERP software is typically installed in your data center at the locations of your choice. The installation and maintenance of the hardware and software is your staff’s responsibility.

Many companies are modernizing and upgrading their on-premise ERP systems to cloud deployments. This requires careful planning of your ERP upgrade as well as a thoughtful process of evaluating ERP software and deployment options .

For companies that want a mixture of both to meet their business requirements, there is the hybrid cloud ERP model. This is where some of your ERP applications and data will be in the cloud and some on premise. Sometimes this is referred to as two-tier ERP .

ERP for finance can help you manage your daily accounting and financial close processes securely, regardless of your deployment approach.

Today’s ERP systems provide an enormous range of business functionality, but they still need to connect to and synchronize with other applications and data sources – such as CRM and HCM software, e-commerce platforms, industry-specific solutions, and even other ERPs. With ERP integration , companies can gain a unified view of information from different systems, increase business process efficiency, improve customer experiences, and facilitate collaboration across teams and business partners.

Modern ERP systems are open and flexible – and can easily integrate with a wide range of software products using connectors or customized adaptors, such as application programming interfaces (APIs). Other methods for ERP integration include ESB (enterprise service bus) and iPaaS (integration platform-as-a-service). iPaaS, which offers a cloud-based approach, is a very popular option for modern businesses. iPaaS platforms can rapidly sync on-premise or cloud-based ERP with SaaS applications from the same vendor or third-parties. They typically require little-to-no coding, they’re flexible and relatively inexpensive, and they offer a whole host of other uses – such as automatic API generation, machine learning data integration, Internet of Things (IoT) network integration, prebuilt content, and more.

The cost of ERP depends on the software vendor, the modules selected, and the deployment method. Generally speaking, cloud-based ERP has lower costs than on-premise ERP because there is no hardware that needs to be purchased – and no expensive in-house IT experts that need to be hired. The vendor handles the maintenance and charges the customer an annual or monthly subscription fee, usually based on the number of users.

When calculating the return on investment (ROI) and total cost of ownership (TCO) of a new ERP implementation, the initial and ongoing workforce costs are just as important as the software selection and deployment costs. With cloud and hybrid options, new factors must be evaluated. For example, software maintenance, facility, computer capacity, downtime, recovery, security, privacy, and IT staff costs are all important considerations. As mentioned, cloud options significantly reduce both capital and operating costs – improving both ROI and TCO.

ERP history: The rapid evolution of ERP

Computerized business applications were born in the accounting and finance world in the 1960’s using mainframe computers. These pioneering applications were faster and more accurate than manual processes – but were expensive, limited in functionality, and still slow. Before long, these applications spawned the development of dedicated, standalone solutions such as sales order processing and manufacturing requirements planning ( MRP ).

In the mid 1980’s, competition in the manufacturing sector was exploding and new tools were required. New MRP II software integrated accounting and finance, sales, purchasing, inventory, and manufacturing planning and scheduling – providing the manufacturer with an integrated system.

Near the end of the 1990’s, ERP was introduced. ERP transformed the technology sector by serving a broader range of industries and by combining MRP II, human resources, project accounting, and end-user reporting.

In the short span of the 21st century, faster Internet speeds and new development tools have again revolutionized ERP suites. The introduction of browser-based software paved the way for cloud ERP software , a breakthrough that has expanded both the reach and the functionality of ERP solutions.

Today – in the era of digital transformation – modern ERP systems are increasingly taking advantage of new intelligent technologies such as AI, machine learning, robotic process automation (RPA), the IoT, natural language processing (NLP), and in-memory databases. They provide businesses with the ability to run even more efficient processes, leverage up-to-the-minute insights from both transactional and unstructured data, and ultimately remain competitive in a time of unprecedented change.

The future of ERP

Digital transformation is speeding up – and ERP is at the core. As enterprises adopt digital technologies in every part of the business, they are fundamentally changing the way they operate.

According to Gartner , one of the core digital business accelerators is to “banish drags” – in other words, eliminate any negative force that slows the business down, including outdated processes and systems. So, it’s not surprising that companies are already demanding more robust ERP systems.

Following are three major trends that build on the momentum we see today:

• Cloud, cloud, cloud: Preference for cloud ERP will continue to intensify as more and more companies discover the benefits – including “anywhere” access, reduced cost of hardware and technical support, greater security, and integration with other systems, to name just a few. According to Panorama Research in their 2020 ERP Report , “More than half of organizations are selecting cloud software (63%) instead of on-premises software (37%).” As the speed of business continues to accelerate, cloud becomes even more essential.
• Vertical integration: The tug of war between best-of-breed solutions and integrated ERP is officially over. Going forward, we believe that companies will demand the best of both worlds – a fully integrated ERP system with vertical extensions. This allows companies to get the specific functionality they need, without painful integration issues or data locked in information silos. We also see the shift toward ever greater flexibility, as business processes are tailored to individual company needs.
• User personalization: Staff, customers, and suppliers all want content and functionality that matches their specific needs or interests and makes them more productive. The changing demographics of the workforce, particularly in industries such as manufacturing, are also driving interest in low-code, no-code platforms. These platforms allow users to get the experience they want, rather than having to adapt to the software. Users can also expect customized dashboards, AI-driven search, personalized chat, and personalized workflows across devices.

Explore more ERP technology trends – and learn how to systematically evaluate your options, avoid pitfalls, and get started with the right innovations for your business.

Any modern ERP system will have a long list of capabilities based on the industry they serve and the modules they offer. However, there are 10 fundamental features that all enterprise resource management systems should have:

• A common database: Centralized information and single version of the truth – providing consistent, shared data and a cross-functional view of the company.
• Embedded analytics: Built-in analytics, self-service BI, reporting, and compliance tools that can deliver intelligent insight for any area of the business.
• Data visualization: Visual presentation of key information with dashboards, KPIs, and point-and-click analytics to assist in quick and informed decision-making.
• Automation. Automation of repetitive tasks as well as advanced RPA powered by AI and machine learning .
• Consistent UI/UX: The same look and feel across modules – as well as easy-to-use configuration and personalization tools for processes, users (including customers and suppliers), business units, locations, and product lines, for example.
• Integration: Seamless integration of business processes and workflows – as well as open and easy integration with other software solutions and data sources, including from third parties.
• New technologies: Support for AI and machine learning, digital assistants, the IoT , RPA , security and privacy, and mobile.
• Technology platform: A fast, proven, and stable technology stack for this long-term investment – including a low-code/no-code platform , iPaaS, data management, and more.
• Multinational support: Including for languages, currencies, and local business practices and regulations – as well as technical support for cloud services, training, help desk, and implementation.
• Choice of deployment: Cloud, on-premise, or hybrid.

ERP isn’t just for global enterprises. ERP solutions are designed for businesses of all sizes – small, midsize, and large. You can also get industry- and company-specific functionality to meet unique business needs. Regardless of your business sector and size, you’ll want to plan your ERP implementation project carefully, following best practices.

Small business ERP

ERP software for small businesses can help you move beyond spreadsheets and efficiently manage every aspect of your growing company – from sales and customer relationships to financials and operations. Small business ERP tools are typically in the cloud, quick to install, and designed to grow with you.

Mid-Market ERP

Today, ERP software designed for mid-market companies and subsidiaries benefit from built-in analytics, rapid deployment, and best practices for dozens of different business processes – financials, HR, supply chain management, and more. Midsize ERP tools help growing businesses scale and compete, even with limited resources. Modular, cloud-based enterprise ERP systems are also a popular choice for midmarket companies with complex processes or plans for rapid growth.

Enterprise ERP

Large companies with global or subsidiary operations need a robust, market-leading ERP system with embedded AI, machine learning, and analytics – and intelligent automation to transform business models and processes. ERP systems can be deployed on premise, in the cloud, or in a hybrid scenario depending on business need. They can integrate with existing databases or, ideally, run on newer, powerful in-memory databases .

Many companies are modernizing and upgrading their on-premise ERP systems to cloud deployments. This requires careful planning of your ERP upgrade , as well as an ERP evaluation and review of your deployment options .

What is an ERP software system?

An ERP software system is a set of integrated applications or modules for managing a company’s core business processes – including finance and accounting , supply chain , HR , procurement , sales, inventory management, and more. ERP modules are integrated into one complete system and share a common database to streamline processes and information across the enterprise. Businesses can expand the scope of their ERP as they grow.

What is ERP cloud software?

Cloud ERP is the deployment of ERP in the cloud rather than on premise. The cloud provides an ideal environment for ERP as it is an accessible, reliable, secure, and highly scalable platform for mission-critical software. True cloud ERP software is developed specifically for cloud deployment and takes full advantage of the cloud environment. Learn more about cloud ERP and ERP deployment options .

What is ERP in accounting?

In accounting, the acronym ERP stands for enterprise resource planning – which is a type of business management software. ERP finance modules offer many of the same features as accounting software, such as tools for accounts receivable and payable, general ledger, expense management, reporting and analysis, and more. In addition to finance, ERP includes modules for different lines of business, such as supply chain and HR, and integrates everything together in a single system.

How do I know I'm ready for an ERP system?

Most businesses start out using a variety of simple, standalone tools to manage different business processes – such as QuickBooks or Excel spreadsheets. Here are five signs you’ve outgrown them and need a modern ERP system .

• You’re spending more time on daily activities. If it’s taking longer to manage key activities, like closing the books, too many disparate applications may be to blame. ERP software integrates solutions and data into one system with a common interface, making it easier for business units to communicate and do their jobs effectively.
• You have many unanswered business questions. Can you easily answer important questions about your business, such as revenue per product line or number of returns? If not, segregated systems and a lack of access to metrics and KPIs may be holding you back. Enterprise resource planning software is designed to address these challenges.
• You have runaway business processes. Are there areas where your processes are getting away from you? Maybe it’s harder for you to manage inventory, satisfy customers, or keep costs in check. If so, your business processes may need to be restructured to accommodate growth or changing priorities – a natural fit for ERP software.
• You have manual processes with multiple data sets. Are most of your departments using their own applications and processes to get things done? If so, chances are you’re spending too much time on duplicate data entry. When information can’t flow between systems, reporting takes longer, errors happen often, and decision-making is hampered.
• You’re missing out on fast-moving opportunities. Are you spending so much time running your business that you can’t pursue exciting new opportunities? Newer ERP systems include advanced, intelligent capabilities, like machine learning and predictive analytics, that make it easier to identify and capitalize on profitable new ventures.

Explore ERP software

No matter what your size, SAP has an ERP solution for your business needs.

Essential ERP for growing companies

Explore trends, user guides, and expert advice in this three-part ERP miniseries.

JavaScript is disabled in your browser. To view the website properly, please enable JavaScript in your browser settings and refresh the page.

Apply for and manage a grant or program for your business.

Manage your interactions with the R&D Tax Incentive program.

• Environmental management

Develop your sustainability action plan

An action plan is a useful tool to help your business take practical steps towards being sustainable.

On this page

Why you need a sustainability action plan

Download a sustainability action plan template.

Sustainability is a journey. By continuing to make changes to your business for the good of the planet and people around you, you can:

• improve profitability and reduce costs
• form new partnerships with local communities and suppliers
• build your reputation and stay competitive
• appeal to new customers
• attract and retain employees
• reduce your carbon footprint
• adapt to climate change.

It's fine if your sustainability journey looks different to that of other businesses. What matters most is that you start now and keep going. 

A sustainability action plan helps you figure out what to do and stay on track.

You can also use your plan to promote your progress to customers.

Our template includes a table that sets out your objectives, costs and more. You can edit the template and add or remove rows as you need.

Sustainability action plan template

Our template steps you through the process of developing a sustainability action plan with examples to guide you.

You may want to check our tips below before you start.

1. Manage your approach to sustainability

Good sustainability management means you have the right supports in place to achieve your sustainability objectives. As you develop your plan, consider how you will manage the changes you want to make.

You might need to introduce new practices and procedures to help you. For example:

• Can you include a sustainability update in your staff meetings?
• Can you add your sustainability actions to your current task management system?
• Can you allocate certain hours for people or block out time in your calendar for sustainability efforts each month?
• Do you need to collect new data (such as employee satisfaction scores) to measure the benefits of your sustainability actions?

2. Consider simple changes as well as ones that take longer to achieve

Many sustainability actions involve a simple change in process or behaviour. Others need long-term planning and investment.

Consider a mix of both, so you can see positive differences soon while working towards bigger achievements.

3. Estimate your returns to help you choose your actions

Developing your plan involves doing some sums. For each sustainability action you consider, estimate the cost and the likely return on investment.

Some benefits can be tricky to measure but try to be as accurate as you can. This helps you compare different actions and focus on ones that make a real difference to your business.

4. Bring your team on the journey

Sustainability is a team effort. Explain to your team why sustainability is important and what you need them to do. Be clear about who's responsible. Assign a team or individual to each sustainability action in your plan.

Consider creating a new role to drive sustainability, such as a chief sustainability officer or sustainability manager. If it's a voluntary role on top of someone's current role, make sure you give them enough time to do what they need to do.

5. Update your plan as you go

As your business changes, your plan needs to change to make sure you're heading in the right direction.

Decide how often you want to review your plan and set aside the time with your team in advance.

It's a good idea to keep a record of each version of your plan.

Remember to celebrate your progress and share it with customers! Learn how to Promote your sustainable business .

Find out how to promote your sustainable business.

Use our checklist to help your business be more sustainable., was this page helpful, thanks for sharing your feedback with us..

Our live chat service is open from 8am - 8pm, Monday to Friday, across Australia (excluding national public holidays ).

Learn about the other ways you can contact us .

All our experts are busy now. Please try again later or contact us another way

We're open from 8am - 8pm, Monday to Friday, across Australia (excluding national public holidays ).

We use cookies to give you a better experience on our website. Learn more about how we use cookies and how you can select your preferences.

• Manage your subscription
• Manage payment method
• Renew your subscription
• Turn recurring billing on or off
• When subscription expires
• Cancel Microsoft 365
• Microsoft 365 subscription refunds
• Share Microsoft 365 Family
• Stop sharing Microsoft 365 Family
• You received an invitation to share
• Switch between Microsoft 365 subscriptions
• Switch to a business subscription
• Transfer to a different Microsoft account
• About accounts
• Sign in to Microsoft 365
• Why you need to sign in
• Forgot account or password
• Get started at Microsoft 365.com
• Meet the Microsoft 365 app launcher
• Check version
• Microsoft 365 for home or business
• What business product do I have?
• Difference between Microsoft 365 and Office 2021
• Difference between home and business plans
• Difference between Microsoft 365 and free web apps
• Troubleshoot

What's the difference between Microsoft 365 plans for home or business

Microsoft 365 is a subscription service that makes sure you always have the most up-to-date modern productivity tools. If you're looking to buy Microsoft 365, but not sure which plan is right for you, use the information below to help guide your decision.

Watch: Business plans versus personal and family plans

Business plans versus personal and family plans

Microsoft 365 business subscriptions

Microsoft 365 business subscriptions  can help you grow your business, no matter if you're a team of one or more. 

Microsoft 365 Family and Personal

Personal and family subscriptions are ideal for personal use like home, personal, or family projects and school related activities.

The right plan for you will depend on what your needs are. Let's explore the options.

If you're leaning towards a business plan, deciding which one can depend on your specific business needs. The Microsoft 365 plan chooser is designed to help you with this. The chooser will make recommendations based on your answers to questions such as the size of your business, your field of work, the devices you use, and what kind of features, IT support, and security you're looking for. See Find the right plan for your business .

Looking for more product details and prices? Check out the comparison tables:  Compare Microsoft 365 for business plans

Buy or try Microsoft 365:

For business      For personal and family

Do you need both a business plan and a personal plan?

In some cases, a single Microsoft 365 plan will suit all your needs, but there might be instances when having both plans is the correct decision for you.

For example, you may want to keep your personal files, photos, and other documents separate from your business, having two plans will allow you to do this.

Additionally, if you already have Microsoft 365 Family that you're sharing with friends and family who aren't part of your business, keeping that personal subscription might be the best thing for everyone. This means you don't have to move anyone off that plan, and you don't have to worry about any personal files you already have associated with that subscription and your personal account. 

Switch from a personal Microsoft 365 subscription to Microsoft 365 for business

Have you already been using Microsoft 365 Family or Personal for your business and now you're ready to switch your business to Microsoft 365 for business? It's possible to transfer your business documents and files to your new business plan. Learn more about your options to help you with this process.

Follow the steps in  Switch from Microsoft 365 for home to a business subscription .

Work with a Microsoft 365 business partner in your area: Find the right partner for you .

Our product experts are available to help you with this free of charge:  Contact product experts online. Note: Help from Microsoft business consultants isn't available in all markets.

Need more help?

Want more options.

Explore subscription benefits, browse training courses, learn how to secure your device, and more.

Microsoft 365 subscription benefits

Microsoft 365 training

Microsoft security

Accessibility center

Communities help you ask and answer questions, give feedback, and hear from experts with rich knowledge.

Ask the Microsoft Community

Microsoft Tech Community

Windows Insiders

Microsoft 365 Insiders

Find solutions to common problems or get help from a support agent.

Online support

Was this information helpful?

Thank you for your feedback.

• Best for customer satisfaction
• Best for older adults
• Best for long-term care
• Best for high returns
• Best for agent support
• Best for term life
• Why you should trust us

Best Life Insurance of June 2024

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

Life insurance is as complicated as the policyholders and beneficiaries who use it. That means there's no single "best" life insurance company. Instead, you can find the best option based on what you want or what you prioritize.

Summary of the Best Life Insurance Companies

• Best for customer satisfaction:   State Farm Life Insurance
• Best for older adults:   Prudential Life Insurance
• Best for agent support:   New York Life Insurance
• Best for long-term care:   Columbus Life
• Best for high returns:   Allianz Life
• Best for term life:   North American Company

Best Life Insurance Companies of 2024

While there is no such thing as the objective best life insurance policy, you will be able to find the best insurance policy for your specific needs. Here are our picks for the best life insurance companies, whether you want to use your life insurance policy to build wealth through cash value or you're just looking for a term life insurance policy .

Best Life Insurance for Customer Satisfaction: State Farm Life Insurance

Bundling is standard, and agents often quote with multiple discounts.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Best in JD Power customer service ratings
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Company offers a range of different insurance products to meet buyer needs
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Agents are knowledgeable about its products
• con icon Two crossed lines that form an 'X'. Life insurance products are conservative and limited
• con icon Two crossed lines that form an 'X'. Buyers may be subject to multi-year waiting periods before they qualify for full payouts on life insurance policies
• con icon Two crossed lines that form an 'X'. State Farm agents cannot offer alternative options if State Farm is unable to bind a life insurance policy

State Farm is one of the insurance industry's most prominent insurers offering auto, home, and other insurance. Bundling is standard, and agents often quote with multiple discounts. Its term, universal, and whole life insurance products are no exception.

• Life insurance products include term and permanent life
• Ranks highly for customer satisfaction

State Farm Life Insurance gets the best life insurance ranking in J.D Power's Individual Life Insurance Study, with a score of 843/1,000. The company is also ranked A++ with AM Best for its financial stability with term, universal, and whole life insurance options. 

All State Farm policies have to be purchased through a State Farm agent. Your agent can help you bundle and save or buy one policy. State Farm is also among the companies offering "survivorship universal life insurance ," which means the policy covers two people, and it kicks in after the second person dies. Couples looking to maximize their death benefit for beneficiaries with one premium payment each month may enjoy lower overall costs.

State Farm agents can run quotes and compare options to find the right plans for each applicant. The range of options, discounts, and familiar name all contribute to the popularity of State Farm's life insurance.

Read our State Farm Life Insurance review here.

Best Life Insurance for Older Adults: Prudential VUL Protector Life Insurance

Offers aggressive financial plans.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Available in all 50 states (New York residents may have different plans)
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Buyers can withdraw money to pay for nursing home bills due to severe illness or disability
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Knowledgeable agents who can walk you through your options
• con icon Two crossed lines that form an 'X'. Financial returns are limited
• con icon Two crossed lines that form an 'X'. Limited policy options for seniors and other groups who might struggle to find life insurance

The aggressive financial plans offered by Prudential may appeal to many younger buyers and those with a stable income. However, those with lower income or buyers who aren't sure about the financial system may be more hesitant to engage with Prudential. Like many other industry giants, Prudential is working to change this perception.

Prudential Life Insurance is available in all states except New York. New York residents can buy the Pruco Life of New Jersey VUL Protector plan. This plan allows buyers to pull money out of their plan to pay for nursing home expenses. Cash value policy premiums are fixed, so you won't have to worry about extra costs later on. Internal costs are low, which minimizes risk. Due to age, many older adults want a safe investment option for their money. Prudential VUL Protector invests to avoid loss. That also means you're not as likely to see big increases in your available funds outside of what you deposit.

Read our Prudential Life Insurance review here.

Best Life Insurance for Long-Term Care: Columbus Life Insurance

Offers lien method to makes it easier to calculate the financial impact of pulling money out early.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Buyers can pull money out for medical and other bills in the event of disease or disability
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Columbus uses lien method to simplify accelerated death payments
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Company offers a wide range of riders to customize policies
• con icon Two crossed lines that form an 'X'. Premiums may be higher than competitors
• con icon Two crossed lines that form an 'X'. Term policies are not guaranteed to be converted to whole

Best for long-term care and accelerated death benefits.

Columbus Life offers a wide range of riders to customize your policy with affordable premiums. The company also allows you to convert term policies to whole life insurance policies until the end of your term (generally around age 70). For this and many other reasons, customer satisfaction is high.

When using living health benefits (otherwise known as accelerated death benefits), buyers are allowed to pull money from policies early to pay for medical bills, living costs, etc. under certain circumstances. Most companies use a discounted death benefit, which reduces your final payout using two models. Columbus uses the lien method, which makes it easier to calculate the financial impact of pulling money out early.

Best Life Insurance for High Returns on Income: Allianz Life Insurance

Offers life insurance policies for foreign nationals with H-1B visas.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Plans offer high returns on investment
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Great for investment and long-term retirement planning
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. May increase your income by as much as 20%
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Allianz offers plans for foreign nationals including H-1B visas
• con icon Two crossed lines that form an 'X'. Plans are meant specifically for high-income adults, alternatives may not be offered

Best for investing and high returns on income.

Allianz Life plans are geared towards high-income adults looking for more tax-free income. Allianz offers a 40% multiplier bonus with a 1% annual assets charge. In short, the professionals managing your investments take 10%. Overall, your investments would pull in an extra 14%-1% asset charge. This means you end up with 3% more than what you deposit every year your life policy is active. This plan offers strong returns when using a life policy to supplement your retirement savings. Allianz also offers specialized plans to grow your income by as much as 20% according to some estimates.

Of note: Allianz also offers plans for foreign nationals, including those with H-1B visas.

Best Life Insurance for Agent Support: New York Life Insurance

Offers aggressive financial products and extensively trained agents.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Strong life insurance options for financial planning and wealth building
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Policies available nationwide
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Knowledgeable life insurance agents
• con icon Two crossed lines that form an 'X'. May require a medical exam
• con icon Two crossed lines that form an 'X'. Buyers looking for more modest policies may not find the most competitive pricing

If you're preparing for a comfortable retirement or looking to build generational wealth, New York Life is one of the strongest options. If you have questions or genuinely want to understand your life insurance options, New York Life agents are among the most qualified professionals in the business.

• Life insurance provider with policies available across the US

New York Life Insurance agents go through extensive training before they ever hit the sales floor. What does this get you? Policies vary widely, and New York Life offers both large and small payouts. Some policies have significant penalties for early withdrawal, but taking a loan offers more options. Whatever your questions, New York Life agents are trained to offer comprehensive support giving you accurate information about its policies every time. The company comes in at position eight in J.D. Power's latest life insurance customer satisfaction study.

Read our New York Life Insurance review here.

Best Life Insurance for Term Life: North American Life Insurance

Offers term policies alongside accelerated death benefits for critical, chronic, and terminal illnesses and more.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers accelerated death benefits for critical, chronic, and terminal illnesses
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers conversion for life policies up to 70 years old
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Term policies can be renewed up to age 95 for qualifying applicants
• con icon Two crossed lines that form an 'X'. Not all term policies qualify for renewal or conversion

Best Term Policy.

North American Company offers term policies alongside accelerated death benefits for critical, chronic, and terminal illnesses and more. The company allows one conversion on a 20-year policy at 15 years or 70 years old (whichever is earlier). The conversion cannot happen later than the five-year marker regardless of which policy you choose or the length. North American Company also offers a term policy with a lower premium renewable up to the age of 95 for qualifying insureds.

Types of Life Insurance

While there's many different types of life insurance policies , broadly speaking, there are two types of life insurance: temporary and permanent. Let's go over each in detail.

Temporary life insurance

Temporary life insurance is often called term life insurance. This type of policy covers you for a set amount of time before expiring, usually between 10-30 years. If you pass away after your policy expires, your family won't receive any benefits. Additionally, your policy won't accrue cash value like a permanent policy. That said, some term life insurance policies offer a conversion from term to whole life insurance, so you can extend your coverage. 

Because its benefits aren't guaranteed, term life policies are generally cheaper than permanent life insurance. That said, the vast majority of term life insurance policies never pay out. on

Permanent life insurance

Permanent life insurance is an umbrella term for a variety of life insurance policies that will insure you indefinitely and guarantee a payout as long as you maintain your policy. Policy types that fall under permanent life insurance includes:

• Whole life insurance
• Universal life insurance
• Variable life insurance
• Variable universal life insurance
• Simplified life insurance
• Guaranteed issue life insurance

These policies vary widely in purpose and intended buyers, but all guarantee death benefits to your loved ones. Some permanent life insurance policies, like whole, universal, and variable have a cash value component , which you can use as a savings tool or to leave your heirs a larger death benefit.

How to Pick the Best Life Insurance Policy for You

Finding the right fit in life insurance starts with finding a trusted insurance agent. Because there are so many state regulations, shopping for homeowners or auto insurance can be easily done online. Life insurance is not required. So it's a voluntary purchase. Many buyers don't know what they need or when they need it. Before making your selection, consider a few things:

Some companies will sell you a policy for your child as soon as they're born. While this may seem morbid, early sign-up means lower rates for a policy your child could enjoy in the future. Regardless, early sign-up equates to more policy for lower premiums and a higher likelihood of acceptance. At 20, you may be healthier and be able to pay into the policy for a longer period compared to when you're 50 with more age-related conditions.

As a general rule, never agree to more than you can afford. For the average life insurance agent, their job is to sell you a large policy with a large commission. Consider not only how much you make now, but how likely your current income is to continue. If you work on a project basis and your project is scheduled to end in 12 months, you may want to reconsider a policy premium outside your monthly savings.

How much are you prepared to buy? Some people only want a small policy to cover funerals and other end-of-life expenses. Others build a life policy into their retirement plan. Whatever direction you're going, involving a financial planner could help you make the right decisions. Depending on the carrier, customers can also compare set limits with index universal life policies, which set no limit. These policies never expire, and the value builds over the entirety of your life.

Living Benefits

Life happens unexpectedly. You could be healthy one day and in the hospital the next. Many life policies offer living benefits. These allow you to draw a limited amount out of your policy to cover medical and other bills you cannot pay while sick.

Much like a 401(k), many life insurance policies have penalties for early withdrawal. No matter what policy you want, this question is critical to an informed decision. It's a question of how early you can withdraw and how much you'll lose from the total to have the money in 10 years instead of 30 or after death.

Some policies require insured parties to pay premiums for at least one year before any significant payout would be available. Suicide exclusions are common. Even with no medical exam policies, the company may still do a check for known conditions. An insurance company has to mitigate its risk.

Flexibility

Once you've been denied a life insurance policy, a mark goes on your record. No matter the reasons, other insurance companies may deny you coverage based on the first denial. So consider your whole situation and choose your policy carefully before you submit any applications. Some policies have greater flexibility if you lose your job or otherwise can't make payments. Others will lapse if you miss even one payment.

Payment Type

Even within whole life or term life insurance policies, customers have the option to choose guaranteed fixed or variable rates. Some have guaranteed payouts, but you'll need to ask your agent for details.

What is your intended use? Why are you shopping for a life insurance policy in the first place, and what are your goals? Many successful financial planners also have a background in life insurance. So while they may not be able to find you a specific life insurance policy, financial planners can help you set out a blueprint for your purchase.

Why You Should Trust Us: How We Reviewed the Best Life Insurance Companies

In life insurance, it's easy to get "sold a bill of goods." Many life insurance agents pass a state test to be thrown into the deep end. Agents sell the company product, but not all know the products. In this vein, we look at the products each company offers. We also look at agent training.

A good life insurance agent may not volunteer all facts upfront. But a company's agents should answer questions about its products accurately and in a way the average consumer can digest. Agents should be able to inform you about the long-term benefits and limitations. This will help customers find the right policy for their long-term plan.

We consider affordability, policy sizes available, and performance for a comprehensive assessment in our insurance rating methodology . If you can, we recommend also working with a financial advisor to make a plan for your future with life insurance.

Our Expert Panel for The Best Life Insurance Companies

To inform our choices for the best life insurance companies, we spoke with the following experts:

• Paul LaPiana , head of product at MassMutual
• Barbara Pietrangelo , CFP, CLU, and chair of the nonprofit Life Happens
• Wykeeta Peel , Corporate Vice President and Market Manager, African American Market Unit at New York Life

The Experts' Advice on Choosing The Best Life Insurance for You

How much life insurance coverage do you believe the average buyer should have.

Paul LaPiana, Head of Product at MassMutual

"There are different approaches to determining how much life insurance you need. One is the 'human life' approach, which estimates the current value of your future earning potential. Another is securing specific coverage to pay off debts such as a mortgage or provide for the education of children. A comprehensive protection plan should provide the right amount of coverage over the course of your working life and into retirement."

Barbara A. Pietrangelo, Chair of Life Happens

"There is no one-size-fits-all life insurance policy because everyone is different. One way to get a rough estimate is to multiply your income by 10 to 15; another is adding $100,00 to that amount, should you have a child and anticipate college education expenses.

Your best bet is to talk to a financial professional or use the Life Insurance Needs Calculator on LifeHappens.org to analyze what's right for you."

Wykeeta Peel, Corporate Vice President & Market Manager African American Market Unit at New York Life

"As you consider what policy best meets your needs, it can help to answer four key questions: First, how much death benefit do you need? Second, how long will you need that coverage? Third, what is your budget (or how much monthly premium can you afford to pay?), and finally, what is your investment risk tolerance?

To determine how much death benefit makes sense, it's helpful to think beyond using life insurance to cover funeral expenses and consider whether anyone is relying on the policy owner's income to maintain a lifestyle, pay rent or a mortgage, or fund a child's education and for how long.

There are various rules of thumb regarding the right amount of Life insurance coverage. Some tips can be found online, but they only provide an estimate and don't necessarily factor in an individual's specific needs. In my opinion, human guidance, powered by technology, is required. Basically, it comes down to how much money your loved ones would need to remain on firm financial ground if your earnings were no longer in the picture and that is different for everyone."

What is the biggest opportunity you see for improvement in the life insurance industry?

"Increased accessibility through digital and other channels as well as through underwriting enhancements. Increased tailoring of products and features. And an increased emphasis on health and wellness programs."

"Having enough qualified insurance professionals to walk potential buyers through the multiple benefits of life insurance will be pivotal to the growth of the industry. Education is a key factor here, as professional agents also need to be able to explain life insurance and its benefits in an easy, digestible way, especially when there are so many misconceptions about life insurance."

"The need for life insurance is greater than ever. In fact, a recent New York Life Wealth Watch survey found that 37% of adults have been thinking about life insurance more often these days – and half of adults report that financial products that provide protection (50%) and reliability (50%) are more important now compared to last year. This may be especially true for middle-market and Cultural Market families.

Our organizational structure of having Cultural Market agents embedded in the communities where we live and work allows us to understand the needs of diverse communities and develop solutions that resonate with them."

What advice would you give to buyers who are debating whether or not to buy life insurance?

"It is difficult to say with any certainty how healthy you will be years from now. That's why securing life insurance, and insuring your insurability, today, when you are the youngest you'll ever be again, and perhaps your healthiest is a wise decision."

"Do you love someone? If the answer is yes, then life insurance is certainly something you should consider. Many buy gifts and experiences to express their love, but haven't considered that life insurance is just another way to say I love you. Nothing says support like ensuring your family's financial security and peace of mind."

"If you have someone depending on your income, you should consider purchasing life insurance. A death benefit from a life insurance policy can replace income from the loss of a breadwinner, ensure a family can stay in their home, fund educational or retirement expenses, address debt and so much more.

A life insurance policy can also help you grow your family's wealth over time. Once the risk of an unexpected loss has been managed, you can begin to think more broadly about your family's financial future. Life insurance can enable your mindset to shift from death to growth."

What's the most important thing buyers should look for when choosing a life insurance agent/company to buy from?

"With life insurance, you are securing a future commitment that may be decades away. Research the company behind the policy to ensure it has high financial strength ratings, longevity, and an excellent track record of paying claims."

"When looking for an insurance agent or company, be sure to do your research. When comparing companies, be sure to remember that the policy features that fit you and your loved ones best is the most important factor. Don't automatically assume you should buy from the higher-rated company.

If the policy from the other company has more of what you're looking for, it might be the better choice. If you're unsure where to start, try the Life Happens Agent Locator to find an insurance professional in your area."

• "The insurers' track record: At its core, life insurance is protection - a hedge against the unexpected - and you are paying premiums in exchange for the promise that the insurer will be there when you need them, so the financial strength and track record of the company backing your policy is critical.
• Customer service: Are service professionals available by phone and digital channels? Is there is an online dashboard where you can manage your policy? Beyond ensuring assistance is available after you purchase a policy, it's also critical to ensure you have access to trusted advice and guidance before you buy.
• Flexibility in conversion: How easy is it to change? Life can be unpredictable and while term insurance can cover your loved ones through a critical period of time, you may decide that access to cash value is an important piece of your strategy.
• Accelerated online applications : Online applications are convenient but don't replace human guidance. Keep in mind that accelerated online applications may have a maximum coverage amount, meaning that you may not be able to get all the coverage you may need exclusively through an online process.
• A range of payment options: It's important to understand how often you're required to make premium payments and whether and how often you can change the frequency of payments."

Best Life Insurance FAQs

According to JD Power's 2023 life insurance study, State Farm is the highest-rated life insurance company when it comes to overall customer satisfaction. However, you still may want to shop around for quotes from various insurers if you're looking to purchase a new policy.

There isn't one best life insurance company, because the best option for you will depend on the type of policy you're looking for. It's best to work with a qualified insurance agent to help you find the best coverage. If you're deciding between multiple similar options, it's also worth consulting J.D. Power's life insurance customer satisfaction study . The latest study ranks State Farm as the top pick for individual life insurance, outpacing Nationwide by three points.

The best type of life insurance policy for you will differ from someone else's, as your policy should be tailored to your needs. The best policy for you will be affordable and will offer the benefits best suited to your situation. For example, some policies are only meant to cover end-of-life expenses such as burial and funeral arrangements, whereas others include living benefits like a cash value insurance plan , which you can borrow against during your lifetime.

Some life insurance policies are advertised as "no medical exam." This doesn't mean the insurer won't ask you about known conditions or look at medical records. Policies with no medical exam also tend to offer lower benefits with higher premiums. Most companies have a network of medical examiners, some of whom can come to your home. You can find our guide on the best no exam life insurance here.

Each situation is different and requires a knowledgeable life insurance agent to assess your best options. Bring all your questions and the coverage you're looking for to an insurance agent near you to explore your options.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

**Enrollment required.

• Main content