What Is a Business Plan?

In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve those goals.

Don’t swallow the obsolete idea of the business plan must be a long, formal document, as if it were some term paper you have to write. That’s not true anymore. While every business has huge benefits to gain from going through the business planning process, only a small subset needs the formal business plan document required for seeking investors or supporting a commercial loan.

See Also: Business Planning Guide

For the rest of us, this is great news because it makes the planning process much less daunting. You start simple, and grow it organically. You don’t do anything that doesn’t have a business purpose, so you don’t describe your management team (to name one example) unless you need to for outsiders. You don’t do an exit strategy if you’re not writing for investors and therefore you aren’t concerned with an exit. In business planning, form follows function. The plan is what’s going to happen. The formal document, the pitch deck, the summary memo—those are outputs of the planning process, not the actual plan.

And furthermore, even for those of you who do need to produce a business plan document, the task of writing a business plan today is much less daunting than it used to be. These days, business plans are simpler, shorter, and easier to produce than they have ever been. Gone are the days of 30- and 40-page business plans—modern business plans are shorter, easier to write, and—thankfully—easier to read (and you could always have our MBA business plan consulting experts write a business plan for you, if you so choose).

In this article, I’m going to explore the answer to the question, “What is a business plan?” I’ll also review:

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan, or at least the very basic components of one. At its heart, a business plan is just a plan for how your business is going to work, and how you’re going to make it succeed.

Typically, a business plan is longer than a list on a napkin (although, as you’ll see below, it is possible—and sometimes ideal—to write your entire business plan on one page). For me in practice, and for most real businesses, it can be as simple as a few bullet points to focus strategy, milestones to track tasks and responsibilities, and the basic financial projections you need to plan cash flow budget expenses.

Business plans should only become printed documents on select occasions, when needed to share information with outsiders or team members. Otherwise, they should be dynamic documents that you maintain on your computer. The plan goes on forever, so the printed version is like a snapshot of what the plan was on the day that it was printed.

If you do need a formal business plan document, then that includes an executive summary, a company overview, some information about your products and/or services, your marketing plan, a list of major company milestones, some information about each member of the management team and their role in the company, and details of your company’s financial plan. These are often called the “sections” or “chapters” of the business plan, and I’ll go into much greater depth about each of them below.

In all cases, the most important section of the business plan is the review schedule. That’s as simple as “the third Thursday of every month” to cite one obvious example. That’s the part of the plan that acknowledges that it is part of a planning process, in which results and metrics will be reviewed and revised regularly. A real business plan is always wrong—hence the regular review and revisions—and never done, because the process of review and revise is vital.

Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But business plans are also vital for running a business, whether or not it needs new loans or new investments. Existing businesses should have business plans that they maintain and update as market conditions change and as new opportunities arise.

Every business has long-term and short-term goals, sales targets, and expense budgets—a business plan encompasses all of those things, and is as useful to a startup trying to raise funds as it is to a 10-year-old business that’s looking to grow.